<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 27, 1996.
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 0-17781
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SYMANTEC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0181864
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10201 TORRE AVENUE, CUPERTINO, CALIFORNIA 95014-2132
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 253-9600
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO
----- -----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, including 4,033,732 shares of Delrina exchangeable stock, as of
November 4, 1996:
COMMON STOCK, PAR VALUE $0.01 PER SHARE 54,793,294 SHARES
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<PAGE>
SYMANTEC CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 27, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets
as of September 30, 1996 and March 31, 1996 . . . . . . . . . 3
Consolidated Statements of Operations
for the three and six months ended September 30, 1996
and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flow
for the six months ended September 30, 1996 and 1995. . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 22
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 22
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 23
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
(In thousands) 1996 1996
- --------------------------------------------------------------------------------
ASSETS (unaudited)
Current assets:
Cash and short-term investments $ 140,278 $ 129,199
Trade accounts receivable 65,378 72,256
Inventories 2,480 7,893
Deferred income taxes 12,693 12,875
Other 13,449 14,639
--------- ---------
Total current assets 234,278 236,862
Equipment and leasehold improvements 53,527 51,698
Capitalized software 6,933 4,183
Other 2,892 5,186
--------- ---------
$ 297,630 $ 297,929
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,375 $ 23,368
Accrued compensation and benefits 16,880 14,888
Other accrued expenses 50,337 60,566
Income taxes payable 2,699 3,329
Current portion of long-term obligations 19 68
--------- ---------
Total current liabilities 93,310 102,219
Convertible subordinated debentures 15,000 15,000
Long-term obligations 298 393
Stockholders' equity:
Preferred stock (authorized: 1,000 shares;
issued and outstanding: none) -- --
Common stock (authorized: 100,000;
issued and outstanding: 54,758
and 53,636 shares) 548 536
Capital in excess of par value 284,398 279,508
Notes receivable from stockholders (144) (144)
Cumulative translation adjustment (7,257) (7,591)
Accumulated deficit (88,523) (91,992)
--------- ---------
Total stockholders' equity 189,022 180,317
--------- ---------
$ 297,630 $ 297,929
--------- ---------
--------- ---------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------- ----------------------
(In thousands, except per share data; unaudited) 1996 1995 1996 1995
- ------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 109,178 $ 108,510 $ 218,396 $ 218,375
Cost of revenues 20,730 35,090 42,214 57,308
--------- --------- --------- ---------
Gross margin 88,448 73,420 176,182 161,067
Operating expenses:
Research and development 20,835 23,795 43,841 43,868
Sales and marketing 52,967 60,448 106,746 112,659
General and administrative 7,826 11,811 15,093 20,888
Acquisition, restructuring and
other expenses 7,290 -- 8,585 (71)
--------- --------- --------- ---------
Total operating expenses 88,918 96,054 174,265 177,344
--------- --------- --------- ---------
Operating income (loss) (470) (22,634) 1,917 (16,277)
Interest income 1,751 1,921 3,435 4,184
Interest expense (337) (344) (668) (783)
Other income (expense), net 36 (1,188) (332) (2,653)
--------- --------- --------- ---------
Income (loss) before income taxes 980 (22,245) 4,352 (15,529)
Provision (benefit) for income taxes 98 (4,459) 435 (4,609)
--------- --------- --------- ---------
Net income (loss) $ 882 $ (17,786) $ 3,917 $ (10,920)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income (loss) per share $ 0.02 $ (0.34) $ 0.07 $ (0.21)
--------- --------- --------- ---------
--------- --------- --------- ---------
Shares used to compute net income
(loss) per share 54,951 52,498 55,042 52,033
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-----------------------
(In thousands; unaudited) 1996 1995
- ----------------------------------------------------------------- -------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 3,917 $ (10,920)
Delrina net loss for the quarter ended June 30, 1995 -- 4,834
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization of equipment and
leasehold improvements 11,953 8,831
Amortization and write-off of capitalized software costs 2,684 7,412
Write-off of equipment and leasehold improvements 2,441 --
Deferred income taxes 181 2,854
Net change in assets and liabilities:
Trade accounts receivable 7,197 (1,100)
Inventories 5,446 (495)
Other current assets 1,163 (8,874)
Other assets 2,272 2,429
Accounts payable (27) 1,823
Accrued compensation and benefits 2,014 689
Accrued other expenses (10,391) 7,563
Income taxes payable (660) (66)
-------- ---------
Net cash provided by operating activities 28,190 14,980
-------- ---------
INVESTING ACTIVITIES:
Capital expenditures (16,274) (17,535)
Capitalized software (5,442) (1,213)
Purchases of short-term, available-for-sale investments (95,000) (51,000)
Maturities of short-term, available-for-sale investments 66,751 55,476
-------- ---------
Net cash used in investing activities (49,965) (14,272)
-------- ---------
FINANCING ACTIVITIES:
Principal payments on long-term obligations (144) (124)
Net proceeds from sales of common stock and other 4,458 15,168
-------- ---------
Net cash provided by financing activities 4,314 15,044
Effect of exchange rate fluctuations on cash and cash equivalents 291 (98)
-------- ---------
Increase (decrease) in cash and cash equivalents (17,170) 15,654
Beginning cash and cash equivalents 41,777 30,192
-------- ---------
Ending cash and cash equivalents $ 24,607 $ 45,846
-------- ---------
-------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
5
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements of Symantec Corporation ("Symantec" or the
"Company") as of September 30, 1996 and for the three and six months ended
September 30, 1996 and 1995 are unaudited and, in the opinion of management,
contain all adjustments, consisting of only normal recurring items necessary for
the fair presentation of the financial position and results of operations for
the interim periods. These consolidated financial statements should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included in Symantec's Annual Report on Form 10-K for the year ended
March 31, 1996. The results of operations for the three and six months ended
September 30, 1996 are not necessarily indicative of the results to be expected
for the entire year. Certain previously reported amounts have been reclassified
to conform to the current presentation format.
Symantec has a 52/53-week fiscal accounting year. Accordingly, all references
as of and for the periods ended September 30, 1996, March 31, 1996 and
September 30, 1995 reflect amounts as of and for the periods ended September 27,
1996, March 29, 1996 and September 29, 1995, respectively.
Research and development expenditures are charged to operations as incurred.
During the September 1996 quarter, the Company capitalized approximately $2.5
million of costs principally associated with the development of certain
networking software products in accordance with Statement of Financial
Accounting Standard No. 86. To the extent the Company capitalizes its product
development costs, the effect is to defer such costs to future periods and match
those costs to the revenue generated by the developed products. Amounts
capitalized may fluctuate depending in part on the number and status of internal
software development projects.
6
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2. BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
September 30, March 31,
(In thousands) 1996 1996
- -------------------------------------------------------------- ------------- ---------
(unaudited)
<S> <C> <C>
Cash and short-term investments:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,607 $ 20,176
Cash equivalents . . . . . . . . . . . . . . . . . . . . . 5,000 21,601
Short-term investments . . . . . . . . . . . . . . . . . . 115,671 87,422
--------- ---------
$ 140,278 $ 129,199
--------- ---------
--------- ---------
Trade accounts receivable:
Receivables. . . . . . . . . . . . . . . . . . . . . . . . $ 71,429 $ 77,272
Less: allowance for doubtful accounts. . . . . . . . . . . (6,051) (5,016)
--------- ---------
$ 65,378 $ 72,256
--------- ---------
--------- ---------
Inventories:
Raw materials. . . . . . . . . . . . . . . . . . . . . . . $ 999 $ 1,969
Finished goods . . . . . . . . . . . . . . . . . . . . . . 1,481 5,924
--------- ---------
$ 2,480 $ 7,893
--------- ---------
--------- ---------
Equipment and leasehold improvements:
Computer equipment . . . . . . . . . . . . . . . . . . . . $ 87,096 $ 79,153
Office furniture and equipment . . . . . . . . . . . . . . 26,693 25,753
Leasehold improvements . . . . . . . . . . . . . . . . . . 16,299 12,603
--------- ---------
130,088 117,509
Less: accumulated depreciation and amortization. . . . . . (76,561) (65,811)
--------- ---------
$ 53,527 $ 51,698
--------- ---------
--------- ---------
Capitalized software:
Purchased product rights . . . . . . . . . . . . . . . . . $ 7,490 $ 8,680
Capitalized software costs . . . . . . . . . . . . . . . . 10,509 5,623
Less: accumulated amortization of purchased
product rights . . . . . . . . . . . . . . . . . . . . . (7,341) (8,162)
Less: accumulated amortization of capitalized
software costs . . . . . . . . . . . . . . . . . . . . . (3,725) (1,958)
--------- ---------
$ 6,933 $ 4,183
--------- ---------
--------- ---------
Other accrued expenses:
Acquisition, restructuring and other expenses. . . . . . . $ 4,669 $ 7,833
Deferred revenue . . . . . . . . . . . . . . . . . . . . . 18,831 26,266
Marketing development funds. . . . . . . . . . . . . . . . 11,407 11,412
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,430 15,055
--------- ---------
$ 50,337 $ 60,566
--------- ---------
--------- ---------
</TABLE>
NOTE 3. LINE OF CREDIT
The Company has a $10.0 million bank line of credit that expires in March 1998.
The line of credit is available for general corporate purposes and bears
interest at the bank's reference (prime) interest rate (8.25% at
September 30, 1996), the U.S. offshore rate plus 1.25%, a CD rate plus 1.25% or
LIBOR plus 1.25%, at the Company's discretion. The line of credit requires bank
approval for the payment of cash dividends. Borrowings under this line are
unsecured and are subject to the Company maintaining certain financial ratios
and profits. The Company was in compliance with the line of credit covenants as
of September 30, 1996. At September 30, 1996, there was approximately $0.4
million of standby letters of credit outstanding under this line of credit.
There were no borrowings outstanding under this line at September 30, 1996.
7
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. ACQUISITION, RESTRUCTURING AND OTHER EXPENSES
Acquisition, restructuring and other expenses consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------- ---------------------
(In thousands) 1996 1995 1996 1995
- --------------------------------------------- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Write off of investment in joint venture $ 1,750 $ -- $ 1,750 $ --
Write off of in process research and
development costs 3,050 -- 3,050 --
Centralization and restructuring and other 2,490 -- 3,185 --
Fast Track acquisition -- -- 600 --
Relocation of certain research
and development activities -- -- -- 2,229
Central Point acquisition -- -- -- (2,300)
------- ------- ------- --------
Total acquisition, restructuring and
other expenses $ 7,290 $ -- $ 8,585 $ (71)
------- ------- ------- --------
------- ------- ------- --------
</TABLE>
During the quarter ended September 30, 1996, Symantec recorded a $1.8 million
charge in connection with the write off of an investment in a joint venture and
a $3.1 million charge in connection with the acquisition of certain in process
software development technology.
During the quarter ended September 30, 1996, Symantec recorded $2.5 million for
costs related to the restructuring of certain domestic and international sales
and research and development operations. During the quarter ended June 30, 1996
the Company incurred a charge of $0.7 million for the centralization of certain
research and development activities, settlement costs related to the Carmel
lawsuit and other expenses.
Symantec recorded total acquisition charges of $0.6 million in the quarter ended
June 30, 1996 in connection with the acquisition of Fast Track. The charges
included $0.4 million for legal, accounting and financial advisory services and
$0.2 million for the consolidation and discontinuance of certain operational
activities and other acquisition related expenses.
During the quarter ended June 30, 1995, the Company incurred $2.2 million to
consolidate certain research and development activities. This relocation has
been completed. In the quarter ended June 30, 1995, the Company also recognized
a reduction in accrued acquisition and restructuring expenses related to the
acquisition of Central Point Software, Inc. ("Central Point") of $2.3 million,
as actual costs incurred were less than costs previously accrued by Central
Point.
As of September 30, 1996, total remaining accrued acquisition, restructuring and
other expenses were $4.7 million and included $0.7 million for legal, accounting
and financial advisory services, $2.8 million for the elimination of duplicative
and excess facilities, and $1.2 million for the consolidation and discontinuance
of certain operational activities and other acquisition related expenses.
NOTE 5. INCOME TAXES
Income taxes are computed in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Symantec provides for income
taxes during interim reporting periods based upon an estimate of its annual
effective tax rate. This estimate reflects U.S. federal, state and foreign
income taxes.
8
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is calculated using the treasury stock or the
modified treasury stock method, as appropriate, if dilutive. Common stock
equivalents are attributable to outstanding stock options. Fully diluted
earnings per share includes the assumed conversion of all of the outstanding
convertible subordinated debentures, if dilutive.
NOTE 7. LITIGATION
On March 18, 1996, a class action complaint was filed by the law firm of Milberg
Weiss Bershad Hynes & Lerach in Superior Court of the State of California,
County of Santa Clara against the Company and several of its current and former
officers and directors. The complaint alleges that Symantec insiders inflated
the stock price and then sold stock based on inside information that sales were
not going to meet analysts' expectations. The complaint seeks damages in an
unspecified amount. Symantec believes the complaint has no merit and will
vigorously defend itself. The Company has accrued certain estimated legal fees
and expenses related to this matter; however, actual amounts may differ
materially from those estimated amounts.
On September 3, 1992, Borland International, Inc. ("Borland") filed a lawsuit in
the Superior Court for Santa Cruz County, California against Symantec, Gordon E.
Eubanks, Jr. (Symantec's President and Chief Executive Officer) and Eugene Wang
(a former Executive Vice President of Symantec who is a former employee of
Borland). The complaint, as amended, alleges misappropriation of trade secrets,
unfair competition, including breach of contract, interference with prospective
economic advantage and unjust enrichment. Borland alleged that prior to joining
Symantec, Mr. Wang transmitted to Mr. Eubanks confidential information
concerning Borland's product and marketing plans. Borland claims damages in an
unspecified amount. Symantec has denied the allegations of Borland's complaint
and contends that Borland has suffered no damages from the alleged actions.
Borland obtained a temporary restraining order and a preliminary injunction
prohibiting the defendants from using, disseminating or destroying any Borland
proprietary information or trade secrets. Symantec filed a cross complaint
against Borland alleging that Borland had committed abuse of process and
defamation in publishing statements that Symantec had acted in contempt of a
temporary restraining order. The case is not being actively prosecuted at this
time pending the outcome of the criminal proceedings, discussed below. Symantec
believes that Borland's claims have no merit.
On September 2, 1992, the Scotts Valley, California police department, operating
with search warrants for Borland proprietary and trade secret information,
searched Symantec's offices and the homes of Messrs. Eubanks and Wang and
removed documents and other materials. On February 26, 1993, criminal
indictments were filed against Messrs. Eubanks and Wang for allegedly violating
various California Penal Code Sections relating to the misappropriation of trade
secrets and unauthorized access to a computer system. On August 23, 1993, the
Court recused the District Attorney's Office from prosecution of the action. On
October 5, 1993, the State Attorney General and the District Attorney's Office
filed a Notice of Appeal of the Order, and that appeal was argued on July 11,
1995. On September 8, 1995, the Court of Appeals reversed the recusal order. A
petition for review of this decision by the California Supreme Court was granted
on December 14, 1995 and a hearing before the full court was held on November 5,
1996. No ruling has been made. Symantec believes the criminal charges against
Messrs. Eubanks and Wang have no merit.
On June 11, 1992, Dynamic Microprocessor Associates, Inc. ("DMA"), a former
wholly-owned subsidiary of Symantec which has since been merged into Symantec,
commenced an action against EKD Computer Sales & Supplies Corporation ("EKD"), a
former licensee of DMA and Thomas Green, a principal of EKD, for copyright
infringement, violations of the Lanham Act, trademark infringement,
misappropriation, deceptive acts and practices, unfair competition and breach of
contract. On July 14, 1992, the Suffolk County, New York sheriff's department
conducted a search of EKD's premises and seized and impounded thousands of
infringing articles. On July 21, 1992, the Court issued a preliminary
injunction against EKD and Mr. Green, enjoining them from manufacturing,
marketing, distributing, copying or purporting to license DMA's pcANYWHERE III
or using DMA's marks.
9
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On July 20, 1992 and in a subsequent amendment, EKD and Mr. Green answered
Symantec's complaint denying all liability and asserting counterclaims against
Symantec and Lee Rautenberg, a former principal of DMA. In May 1993, EKD and
Mr. Green were granted permission to file a Second Amended Answer and
Counterclaims that dropped every previously raised claim and instead alleged
that DMA obtained the temporary restraining order and preliminary injunction in
bad faith and that DMA, Symantec and Mr. Rautenberg breached certain license
agreements and violated certain federal and New York State antitrust laws. In
February 1995, DMA was granted leave to file an Amended Complaint, which EKD
subsequently responded to by a Third Amended Answer and Counterclaims virtually
identical to EKD's Second Amended pleading. Symantec believes the charges made
by EKD and Mr. Green have no merit.
Symantec is involved in a number of other judicial and administrative
proceedings incidental to its business. The Company intends to defend all of
the aforementioned pending lawsuits vigorously and although adverse decisions
(or settlements) may occur in one or more of the cases, the final resolution of
these lawsuits, individually or in the aggregate, is not expected to have a
material adverse effect on the financial position of the Company. However,
depending on the amount and timing of an unfavorable resolution of these
lawsuits, it is possible that the Company's future results of operations or cash
flows could be materially adversely affected in a particular period.
NOTE 8. SALE OF PRODUCT RIGHTS
During September 1996, Symantec sold its electronic forms software products and
related tangible assets to JetForm Corporation ("JetForm") for approximately
$100 million, payable over four years in quarterly installments. JetForm has
the option to tender payment in either cash or in unregistered JetForm common
stock. Due to the uncertainty regarding the collectibility of these amounts,
Symantec is recognizing the payment amounts as received from JetForm. During
the September 30, 1996 quarter, Symantec received the first quarterly payment in
the form of JetForm unregistered common stock. The installment payment is
included in net revenues. The minimum value of the unregistered common stock
has been guaranteed by JetForm to be $7.2 million.
NOTE 9. SUBSEQUENT EVENT
In October 1996, Symantec entered into lease agreements for two office buildings
in Cupertino, California. The lease agreements are for seven years and the
lease payments total approximately $2.6 million per year. Lease payments are
based on the three month London Interbank Offering Rate (LIBOR) rate in effect
at the beginning of each fiscal quarter. Symantec has the right to acquire the
related properties at any time during the seven year lease period or may renew
the lease. The guaranteed residual payment on the lease agreements totals
approximately $38.5 million. Symantec is required to maintain a corresponding
restricted cash balance, which will be invested in U.S. treasury notes with
maturities not to exceed three years. The investments will be classified as
long-term restricted investments within the financial statements.
The Company currently occupies a portion of these office buildings and will
assume the right to sub-lease income provided by the other tenants, which is
estimated to be approximately $2.1 million per fiscal year based on current
occupancy and rental rates. The sub-lease agreements have terms expiring in
January 1997 through September 2000.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
The following discussion contains forward-looking statements that are subject to
significant risks and uncertainties. The forward-looking statements within this
Form 10-Q are identified by words such as "believes," "anticipates," "expects,"
"intends," "may" and similar expressions, but these words are not the exclusive
means of identifying such statements. In addition, any statements which refer
to expectations, projections or other characterizations of future events or
circumstances are forward-looking statements.
There are several important factors that could cause actual results to differ
materially from historical results and percentages and results anticipated by
the forward-looking statements contained in the following discussion. Such
factors and risks include, but are not limited to, competition in the
application, enterprise and network computer software industry, including price
and product feature competition; the introduction of new or upgraded products by
existing or new competitors; the economic environment, including corporate
spending patterns; dependence on distributors and the emergence of new or
changes to the current distribution channels, including the Internet; consumer
acceptance of new operating systems and the successful development of the
Company's products for these operating systems; the timing and consumer
acceptance of the Company's new or upgraded products; the ability to
successfully develop, market, support and acquire new products in an environment
of rapidly changing technology and operating systems and the cost of such
activities; acquisition risks, including increased costs and uncertain benefits
and the ability to effectively integrate operations of acquired companies and
manage growth, seasonality in the retail software markets in Europe; and risks
associated with international operations, including foreign currency conversion,
taxes and other legal restrictions.
The customer acceptance of upgraded operating systems are particularly important
events that increase the uncertainty and have increased the volatility of
Symantec's results. In addition, the Company operates in a complex legal
environment where, for example, an increasing number of patents are being issued
that are potentially applicable to software, and allegations of patent
infringement are becoming increasingly common in the software industry.
Symantec is currently evaluating claims of patent infringement asserted by IBM
with respect to certain of the Company's products. While the Company believes
that it has valid defenses to these claims, there can be no assurance that the
outcome of any related litigation or negotiation would not have a material
adverse impact on the Company. Additional information on these and other risk
factors which could adversely affect the Company's financial results is included
in the Annual Report on Form 10-K and the quarterly report on Form 10-Q as filed
by the Company with the Securities and Exchange Commission on June 26, 1996 and
August 9, 1996, respectively.
OVERVIEW
Symantec develops, markets and supports a diversified line of application and
system software products designed to enhance individual and workgroup
productivity as well as manage networked computing environments. Founded in
1982, the Company has offices in the United States, Canada, Japan, Australia,
Europe, the Pacific Rim and Latin America.
The Company's earnings and stock price have been and may continue to be subject
to significant volatility, particularly on a quarterly basis. Symantec has
previously experienced shortfalls in revenue and earnings from levels expected
by securities analysts, which has had an immediate and significantly adverse
effect on the trading price of the Company's common stock. This may occur again
in the future. Additionally, as a growing percentage of the Company's revenues
is generated through site licenses that often occur late in the quarter, the
Company may not learn of revenue shortfalls until late in the fiscal quarter,
which could result in an even more immediate and adverse effect on the trading
price of the Company's common stock.
Furthermore, the Company participates in a highly dynamic industry, which often
results in significant volatility of the Company's common stock price. In
particular, the impact of, and investors' assessment of the impact of the
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
market's acceptance and adoption rate of new operating systems on Symantec's
business will likely continue to result in significant volatility of Symantec's
stock price. Also, the Internet has allowed the emergence of new competitors in
network utilities who have subsequently extended there offerings to desktop
based products. In addition, customer buying patterns and their allocation
between investments in hardware verses software could change and cause a
significant adverse effect on the Company's performance and the Company's common
stock price. The trend towards server-based applications, the Internet and
intranet environments could have a material adverse effect on sales of the
Company's desktop-based products which may not be offset by sales of the
Company's network-based products.
During September 1996, Symantec sold its electronic forms software programs and
related tangible assets to JetForm for approximately $100 million, payable over
four years in quarterly installments. JetForm has the option to tender payment
in either cash or in unregistered JetForm common stock. Due to the uncertainty
regarding the receipt of these amounts, Symantec is only recognizing the amounts
as received from JetForm. During the September 30, 1996 quarter, Symantec
received the first quarterly payment in the form of JetForm unregistered stock.
The installment was included in net revenues. The minimum value of the
unregistered common stock has been guaranteed by JetForm to be $7.2 million.
Symantec has completed a number of acquisitions and expects to acquire other
companies in the future. While the Company believes that previous acquisitions
were in the best interests of the Company and its stockholders, acquisitions
involve a number of special risks, including the diversion of management's
attention to assimilation of the operations and personnel of the acquired
companies in an efficient and timely manner, the retention of key employees, the
difficulty of presenting a unified corporate image, the coordination of sales
and research and development efforts and the successful integration of the
acquired products.
The Company has lost certain employees of acquired companies whom it desired to
retain, and in some cases, the assimilation of the operations of acquired
companies took longer than initially had been anticipated by the Company. In
addition, because the employees of acquired companies have frequently remained
in their existing, geographically diverse locations and facilities, the Company
has not realized certain economies of scale or cost reductions that might
otherwise have been achieved.
Symantec typically incurs significant acquisition expenses for legal, accounting
and financial advisory services, the write-off of duplicative technology, the
consolidation and discontinuance of certain operational activities and other
expenses related to the combination of the companies. These expenses may have a
significant adverse impact on the Company's future profitability and financial
resources.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS
The following table sets forth each item from the consolidated statements of
operations as a percentage of net revenues and the percentage change in the
total amount of each item for the periods indicated.
<TABLE>
<CAPTION>
Three Months Percent Six Months Percent
Ended Change Ended Change
September 30, in Dollar September 30, in Dollar
1996 1995 Amounts 1996 1995 Amounts
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . . 100% 100% 1% 100% 100% 0%
Cost of revenues . . . . . . . . . . . . 19 32 (41) 19 26 (26)
---- ---- ---- ----
Gross margin . . . . . . . . . . . 81 68 20 81 74 9
Operating expenses:
Research and development. . . . . . . 19 22 (12) 20 20 --
Sales and marketing . . . . . . . . . 49 56 (12) 49 52 (5)
General and administrative. . . . . . 7 11 (34) 7 9 (28)
Acquisition, restructuring and
other expenses. . . . . . . . . . . . 6 -- 100 4 -- *
---- ---- ---- ----
Total operating expenses . . . . . 81 89 (7) 80 81 (2)
---- ---- ---- ----
Operating income (loss). . . . . . . . . -- (21) 98 1 (7) *
Interest income. . . . . . . . . . . . . 1 1 (9) 1 2 (18)
Interest expense . . . . . . . . . . . . -- -- (2) -- -- (15)
Other income (expense), net. . . . . . . -- (1) * -- (2) (87)
---- ---- ---- ----
Income (loss) before income taxes. . . . 1 (21) * 2 (7) *
Provision (benefit) for income taxes . . -- (5) * -- (2) *
---- ---- ---- ----
Net income (loss). . . . . . . . . . . . 1% (16)% * 2% (5)% *
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
* percentage change is not meaningful.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
NET REVENUES.
Net revenues were $109.2 million and $108.5 million in the quarters ended
September 30, 1996 and 1995, respectively. Net revenues were $218.4 million in
the six months ended September 30, 1996 and 1995. Net revenues for the three
and six months ended September 30, 1996 included a decrease in distribution and
international net revenues which was offset by a $7.2 million royalty payment
received from JetForm and an increase in site licenses and consulting net
revenues. During September 1996, Symantec sold its electronic forms software
products and related tangible assets to JetForm for approximately $100 million,
payable over four years in quarterly installments. Due to the uncertainty
regarding the collectibility of these amounts, Symantec is recognizing the
payments amounts as received from JetForm.
Net revenues from international sales were $29.7 million and $33.6 million and
represented 27% and 31% of net revenues in the quarters ended September 30, 1996
and 1995, respectively. The decrease in international net revenues during the
September 1996 quarter was primarily due to reduced products sales in Germany
and Holland which was partially offset by an increase in Japan and United
Kingdom as compared to the same period last year. Net revenues from
international sales were $64.7 million and $76.4 million and represented 30% and
35% of total net revenues for the six months ended September 30, 1996 and 1995,
respectively. International revenues for the six months ended September 30,
1995 included the one time recognition of approximately $7.2 million of
international net revenues previously deferred by Central Point prior to its
acquisition by Symantec.
During the September 1996 quarter, Symantec released various new products
including Norton Anti-virus for Windows 95 v. 2.0, Norton Utilities for Windows
95 v. 2.0, Internet Fast Find v. 1.0, SAM v. 4.5 and Norton Administrator Suite
- - Premier Edition v. 1.0.
The release of product upgrades typically result in an increase in net revenues
during the first three to six months following their introduction due to
purchases by existing users, usually at discounted prices, and initial inventory
purchases by Symantec's distributors. In addition, between the date Symantec
announces a new version or new product and the ultimate release date,
distributors, dealers and end users often delay purchases, cancel orders or
return existing versions of the Company's products in anticipation of the
availability of the new version or new product.
The Company's pattern of revenues and earnings may also be affected by a
phenomenon known as "channel fill." Channel fill occurs following the
introduction of a new product or a new version of a product as distributors buy
significant quantities of the new product or new version in anticipation of
sales of such product or version. Following such purchases, the rate of
distributors' purchases often declines in a material amount, depending on the
rates of purchases by end users or "sell-through." The phenomenon of channel
fill also may occur in response to sales promotions or incentives, or the
discontinuance of sales promotions or incentives, some of which may be designed
to encourage customers to accelerate purchases that might otherwise occur in
later periods. Channels also may become filled simply because the distributors
are unable to, or do not, sell their inventories to retail distribution or end
users as originally anticipated. If sell-through does not occur at a sufficient
rate, distributors will delay purchases or cancel orders in later periods or
return prior purchases in order to reduce their inventories. Such order delays
or cancellations can cause material fluctuations in revenues from one quarter to
the next. The impact is somewhat mitigated by the Company's deferral of revenue
associated with inventories estimated to be in excess of levels deemed
appropriate in the distribution channel; however, net revenues may still be
materially affected favorably or adversely by the effects of channel fill.
Channel fill did not have a material impact on the Company's revenues in the
three and six months ended September 30, 1996 and 1995 but may have a material
impact in future periods, especially in periods where a large number of new
products are introduced.
Symantec believes that many of its customers are moving toward an
enterprise-wide computing environment where more desktop personal computers will
be interconnected into large local-area and wide-area networks administered by
corporate MIS departments as well as through the public Internet and corporate
intranets. Symantec's entry into
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
the enterprise software market is still relatively new and, as a result,
Symantec is beginning to compete with companies with which it has not previously
competed. As a result, there is uncertainty regarding customer acceptance of
the Company's products as Symantec has not been a major supplier in the
enterprise market. These factors increase the uncertainty of forecasting
financial results. While the Company expects the market's shift toward
enterprise, Internet/intranet products to continue, there can be no assurance
that the Company's enterprise products will be successful or will gain customer
acceptance.
With the expansion to enterprise-wide computing systems markets, Symantec
believes that it must continue to develop relationships with systems integrators
and other third-party vendors that provide customer specific consulting and
integration services and deliver products developed for this market segment.
Furthermore, the sales cycle with respect to enterprise products is lengthy and
may be subject to integration and acceptance by the customer. In addition, a
very high proportion of enterprise product sales may be completed in the last
few days of each quarter, in part because customers are able, or believe that
they are able, to negotiate lower prices and more favorable terms. Each of
these factors increase the risk that forecasts of quarterly financial results
will not be achieved.
Enterprise products are frequently sold through site licenses where a license
for multiple workstations is sold to a customer at a negotiated price. Desktop
software products are generally sold through the distribution channel or
directly to end-users. Enterprise product revenues are typically comprised of
lower volume, high dollar site license transactions compared to desktop product
revenues which are typically comprised of higher volume, low dollar pre-packaged
product transactions. The prices of site licenses tend to vary based upon the
individual products purchased, the number of units licensed and the number of
workstations at the customer's site.
Price competition is significant in the microcomputer business software market
and may continue to increase and become even more significant in the future,
resulting in reduced profit margins. Should competitive pressures in the
industry continue to increase, Symantec may be required to reduce software
prices and/or increase its spending on sales, marketing and research and
development as a percentage of net revenues, resulting in lower profit margins.
This could have a material adverse effect on the Company's results of
operations. In addition, aggressive pricing strategies of competitors in other
software markets, some of whom have significant financial resources, may cause
the Company to further reduce software prices and/or increase sales and
marketing expenses on a number of the Company's products. Symantec has recently
reduced pricing on several of the Company's key products. These decreases were
more than offset by an increase in total number of units sold.
Many of the Company's major customers, including two large distributors, tend to
make the majority of their purchases at the end of the fiscal quarter, in part
because they are able, or believe that they are able, to negotiate lower prices
and more favorable terms. This end-of-period buying pattern means that
forecasts of quarterly and annual financial results are particularly vulnerable
to the risk that they will not be achieved, either because expected sales do not
occur or because they occur at lower prices or on less favorable terms to the
Company. The Company's distribution customers also carry the products of
Symantec's competitors, some of which have significant financial resources. The
distributors have limited capital to invest in inventory, and their decisions to
purchase the Company's products is partly a function of pricing, terms and
special promotions offered by Symantec as well as by its competitors over which
the Company has no control and which it cannot predict.
While Symantec's diverse product line has tended to lessen fluctuations in
quarterly net revenues, these fluctuations have occurred recently and are likely
to occur in the future. These fluctuations may be caused by a number of
factors, including the timing of announcements and releases of new or enhanced
versions of its products and product upgrades, the introduction of competitive
products by existing or new competitors, reduced demand for any given product,
seasonality in the retail software market in Europe, the market's transition
between operating systems and the transition from a desktop PC environment to an
enterprise-wide environment. These factors may cause significant fluctuations
in net revenues and, accordingly, operating results.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
The Company has in the past and is continuing to devote substantial efforts to
the development of software products that operate on Microsoft's Windows 95
and/or Windows NT operating systems. Microsoft has incorporated advanced
utilities including telecommunications, facsimile and data recovery utilities in
Windows 95 and may include additional product features in future releases of its
operating systems that may decrease the demand for certain of the Company's
products. Should the Company be unable to successfully or timely develop
products that operate under these operating systems, the Company's future net
revenues and operating results would be immediately and significantly adversely
affected. In addition, as the timing of delivery and adoption of many of
Symantec's products is dependent on the adoption rate of these operating
systems, which the Company and securities analysts are unable to predict, the
ability of Symantec and securities analysts to forecast the Company's net
revenues has been and will continue to be adversely impacted. As a result,
there is a heightened risk that net revenues and profits will not be in line
with analysts' expectations in the periods following the introduction of new or
upgraded operating systems.
The length of Symantec's product development cycle has generally been greater
than Symantec originally expected. Although such delays have undoubtedly had a
material adverse effect on Symantec's business, Symantec is not able to quantify
the magnitude of net revenues that were deferred or lost as a result of any
particular delay because Symantec is not able to predict the amount of net
revenues that would have been obtained had the original development expectations
been met. Delays in product development, including products being developed for
currently available operating systems and operating systems under development
are likely to occur in the future and could have a material adverse effect on
the amount and timing of future revenues. Due to the inherent uncertainties of
software development projects, Symantec does not generally disclose or announce
the specific expected shipment date of the Company's product introductions. In
addition, there can be no assurance that any products currently being developed
by Symantec will be technologically successful, that any resulting products will
achieve market acceptance or that the Company's products will be effective in
competing with products either currently in the market or introduced in the
future.
During fiscal 1993, Symantec believes net revenues were adversely affected by an
unexpected substantial price reduction in 486-based personal computers that
caused a shift in customer spending from software to personal computer hardware.
Symantec also believes that the shift was caused by the introduction of Windows
3.1, which required more computing capability. The next class of personal
computers, including those based on Intel's P6/Pentium Pro microprocessor or
Motorola, Inc.'s Power-PC, have started to reduce in price, and there may be
another shift in customer buying away from software and Symantec's products,
which could result in significantly reduced revenues and a material adverse
effect on operating results. In addition, Windows 95 and Windows NT require
significantly more computer memory and hard disk space than Windows 3.1, and if
there is a shift from software to hardware spending, there could be an adverse
effect on the sales of computer hardware and software. Either of these events
could result in significantly reduced net revenues and have a material adverse
effect on Symantec's operating results. Symantec has noted that P6/Pentium Pro
microprocessors are being marketed aggressively by Intel.
The Company estimates and maintains reserves for product returns. Symantec's
return policy allows its distributors, subject to certain limitations, to return
purchased products in exchange for new products or for credit towards future
purchases. End users may return products through dealers and distributors
within a reasonable period from the date of purchase for a full refund, and
retailers may return older versions of the Company's products. Various
distributors and resellers may have different return policies that may
negatively impact the level of products which are returned to Symantec. Product
returns occur when the Company introduces upgrades and new versions of products
or when distributors order excessive product. In addition, competitive factors
often require the Company to offer rights of return for products that
distributors or retail stores are unable to sell. Symantec has experienced, and
may experience in the future, significant increases in product returns above
historical levels from customers of acquired companies after an acquisition is
completed. Symantec prepares detailed analyses of historical return rates when
estimating anticipated returns and maintains reserves for product returns. In
addition to detailed historical
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
return rates, the Company's estimation of return reserves takes into
consideration upcoming product upgrades, current market conditions, customer
inventory balances and any other known factors that could impact anticipated
returns. Based upon returns experienced, the Company's estimates have been
materially accurate. The impact of actual returns on net revenues, net of such
provisions, has not had a material effect on the Company's liquidity as the
returns typically result in the issuance of credit towards future purchases as
opposed to cash payments to the distributors. However, there can be no
assurance that future returns will not exceed the reserves established by the
Company or that future returns will not have a material adverse effect on the
operating results of the Company.
The Company's product return reserve balances typically fluctuate from period to
period based upon the level and timing of product upgrade releases. Product
return reserve balances at September 30, 1996 were substantially lower than
reserve balances at September 30, 1995. The decrease in the product return
reserve balance is primarily related to the introduction of Symantec's
Windows 95 products during the quarters ending September 30, 1995 which had high
sell-in volumes. The level of actual product returns and related product return
reserves is largely a factor of the level of product sell-in (gross revenue)
from normal sales activity and the replacement of obsolete quantities with the
current version of the Company's product. As a result, gross revenues generally
move in the same direction as product returns. Changes in the levels of product
returns and related product return reserves are generally offset by changing
levels of gross revenue and, therefore, do not typically have a material impact
on reported net revenues.
The Company operates with relatively little backlog; therefore, if near-term
demand for the Company's products weakens in a given quarter, there could be an
immediate, material adverse effect on net revenues and on the Company's
operating results.
Symantec maintains a research and development facility in Santa Monica,
California that was damaged during the January 1994 earthquake in Southern
California. Much of the Company's administration, sales and marketing,
manufacturing and research and development facilities are located on the west
coast of the United States. Future earthquakes or other natural disasters could
cause a significant disruption to the Company's operations and may cause delays
in product development that could adversely impact future revenues of the
Company.
Symantec's domestic order entry department is located in Oregon, with shipments
being made from a warehouse in California. Order entry and shipping is
similarly separated in Europe. A disruption in communications between these
facilities, particularly at the end of a fiscal quarter, would likely result in
an unexpected shortfall in net revenues and could result in an adverse impact on
operating results.
Symantec provides a wide variety of free and fee-based technical support
services to its customers. Symantec provides its customers with free support
via electronic and automated services as well as 90 days complimentary free
telephone support for certain of the Company's products. In addition, Symantec
offers both individual users and corporate customers a variety of fee-based
support options for certain of the Company's products, designed to meet their
individual technical support requirements. Fee-based technical support services
did not generate significant net revenues in the three and six months ended
September 30, 1996 and 1995 and are not expected to generate material net
revenues in the near future.
GROSS MARGIN.
Gross margin represents net revenues less cost of revenues. Cost of revenues
consists primarily of manufacturing expenses, manuals, packaging, royalties paid
to third parties under publishing contracts and amortization and write-off of
capitalized software. Amortization of capitalized software, including
amortization and the write-off of both purchased product rights and capitalized
software development expenses, totaled $1.9 million and $6.5 million for the
quarters ended September 30, 1996 and 1995, respectively, and $2.7 million and
$7.4 million for the six months ended September 30, 1996 and 1995, respectively.
During the September 1995 quarter, Delrina incurred expenses of approximately
$4.5 million for the write-off of previously capitalized software development
costs for software designed to operate on Windows 3.1.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Gross margins were 81% and 68% for the quarters ended September 30, 1996 and
1995, respectively. The increase in the gross margin percentage is primarily
due to a $7.2 million installment payment included in net revenues and $1.2
million of non-recurring costs included in cost of goods sold associated with
the JetForm royalty payment received during the September 1996 quarter and $2.0
million of high margin consulting fees recorded during the September 1996
quarter. The September 30, 1995 quarter included significant expenses incurred
by Delrina related to the write-off of certain products designed to operate on
Windows 3.1. Symantec believes that the gross margin percentage should remain
at approximately 80% to 83% for the remainder of Fiscal 1997 unless there is a
significant change in Symantec's net revenues.
The Company has capitalized significant development costs in accordance with
Statement of Financial Accounting Standard No. 86 during the September 1996
quarter and expects to capitalize significant development costs during the next
several quarters related to the development of certain networking software
products. Should the Company be unable to successfully or timely develop these
products or should these products not achieve timely market acceptance, the
Company may incur significant expenses associated with the write-off of these
previously capitalized costs.
The microcomputer business software market has been subject to rapid changes
that can be expected to continue. The introduction of new or upgraded operating
systems and future technology or market changes may cause certain products to
become obsolete more quickly than expected and thus may result in capitalized
software write-offs and an increase in required inventory reserves and,
therefore, reduced gross margins and net income. In addition, the modifications
to computer software, including the correction of software bugs, may result in
significant inventory rework costs, including the cost of replacing inventory in
the distribution channel.
RESEARCH AND DEVELOPMENT EXPENSES.
Research and development expenses decreased 13% to $20.8 million or 19% of net
revenues in the quarter ended September 30, 1996 from $23.8 million or 22% of
net revenues in the quarter ended September 30, 1995. The decrease in research
and development expense is principally due to an increase in capitalized
software development costs and decreased product development efforts associated
with the Company's development of certain software products. Research and
development expenses were 20% of net revenues in the six months ended
September 30, 1996 and 1995.
While Symantec believes its research and development expenditures will result in
successful product introductions, including products being developed for
currently available operating systems and operating systems under development,
the uncertain outcome of software development projects means that increased
research and development efforts will not necessarily result in successful
product introductions due to technical difficulties, market conditions,
competitive products and other factors, such as customer acceptance of products
and new operating systems.
Research and development expenditures are charged to operations as incurred.
During the three and six month periods ending September 30, 1996, the Company
capitalized approximately $2.5 million and $5.4 million, respectively, of costs
principally associated with the development of certain networking software
products in accordance with Statement of Financial Accounting Standard No. 86.
To the extent the Company capitalizes its product development costs, the effect
is to defer such costs to future periods and match them to the revenue generated
by the developed products. Amounts capitalized may fluctuate depending in part
on the number and status of internally developed software projects. Capitalized
software development costs were not material as of September 30, 1995.
SALES AND MARKETING EXPENSES.
Sales and marketing expenses decreased 12% to $53.0 million or 49% of net
revenues in the quarter ended September 30, 1996 from $60.4 million or 56% of
net revenues in the prior year's comparable quarter. Sales and
18
<PAGE>
marketing expenses were $106.7 million and $112.7 million and represented 49%
and 52% of net revenues for the six months ended September 30, 1996 and 1995,
respectively. The decrease in sales and marketing expenses was principally due
to the elimination of duplicative sales and marketing expenses as a result of
the acquisition of Delrina by Symantec.
Symantec believes substantial sales and marketing efforts are essential to
achieve revenue growth and to maintain and enhance Symantec's competitive
position. Accordingly, with the introduction of new and upgraded products,
Symantec expects the expenses associated with these efforts to continue to
constitute its most significant operating expense. There can be no assurance
that these increased sales and marketing efforts will be successful.
GENERAL AND ADMINISTRATIVE EXPENSES.
General and administrative expenses decreased 34% from $11.8 million or 11% of
net revenues in the quarter ended September 30, 1995 to $7.8 million or 7% of
net revenues in the quarter ended September 30, 1996. General and
administrative expenses decreased 28% from $20.9 million or 10% of net revenues
for the six months ended September 30, 1995 to $15.1 million or 7% of net
revenues for the six months ended September 30, 1996. The decrease in general
administrative expenses is primarily due to the elimination of duplicative
general and administrative expenses as a result of the acquisition of Delrina by
Symantec.
ACQUISITION, RESTRUCTURING AND OTHER EXPENSES.
ACQUISITION EXPENSES. During the quarter ended September 30, 1996, Symantec
recorded a $1.8 million charge in connection with the write off of its
investment in a joint venture and a $3.1 million charge in connection with the
acquisition of certain in process software development technology.
Symantec recorded total acquisition charges of $0.6 million in the quarter ended
June 30, 1996 in connection with the acquisition of Fast Track. The charges
included $0.4 million for legal, accounting and financial advisory services and
$0.2 million for the consolidation and discontinuance of certain operational
activities and other acquisition related expenses.
In the quarter ended June 30, 1995, the Company recognized a reduction in
accrued acquisition and restructuring expenses related to CPS of $2.3 million as
actual costs incurred were less than costs previously accrued by the companies.
Symantec has acquired a number of companies in the past and may make additional
acquisitions in the future. While the Company believes that previous
acquisitions were in the best interest of the Company and its stockholders,
acquisitions involve a number of special risks, including the diversion of
management's attention to assimilation of the operations and personnel of the
acquired companies in an efficient and timely manner, the retention of key
employees, the difficulty of presenting a unified corporate image, the
coordination of research and development and sales efforts and the integration
of the acquired products.
Symantec has lost certain employees of acquired companies whom it desired to
retain, and, in some cases, the assimilation of the operations of acquired
companies took longer than initially anticipated by the Company. In addition,
because the employees of acquired companies have frequently remained in their
existing, geographically diverse locations and facilities, Symantec has not
realized certain economies of scale or cost reductions that might otherwise have
been achieved.
Symantec typically incurs significant acquisition expenses for legal, accounting
and financial advisory services, the write-off of duplicative technology and
other expenses related to the combination of Symantec and an acquired company.
These expenses may have a significant adverse impact on Symantec's future
profitability and financial resources.
RESTRUCTURING EXPENSES. In February 1995, Symantec announced a plan to
consolidate certain research and development activities. This plan was designed
to gain greater synergy between the Company's Third Generation
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Language and Fourth Generation Language development groups. During the quarter
ended June 30, 1995, the Company incurred $2.2 million for the relocation costs
of moving equipment and personnel. This relocation has subsequently been
completed.
During the quarter ended September 30, 1996, Symantec recorded $2.5 million for
costs related to the restructuring of certain domestic and international sales
and research and development operations. This restructuring plan should be
substantially completed during fiscal 1997.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE).
Interest income was $1.8 million and $1.9 in the quarters ended September 30,
1996 and 1995, respectively, and $3.4 million and $4.2 million for the six
months ended September 30, 1996 and 1995, respectively. The decrease in
interest income for the three and six month periods is due to lower average
interest rates on invested cash balances.
Interest expense was $0.3 million for the three months ended September 30, 1996
and 1995, and $0.7 million and $0.8 million for the six months ended
September 30, 1996 and 1995, respectively. Other income (expense) is primarily
comprised of foreign currency exchange gains and losses from fluctuations in
foreign currency exchange rates.
Symantec conducts business in various foreign currencies and is therefore
subject to the transaction exposures that arise from foreign exchange rate
movements between the dates that foreign currency transactions are recorded and
the dates that they are settled. Symantec utilizes some natural hedging to
mitigate Symantec's transaction exposures and, effective December 31, 1993,
Symantec commenced hedging some residual transaction exposures through the use
of one-month forward contracts. At September 30, 1996, there was a total of
approximately $84.0 million of outstanding forward exchange contracts. The net
liability of forward contracts was approximately $35.5 million at September 30,
1996. There have been no significant gains or losses to date with respect to
these activities. Gains or losses would occur on forward contracts held by
Symantec when changes in foreign currency exchange rates occur. These gains and
losses should be largely offset by the transaction gains and losses resulting
from foreign currency denominated cash, accounts receivable, trade payables,
intercompany balances, and short-term notes. There can be no assurance that
these strategies will continue to be effective or that transaction gains or
losses can be minimized or forecasted accurately. Symantec does not hedge its
translation risk.
INCOME TAX PROVISION.
The effective tax provision for the six months ended September 30, 1996 was 10%,
which compared to an effective income tax benefit of 30% in the prior year's
comparable period. The lower tax benefit for the six months ended September 30,
1996 was primarily attributable to unbenefitted pre-acquisition losses from
Delrina. Symantec believes that the effective tax rate may increase in future
fiscal years.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments increased $11.1 million from $129.2 million at
March 31, 1996 to $140.3 million at September 30, 1996, largely due to cash
provided by operating activities, which was partially offset by cash
expenditures for capital equipment. Net cash provided by operating activities
was $28.2 million and was comprised of the Company's net income of $3.9 million
and non-cash related expenses of $17.3 and an increase in net assets and
liabilities of $7.0 million.
Trade accounts receivable decreased $6.9 million from $72.3 million at March 31,
1996 to $65.4 million at September 30, 1996 primarily due to improved cash
collections. Net inventories decreased $5.4 million from $7.9 million at March
31, 1996 to $2.5 million at September 30, 1996. The decrease in inventory
balances was due to the recognition of revenue previously deferred and higher
Delrina product inventories at March 31, 1996.
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Symantec has a $10.0 million bank line of credit that expires in March 1998.
The line of credit is available for general corporate purposes and bears
interest at the bank's reference (prime) interest rate. Borrowings under this
line are unsecured and are subject to Symantec maintaining certain financial
ratios and profits. The Company was in compliance with the line of credit
covenants at September 30, 1996. During the quarter ended September 30, 1996,
there was approximately $0.4 million of standby letters of credit outstanding
under this line of credit. There were no borrowings outstanding under this line
at September 30, 1996. Future acquisitions by the Company may cause the Company
to be in violation of the line of credit covenants; however, the Company
believes that if the line of credit were canceled or amounts were not available
under the line of credit, there would not be a material adverse impact on the
financial results, liquidity or capital resources of the Company.
Symantec may utilize significant amounts of cash in connection with the
potential acquisition of additional companies, capital equipment and software
product rights in the future. However, if the Company were to sustain
significant losses, there can be no assurances that the bank line of credit,
which is available through March 1998, would remain available. Additionally,
Symantec could be required to reduce operating expenses, which could result in
further product delays; reassess acquisition opportunities, which could
negatively impact Symantec's growth objectives; and/or pursue further financing
options. Symantec believes existing cash and short-term investments will be
sufficient to fund operations for the next year.
21
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information with respect to this item is incorporated by reference to Note 7 of
Notes to Consolidated Financial Statements included herein on page 9 of this
Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) An annual meeting of stockholders of Symantec was held on September 25,
1996.
(b) Matters voted on at the meeting and votes cast on each were as follows:
<TABLE>
<CAPTION>
Total Vote Authority
Total Vote Withheld Withheld
For Each From Each From All
Director Director Nominees
---------- ---------- ---------
<S> <C> <C> <C>
1. To elect six directors to Symantec's Board
of Directors, each to hold office until
his successor is elected and qualified
or until his earlier resignation or removal.
Charles M. Boesenberg. . . . . . . . . . . . 42,605,234 1,954,958 --
Walter W. Bregman. . . . . . . . . . . . . . 42,607,422 1,952,770 --
Carl D. Carman . . . . . . . . . . . . . . . 42,599,179 1,961,013 --
Gordon E. Eubanks, Jr. . . . . . . . . . . . 42,469,582 2,090,610 --
Robert S. Miller . . . . . . . . . . . . . . 42,594,089 1,966,103 --
Leslie L. Vadasz . . . . . . . . . . . . . . 42,605,275 1,954,917 --
<CAPTION>
Broker
For Against Abstain "Non-Votes"
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
2. To consider and act upon a proposal 18,042,317 14,859,144 244,250 11,414,481
to amend the 1996 Equity Incentive Plan to
increase the number of shares authorized for
issuance by the number of options previously
granted pursuant to Symantec's terminated
1988 Option Plan that expire, are canceled or
become unexercisable for any reason without
having been exercised in full, provided that
such additional number does not exceed
1,336,373 (to total authorized of 4,077,946).
3. To consider and act upon a proposal 24,140,448 8,822,807 182,456 11,414,481
to (a) amend the 1989 Employee Stock
Purchase Plan to increase the number
of shares authorized for issuance by
1,400,000 to 3,400,000; and (b) amend
employee eligibility requirements so that
persons who are employed by Symantec as
of the third business day before the
beginning of an offering period and meet the
other eligibility requirements are eligible
to participate in the Stock Purchase Plan.
4. To consider and act upon a proposal to 42,926,234 140,867 1,493,091 --
ratify the Board of Director's selection
of Ernst & Young as Symantec's
independent auditors.
</TABLE>
22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed as part of, or incorporated by
reference into, this Form 10-Q:
10.01 Participation Agreement dated as of October 18, 1996 by and among
Symantec Corporation, Sumitomo Bank Leasing and Financing,
Inc., The Sumitomo Bank, Limited, San Francisco Branch and
the Sumitomo Bank, Limited, San Francisco Branch
10.02 Appendix A to Participation Agreement, Master Lease, Lease
Supplements Loan Agreement, Pledge Agreement, Lessor
Mortgages, and Guaranty
10.03 Master Lease and Deed of Trust dated as of October 18, 1996
between Symantec Corporation and Sumitomo Bank Leasing and
Finance, Inc.
10.04 Lease Supplement No. 2 and Memorandum of Lease and Deed of Trust
dated as of October 22, 1996 among Symantec Corporation,
Sumitomo Bank Leasing and Finance, Inc. and First American
Title Insurance Company
10.05 Guaranty dated as of October 18, 1996 made by Symantec
Corporation in favor of Various Financial Institutions and
The Sumitomo Bank, Limited, San Francisco Branch
10.06 Pledge Agreement dated as of October 18, 1996, made by Symantec
Corporation, in favor of Sumitomo Bank, Limited, San
Francisco Branch for the benefit of the Lenders, and
Donaldson, Lufkin, Jenrette Securities Corporation, as
collateral agent
11.01 Computation of Net Income (Loss) Per Share.
27.01 Financial Data Schedule.
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Company on September 25, 1996,
reporting the asset sale of the FormFlow family of electronic forms
software programs and related tangible assets of Delrina to JetForm,
pursuant to an Asset Purchase Agreement dated as of September 10, 1996
executed between Delrina and JetForm.
ITEMS 2, 3, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 11, 1996 SYMANTEC CORPORATION
By /s/ Robert R. B. Dykes
-------------------------------------------
Robert R. B. Dykes
Executive Vice President/Worldwide
Operations and Chief Financial Officer
(duly authorized officer)
/s/ Howard A. Bain III
-------------------------------------------
Howard A. Bain III
Vice President Finance and
Chief Accounting Officer
24
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
dated as of October 18, 1996
among
SYMANTEC CORPORATION,
as Lessee, Pledgor and Guarantor,
SUMITOMO BANK LEASING AND FINANCE, INC.,
as Lessor,
THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH,
and the other
VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED HEREIN,
as Lenders,
and
THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH
as Agent
------------------------------------
Lease Financing of Three Properties
Located in Cupertino, California
for Symantec Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "PARTICIPATION AGREEMENT"), dated as of
October 18, 1996, is entered into by and among SYMANTEC CORPORATION, a Delaware
corporation, as the Lessee, Pledgor and Guarantor (together with its permitted
successors and assigns, the "LESSEE"; in its capacity as Pledgor, the "PLEDGOR";
and in its capacity as Guarantor, the "GUARANTOR"); SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation, as Lessor (together with its permitted
successors and assigns, the "LESSOR"); THE SUMITOMO BANK, LIMITED, SAN FRANCISCO
BRANCH, a Japanese banking organization acting through its San Francisco Branch,
and the other various financial institutions as are or may from time to time
become lenders (the "LENDERS") under the Loan Agreement; and THE SUMITOMO BANK,
LIMITED, SAN FRANCISCO BRANCH, as Agent (in such capacity, the "AGENT").
W I T N E S E T H:
WHEREAS, on each Acquisition Date, the Lessor will purchase from one or
more third parties designated by the Lessee parcels of Land, together with all
Improvements thereon, if any;
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires
to lease from the Lessor, each Property; and
WHEREAS, the Lessor is willing to provide a portion of the funding of the
costs of the acquisition of Land and all Improvements thereon, if any, Fees and
the Transaction Expenses incurred in connection therewith;
WHEREAS, the Lenders are willing to provide financing of the remaining
portion of the costs of acquisition of Land and all Improvements thereon, if
any, Fees and the Transaction Expenses incurred in connection therewith; and
WHEREAS, to secure such financing (a) the Lessor will have the benefit of a
first priority Lien on the Properties and
<PAGE>
(b) the Lenders will have the benefit of (i) a Lien on the Lessor's right, title
and interest in the Properties, (ii) a guaranty of all of the obligations of the
Lessor under the Loan Agreement, and (iii) a pledge of certain marketable
securities of the Lessee;
In consideration of the mutual agreements contained in this Participation
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in APPENDIX A hereto for
all purposes hereof; and the rules of interpretation set forth in APPENDIX A
hereto shall apply to this Participation Agreement.
ARTICLE II
CONDITIONS PRECEDENT TO DOCUMENTATION AND ACQUISITION DATES
SECTION II.1. DOCUMENTATION DATE. The date of effectiveness of this
Participation Agreement (the "DOCUMENTATION DATE") shall be deemed to have
occurred on the earliest date on which the following conditions precedent shall
have been satisfied or waived, in the reasonable discretion of the Lessor and
Agent:
(a) PARTICIPATION AGREEMENT. This Participation Agreement shall have
been duly authorized, executed and delivered by the parties hereto.
(b) MASTER LEASE. The Master Lease shall have been
-2-
<PAGE>
duly authorized, executed and delivered by the parties thereto.
(c) LOAN AGREEMENT. The Loan Agreement shall have been duly
authorized, executed and delivered by the parties thereto.
(d) ASSIGNMENT OF LEASE AND RENT. The Assignment of Lease and Rent,
shall have been duly authorized, executed and delivered by the Lessor, as
assignor, to the Lenders, as assignees, and the Assignment of Lease and
Rent, shall have been consented to and acknowledged by the Lessee.
(e) GUARANTY. The Guaranty shall have been duly authorized, executed
and delivered by the Company.
(f) PLEDGE AGREEMENT. The Pledge Agreement shall have been duly
authorized, executed and delivered by the parties thereto.
(g) CORPORATE DOCUMENTS. The Lessee shall have delivered to the
Agent, the Lessor and each Lender
(i) a certificate of its Secretary or an Assistant Secretary
attaching and certifying as to (A) the resolutions of the Board of
Directors duly authorizing the execution, delivery and performance by
it of each Operative Document to which it is or will be a party, (B)
its certificate of incorporation and by-laws, and (C) the incumbency
and signature of persons authorized to execute and deliver on its
behalf the Operative Documents to which it is a party; and
(ii) a certificate of good standing with respect to it issued by
the Secretary of State of the State of Delaware.
(h) LEGAL OPINION. The Agent and the Lessor shall
-3-
<PAGE>
have received, with a copy for each Lender, an opinion of counsel for the
Lessee, covering the matters set forth in EXHIBIT C, dated the
Documentation Date and addressed to the Agent, the Lessor and the Lenders,
and otherwise in form and substance reasonably satisfactory to the Agent,
the Lessor and the Lenders.
(i) REPRESENTATIONS AND WARRANTIES. On the Documentation Date, the
representations and warranties of each of the Lessee and in each of the
other Operative Documents shall be true and correct in all material
respects as though made on and as of such date, except to the extent such
representations or warranties relate solely to an earlier date, in which
case such representations and warranties shall have been true and correct
in all material respects on and as of such earlier date.
(j) FEES. The Agent and the Lessor shall have received all Fees then
due and payable pursuant to the Fee Letter.
(k) CERTAIN TRANSACTION EXPENSES. Counsel for each of the
Participants shall have received, to the extent then invoiced, payment in
full in cash of all Transaction Expenses payable to such counsel pursuant
to SECTION 9.1.
All documents and instruments required to be delivered pursuant to this SECTION
2.1 shall be delivered at the offices of Mayer, Brown & Platt, 1675 Broadway,
New York, New York, or at such other location as may be determined by the
Lessor, the Lenders and the Lessee.
SECTION II.2. ACQUISITION DATES. Each closing date with respect to an
acquisition of Land (and the Improvements existing thereon, if any) (each an
"ACQUISITION DATE") shall occur on the date on which all the conditions
precedent thereto set forth in this SECTION 2.2 with respect to such acquisition
of Land shall have been satisfied or waived by the applicable parties as set
-4-
<PAGE>
forth herein. The parties hereto agree that the Lessor's obligations to acquire
any parcel of Land (and Improvements thereon, if any) and the obligation of the
Lessor to make available any related Lessor Amount shall not be subject to any
conditions precedent set forth in this SECTION 2.2 to the extent such conditions
are actions required of the Lessor. Subject to the preceding sentence, the
obligation of the Lessor to acquire any Land (and/or Improvements, if any) on an
Acquisition Date, the obligation of the Lessor to make available any related
Lessor Amount on such Acquisition Date and the obligation of each Lender to make
any related Loan on such Acquisition Date, are subject to satisfaction or waiver
of the following conditions precedent:
(a) FUNDING REQUEST. Each of the Lenders, the Lessor and the Agent
shall have received a fully executed counterpart of the applicable Funding
Request in accordance with SECTION 3.4. Each of the delivery of a Funding
Request and the acceptance of the proceeds of such Advance shall constitute
a representation and warranty by the Lessee that on such Acquisition Date
(both immediately before and after giving effect to the making of such
Advance and the application of the proceeds thereof), the statements made
in SECTION 8.1 are true and correct.
(b) RESPONSIBLE OFFICER'S CERTIFICATE. The Lessor and the Lenders
shall each have received a Responsible Officer's Certificate of the Lessee,
in substantially the form of EXHIBIT B attached hereto, dated as of the
Acquisition Date, stating that (i) to such Responsible Officer's knowledge
each and every representation and warranty of the Lessee contained in each
Operative Document to which it is a party is true and correct in all
material respects on and as of such Acquisition Date; (ii) to such
Responsible Officer's knowledge no Default or Event of Default has occurred
and is continuing under any Operative Document to which it is a party with
respect to the Lessee; (iii) to such Responsible Officer's knowledge each
Operative Document to which the Lessee is a party is in full force and
effect with respect
-5-
<PAGE>
to it; and (iv) the Lessee has duly performed and complied with all
conditions contained herein or in any other Operative Document required to
be performed or complied with by it on or prior to such Acquisition Date.
(c) DEED. On or prior to such Acquisition Date, the Lessor shall
have received a Deed with respect to such Property (and/or all Improvements
located thereon) being purchased on such Acquisition Date, conveying fee
simple title to the applicable Land, and all Improvements existing thereon,
if any, to the Lessor and subject only to Permitted Liens.
(d) BILL OF SALE. On or prior to the Acquisition Date, the Lessor
shall have received a bill of sale (a "BILL OF SALE"), conveying title to
the Lessor in any Improvements and other personal property (other than
inventory) comprising part of the applicable Property.
(e) LEASE SUPPLEMENT LESSOR AND FINANCING STATEMENTS; RECORDATION.
On or prior to the Acquisition Date
(i) the Lessee and the Lessor shall have delivered to the Agent
and the Lenders the original counterpart of each of the Lease
Supplement executed by the Lessee and the Lessor with respect to the
applicable Property;
(ii) the Lessee shall have delivered to the Lessor all Lessor
Financing Statements relating to such Property as the Lessor or any
other Participant may reasonably request in order to protect the
Lessor's interest under the Master Lease and the Lease Supplement
relating to the applicable Property to the extent the Master Lease and
such Lease Supplement constitute security agreements; and
-6-
<PAGE>
(iii) each of the Participants shall have received evidence
reasonably satisfactory to it that each of (i) the Lease Supplement
and any other instrument constituting a Lessor Mortgage, and (ii) the
Lessor Financing Statements, in each case relating to such Property,
has been, or are being, recorded in a manner sufficient to properly
secure each of their interests therein.
(f) APPRAISAL. On or prior to the Acquisition Date, the Lessor and
the Lenders shall have received an Appraisal of the applicable Property, in
form and substance satisfactory to the Agent and the Lessor, which
Appraisal shall show that, as of the Acquisition Date, the Fair Market
Sales Value of such Property shall not be less than 100% of the sum of the
Property Acquisition Costs for such Property.
(g) EVIDENCE OF INSURANCE. The Lessor and the Lenders shall have
received evidence that the insurance maintained by the Lessee with respect
to such Property satisfies the requirements set forth in Article XIII of
the Master Lease, setting forth the respective coverage, limits of
liability, carrier, policy number and period of coverage.
(h) ENVIRONMENTAL AUDIT. The Lessor and each Lender shall have
received an Environmental Audit with respect to the applicable Property in
form and Substance reasonably satisfactory to the Lessor and the Agent.
(i) PROPERTY SURVEY AND TITLE INSURANCE. On or prior to the
Acquisition Date, the Lessee shall have delivered to each of the Lessor and
the Agent, on behalf of the Lenders, an American Land Title Association
("ALTA")/1992 (Urban) Survey of such Property certified to the Participants
and the title company and otherwise in form reasonably acceptable to the
Participants and a commitment to deliver an ALTA extended owners and
lenders title insurance policy covering such Property in favor of the
Lessor and the Agent,
-7-
<PAGE>
on behalf of the Lenders, respectively, such policy in an amount not less
than the sum of the related Property Acquisition Costs and to be reasonably
satisfactory to the Agent and the Lessor with such customary endorsements
issued by the title company as a routine matter, if requested by the Agent.
(j) SUBLEASES. With respect to any Property that as of the
Acquisition Date is subject to a sublease between the Lessee, as sublessor,
and the sublessee thereof, then on or prior to such Acquisition Date (i)
the Lessee shall have delivered a copy of each such sublease to the Lessor
and the Agent, and (ii) with respect to each such sublease, the Lessee
shall have executed and delivered, and caused each such sublessee to
execute and deliver, to the Lessor and the Agent, a Subordination,
Nondisturbance and Attornment agreement in the form of EXHIBIT D.
(k) GOVERNMENTAL APPROVALS. All necessary Governmental Actions
required by any Requirement of Law or any Property Legal Requirements for
the purpose of authorizing the Lessor to acquire the applicable Property
shall have been obtained or made and be in full force and effect.
(l) LITIGATION. No action or proceeding shall have been instituted,
nor shall any action or proceeding be threatened, before any Governmental
Authority, nor shall any order, judgment or decree have been issued or
proposed to be issued by any Governmental Authority (i) to set aside,
restrain, enjoin or prevent the full performance of any Operative Document
or any transaction contemplated hereby or thereby or (ii) which is
reasonably likely to materially and adversely affect the Lessee.
(m) REQUIREMENTS OF LAW. The transactions contemplated by the
Operative Documents do not and will not violate any Material Requirement of
Law and do not and will
-8-
<PAGE>
not subject the Lessor to any Material adverse regulatory prohibitions or
constraints.
(n) NO DEFAULT. There shall not have occurred and be continuing any
Default or Event of Default under any of the Operative Documents, and no
Default or Event of Default under any of the Operative Documents will have
occurred after giving effect to the acquisition of the Land and
Improvements located thereon, if any, requested by such Funding Request.
(o) NO MATERIAL ADVERSE CHANGE. As of the Acquisition Date, there
shall not have occurred any Material adverse change in the consolidated
assets, liabilities, results of operations, or financial condition of the
Lessee from that set forth in the Submitted Financial Statements.
(p) SUPPLEMENT TO ASSIGNMENT OF LEASE AND RENT. On or prior to such
Acquisition Date, the Lessor shall have delivered to the Agent a Supplement
to the Assignment of Lease and Rent with respect to the applicable Property
substantially in the form of Exhibit A thereto, together with a consent to
and acknowledgement of such Supplement duly executed by the Lessee.
(q) OPINION OF COUNSEL TO THE LESSEE. On the initial Acquisition
Date only, the Participants shall have received an opinion of counsel
located in the jurisdiction in which the applicable Land is situated in
form and substance reasonably acceptable to the Lessor and the Agent.
All documents and instruments required to be delivered pursuant to this SECTION
2.2 shall be delivered to the Lessor at the offices of Mayer, Brown & Platt,
1675 Broadway, New York, New York, or at such other locations as may be
determined by the Lessor, the Lenders and the Lessee.
-9-
<PAGE>
ARTICLE III
FUNDING OF ADVANCES
SECTION III.1. ADVANCES. Subject to the conditions and terms hereof, the
Lessor and the Agent shall take the following actions at the written request of
the Lessee on the Acquisition Date for each Property:
(a) the Lessor and the Agent shall make an Advance (out of the funds
provided by the Lessor and the Lenders) to the Lessee, for the purpose of
financing the acquisition of Land and Improvements existing thereon, if
any, and the Fees and the Transaction Expenses incurred in connection
therewith, and the proceeds of such Advances shall be made directly to the
Lessee or to such payees designated in writing by the Lessee;
(b) the Lessor shall acquire the Land and Improvements, if any (using
the funds provided by the Lessor and the Lenders); and
(c) the Lessor shall lease the Land and Improvements to the Lessee
under the Master Lease and the respective Lease Supplements.
Notwithstanding any other provision hereof, the Participants shall not be
obligated to make any Advance if, after giving effect thereto, the aggregate
outstanding amounts of each of the Loans and the Lessor Amounts would exceed the
Maximum Commitment Amount.
SECTION III.2. LESSOR COMMITMENT. Subject to the conditions and terms
hereof, the Lessor shall make available to the Lessee on the Acquisition Date
for each Property an amount (each such amount, a "LESSOR AMOUNT") in immediately
available funds equal to the Commitment Percentage of the Lessor of the
-10-
<PAGE>
amount of the Advance being funded on such Acquisition Date. Notwithstanding
any other provision hereof, the Lessor shall not be obligated to make available
any Lessor Amount if, after giving effect to the proposed Lessor Amount, the
outstanding aggregate amount of the respective Lessor Amounts of the Lessor
would exceed the Lessor's Commitment.
SECTION III.3. LENDERS' COMMITMENTS. Subject to the conditions and terms
hereof, the Lenders severally shall make Loans to the Lessor at the request of
the Lessee on the Acquisition Date for each Property in an amount in immediately
available funds equal to such Lender's Commitment Percentage of the amount of
the Advance being funded to Lessee on such Acquisition Date. Notwithstanding
any other provision hereof, no Lender shall be obligated to make any Loan if,
after giving effect to the proposed Loan, the outstanding aggregate amount of
such Lender's Loans would exceed such Lender's Commitment.
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<PAGE>
SECTION III.4. PROCEDURES FOR ADVANCES.
(a) With respect to each funding of an Advance, the Lessee shall give
the Lessor and the Agent prior written notice pursuant to a Funding Request
substantially in the form of EXHIBIT A (a "FUNDING REQUEST"), which Funding
Request shall be delivered not later than 10:00 a.m., five (5) Business
Days prior to the proposed Acquisition Date, specifying: (i) the proposed
Acquisition Date, (ii) the amount of Advance requested, and (iii) to which
Properties such Advance is being allocated and the amount allocated to each
Property. The Agent and the Lessor shall calculate the amounts of the
Lessor Amounts and the Loans required to fund the requested Advance as it
relates to each Property. In the event that the Lessor and the Lenders are
unable to obtain a LIBO Rate (Reserve Adjusted) for the period of the
Advance requested in any Funding Request, the Lessor and the Lenders shall
make available Lessor Amounts and Loans, as the case may be, at the
Alternate Base Rate equal to the Advance requested in such Funding Request.
Such Lessor Amounts and Loans shall accrue Yield or Interest, as the case
may be, at the Alternate Base Rate until the date on which the Lessor and
the Lenders shall be able to obtain a LIBO Rate (Reserve Adjusted) for the
amount of such Advance, at which time such Lessor Amounts and Loans shall
convert and thereafter accrue Yield and Interest, as the case may be, at
the LIBO Rate (Reserve Adjusted); PROVIDED, HOWEVER, that no such
conversion shall occur unless the Lessee shall have submitted an Interest
Period Selection Notice in connection therewith.
(b) The proceeds of each Advance shall be used solely to provide the
Lessee with funds with which to pay or reimburse itself for Property
Acquisition Costs.
ARTICLE IV
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<PAGE>
YIELD; INTEREST; FEES
SECTION IV.1. YIELD.
(a) The amount of the Lessor Amounts outstanding from time to time
shall accrue yield ("YIELD") at the Yield Rate, calculated using the actual
number of days elapsed and, when the Yield Rate is based on the LIBO Rate
(Reserve Adjusted), a 360-day year basis and, if calculated at the
Alternate Base Rate, a 360-day year basis if the Alternate Base Rate is
calculated at the Federal Funds Rate, and a 365-, or, if applicable, 366-,
day year basis if the Alternate Base Rate is calculated at the Prime Rate.
If all or any portion of the Lessor Amounts, any Yield payable thereon or
any other amount payable hereunder shall not be paid when due (whether at
stated maturity, acceleration thereof or otherwise), such overdue amount
shall bear interest at a rate per annum which is equal to the Overdue Rate.
(b) The Agent shall distribute, in accordance with ARTICLE VII, the
Lessor Basic Rent and all other amounts due with respect to the Lessor
Amounts paid to the Agent by the Lessee under the Lease from time to time.
(d) During the Base Lease Term, Yield shall accrue on outstanding
Lessor Amounts and shall be paid on each Scheduled Payment Date.
(e) During the Base Lease Term, the Lessee shall make an amortization
payment, if any, with respect to the aggregate Lessor Amounts, on the date
and in the amount(s) set forth in the Master Rent Schedule.
(f) The outstanding aggregate Lessor Amounts shall be repaid in full
on the Maturity Date.
SECTION IV.2. INTEREST ON LOANS.
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<PAGE>
(a) Each Loan shall accrue interest computed and payable in
accordance with the terms of the Loan Agreement.
(b) The Agent shall distribute, in accordance with the ARTICLE VII,
the Lender Basic Rent and all other amounts due with respect to the Loans
paid to the Lessor by the Lessee under the Lease from time to time.
SECTION IV.3. FEES. The Lessee shall pay the Fees to the Lessor and the
Agent.
ARTICLE V
CERTAIN INTENTIONS OF THE PARTIES
SECTION V.1. NATURE OF TRANSACTION.
(a) The parties hereto intend that (i) for financial accounting
purposes with respect to the Lessee, the Lessor will be treated as the
owner and the lessor of the Properties and the Lessee will be treated as
the lessee of the Properties and (ii) for all other purposes, including
federal and all state and local income tax purposes, state real estate and
commercial law and bankruptcy purposes, (A) the Lease will be treated as a
financing arrangement, (B) the Lessor and the Lenders will be deemed
lenders making loans to the Lessee in an amount equal to the sum of the
Lessor Amounts and the outstanding principal amount of the Loans, which
loans are secured by the Properties and (C) the Lessee will be treated as
the owner of the Properties and will be entitled to all tax benefits
ordinarily available to an owner of properties like the Properties for such
tax purposes. Nevertheless, the Lessee acknowledges and agrees that
neither the Lessor nor any of the Lenders has made any representations or
warranties to the Lessee concerning the tax, accounting or legal
characteristics of the Operative Documents and that the Lessee has obtained
and relied upon
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<PAGE>
such tax, accounting and legal advice concerning the Operative Documents as
it deems appropriate.
(b) Specifically, without limiting the generality of CLAUSE (a) of
this SECTION 5.1, the parties hereto intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute
of the United States of America or any State or Commonwealth thereof
affecting the Lessee, the Lessor, or the Lenders or any collection actions,
the transactions evidenced by the Operative Documents shall be regarded as
loans made by the Lessor and the Lenders as unrelated third party lenders
of the Lessee.
SECTION V.2. AMOUNTS DUE UNDER LEASE. Anything else herein or elsewhere
to the contrary notwithstanding, it is the intention of the Lessee, the Lessor
and the Lenders that: (i) the amount and timing of installments of Basic Rent
due and payable from time to time from the Lessee under the Lease shall be equal
to the aggregate payments due and payable as interest on the Loans and Yield on
the Lessor Amounts on each Basic Rent Payment Date; (ii) if the Lessee elects
the Purchase Option or becomes obligated to purchase any of the Properties under
the Lease, the Loans, the Lessor Amounts, all interest, Yield and Fees thereon
and all other obligations of the Lessee owing to the Lessor and the Lenders
shall be paid in full by the Lessee; (iii) if the Lessee properly elects the
Remarketing Option, the Lessee shall only be required to pay to the Lessor the
proceeds of the sale of each of the Properties, the Loan Balance and any amounts
due pursuant to ARTICLE XIII hereof and Section 20.2 of the Master Lease (which
aggregate amounts may be less than the Lease Balance); and (iv) upon an Event of
Default resulting in an acceleration of the Lessee's obligation to purchase the
Properties under the Lease, the amounts then due and payable by the Lessee under
the Lease shall include all amounts necessary to pay in full the Lease Balance,
plus all other amounts then due from the Lessee to the Participants under the
Operative
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Documents.
ARTICLE VI
ADDITIONAL COLLATERAL
SECTION VI.1. DEFICIENCY. If the fair market value, as determined by the
Collateral Agent, of the Additional Collateral held by the Collateral Agent
shall be less than 102.0% of the Loan Balance then outstanding (any such day of
determination, a "DEFICIENCY DATE"), and the Lessee has been given notice of
such deficiency by the Collateral Agent pursuant to the terms and conditions of
the Pledge Agreement, THEN, within two Business Days of such Deficiency Date,
the Lessee shall deposit with the Collateral Agent such Additional Collateral
("DEFICIENCY COLLATERAL") so as to cause the fair market value, as determined by
the Collateral Agent, of Additional Collateral then held by the Collateral Agent
pursuant to the terms and conditions of the Pledge Agreement, and after giving
effect to the deposit of such Deficiency Collateral, to be equal to or in excess
of 102.0% of the then outstanding Loan Balance.
SECTION VI.2. SURPLUS. If on any day the fair market value of the
Additional Collateral held by the Collateral Agent pursuant to terms and
conditions of the Pledge Agreement shall exceed 102.0% of the then outstanding
Loan Balance, and provided that no Default or Event of Default has occurred and
is continuing, then the Lessee may request in writing to the Agent and the
Lessor that the Lessor and the Agent cause the Collateral Agent to release to
the Lessee Additional Collateral in an amount such that after giving effect to
such release, the fair market value, as determined by the Collateral Agent of
the remaining Additional Collateral held by the Collateral Agent subject to the
terms and conditions of the Pledge Agreement shall equal or exceed 102.0% of the
then outstanding Loan Balance (such released Additional Collateral, "SURPLUS
COLLATERAL"). Upon receipt of such notice, and subject to the terms and
conditions of the
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Pledge Agreement, the Agent and the Lessor promptly shall cause the Collateral
Agent to release such Surplus Collateral to the Lessee; PROVIDED, HOWEVER, that
after giving effect to such release, no Default of Event of Default shall occur;
and PROVIDED FURTHER, that no release of Surplus Collateral shall in any way
affect the obligations of the Lessee pursuant to SECTION 6.1.
ARTICLE VII
DISTRIBUTIONS
SECTION VII.1. BASIC RENT. Each payment of Basic Rent (and any payment of
interest on overdue installments of Basic Rent) received by the Agent shall be
distributed by the Agent to the Lessor and the Lenders PRO RATA, without
priority, in accordance with, and for application to, the Lender Basic Rent and
Lessor Basic Rent then due, as well as any overdue interest or yield due to the
Lenders (to the extent permitted by applicable law).
SECTION VII.2. PURCHASE PAYMENTS BY THE LESSEE.
(a) Any payment received by the Agent as a result of:
(i) the purchase of any or all of the Properties in connection
with the exercise of the Purchase Option under Section 18.1 of the
Master Lease,
(ii) compliance with the obligation to purchase (or cause its
designee to purchase) all of the Properties in accordance with Section
18.2 of the Master Lease,
(iii) compliance with the obligation to purchase all unsold
Properties in accordance with Section 16.2(e) of the Master Lease,
(iv) failure to fulfill one or more of the
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conditions to exercise of the Remarketing Option with respect to any
Property pursuant to Section 20.1 of the Master Lease and Lessor's
receipt of the Lease Balance pursuant to the next-to-last paragraph of
Section 20.1 of the Master Lease,
(v) the payment of the Property Balance with respect to any
Property in accordance with Section 15.1 of the Master Lease,
shall be distributed by the Agent to the Lessor and the Lenders PRO RATA
without priority of one over the other, in the proportion that the
Participant Balance of each of the Lenders and the Lessor bears to the
aggregate of all of the Participant Balances.
SECTION VII.3. PAYMENT OF LOAN BALANCE. The payment of the Loan Balance
to the Agent in accordance with Section 20.1(k) of the Master Lease upon the
exercise of the Remarketing Option shall be distributed to the Lenders for
application to pay in full the Participant Balance of each Lender.
SECTION VII.4. SALES PROCEEDS OF REMARKETING OF PROPERTIES. Any payments
received by the Agent as proceeds from the sale of the Properties sold pursuant
to the exercise of the Remarketing Option pursuant to Article XX of the Master
Lease, together with any payment made as a result of an appraisal pursuant to
SECTION 13.2, shall be distributed by Agent in the funds so received in the
following order of priority:
FIRST, to the Lessor for application to pay in full the Participant
Balance of the Lessor, and
SECOND, the balance, if any, shall be promptly paid to the Lessor to
be distributed as provided in the Lease.
SECTION VII.5. SUPPLEMENTAL RENT. All payments of Supplemental Rent
received by the Agent (excluding any amounts
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payable pursuant to the preceding provisions of this ARTICLE VII) shall be
distributed promptly by the Agent upon receipt thereof to the Persons entitled
thereto pursuant to the Operative Documents.
SECTION VII.6. ADDITIONAL COLLATERAL REALIZATIONS. All amounts realized
and received by the Agent on account of the exercise of its remedies with
respect to the Additional Collateral shall be distributed by the Agent in the
following order of priority:
FIRST, so much of such payment or amount as shall be required to
reimburse the Agent or Collateral Agent for any tax, expense or other
loss incurred by the Agent or Collateral Agent, as the case may be (to
the extent not previously reimbursed and to the extent incurred in
connection with any duties as the Agent or Collateral Agent, as the
case may be), shall be distributed to the Agent for its own account;
SECOND, so much of such payments or amounts as shall be required
to pay the Agent or the Collateral Agent the amounts payable to it
pursuant to any expense reimbursement or indemnification provisions of
the Operative Documents shall be distributed to the Agent or the
Collateral Agent, as the case may be;
THIRD, so much of such payments or amounts as shall be required
to pay the then existing or prior Lenders the amounts payable to them
pursuant to any expense reimbursement or indemnification provisions of
the Operative Documents shall be distributed to each such Lender
without priority of one over the other in accordance with the amount
of such payment or payments payable to each such Person;
FOURTH, to the Lenders for application to pay in full the
Participant Balance of each Lender and, in the
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case where the amounts so distributed shall be insufficient to pay in
full as aforesaid, then PRO RATA among the Lenders without priority of
one over the other in the proportion that the Participant Balance of
each such Lender bears to the aggregate Participant Balances of all
Lenders; and
FIFTH, the balance, if any, of such payment or amounts remaining
thereafter shall be promptly distributed to, or as directed by, the
Lessee.
Notwithstanding the foregoing, (i) proceeds derived from the liquidation of
the Additional Collateral shall be distributed FIRST, among the Lenders without
priority of one over the other in the proportion that the Participant Balance of
each such Lender bears to the aggregate Participant Balances of all Lenders,
SECOND, to the Lessor in satisfaction of the Lessor Balance and THIRD, to the
extent of any excess, to the Lessee and (ii) proceeds derived from the sale of
Properties shall be distributed FIRST, to the Lessor in satisfaction of the
Lessor Balance, SECOND, among the Lenders as provided in foregoing CLAUSE (i)
and THIRD, to the extent of any excess, to the Lessee.
SECTION VII.7. DISTRIBUTION OF PAYMENTS AFTER LEASE EVENT OF DEFAULT.
(a) All amounts received by the Agent during the continuance of a
Lease Event of Default, shall, except as provided in SECTION 7.6, be
distributed by the Agent in the following order of priority:
FIRST, so much of such payment or amount as shall be required to
reimburse the Agent for any tax, expense or other loss incurred by the
Agent (to the extent not previously reimbursed and to the extent
incurred in connection with any duties as the Agent), shall be
distributed to the Agent for its own account;
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SECOND, so much of such payments or amounts as shall be required
to pay the Agent the amounts payable to it pursuant to any expense
reimbursement or indemnification provisions of the Operative Documents
shall be distributed to the Agent;
THIRD, so much of such payments or amounts as shall be required
to pay the then existing or prior Lenders and the Lessor the amounts
payable to them pursuant to any expense reimbursement or
indemnification provisions of the Operative Documents shall be
distributed to each such Lender and Lessor without priority of one
over the other in accordance with the amount of such payment or
payments payable to each such Person;
FOURTH, to the Lessor to pay in full the Lessor Balance then to
the Lenders to pay in full any outstanding Loan Balance; and
FIFTH, the balance, if any, of such payment or amounts remaining
thereafter shall be promptly distributed to, or as directed by, the
Lessee.
(b) All payments received and amounts realized by the Agent in
connection with any Condemnation during the continuance of a Lease Event of
Default shall be distributed by the Agent as follows:
(i) in the event that Lessor and the Agent elect to pay all or a
portion of such amounts to the Lessee for the repair of damage caused
by such Condemnation in accordance with Section 14.1(a) of the Master
Lease, then such amounts shall be distributed to the Lessee, and
(ii) in the event that the Lessor and the Agent
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elect to apply all or a portion of such amounts to the purchase price
of the related Property in accordance with Section 14.1(a) and Article
XV of the Master Lease, then such amounts shall be distributed in
accordance with CLAUSE (a).
SECTION VII.8. OTHER PAYMENTS.
(a) Except as otherwise provided in SECTIONS 7.1, 7.2, 7.6, 7.7 and
CLAUSE (b) below, any payment received by the Agent for which no provision
as to the application thereof is made in the Operative Documents or
elsewhere in this ARTICLE VII shall be distributed PRO RATA among the
Lenders and the Lessor without priority of one over the other, in the
proportion that the Participant Balance of each bears to the aggregate of
all the Participant Balances.
(b) Except as otherwise provided in SECTIONS 7.1, 7.2, 7.6 and
7.7, all payments received and amounts realized by Lessor under the
Master Lease or otherwise with respect to the Properties to the extent
received or realized at any time after indefeasible payment in full of
the Participant Balances of all of the Lenders and the Lessor and any
other amounts due and owing to the Lenders or the Lessor, shall be
distributed forthwith by the Agent in the order of priority set forth in
SECTION 7.7.
(c) Except as otherwise provided in SECTIONS 7.1 and 7.2, any payment
received by Lessor for which provision as to the application thereof is
made in an Operative Document but not elsewhere in this ARTICLE VI shall be
distributed forthwith by the Agent to the Person and for the purpose for
which such payment was made in accordance with the terms of such Operative
Document.
SECTION VII.9. CASUALTY AND CONDEMNATION AMOUNTS. Subject to SECTION
7.7(b), any amounts payable to the Agent as a result of a Casualty or
Condemnation pursuant to Section 14.1 of the
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Master Lease and the Assignment of Lease and Rent shall be distributed as
follows:
(a) all amounts payable to a Lessee for the repair of damage caused
by such Casualty or Condemnation in accordance with Section 14.1(a) of the
Master Lease shall be distributed to the Lessee, and
(b) all amounts that are to be applied to the purchase price of the
related Property in accordance with Section 14.1(a) and Article XV of the
Master Lease shall be distributed by the Agent to the Lenders and the
Lessor PRO RATA without priority of one over the other, in the proportion
that the Participant Balance of each bears to the aggregate of all of the
Participant Balances. SECTION 13.10 shall not apply to any distribution or
prepayment made pursuant to this Section 7.9(b).
SECTION VII.10. ORDER OF APPLICATION. To the extent any payment made to
any Lender or the Lessor pursuant to SECTION 7.2, 7.3, 7.4, 7.6 or 7.7 is
insufficient to pay in full the Participant Balance of such Lender or the
Lessor, then each such payment shall first be applied to accrued interest or
Yield and then to principal or the Lessor Amount, as applicable.
ARTICLE VIII
REPRESENTATIONS
SECTION VIII.1. REPRESENTATIONS OF THE PARTICIPANTS. Each Participant
represents and warrants to each other Participant and the Lessee that:
(a) ERISA. Such Participant is not and will not be making its Loans
or funding its Lessor Amounts hereunder, and is not performing its
obligations under the Operative Documents, with the assets of an "employee
benefit plan" (as
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defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or
"plan" (as defined in Section 4975(e)(1) of the Code).
(b) STATUS. Such Participant is a commercial bank, savings and loan
association, savings bank, pension plan, depository institution, insurance
company, branch or agency of a foreign bank or other similar financial
institution, or an Affiliate thereof.
(c) POWER AND AUTHORITY. Such Participant has the requisite power
and authority to enter into and perform under the Operative Documents to
which it is a party.
SECTION VIII.2. REPRESENTATIONS OF THE LESSEE. The Lessee hereby
represents and warrants to each Participant and the Agent that:
(a) CORPORATE STATUS. The Lessee (i) is a duly organized and validly
existing corporation in good standing under the laws of the State of
Delaware and (ii) has duly qualified and is authorized to do business and
is in good standing in all jurisdictions where the failure to do so might
have a Material adverse effect on it or its properties.
(b) CORPORATE POWER AND AUTHORITY. The Lessee has the corporate
power and authority to execute, deliver and carry out the terms and
provisions of the Operative Documents to which it is or will be a party and
has taken all necessary corporate action to authorize the execution,
delivery and performance of the Operative Documents to which it is a party
and has duly executed and delivered each Operative Document required to be
executed and delivered by it and, assuming the due authorization, execution
and delivery thereof on the part of each other party thereto, each such
Operative Document constitutes a legal, valid and binding obligation
enforceable against it in accordance with its
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terms, except as the same may be limited by insolvency, bankruptcy,
reorganization or other laws relating to or affecting the enforcement of
creditors' rights or by general equitable principles and except as the same
may be limited by certain circumstances under law or court decisions in
respect of provisions providing for indemnification of a party with respect
to liability where such indemnification is contrary to public policy.
(c) NO VIOLATION. Neither the execution, delivery and performance by
the Lessee of the Operative Documents to which it is or will be a party nor
compliance with the terms and provisions thereof, nor the consummation by
the Lessee of the transactions contemplated therein (i) will result in a
violation by the Lessee of any provision of any Applicable Law or
Materially adversely affect (x) the validity or enforceability of the
Operative Documents to which the Lessee is a party, or the title to, or
value or condition of, any Property, or (y) the consolidated financial
position, business or consolidated results of operations of the Lessee or
the ability of the Lessee to perform its obligations under the Operative
Documents, (ii) will conflict with or result in any breach which would
constitute a default under, or (other than pursuant to the Operative
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Lessee
pursuant to the terms of any indenture, loan agreement or other agreement
for borrowed money to which the Lessee is a party or by which it or any of
its property or assets is bound or to which it may be subject (other than
Permitted Liens), or (iii) will violate any provision of the certificate of
incorporation or by-laws of the Lessee.
(d) LITIGATION. There are no actions, suits or proceedings pending
(except for the action entitled STEVE COOPERMAN ET AL v. GORDON EWBANKS,
JR. ET AL, case no. CV756665, which has been disclosed to the Lessor) or,
to the
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knowledge of the Lessee, threatened (i) that are reasonably likely to have
a Materially Adverse Effect on any Property or on the businesses,
operations, financial condition or Material Assets of the Lessee or (ii)
that question the validity of the Operative Documents or the rights or
remedies of any Participant with respect to the Lessee or any Property
under the Operative Documents. There is no action, suit or proceeding
(including any proceeding in condemnation or eminent domain or under any
Environmental Law) pending or, to the best of the Lessee's knowledge,
threatened with respect to the Lessee or any Property which adversely
Materially affects the title to, or the use, operation or value of, such
Property.
(e) GOVERNMENTAL APPROVALS. No Governmental Action by any
Governmental Authority having jurisdiction over the Lessee or any Property
is required to authorize or is required in connection with (i) the
execution, delivery and performance by the Lessee of any Operative Document
to which it is a party, (ii) the Construction or (iii) the legality,
validity, binding effect or enforceability against the Lessee of any
Operative Document to which it is a party.
(f) INVESTMENT COMPANY ACT. The Lessee is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act.
(g) PUBLIC UTILITY HOLDING COMPANY ACT. The Lessee is not a "holding
company" or a "subsidiary company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Company Act of 1935, as amended.
(h) PROVIDED INFORMATION. The information and materials which have
been provided by the Lessee or on its behalf by any Person to any
Participant with respect to each Property, in each case as supplemented or
amended prior to the Acquisition Date, are true and accurate in all
Material respects on the date as of which such information and
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materials are dated or certified and are not incomplete by omitting to
state any fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
(i) TAXES. All United States Federal income tax returns and all
other tax returns which are required to have been filed have been or will
be filed by or on behalf of the Lessee by the respective due dates,
including extensions, and all taxes due with respect to the Lessee pursuant
to such returns or pursuant to any assessment received by the Lessee have
been or will be paid. The charges, accruals and reserves on the books of
the Lessee in respect of taxes or other governmental charges are, in the
opinion of the Lessee adequate.
(j) COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all Material
respects with the presently applicable provisions of ERISA and the Code
with respect to the Plan. No member of the ERISA Group has (i) sought a
waiver of the minimum funding standard under Section 412 of the Code in
respect of any Plan, (ii) failed to make any contribution or payment to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or
made any amendment to any Plan or Benefit Arrangement, which has resulted
or could result in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums
under Section 4007 of ERISA. No Plan Termination Event has occurred with
respect to any Plan or Multiple Employer Plan. No member of the ERISA
Group has any knowledge of any event that could result in a liability of
any such member to the PBGC, whether under a Plan, a Multiemployer Plan, a
Multiple Employer Plan, or otherwise. There have not been any nor are
there now existing any events or conditions that would permit any Plan to
be terminated under circumstances that
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would cause the lien provided under Section 4068 of ERISA to attach to the
Material Assets of the Lessee or its ERISA Affiliates. The value of the
Plans' benefits guaranteed under Title IV of ERISA on the date hereof does
not exceed the value of such Plans' assets allocable to such benefits as of
the date of this Agreement. No "Prohibited Transaction" within the meaning
of Section 406 of ERISA exists or will exist upon the execution and
delivery of this Agreement or any Operative Document.
(k) ENVIRONMENTAL LAWS. The Lessee is in compliance with all
Environmental Laws relating to pollution and environmental control in all
domestic jurisdictions in which all real property of the Lessee, including
the Land, are located, other than those the non-compliance with which would
not have a Material adverse effect on such real property, including the
Land, or the consolidated results of operations, business, or consolidated
financial position of the Lessee.
(l) OFFER OF SECURITIES, ETC. Neither the Lessee nor any Person
authorized to act on the Lessee's behalf has, directly or indirectly,
offered any interest in each Property or any other interest similar thereto
(the sale or offer of which would be integrated with the sale or offer of
such interest in each such Property), for sale to, or solicited any offer
to acquire any of the same from, any Person other than each Participant and
the Agent and other "accredited investors" (as defined in Regulation D of
the Securities and Exchange Commission).
(m) FINANCIAL STATEMENTS.
(i) The Submitted Financial Statements, copies of which have been
delivered to the Agent and each Participant, present fairly, in
conformity with GAAP, the financial position of the Lessee as of such
date and its results of operations and cash flows for such fiscal
year.
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(ii) The unaudited consolidated statement of financial position
of the Lessee as of June 30, 1996 and the related unaudited
consolidated statements of income, and cash flows for the year to
date, copies of which have been delivered to the Agent and each
Participant, present fairly, in conformity with GAAP applied on a
basis substantially consistent with the financial statements referred
to in CLAUSE (i) of this SUBSECTION (m), the consolidated financial
position of the Lessee as of such date and its consolidated results of
operations and cash flows for such year-to-date period (subject to
normal year-end adjustments).
(n) PROPERTY. Each Property and the contemplated use thereof by the
Lessee and its agents, assignees, employees, lessees, licensees and tenants
complies with all Material Requirements of Law (including, without
limitation, all zoning and land use laws and Environmental Laws) and
Material Insurance Requirements, except for such Requirements of Law as the
Lessee shall be contesting in good faith by appropriate proceedings. There
is no action, suit or proceeding (including any proceeding in condemnation
or eminent domain or under any Environmental Law) pending or, to the best
of the Lessee's knowledge, threatened with respect to the Lessee, its
Affiliates, or any Property which Materially adversely affects the title
to, or the use, operation or value of, any Property.
(o) UTILITIES, ETC.. All water, sewer, electric, gas, telephone and
drainage facilities and all other utilities required to adequately service
the applicable Improvements for such Property's intended use are available
pursuant to adequate permits (including any that may be required under
applicable Environmental Laws). No fire or other casualty with respect to
any Property has occurred which fire or other casualty has had a Material
adverse effect on any such Property. Each Property has available all
Material services of public facilities and other utilities necessary for
use and operation of each Property for its intended purposes including,
without limitation, adequate water, gas and
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electrical supply, storm and sanitary sewerage facilities, telephone, other
required public utilities and means of access between such Improvements and
public highways for pedestrians and motor vehicles. All utilities serving
each Property are located in, and vehicular access to the Improvements on
each Property is provided by, either public rights-of-way abutting each
Property or Appurtenant Rights. All Material licenses, approvals,
authorizations, consents, permits (including, without limitation, building,
demolition and environmental permits, licenses, approvals, authorizations
and consents), easements and rights-of-way, including proof and dedication,
required for the use, treatment, storage, transport, disposal or
disposition of any Hazardous Substance on, at, under or from each Property
during the use thereof have either been irrevocably obtained from the
appropriate Governmental Authorities having jurisdiction or from private
parties, as the case may be, or will be irrevocably obtained from the
appropriate Governmental Authorities having jurisdiction or from private
parties, as the case may be, prior to commencing any use and operation of
such Property.
(p) TITLE. The applicable Deed will be in form and substance
sufficient to convey good and marketable title to the applicable Property
in fee simple, subject only to Permitted Liens. The Lessor will at all
times during the applicable Term have good title to all Equipment located
on each Property and in any Improvements on each Property, subject only to
Permitted Liens.
(q) INSURANCE. The Lessee has obtained insurance coverage covering
the applicable Property which meets the requirements of the Master Lease,
and such coverage is in full force and effect. The Lessee carries
insurance with reputable insurers in respect of its Material Assets, in
such manner, in such amounts and against such risks as is customarily
maintained by other Persons of similar size engaged in similar business.
(r) FLOOD HAZARD AREAS. Except as otherwise
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identified on the applicable survey delivered pursuant to SECTION 2.1(q),
no portion of any Property is located in an area identified as a special
flood hazard area by the Federal Emergency Management Agency or other
applicable agency. If any Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or
other applicable agency, then flood insurance has been obtained for such
Property in accordance with ARTICLE XIII of the Lease and in accordance
with the National Flood Insurance Act of 1968, as amended.
(s) OUTSTANDING DEBT. As of the date hereof, the Lessee has no
outstanding Indebtedness, other than Indebtedness arising or permitted
hereunder or under the Operative Documents, except as reflected on the
balance sheets in the Submitted Financial Statements.
(t) TITLE TO PROPERTIES. The Lessee has good and marketable title to
all of its Material Assets reflected on the balance sheets in the Submitted
Financial Statements, except for such Material Assets as have been disposed
of in the ordinary course of business, and all such Material Assets are
free and clear of any Lien, except as reflected in the Submitted Financial
Statements and/or notes thereto or as otherwise permitted by the provisions
hereof or under the Operative Documents, and except for Permitted Liens.
The Lessee has such trademarks, trademark rights, trade names, trade name
rights, franchises, copyrights, patents, patent rights and licenses as to
allow it to conduct its business as now operated, without known conflict
with the rights of others.
(u) DEFAULTS. The Lessee is not in default under (and no event has
occurred which with the lapse of time or notice or action by a third party
could result in a default under) any instrument evidencing any Indebtedness
in excess of $1,000,000.00 or under any agreement relating thereto or any
indenture, mortgage, deed of trust, security agreement, lease, franchise or
other agreement or other instrument to which any such Person is a party or
by which any such Person
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or any of its Material Assets is subject to or bound.
(v) USE OF ADVANCES. No part of any Advance will be used directly or
indirectly for the purpose of purchasing or carrying, or for payment in
full or in part of Debt that was incurred for the purposes of purchasing or
carrying, any margin security as such term is defined in Section 207.2 of
Regulation G of the Board of Governors of the Federal Reserve System (12
C.F.R., Chapter II, Part 207).
(w) SOLVENCY. The Lessee is Solvent.
ARTICLE IX
PAYMENT OF CERTAIN EXPENSES
The Lessee agrees, for the benefit of the Lessor, the Agent and the
Lenders, that:
SECTION IX.1. TRANSACTION EXPENSES.
(a) The Lessee shall pay, or cause to be paid, from time to time all
Transaction Expenses in respect of the transactions on the Documentation
Date and each Acquisition Date; PROVIDED, HOWEVER, that, if the Lessee has
not received written invoices therefor prior to such date, such Transaction
Expenses shall be paid within ten (10) days after the Lessee has received
written invoices therefor.
(b) The Lessee shall pay or cause to be paid (i) all Transaction
Expenses incurred by the Lessor, the Agent or any Lender in entering into
any future amendments or supplements with respect to any of the Operative
Documents, whether or not such amendments or supplements are ultimately
entered into, or giving or withholding of waivers of consents hereto or
thereto, in each case which have been requested by or approved by the
Lessee, (ii) all Transaction Expenses incurred by the Lessor, the Agent or
the Lenders in connection with any purchase of any Property by the Lessee
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or other Person pursuant to Articles XVIII and XXI of the Master Lease and
(iii) all Transaction Expenses incurred by any of the other parties hereto
in respect of enforcement of any of their rights or remedies against the
Lessee or any other Affiliate of the Lessee in respect of the Operative
Documents.
SECTION IX.2. BROKERS' FEES AND STAMP TAXES. The Lessee shall pay or
cause to be paid any brokers' fees and any and all stamp, transfer and other
similar taxes, fees and excises, if any, including any interest and penalties,
which are payable in connection with the transactions contemplated by this
Participation Agreement and the other Operative Documents.
SECTION IX.3. LOAN AGREEMENT AND RELATED OBLIGATIONS. The Lessee shall
pay, without duplication of any other obligation of the Lessee to pay any such
amount under the Operative Documents, before the due date thereof, all costs,
expenses and other amounts (other than principal and interest on the Loans which
are payable to the extent otherwise required by the Operative Documents)
required to be paid by the Lessor under the Loan Agreement.
ARTICLE X
OTHER COVENANTS AND AGREEMENTS
SECTION X.1. AFFIRMATIVE COVENANTS OF LESSEE. The Lessee hereby agrees
that so long as this Participation Agreement is in effect, the Lessee shall:
(a) INFORMATION. The Lessee will deliver to the Agent, and each
Participant:
(i) as soon as available and in any event within one hundred
(100) days after the end of each fiscal year of the Lessee,
consolidated statements of financial position of the Guarantor and its
consolidated subsidiaries as of the end of such fiscal
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year and the related consolidated statements of income and cash flows
for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, with such consolidated
financial statements reported on by Ernst & Young or other independent
public accountants of nationally recognized standing reasonably
acceptable to the Required Participants;
(ii) as soon as available and in any event within sixty (60)
days after the end of each of the first three quarters of each fiscal
year of the Guarantor, a consolidated statement of financial position
of the Guarantor as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and
for the portion of the Guarantor's fiscal year ended at the end of
such quarter;
(iii) if and when any member of the ERISA Group (1) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV or
ERISA, or knows that the plan administrator of any Plan has given or
is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the
PBGC; (2) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (3) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (4) applies for a waiver
of the minimum funding standard under Section 412 of the Code, a copy
of such application; (5) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information
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filed with the PBGC; (6) gives notice of withdrawal from any Plan
pursuant to Section 4063 of ERISA, a copy of such notice; or (7) fails
to make any payment or contribution to any Plan or Multiemployer Plan
or in respect of any Benefit Arrangement or makes any amendment to any
Plan or Benefit Arrangement which has resulted or could result in the
imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting
officer of the Lessee setting forth details as to such occurrence and
action, if any, which the Lessee or applicable member of the ERISA
Group is required or proposes to take;
(iv) as soon as possible and in any event within five days after
the occurrence of each Event of Default or each event that, with the
giving of notice or time elapse, or both, would constitute an Event of
Default continuing on the date of such statement, a statement of the
authorized officer setting forth details of such Event of Default or
event and the action that the Lessee proposes to take with respect
thereto;
(v) immediately upon any change of the Lessee's independent
public accountants, notification thereof and such further information
as the Agent or the Lessor may reasonably request concerning the
resignation, refusal to stand for reappointment after completion of
the current audit or dismissal of such accountants;
(vi) promptly upon becoming aware thereof, written notice of any
Material adverse change in the business, or operations of the Lessee;
(vii) promptly upon becoming aware thereof, written notice of
the commencement or existence of any proceeding against the Lessee or
any Affiliate of the Lessee by or before any court or governmental
agency that might, in the reasonable judgment of the Lessee, result in
a Material adverse effect on the business,
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operations or financial conditions of the Lessee or the ability of the
Lessee to perform its obligations under the Operative Documents;
(viii) as soon as possible and in any event within five days
after the occurrence of any material violation or alleged violation of
an Environmental Law, a statement of an authorized officer setting
forth the details of such violation and the action which the Lessee
proposes to take with respect thereto; and
(ix) from time to time such additional information regarding the
business, properties, condition or operations, financial or otherwise,
of the Lessee, or regarding any Property or the status of any
construction thereon, as the Agent or the Lessor may reasonably
request.
(b) COMPLIANCE WITH LAWS. The Lessee will comply in all Material
respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) with
respect to its Material Assets, including each Property, except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings.
(c) FURTHER ASSURANCES. The Lessee shall take or cause to be taken
from time to time all action necessary to assure that the intent of the
parties pursuant to the Operative Documents is given effect as contemplated
by this Lease and that the Lessor holds a perfected Lien on each Property
securing the Lease Balance as contemplated by ARTICLE V. The Lessee shall
execute and deliver, or cause to be executed and delivered, to the Lessor
and the Agent from time to time, promptly upon request therefor, any and
all other and further instruments (including correction instruments and
supplemental mortgages, deeds of trust and security agreements) that may be
reasonably requested by the any Participant to cure any deficiency in the
execution and
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delivery of any Operative Document to which it is a party.
(d) PRESERVATION OF EXISTENCE, ETC. The Lessee will preserve and
maintain its existence and all rights, privileges and franchises necessary
and desirable in the normal conduct of its business and the performance of
its obligations hereunder and under the Operative Documents.
(e) PAYMENT OF TAXES, ETC. The Lessee shall pay and discharge before
the same shall become delinquent, (i) all taxes, assessments and
governmental charges or levies imposed upon it or upon its Material Assets,
and (ii) all lawful claims that, if unpaid, might by law become a Lien upon
its Material Assets; PROVIDED, HOWEVER, that the Lessee shall not be
required to pay or discharge any such tax, assessment, charge or claim that
is being contested in good faith and by proper proceedings, so long as no
public tax sale divesting Lessee of its interest in the Lessor Property can
occur during such proceedings.
(f) FINANCIAL COVENANTS.
(i) QUICK RATIO. The Lessee shall maintain as of the last day
of any fiscal quarter (on a consolidated basis) a ratio of "A" to "B"
at least equal to 1.15:1.00 where:
"A" means the sum of cash, short-term investments, marketable
securities not classified as long-term investments and accounts
receivable less all security interests, liens, encumbrances or rights
of others (including any agreement to grant such a security interest,
lien or encumbrance in the future, whether contingent or not and
including any lien permitted under subsection 9.03 of the Credit
Agreement hereof) on such assets; and
"B" means current liabilities including all funded obligations,
outstanding Letter of Credit Obligations (as defined in the Credit
Agreement), and Bank
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guaranties outstanding under the Credit Agreement and all similar
unfunded instruments under the Credit Agreement and, in each case, any
instrument and agreement required under the Credit Agreement.
(ii) TANGIBLE NET WORTH. The Lessee shall maintain as of the
last day of any fiscal quarter (on a consolidated basis) Tangible Net
Worth of at least $133,500,000 plus the sum of (i) 75% of net income
after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after December 29, 1995 and
(ii) 100% of Equity Proceeds (as defined in the Credit Agreement);
PROVIDED, however, that for the purposes of computing compliance with
this paragraph, the amount of (a) any goodwill recognized and (b) any
charges to income taken during the fiscal quarter (without giving
effect to any retroactive adjustments) which are associated with any
acquisitions consummated during any quarter commencing after December
29, 1995, and reflected in the financial statements for the quarter in
which they are consummated, shall not be taken into account.
(iii) LEVERAGE RATIO. The Lessee shall not permit at any time
(on a consolidated basis) total liabilities to exceed, for the period
from the Documentation Date, 1.25 times Tangible Net Worth.
ARTICLE XI
LESSEE DIRECTIONS
SECTION XI.1. LESSEE DIRECTIONS. The Lessor and the Lenders hereby agree
that, so long as no Lease Default or Lease Event of Default exists, the Lessee
shall have the exclusive right to exercise any right of the Lessor under the
Loan Agreement upon not less than two (2) Business Days' prior written notice
from the Lessee to the Lessor.
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ARTICLE XII
TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION XII.1. ASSIGNMENTS. All or any part of the interest of any
Participant in, to or under this Participation Agreement, the other Operative
Documents, the Properties or the Notes may be assigned or transferred by such
Participant at any time; PROVIDED, HOWEVER, that (a) each assignment or transfer
shall comply with all applicable securities laws, (b) any assignment or transfer
by a Lender to a Person that is not an Affiliate of the transferor thereof shall
be subject to the consent of the Lessee (which consent shall not be unreasonably
withheld, and no such consent being required with respect to the interest of the
Lessor under the Operative Documents), and (c) any assignee or transferee
(i) acknowledges that the obligations to be performed from and after the date of
such transfer or assignment under this Participation Agreement and all other
Operative Documents are its obligations, including the obligations imposed by
this SECTION 12.1 (and the transferor and transferee Participant shall deliver
to the Lessee, the Lessor and the Agent an Assignment Agreement, in
substantially the form of EXHIBIT E, executed by the assignee or transferee) and
(ii) further represents and warrants to the Lessor, each Participant and the
Lessee that:
(A) it is a commercial bank, savings and loan association, savings
bank, pension plan, depository institution, insurance company, branch or
agency of a foreign bank or other similar financial institution, in each
case, having a minimum capital and surplus of $50,000,000;
(B) it has the requisite power and authority to accept such
assignment or transfer;
(C) it will not transfer such Note or interest in a Lessor Amount, as
the case may be, unless the proposed transferee makes the foregoing
representations and
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covenants;
(D) it will not take any action with respect to such Note or interest
in a Lessor Amount, as the case may be, that would violate any applicable
securities laws; and
(E) it will not assign or transfer any interest such Note or interest
in a Lessor Amount, as the case may be, except in compliance with this
SECTION 12.1.
Notwithstanding the foregoing, the Lessor shall not sell, transfer, assign
or otherwise encumber title to any Property, or any portion of any Property,
except as expressly permitted by the Operative Documents or enter into any lease
or easement with respect to any Property, or portion of any Property, except as
expressly permitted by the Operative Documents.
SECTION XII.2. PARTICIPATIONS. Any Participant may at any time sell to
one or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "SUB-PARTICIPANT"), participating interests
in all or a portion of its rights and obligations under this Participation
Agreement, the other Operative Documents, the Properties or its Notes
(including, without limitation, all or portion of the Rent owing to it);
PROVIDED, HOWEVER, that
(a) no participation contemplated in this SECTION 12.2 shall relieve
such Participant from its obligations hereunder or under any other
Operative Document;
(b) such Participant shall remain solely responsible for the
performance of its Commitment and such other obligations;
(c) the Lessee shall continue to deal solely and directly with such
Participant in connection with such Participant's rights and obligations
under this Participation Agreement and each of the other Operative
documents;
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(d) such Participant shall notify the Lessee of any proposed
Sub-Participant; and
(e) no Sub-Participant shall be entitled to require such Participant
to take or refrain from taking any action hereunder or under any other
Operative Document except with respect to (i) any change to the amount or
timing of the payment of any fees, principal or interest; or (ii) the
release of any Lien under the Operative Document.
Each Participant agrees that it will notify the Lessee and Agent promptly of the
identity of each Sub-Participant to which it sells a participating interest
hereunder and the amount of such participating interest. The Lessee
acknowledges and agrees that each Sub-Participant, for purposes of ARTICLE XIII,
shall be considered a Participant.
SECTION XII.3. WITHHOLDING TAXES; DISCLOSURE OF INFORMATION; PLEDGE UNDER
REGULATION A.
(a) If any Participant (or the assignee of or sub-participant of a
Participant, each a "TRANSFEREE") is organized under the laws of any
jurisdiction other than the United States or any State thereof, then such
Participant or the Transferee of such Participant, as applicable, shall (as
a condition precedent to acquiring or participating in such Loan or lessor
Amount and as a continuing obligation to the Lessor and the Lessee)
(i) furnish to the Lessor and the Lessee in duplicate, for each taxable
year of such Participant or Transferee during the term of the Lease, a
properly completed and executed copy of either Internal Revenue Service
Form 4224 or Internal Revenue Service Form 1001 and Internal Revenue
Service Form W-8 or Internal Revenue Service Form W-9 and any additional
form (or such other form) as is necessary to claim complete exemption from
United States withholding taxes (wherein such Transferee claims entitlement
to complete exemption from United States withholding taxes on all payments
hereunder), and (ii) provide to the Lessor and the Lessee a new Internal
Revenue Service Form 4224 or Internal Revenue Service Form
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1001 and Internal Revenue Service Form W-8 or Internal Revenue Service
Form W-9 and any such additional form (or any successor form or forms) upon
the expiration or obsolescence of any previously delivered form and
comparable statements in accordance with applicable United States laws and
regulations and amendments duly executed and completed by such Participant
or Transferee, and to comply from time to time with all applicable United
States laws and regulations with regard to such withholding tax exemption.
By its acceptance of a participation or assignment of a Participant's Note,
each Transferee shall be deemed bound by the provisions set forth in this
ARTICLE XII.
(b) Any Participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
ARTICLE XII, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Lessee, subject to any
confidentiality requirements relating to such information.
(c) Anything in this ARTICLE XII to the contrary notwithstanding, any
Participant may without the consent of the Lessee assign and pledge all or
any portion of the Notes held by it to any Federal Reserve Bank, the United
States Treasury or to any other financial institution as collateral
security pursuant to Regulation A of the F.R.S. Board and any operating
circular issued by the Federal Reserve System and/or the Federal Reserve
Bank or otherwise; PROVIDED, any payment by the Lessee for the benefit of
the assigning or pledging Participant shall be deemed to satisfy the
Lessee's obligations with respect thereto.
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ARTICLE XIII
INDEMNIFICATION
SECTION XIII.1. GENERAL INDEMNIFICATION. The Lessee agrees, whether or
not any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After Tax Basis, from and against, any and all Claims that may
be imposed on, incurred by or asserted against such Indemnitee (whether because
of action or omission by such Indemnitee or otherwise), whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other Person
and whether or not such Claim arises or accrues prior to the Acquisition Date or
after the Expiration Date, in any way relating to or arising out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in respect
thereof;
(b) the Properties or any part thereof or interest therein;
(c) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
maintenance, repair, alteration, modification, addition or substitution,
storage, transfer of title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any
sale pursuant to Section 16.2(c), 16.2(e) or 18.3 of the Master Lease or
any sale pursuant to Article XV, XVIII or XX of the Master Lease), return
or other disposition of all or any part or any interest in the Properties
or the imposition of any Lien (or incurring of any liability to refund or
pay over any amount as a result of any Lien) thereon, including, without
limitation: (1) Claims or penalties arising from any
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violation of law or in tort (strict liability or otherwise), (2) latent or
other defects, whether or not discoverable, (3) any Claim based upon a
violation or alleged violation of the terms of any restriction, easement,
condition or covenant or other matter affecting title to the Properties,
(4) the making of any Modifications in violation of any standards imposed
by any insurance policies required to be maintained by Lessee pursuant to
the Lease which are in effect at any time with respect to the Properties or
any part thereof, (5) any Claim for patent, trademark or copyright
infringement, and (6) Claims arising from any public improvements with
respect to the Properties resulting in any change or special assessments
being levied against any Property or any plans to widen, modify or realign
any street or highway adjacent to any of the Properties, or any Claim for
utility "tap-in" fees;
(d) the breach by the Lessee of any covenant, representation or
warranty made by it or deemed made by it in any Operative Document or any
certificate required to be delivered by any Operative Document;
(e) the retaining or employment of any broker, finder or financial
advisor by the Lessee to act on its behalf in connection with this
Participation Agreement;
(f) the existence of any Lien on or with respect to the Properties,
the Improvements, any Basic Rent or Supplemental Rent, title thereto, or
any interest therein including any Liens which arise out of the possession,
use, occupancy, construction, repair or rebuilding of any Property or by
reason of labor or materials furnished or claimed to have been furnished to
the Lessee, or any of its contractors or agents or by reason of the
financing of any personalty or equipment purchased or leased by the Lessee
or Modifications constructed by the Lessee, except Lessor Liens and Liens
in favor of the Lender or the Lessor; or
(g) subject to the accuracy of any Participant's representation set
forth in SECTION 8.1(a), as to such
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Participant, the transactions contemplated by the Lease or by any other
Operative Document, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA and any prohibited transaction described in
Section 4975(c) of the Code;
PROVIDED, HOWEVER, the Lessee shall not be required to indemnify any Indemnitee
under this SECTION 13.1 for any of the following: (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnitee or
any member of its Indemnitee Group (IT BEING UNDERSTOOD that the Lessee shall be
required to indemnify an Indemnitee even if the ordinary (but not gross)
negligence of such Indemnitee caused or contributed to such Claim) or the breach
of any representation, warranty or covenant of such Indemnitee set forth in any
Operative Document, (2) any Claim resulting from Lessor Liens which the Lessor
or the Lenders is responsible for discharging under the Operative Documents, (3)
any Claim to the extent attributable to acts or events occurring after the
Expiration Date or the return or remarketing of any Property so long as the
Lessor or the Lenders are not exercising remedies against the Lessee in respect
of the Operative Documents, and (4) any Claim arising from a breach or alleged
breach by the Lenders or the Lessor of any agreement entered into in connection
with the assignment or participation of any Loan or Lessor Amount. It is
expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of and shall be separate and independent
from any remedy under the Lease or any other Operative Document. Without
limiting the express rights of any Indemnitee under this SECTION 13.1, this
SECTION 13.1 shall be construed as an indemnity only and not a guaranty of
residual value of the Properties or as a guaranty of the Notes.
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SECTION XIII.2. END OF TERM INDEMNITY.
(a) If the Lessee elects the Remarketing Option and there would,
after giving effect to the proposed remarketing transactions, be a
Shortfall Amount, then prior to the Expiration Date and as a condition to
the Lessee's right to complete the remarketing of the Properties pursuant
to Section 20.1 of the Master Lease, the Lessee shall cause to be delivered
to the Lessor at least one hundred twenty (120) days prior to the
Expiration Date, at the Lessee's sole cost and expense, a report from the
Appraiser in form and substance satisfactory to the Participants (the "END
OF THE TERM REPORT") which shall state the appraiser's conclusions as to
the reason for any decline in the Fair Market Sales Value of the applicable
Property from that anticipated for such date in the Appraisal delivered on
the Acquisition Date.
(b) If the Lessee elects the Remarketing Option, then on or prior to
the Expiration Date the Lessee shall pay to the Lessor an amount (not to
exceed the Shortfall Amount) equal to the portion of the Shortfall Amount
that the End of the Term Report demonstrates was the result of a decline in
the Fair Market Sales Value of the applicable Property due to
(i) any rebuilding of the applicable Properties or any part
thereof by the Lessee (except in connection with a Casualty, unless
such rebuilding failed to restore the Property as required under the
Lease), or any failure to restore a Property after a Condemnation
where the proceeds derived therefrom were made available to the Lessee
for restoration, or
(ii) the existence of any Hazardous Activity, Hazardous
Materials or Environmental Violations, the indemnity for which shall
not exceed the cost of the remediation thereof, or
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(iii) any restoration or rebuilding carried out by the Lessee,
or
(iv) any condemnation of any portion of any of the applicable
Properties pursuant to Article XIV of the Master Lease, or
(v) any use of any of the applicable Properties or any part
thereof by the Lessee or any sublessee other than as contemplated by
the applicable Appraisal, or
(vi) any grant, release, dedication, transfer, annexation or
amendment made pursuant to Section 11.2 of the Master Lease, or
(vii) the failure of the Lessor to have good and marketable
title to any of the applicable Properties free and clear of all Liens
(excluding Permitted Liens), or
(viii) the existence of any sublease relating to any of the
applicable Properties that shall survive the Expiration Date.
SECTION XIII.3. ENVIRONMENTAL INDEMNITY. Without limitation of the other
provisions of this ARTICLE XIII, the Lessee hereby agrees to indemnify, hold
harmless and defend each Indemnitee from and against any and all claims
(including without limitation third party claims for personal injury or real or
personal property damage), losses (including but not limited to, to the extent
the Lease Balance has not been fully paid, any loss of value of the Property
related thereto), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings) and
orders, judgments, remedial action, requirements, enforcement actions of any
kind, and all reasonable and documented costs and expenses incurred in
connection therewith (including but not limited to reasonable and documented
attorneys' and/or paralegals' fees and expenses), including, but not limited to,
all costs incurred in
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connection with any investigation or monitoring of site conditions or any
clean-up, remedial, removal or restoration work by any federal, state or local
government agency, arising in whole or in part, out of
(a) the presence on or under any of the Properties of any Hazardous
Materials, or any releases or discharges of any Hazardous Materials on,
under, from or onto any of the Properties,
(b) any activity, including, without limitation, construction,
carried on or undertaken on or off any of the Properties, and whether by
the Lessee or any predecessor in title or any employees, agents,
contractors or subcontractors of the Lessee or any predecessor in title, or
any other Persons (including such Indemnitee), in connection with the
handling, treatment, removal, storage, decontamination, clean-up, transport
or disposal of any Hazardous Materials that at any time are located or
present on or under or that at any time migrate, flow, percolate, diffuse
or in any way move onto or under any of the Properties,
(c) loss of or damage to any property or the environment (including,
without limitation, clean-up costs, response costs, remediation and removal
costs, cost of corrective action, costs of financial assurance, fines and
penalties and natural resource damages), or death or injury to any Person,
and all expenses associated with the protection of wildlife, aquatic
species, vegetation, flora and fauna, and any mitigative action required by
or under Hazardous Materials Laws,
(d) any claim concerning lack of compliance with Hazardous Materials
Laws, or any act or omission causing an environmental condition that
requires remediation or would allow any Governmental Authority to record a
Lien on the land records, or
(e) any residual contamination on or under any of the
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Land, or affecting any natural resources, and to any contamination of any
property or natural resources arising in connection with the generation,
use, handling, storage, transport or disposal of any such Hazardous
Materials, and irrespective of whether any of such activities were or will
be undertaken in accordance with applicable laws, regulations, codes and
ordinances;
PROVIDED, HOWEVER, the Lessee shall not be required to indemnify any Indemnitee
under this SECTION 13.3 for (1) any Claim to the extent resulting from the
willful misconduct or gross negligence of such Indemnitee or (2) any Claim to
the extent attributable to acts or events occurring after the expiration of the
Term or the return or remarketing of any such Property so long as the Lessor and
the Lenders are not exercising remedies against the Lessee in respect of the
Operative Documents. It is expressly understood and agreed that the indemnity
provided for herein shall survive the expiration or termination of and shall be
separate and independent from any remedy under the Lease or any other Operative
Document.
SECTION XIII.4. PROCEEDINGS IN RESPECT OF CLAIMS. With respect to any
amount that the Lessee is requested by an Indemnitee to pay by reason of SECTION
13.1 or 13.3, such Indemnitee shall, if so requested by the Lessee and prior to
any payment, submit such additional information to the Lessee as the Lessee may
reasonably request and which is in the possession of such Indemnitee to
substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall notify the Lessee of the commencement thereof,
and the Lessee shall be entitled, at its expense, to participate in, and, to the
extent that the Lessee desires to, assume and control the defense thereof;
PROVIDED, HOWEVER, that the Lessee shall have acknowledged in writing its
obligation to fully indemnify such Indemnitee in respect of such action, suit or
proceeding, and, the Lessee shall keep such Indemnitee fully apprised of the
status of such action, suit or proceeding and shall provide such Indemnitee with
all information with respect to such action, suit or proceeding as
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such Indemnitee shall reasonably request, and PROVIDED, FURTHER, that the Lessee
shall not be entitled to assume and control the defense of any such action, suit
or proceeding if and to the extent that, (A) in the reasonable opinion of such
Indemnitee, (x) such action, suit or proceeding involves any risk of imposition
of criminal liability or will involve a risk of the sale, forfeiture or loss of,
or the creation of any Lien (other than a Permitted Lien) on any Property or any
part thereof unless, in the case of civil liability, the Lessee shall have
posted a bond or other security satisfactory to the relevant Indemnitees in
respect to such risk or (y) the control of such action, suit or proceeding would
involve an actual or potential conflict of interest, (B) such proceeding
involves Claims not fully indemnified by the Lessee which the Lessee and the
Indemnitee have been unable to sever from the indemnified claim(s), or (C) a
Lease Event of Default has occurred and is continuing. The Indemnitee will join
in the Lessee's efforts to sever such action. The Indemnitee may participate in
a reasonable manner at its own expense and with its own counsel in any
proceeding conducted by the Lessee in accordance with the foregoing. The Lessee
shall not enter into any settlement or other compromise with respect to any
Claim which is entitled to be indemnified under SECTION 13.1 or 13.3 without the
prior written consent of the Indemnitee, which consent shall not be unreasonably
withheld in the case of a money settlement not involving an admission of
liability of such Indemnitee.
Each Indemnitee shall at the expense of the Lessee supply the Lessee with
such information and documents reasonably requested by the Lessee as are
necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by SECTION 13.1 or 13.3. Unless an Event of
Default under the Lease shall have occurred and be continuing, no Indemnitee
shall enter into any settlement or other compromise with respect to any Claim
which is entitled to be indemnified under SECTION 13.1 or 13.3 without the prior
written consent of the Lessee, which consent shall not be unreasonably withheld,
unless such Indemnitee waives its right to be indemnified under SECTION 13.1 or
13.3 with respect to such Claim.
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Upon payment in full of any Claim by the Lessee pursuant to SECTION 13.1 or
13.3 to or on behalf of an Indemnitee, the Lessee, without any further action,
shall be subrogated to any and all claims that such Indemnitee may have relating
thereto (other than claims in respect of insurance policies maintained by such
Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be necessary to preserve
any such claims and otherwise cooperate with the Lessee and give such further
assurances as are necessary or advisable to enable the Lessee vigorously to
pursue such claims.
Any amount payable to an Indemnitee pursuant to SECTION 13.1 or 13.3 shall
be paid to such Indemnitee promptly upon receipt of a written demand therefor
from such Indemnitee, accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable.
SECTION XIII.5. GENERAL TAX INDEMNITY.
(a) INDEMNIFICATION. The Lessee shall pay and assume liability for,
and does hereby agree to indemnify, protect and defend the applicable
Property and all Tax Indemnitees, and hold them harmless against, all
Impositions on an After Tax Basis.
(b) CONTESTS. If any claim shall be made against any Tax Indemnitee
or if any proceeding shall be commenced against any Tax Indemnitee
(including a written notice of such proceeding) for any Imposition as to
which the Lessee may have an indemnity obligation pursuant to this
SECTION 13.5, or if any Tax Indemnitee shall determine that any Imposition
to which the Lessee may have an indemnity obligation pursuant to this
SECTION 13.5 may be payable, such Tax Indemnitee shall promptly (and in any
event, within 30 days) notify the Lessee in writing (PROVIDED that failure
to so notify the Lessee within 30 days shall not alter such Tax
Indemnitee's rights under this SECTION 13.5 except to the extent such
failure precludes or materially adversely
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affects the ability to conduct a contest of any indemnified Taxes) and
shall not take any action with respect to such claim, proceeding or
Imposition without the written consent of the Lessee (such consent not to
be unreasonably withheld or unreasonably delayed) for 30 days after the
receipt of such notice by the Lessee; PROVIDED, HOWEVER, that in the case
of any such claim or proceeding, if such Tax Indemnitee shall be required
by law or regulation to take action prior to the end of such 30-day period,
such Tax Indemnitee shall in such notice to the Lessee, so inform the
Lessee, and such Tax Indemnitee shall not take any action with respect to
such claim, proceeding or Imposition without the consent of the Lessee
(such consent not to be unreasonably withheld or unreasonably delayed) for
10 days after the receipt of such notice by the Lessee unless such Tax
Indemnitee shall be required by law or regulation to take action prior to
the end of such 10-day period.
The Lessee shall be entitled for a period of 30 days from receipt of
such notice from such Tax Indemnitee (or such shorter period as such Tax
Indemnitee has notified the Lessee is required by law or regulation for
such Tax Indemnitee to commence such contest), to request in writing that
such Tax Indemnitee contest the imposition of such Tax, at the Lessee's
expense. If (x) such contest can be pursued in the name of the Lessee and
independently from any other proceeding involving a Tax liability of such
Tax Indemnitee for which the Lessee has not agreed to indemnify such Tax
Indemnitee, (y) such contest must be pursued in the name of such Tax
Indemnitee, but can be pursued independently from any other proceeding
involving a Tax liability of such Tax Indemnitee for which the Lessee has
not agreed to indemnify such Tax Indemnitee or (z) such Tax Indemnitee so
requests, then the Lessee shall be permitted to control the contest of such
claim, PROVIDED that in the case of a contest described in CLAUSE (y), if
such Tax Indemnitee determines reasonably and in good faith that such
contest by the Lessee could have a material adverse impact on the business
or operations of such Tax Indemnitee and provides a written explanation to
the Lessee of such determination, such Tax Indemnitee may
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elect to control or reassert control of the contest, and PROVIDED, that
by taking control of the contest, the Lessee acknowledges that it is
responsible for the Imposition ultimately determined to be due by reason of
such claim, and PROVIDED, FURTHER, that in determining the application of
CLAUSES (x) and (y) of the preceding sentence, each Tax Indemnitee shall
take any and all reasonable steps to segregate claims for any Taxes for
which the Lessee indemnifies hereunder from Taxes for which the Lessee is
not obligated to indemnify hereunder, so that the Lessee can control the
contest of the former. In all other claims requested to be contested by
the Lessee, such Tax Indemnitee shall control the contest of such claim,
acting through counsel reasonably acceptable to the Lessee. In no event
shall the Lessee be permitted to contest (or such Tax Indemnitee required
to contest) any claim, (A) if such Tax Indemnitee provides the Lessee with
a legal opinion of counsel reasonably acceptable to the Lessee that such
action, suit or proceeding involves a risk of imposition of criminal
liability or will involve a material risk of the sale, forfeiture or loss
of, or the creation of any Lien (other than a Permitted Lien) on any
Property or any part of any thereof unless the Lessee shall have posted and
maintained a bond or other security satisfactory to the relevant Tax
Indemnitee in respect to such risk, (B) if an Event of Default has occurred
and is continuing unless the Lessee shall have posted and maintained a bond
or other security satisfactory to the relevant Tax Indemnitee in respect of
the Taxes subject to such claim and any and all expenses for which the
Lessee is responsible hereunder reasonably foreseeable in connection with
the contest of such claim, (C) unless the Lessee shall have agreed to pay
and shall pay, to such Tax Indemnitee on demand all reasonable
out-of-pocket costs, losses and expenses that such Tax Indemnitee may incur
in connection with contesting such Imposition including all reasonable
legal, accounting and investigatory fees and disbursements, or (D) if such
contest shall involve the payment of the Tax prior to the contest, unless
the Lessee shall provide to such Tax Indemnitee an interest-free advance in
an amount equal to
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the Imposition that the Indemnitee is required to pay (with no additional
net after-tax costs to such Tax Indemnitee). In addition for Tax
Indemnitee controlled contests and claims contested in the name of such Tax
Indemnitee in a public forum, no contest shall be required: (A) unless the
amount of the potential indemnity (taking into account all similar or
logically related claims that have been or could be raised in any audit
involving such Tax Indemnitee with respect to any period for which the
Lessee may be liable to pay an indemnity under this SECTION 13.5(b))
exceeds $75,000 or (B) unless, if requested by such Tax Indemnitee, the
Lessee shall have provided to such Tax Indemnitee an opinion of counsel
selected by the Lessee (which may be in-house counsel) (except, in the case
of income taxes indemnified hereunder which shall be an opinion of
independent tax counsel selected by such Tax Indemnitee and reasonably
acceptable to the Lessee) that a reasonable basis exists to contest such
claim. In no event shall a Tax Indemnitee be required to appeal an adverse
judicial determination to the United States Supreme Court.
The party conducting the contest shall consult in good faith with the
other party and its counsel with respect to the contest of such claim for
Taxes (or claim for refund) but the decisions regarding what actions to be
taken shall be made by the controlling party in its sole judgement,
PROVIDED, HOWEVER, that if such Tax Indemnitee is the controlling party and
the Lessee recommends the acceptance of a settlement offer made by the
relevant Governmental Authority and such Tax Indemnitee rejects such
settlement offer then the amount for which the Lessee will be required to
indemnify such Tax Indemnitee with respect to the Taxes subject to such
offer shall not exceed the amount which it would have owed if such
settlement offer had been accepted. In addition, the controlling party
shall keep the noncontrolling party reasonably informed as to the progress
of the contest, and shall provide the noncontrolling party with a copy of
(or appropriate excerpts from) any reports or claims issued by the relevant
auditing agents or taxing authority to the controlling party thereof, in
connection
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with such claim or the contest thereof.
Each Tax Indemnitee shall at the Lessee's expense supply the Lessee
with such information and documents reasonably requested by the Lessee as
are necessary or advisable for the Lessee to participate in any action,
suit or proceeding to the extent permitted by this SECTION 13.5(b).
Notwithstanding anything in this SECTION 13.5(b) to the contrary, no Tax
Indemnitee shall enter into any settlement or other compromise or fail to
appeal an adverse ruling with respect to any claim which is entitled to be
indemnified under this SECTION 13.5 (and with respect to which contest is
required under this SECTION 13.5(b)) without the prior written consent of
the Lessee, unless such Tax Indemnitee waives its right to be indemnified
under this SECTION 13.5 with respect to such claim.
Notwithstanding anything contained herein to the contrary, a Tax
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a claim with respect to the imposition of any Tax if
such Tax Indemnitee shall waive its right to indemnification from Lessee
under this SECTION 13.5 with respect to such claim (and any claim with
respect to such year or any other taxable year the contest of which is
materially adversely affected as a result of such waiver).
(c) REIMBURSEMENT FOR TAX SAVINGS. If (x) a Tax Indemnitee or any
Affiliate thereof realizes a deduction, offset, credit or refund of any
Taxes or any other savings or benefit as a result of any indemnity paid by
the Lessee pursuant to this SECTION 13.5 or (y) by reason of the incurrence
or imposition of any Tax (or the circumstances or event giving rise
thereto) for which a Tax Indemnitee is indemnified hereunder or any payment
made to or for the account of such Tax Indemnitee by the Lessee pursuant to
this SECTION 13.5 or any payment made by a Tax Indemnitee to the Lessee by
reason of this SECTION 13.5(c), such Tax Indemnitee at any time actually
realizes a reduction in any Taxes for which the Lessee is not required to
indemnify such
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Tax Indemnitee pursuant to this SECTION 13.5 which reduction in Taxes was
not taken into account in computing such payment by the Lessee to or for
the account of such Tax Indemnitee or by such Tax Indemnitee to the Lessee,
then such Tax Indemnitee shall promptly pay to the Lessee (xx) the amount
of such deduction, offset, credit, refund, or other savings or benefit
together with the amount of any interest received by such Tax Indemnitee on
account of such deduction, offset, credit, refund or other savings or
benefit or (yy) an amount equal to such reduction in Taxes, as the case may
be, in either case together with an amount equal to any reduced Taxes
payable by such Tax Indemnitee as a result of such payment; PROVIDED that
no such payment shall be made so long as a Default or Event of Default
shall have occurred and be continuing but shall be paid promptly after cure
of such Default or Event of Default. Each Tax Indemnitee agrees to take
such actions as the Lessee may reasonably request (provided in the good
faith judgment of such Tax Indemnitee, such actions would not result in a
material adverse effect on such Tax Indemnitee for which such Tax
Indemnitee is not entitled to indemnification from the Lessee) and to
otherwise act in good faith to claim such refunds and other available Tax
benefits, and take such other actions as may be reasonable to minimize any
payment due from the Lessee pursuant to this SECTION 13.5 and to maximize
the amount of any Tax savings available to it. The disallowance or
reduction of any credit, refund or other tax savings with respect to which
a Tax Indemnitee has made a payment to the Lessee under this SECTION
13.5(e) shall be treated as a Tax for which the Lessee is obligated to
indemnify such Tax Indemnitee hereunder without regard to the exclusions
set forth in the definition of Impositions except the exclusions set forth
in (iv), (v), (vi), (vii), (ix), (x), (xi), (xiv) and (xvi).
(d) PAYMENTS. Any Imposition indemnifiable under this SECTION 13.5
shall be paid directly when due to the applicable taxing authority if
direct payment is practicable and permitted. If direct payment to the
applicable taxing authority is not permitted or is otherwise not made, any
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amount payable to a Tax Indemnitee pursuant to SECTION 13.5 shall be paid
within thirty (30) days after receipt of a written demand therefor from
such Tax Indemnitee accompanied by a written statement describing in
reasonable detail the amount so payable, but not before two Business Days
prior to the date that the relevant Taxes are due. Any payments made
pursuant to this SECTION 13.5 shall be made directly to such Tax Indemnitee
entitled thereto or the Lessee, as the case may be, in immediately
available funds at such bank or to such account as specified by the payee
in written directions to the payor, or, if no such direction shall have
been given, by check of the payor payable to the order of the payee by
certified mail, postage prepaid at its address as set forth in SCHEDULE II
hereto. Upon the request of any Tax Indemnitee with respect to a Tax that
the Lessee is required to pay, the Lessee shall furnish to such Tax
Indemnitee the original or a certified copy of a receipt for the Lessee's
payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(e) REPORTS. In the case of any report, return or statement required
to be filed with respect to any Taxes that are subject to indemnification
under this SECTION 13.5 and of which the Lessee has knowledge, the Lessee
shall promptly notify such Tax Indemnitee of such requirement and, at the
Lessee's expense (i) if the Lessee is permitted (unless otherwise requested
by such Tax Indemnitee) by Applicable Law, timely file such report, return
or statement in its own name or (ii) if such report, return or statement is
required to be in the name of or filed by such Tax Indemnitee or such Tax
Indemnitee otherwise requests that such report, return or statement for
filing by such Tax Indemnitee in such manner as shall be satisfactory to
such Tax Indemnitee and send the same to such Tax Indemnitee for filing no
later than 15 days prior to the due date therefor. In any case in which
such Tax Indemnitee will file any such report, return or statement, the
Lessee shall, upon written request of such Tax Indemnitee, provide such Tax
Indemnitee with such information as is reasonably necessary to allow such
Tax Indemnitee to file such report, return or
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statement.
(f) VERIFICATION. At the Lessee's request, the amount of any
indemnity payment by the Lessee or any payment by a Tax Indemnitee to the
Lessee pursuant to this SECTION 13.5 shall be verified and certified by an
independent public accounting firm mutually acceptable to the Lessee and
such Tax Indemnitee. The costs of such verification shall be borne by the
Lessee unless such verification shall result in an adjustment in the
Lessee's favor of the lesser of (i) $10,000, and (ii) 5 percent of the
payment as computed by such Tax Indemnitee, in which case such fee shall be
paid by such Tax Indemnitee. In no event shall the Lessee have the right
to review such Tax Indemnitee's tax returns or receive any other
confidential information from such Tax Indemnitee in connection with such
verification. Any information provided to such accountants by any Person
shall be and remain the exclusive property of such Person and shall be
deemed by the parties to be (and the accountants will confirm in writing
that they will treat such information as) the private, proprietary and
confidential property of such Person, and no Person other than such Person
and the accountants shall be entitled thereto and all such materials shall
be returned to such Person. Such accounting firm shall be requested to
make its determination within 30 days of the Lessee's request for
verifications and the computations of the accounting firm shall be final,
binding and conclusive upon the Lessee and such Tax Indemnitee. The
parties agree that the sole responsibility of the independent public
accounting firm shall be to verify the amount of a payment pursuant to this
Master Lease and that matters of interpretation of this Master Lease are
not within the scope of the independent accounting firm's responsibilities.
(g) TAX OWNERSHIP. Each Tax Indemnitee represents and warrants that
it will not, prior to the termination of the Master Lease, claim ownership
of (or any tax benefits, including depreciation, with respect to) any
Property for any income tax purposes, it being understood that the Lessee
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is and will remain the owner of the applicable Property for such income tax
purposes until the termination of the Master Lease. If, notwithstanding
the income tax intentions of the parties as set forth herein, any Tax
Indemnitee actually receives any income tax deductions, reductions in
income tax or other income tax benefit as a result of any claim for, or
recharacterization requiring such party to take, any tax benefits
attributable to ownership of any Property for income tax purposes, such Tax
Indemnitee shall pay to the Lessee, together with an amount equal to any
reduced Taxes payable by such Tax Indemnitee as a result of such payment,
the amount of such income tax savings actually realized by such Tax
Indemnitee (less the amount of any anticipated increase in income tax which
such Tax Indemnitee determines is currently payable as a result of such
claim or recharacterization), PROVIDED that the Lessee shall agree to
reimburse such Tax Indemnitee for any subsequent increase in such Tax
Indemnitee's income taxes resulting from such claim or recharacterization
not taken into account in the payment made to the Lessee, up to the net
amount paid to the Lessee by each Tax Indemnitee. The parties agree that
this SECTION 13.5(g) is intended to require a payment to the Lessee if and
only if each Tax Indemnitee shall have actually received an unanticipated
tax savings with respect to any Property that would not have been received
if each Tax Indemnitee had advanced funds to the Lessee in the form of a
loan secured by such Property in an amount equal to the applicable Property
Cost. Nothing in this SECTION 13.5(g) shall be construed to require each
Tax Indemnitee to take any affirmative action to realize any tax savings if
in its good faith reasonable judgment such action may have a material
adverse affect on each Tax Indemnitee.
SECTION XIII.6. INDEMNITY PAYMENTS IN ADDITION TO LEASE OBLIGATIONS. The
Lessee acknowledges and agrees that the Lessee's obligations to make indemnity
payments under this Article XIII are separate from, in addition to, and do not
reduce, the Lessee's obligation to pay under the Lease that portion of the Lease
Balance constituting the Loan Balance.
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SECTION XIII.7. LIBO RATE LENDING UNLAWFUL. If, on or after the date
hereof, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Participant (or
its Funding Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Participant (or its Funding Office) to
make, maintain or fund Loans or Lessor Amounts, as applicable, and such
Participant shall so notify the Lessee, whereupon until such Participant
notifies the Lessee that the circumstances giving rise to such suspension no
longer exist, the obligation to make Loans or Lessor Amounts, as applicable,
shall be suspended. Such Participant, with the consent of the Lessee (which
consent shall not unreasonably be withheld), will designate a different Funding
Office if such designation will avoid the need for giving such notice and will
not, in the judgment of such Participant, be otherwise disadvantageous to such
Participant. If such notice is given (i) each Lessee shall be entitled upon its
request to a reasonable explanation of the factors underlying such notice and
(ii) each Advance then outstanding shall begin to bear interest at the Alternate
Base Rate either (a) on the last day of the then current Interest Period
applicable thereto, if such Participant may lawfully continue to maintain and
fund such Advance to such day or (b) immediately, if such Participant shall
determine that it may not lawfully continue to maintain and fund such Advance to
such day.
SECTION XIII.8. DEPOSITS UNAVAILABLE. If any of the Participants shall
have determined that
(i) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Participant in its relevant
market; or
(ii) by reason of circumstances affecting the Participant's relevant
market, adequate means do not exist for ascertaining the interest rate or
Yield, as the case may
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be, applicable to such Participant's Loans or Lessor Amounts,
then, upon notice from such Participant to the Lessee and the other
Participants, (i) the obligations of the Participants to make Loans or Lessor
Amounts, as the case may be, shall be suspended and (ii) each outstanding Loan
or Lessor Amount, as the case may be, shall begin to bear interest or accrue
Yield at the Alternate Base Rate on the last day of the then current Interest
Period applicable thereto.
SECTION XIII.9. INCREASED COSTS, ETC.
(a) In the event that the adoption of any applicable law, rule or
regulation, or any change therein or in the interpretation or application
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof or compliance by
any Participant with any request or directive after the date hereof
(whether or not having the force of law) of any such authority, central
bank or comparable agency:
(i) does or shall subject any Participant to any additional tax
of any kind whatsoever with respect to the Operative Documents or any
Loan or Lessor Amount, as applicable, made by it, or change the basis
or the applicable rate of taxation of payments to such Participant of
principal, interest or any other amount payable hereunder (except for
the imposition of or change in any tax on or measured by or with
respect to the overall gross or net income, or gross or net receipts
(including, without limitation, any minimum taxes, income or capital
gains taxes, or taxes on, or measured by or with respect to or in the
nature of capital, net worth, excess profits, items of tax preference,
capital stock, business privilege or doing business or any other
similar taxes) of such Participant (other than any such tax imposed by
means of withholding and specifically excluding income taxes merely
collected by means of withholding) or any tax
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imposed in lieu thereof);
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, insurance assessment, compulsory loan or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office
of such Participant which are not otherwise included in determination
of the rate of interest on Loan or Lessor Amount, as applicable,
hereunder; or
(iii) does or shall impose on such Participant any other
condition;
and the result of any of the foregoing is to increase the cost to such
Participant of making or maintaining Loan or Lessor Amount, as applicable,
or to reduce any amount receivable hereunder, then in any such case, the
Lessee shall promptly pay to such Participant, upon demand, any additional
amounts necessary to compensate such Participant for such increased cost or
reduced amount receivable which such Participant deems to be material as
determined by such Participant with respect to Loan or Lessor Amount, as
applicable.
(b) If any Participant shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on capital of such Participant (or any entity directly
or indirectly controlling such Participant) as a consequence of such
Participant's obligations under the
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Operative Documents to a level below that which such Participant (or any
entity directly or indirectly controlling such Participant) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount
deemed by such Participant to be material, then from time to time, within
fifteen (15) days after demand by such Participant, the Lessee shall pay to
such Participant such additional amount or amounts as will compensate such
Participant (or its Parent) for such reduction.
(c) Each Participant will promptly notify the Lessee of any event of
which it has knowledge, occurring after the date hereof, which will entitle
such Participant to compensation pursuant to this Section and will, if
practicable, with the consent of the Lessee (which consent shall not
unreasonably be withheld), designate a different Funding Office or take any
other reasonable action if such designation or action will avoid the need
for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of such Participant, be otherwise disadvantageous to
such Participant. A certificate of such Participant claiming compensation
under this Section and setting forth in reasonable detail its computation
of the additional amount or amounts to be paid to it hereunder shall be
presumed correct in the absence of demonstrable error. In determining such
amount, such Participant may use any reasonable averaging and attribution
methods.
(d) Notwithstanding the foregoing CLAUSES (a) and (b) of this SECTION
13.9, the Lessee shall only be obligated to compensate such Participant for
any amount arising or accruing both:
(i) during (A) any time or period commencing (x) in the case of
SUBSECTION (a), not earlier than the first day of any Interest Period
in effect on the date which, and (y) in the case of SUBSECTION (b),
not earlier than the date on which such Participant notifies the
Lessee that it proposes to demand such
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compensation and identifies to the Lessee the statute, regulation or
other basis upon which the claimed compensation is or will be based
and (B) any time or period during which, because of the retroactive
application of such statute, regulation or other basis, such
Participant did not know that such amount would arise or accrue; and
(ii) within six months prior to any demand therefor, accompanied
by a certificate of such Participant claiming compensation and setting
forth in reasonable detail its computation of the additional amount or
amounts to be paid to it hereunder.
SECTION XIII.10. FUNDING LOSSES. If any payment of principal amount of
any Loan or Lessor Amount is made on any day other than the last day of an
Interest Period applicable thereto, the Lessee shall reimburse the party
claiming reimbursement therefor within fifteen (15) days after demand for any
resulting loss or expense incurred by it, including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
conversion or failure to borrow or prepay, PROVIDED that the such party shall
have delivered to the Lessee a certificate as to the amount of such loss or
expense, which certificate shall be presumed correct in the absence of
demonstrable error. Such party will, at the request of the Lessee, furnish such
additional information concerning the determination of such loss as the Lessee
may reasonably request.
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ARTICLE XIV
MISCELLANEOUS
SECTION XIV.1. SURVIVAL OF AGREEMENTS. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Participation Agreement, the
transfer of any Property to the Lessor, any disposition of any interest of the
Lessor in any Property or any Improvements and the payment of the Notes and any
disposition thereof and shall be and continue in effect notwithstanding any
investigation made by any party and the fact that any party may waive compliance
with any of the other terms, provisions or conditions of any of the Operative
Documents. Except as otherwise expressly set forth herein or in other Operative
Documents, the indemnities of the parties provided for in the Operative
Documents shall survive the expiration or termination of any thereof for a
period not to exceed one year after the later of (x) the Expiration Date and (y)
the payment in full in cash of the Lease Balance.
SECTION XIV.2. NO BROKER, ETC. Each of the parties hereto represents to
the others that it has not retained or employed any broker, finder or financial
adviser, except Lund Financial Corporation to act on its behalf in connection
with this Participation Agreement or the transactions contemplated herein, nor
has it authorized any broker, finder or financial adviser retained or employed
by any other Person so to act. Any party who is in breach of this
representation shall indemnify and hold the other parties harmless from and
against any liability arising out of such breach of this representation.
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SECTION XIV.3. NOTICES. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing by United States mail, by nationally recognized
courier service, by hand or by facsimile transmission and any such notice shall
become effective five Business days after being deposited in the mails,
certified or registered with appropriate postage prepaid or one Business Day
after delivery to a nationally recognized courier service specifying overnight
delivery or, if delivered by hand or facsimile transmission, when received, and
shall be directed to the address of such Person as indicated on SCHEDULE II.
From time to time any party may designate a new address for purposes of notice
hereunder by written notice to each of the other parties hereto in accordance
with this Section.
SECTION XIV.4. COUNTERPARTS. This Participation Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION XIV.5. AMENDMENTS.
(a) The provisions of this Participation Agreement may from time to
time be amended, modified or waived, PROVIDED, HOWEVER, that such
amendment, modification or waiver is in writing and consented to by the
Lessee and the Required Participants; PROVIDED, FURTHER, HOWEVER, that no
amendment or waiver of any provision relating to payment or performance of
an obligation owed to any Participant shall be effective against such
Participant unless it has been consented to in writing by such Participant.
(b) Neither any Operative Document nor any of the terms thereof may
be terminated (except upon payment in full of the Lease Balance or
effective exercise and consummation of the Remarketing Option in accordance
with Article XX of
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<PAGE>
the Master Lease and payment in full of all amounts due in accordance
therewith), amended, supplemented, waived or modified without the written
agreement or consent of each party thereto and, regardless of whether the
Lenders and the Lessor are parties thereto, the Required Participants.
SECTION XIV.6. HEADINGS, ETC. The Table of Contents and headings of the
various Articles and Sections of this Participation Agreement are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
SECTION XIV.7. PARTIES IN INTEREST. Except as expressly provided herein,
none of the provisions of this Participation Agreement is intended for the
benefit of any Person except the parties hereto. The Lessee shall not assign or
transfer any of its rights or obligations under the Operative Documents except
in accordance with the terms and conditions thereof.
SECTION XIV.8. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA (EXCLUDING ANY
CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF
THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
SECTION XIV.9. SEVERABILITY. Any provision of this Participation
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
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<PAGE>
SECTION XIV.10. LIABILITY LIMITED. (a) The parties hereto agree that
except as specifically set forth herein or in any other Operative Document,
Lessor shall have no personal liability whatsoever to the Lessee or any
Participant or their respective successors and assigns for any claim based on or
in respect hereof or any of the other Operative Documents or arising in any way
from the transactions contemplated hereby or thereby and the recourse shall be
solely had against the Lessor's interest in any Property; PROVIDED, HOWEVER,
that Lessor shall be liable in its individual capacity (a) for its own willful
misconduct or gross negligence (or negligence in the handling of funds), (b)
breach of any of its representations, warranties or covenants under the
Operative Documents, or (c) for any Tax based on or measured by any fees,
commission or compensation received by it for acting as the Lessor as
contemplated by the Operative Documents. It is understood and agreed that,
except as provided in the preceding sentence: (i) Lessor shall have no personal
liability under any of the Operative Documents as a result of acting pursuant to
and consistent with any of the Operative Documents; (ii) all obligations of
Lessor to the Lessee are solely nonrecourse obligations except to the extent
that it has received payment from others; and (iii) all such personal liability
of Lessor is expressly waived and released as a condition of, and as
consideration for, the execution and delivery of the Operative Documents by
Lessor.
(b) No Participant shall have any obligation to any other Participant
or to the Lessee, the Lessor or the Lenders with respect to transactions
contemplated by the Operative Documents, except those obligations of such
Participant expressly set forth in the Operative Documents or except as set
forth in the instruments delivered in connection therewith, and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations under the Operative Documents except as otherwise so set forth.
SECTION XIV.11. FURTHER ASSURANCES. The parties hereto shall promptly
cause to be taken, executed, acknowledged or delivered, at the sole expense of
the Lessee, all such further
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acts, conveyances, documents and assurances as the other parties may from time
to time reasonably request in order to carry out and preserve the security
interests and liens (and the priority thereof) intended to be created pursuant
to this Participation Agreement, the other Operative Documents, and the
transactions thereunder (including, without limitation, the preparation,
execution and filing of any and all Uniform Commercial Code financing statements
and other filings or registrations which the parties hereto may from time to
time request to be filed or effected); PROVIDED, HOWEVER, that the Lessee shall
not be required to pay expenses pursuant to this Section to the extent arising
from a breach or alleged breach by the Lenders or the Lessor of any agreement
entered into in connection with the assignment or participation of any Loan or
Lessor Amount. The Lessee, at its own expense and without need of any prior
request from any other party, shall take such action as may be necessary
(including any action specified in the preceding sentence), or as so requested,
in order to maintain and protect all security interests provided for hereunder
or under any other Operative Document.
SECTION XIV.12. SUBMISSION TO JURISDICTION. The Lessee hereby submits to
the nonexclusive jurisdiction of any United States District Court located in the
State of California for purposes of all legal proceedings arising out of or
relating to the Operative Documents or the transactions contemplated hereby.
The Lessee irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
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<PAGE>
SECTION XIV.13. SETOFF. The Lenders and the Lessor shall, upon the
occurrence of any Lease Event of Default, have the right to appropriate and
apply to the payment of the Lessee's obligations under the Lease as security for
the payment of such obligations, any and all balances, credits, deposits,
accounts or moneys of the Lessee then or thereafter maintained with any Lender
or Lessor. The rights of the Lenders and the Lessor under this Section are in
addition to other rights and remedies (including other rights of setoff under
applicable law or otherwise) which such Person may have.
SECTION XIV.14. REPLACEMENT OF LENDER. If a Lender fails to fund its
share of the Loans, and such failure is not based on a right granted thereto
under the Operative Documents, then the Lessee shall have the right (but not the
obligation) to require such Lender to assign and delegate in accordance with
SECTION 12.1 all of such Lender's total Loans and Commitment to any of the
Lenders or to any other financial institution selected by Lessee that, in each
case, is willing to accept such assignment and delegation and if no such Lender
or financial institution will accept such assignment and delegation, the Lessee
shall (in addition to any other right Lessee may have at law or in equity) have
the right to prepay all outstanding amounts with respect to such Lender and
terminate such Lender's Commitment.
SECTION XIV.15. WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS PARTICIPATION AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT
SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A
JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 14.15
HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO
EXCEPTIONS. THE LESSEE ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER OPERATIVE DOCUMENT TO
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<PAGE>
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
PARTICIPANTS ENTERING INTO THIS PARTICIPATION AGREEMENT AND EACH SUCH OTHER
OPERATIVE DOCUMENT.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SYMANTEC CORPORATION, as
Lessee, Pledgor and Guarantor
By
--------------------------------------
Name:
Title:
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<PAGE>
SUMITOMO BANK LEASING AND FINANCE,
INC., as Lessor
By
--------------------------------------
Name:
Title:
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<PAGE>
THE SUMITOMO BANK, LIMITED, SAN
FRANCISCO BRANCH, as Lender and as
Agent
By
--------------------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
TO PARTICIPATION AGREEMENT
COMMITMENTS
------------------------------------------------------------
------------------------------------------------------------
PARTICIPANT COMMITMENT
------------------------------------------------------------
------------------------------------------------------------
LENDER
------------------------------------------------------------
------------------------------------------------------------
The Sumitomo Bank, $45,800,000.00
Limited, San Francisco
Branch
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
LESSOR
------------------------------------------------------------
------------------------------------------------------------
Sumitomo Bank Leasing $7,200,000.00
and Finance, Inc.
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
--------------
--------------
------------------------------------------------------------
TOTAL: $53,000,000.00
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
<PAGE>
SCHEDULE II
TO PARTICIPATION AGREEMENT
NOTICE INFORMATION, WIRE INSTRUCTIONS AND FUNDING OFFICES
LESSEE AND GUARANTOR
SYMANTEC CORPORATION
10201 Torre Avenue
Cupertino, California 95014
Attn: Treasury Department
Facsimile No: (408) 252-3446
Wire Transfer Instructions:
Bank: Bank of America
ABA Number: 121000358
Account Number: 12338-10287
Ref: Symantec Lease
LESSOR:
SUMITOMO BANK LEASING AND FINANCE, INC.
277 Park Avenue
New York, New York 10172
Attention: Chief Credit Officer
Facsimile No.: (212) 224-5222
Wire Transfer Instructions:
Bank: Morgan Guaranty Trust Company of New york
ABA Number: 021000238
Account Name: The Sumitomo Bank, Ltd., San Francisco Branch
Account Number: 631-28-256
Ref: Symantec Lease
Further Credit to: Sumitomo Bank Leasing and Finance
A/C#283572
<PAGE>
AGENT AND LENDER:
THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH
555 California Street
Suite 3350
San Francisco, CA 94104
Attention: Chief Credit Officer
Facsimile No.: (415) 398-3580
Wire Transfer Instructions:
Bank: The Sumitomo Bank of California
ABA Number: 121002042
Ref: Symantec Corporation Lease
II-2
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS; INTERPRETATION.................................. 2
ARTICLE II
CONDITIONS PRECEDENT TO DOCUMENTATION AND ACQUISITION DATES
SECTION 2.1................................................Documentation Date 2
SECTION 2.2.................................................Acquisition Dates 4
ARTICLE III
FUNDING OF ADVANCES
SECTION 3.1..........................................................Advances 8
SECTION 3.3..............................................Lenders' Commitments 8
SECTION 3.4...........................................Procedures for Advances 9
ARTICLE IV
YIELD; INTEREST; FEES
SECTION 4.1.............................................................Yield 10
SECTION 4.2.................................................Interest on Loans 10
SECTION 4.3..............................................................Fees 11
ARTICLE V
CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1.............................................Nature of Transaction 11
SECTION 5.2...........................................Amounts Due Under Lease 11
ARTICLE VI
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ADDITIONAL COLLATERAL
SECTION 6.1........................................................Deficiency 12
SECTION 6.2..........................................................Surplus. 12
ARTICLE VII
DISTRIBUTIONS
SECTION 7.1........................................................Basic Rent 13
SECTION 7.2...................................Purchase Payments by the Lessee 13
SECTION 7.3...........................................Payment of Loan Balance 14
SECTION 7.4.......................Sales Proceeds of Remarketing of Properties 14
SECTION 7.5.................................................Supplemental Rent 14
SECTION 7.6................................Additional Collateral Realizations 14
SECTION 7.7.............Distribution of Payments after Lease Event of Default 15
SECTION 7.8....................................................Other Payments 17
SECTION 7.9.................................Casualty and Condemnation Amounts 17
SECTION 7.10.............................................Order of Application 18
ARTICLE VIII
REPRESENTATIONS
SECTION 8.1...............................Representations of the Participants 18
SECTION 8.2.....................................Representations of the Lessee 18
ARTICLE IX
PAYMENT OF CERTAIN EXPENSES
SECTION 9.1..............................................Transaction Expenses 25
SECTION 9.2.....................................Brokers' Fees and Stamp Taxes 26
SECTION 9.3............................Loan Agreement and Related Obligations 26
ARTICLE X
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
OTHER COVENANTS AND AGREEMENTS
SECTION 10.1..................................Affirmative Covenants of Lessee 26
ARTICLE XI
LESSEE DIRECTIONS
SECTION 11.1................................................Lessee Directions 30
ARTICLE XII
TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION 12.1......................................................Assignments 30
SECTION 12.2...................................................Participations 31
SECTION 12.3..........Withholding Taxes; Disclosure of Information; Pledge Under
Regulation A 32
ARTICLE XIII
INDEMNIFICATION
SECTION 13.1..........................................General Indemnification 33
SECTION 13.2............................................End of Term Indemnity 36
SECTION 13.3..........................................Environmental Indemnity 37
SECTION 13.4.................................Proceedings in Respect of Claims 39
SECTION 13.5............................................General Tax Indemnity 40
SECTION 13.6..............Indemnity Payments in Addition to Lease Obligations 47
SECTION 13.7.......................................LIBO Rate Lending Unlawful 47
SECTION 13.8.............................................Deposits Unavailable 48
SECTION 13.9............................................Increased Costs, etc. 48
SECTION 13.10..................................................Funding Losses 51
ARTICLE XIV
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
MISCELLANEOUS
SECTION 14.1...........................................Survival of Agreements 51
SECTION 14.2..................................................No Broker, etc. 52
SECTION 14.3..........................................................Notices 52
SECTION 14.4.....................................................Counterparts 52
SECTION 14.5.......................................................Amendments 52
SECTION 14.6...................................................Headings, etc. 53
SECTION 14.7..............................................Parties in Interest 53
SECTION 14.8....................................................GOVERNING LAW 53
SECTION 14.9.....................................................Severability 53
SECTION 14.10...............................................Liability Limited 53
SECTION 14.11..............................................Further Assurances 54
SECTION 14.12......................................Submission to Jurisdiction 55
SECTION 14.13..........................................................Setoff 55
SECTION 14.14...........................................Replacement of Lender 55
SECTION 14.15............................................WAIVER OF JURY TRIAL 55
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<PAGE>
SCHEDULES
SCHEDULE I Participants' Commitments
SCHEDULE II Notice Information, Wire Instructions, and Funding Offices
EXHIBITS
EXHIBIT A Form of Funding Request
EXHIBIT B Form of Responsible Officer's Certificate
EXHIBIT C Form of Legal Opinion
EXHIBIT D Form of Nondisturbance, Subordination and Attornment Agreement
EXHIBIT E Form of Assignment Agreement
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<PAGE>
EXECUTION COPY
APPENDIX A
to
Participation Agreement,
Master Lease,
Lease Supplements
Loan Agreement,
Pledge Agreement,
Lessor Mortgages, and
Guaranty
DEFINITIONS AND INTERPRETATION
A. INTERPRETATION. In each Operative Document, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and VICE VERSA;
(ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative Document),
document or instrument means such agreement, document or instrument as
amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms of the other Operative
Documents and reference to any promissory note includes any promissory note
which is an extension or renewal thereof or a substitute or replacement
therefor;
<PAGE>
(v) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of
any Applicable Law means that provision of such Applicable Law from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other
provision;
(vi) reference in any Operative Document to any Article, Section,
Appendix, Schedule or Exhibit means such Article or Section thereof or
Appendix, Schedule or Exhibit thereto;
(vii) "hereunder", "hereof", "hereto" and words of similar import
shall be deemed references to an Operative Document as a whole and not to
any particular Article, Section or other provision thereof;
(viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term; and
(ix) relative to the determination of any period of time, "from"
means "from and including" and "to" means "to but excluding".
B. COMPUTATION OF TIME PERIODS. For purposes of computation of periods of
time under the Operative Documents, the word "from" means "from and including"
and the words "to" and "until" each mean "to but excluding."
C. ACCOUNTING TERMS AND DETERMINATIONS. In each Operative Document,
unless expressly otherwise provided, accounting terms shall be construed and
interpreted, and accounting determinations and computations shall be made, in
accordance with GAAP.
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<PAGE>
D. CONFLICT IN OPERATIVE DOCUMENTS. If there is any conflict between any
Operative Documents, such Operative Document shall be interpreted and construed,
if possible, so as to avoid or minimize such conflict but, to the extent (and
only to the extent) of such conflict, the Participation Agreement shall prevail
and control.
E. LEGAL REPRESENTATION OF THE PARTIES. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
F. DEFINED TERMS. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document.
"ACQUISITION DATE" is defined in SECTION 2.2 of the Participation
Agreement.
"ADDITIONAL COLLATERAL" means any of the following obligations which have
been issued or guaranteed by the United States of America or an agency thereof
and having a remaining maturity of three years or less:
(i) all allotments, accretions, offers, rights, benefits and
advantages whatsoever at any time accruing, offered or arising in respect
of or incidental to the same or in respect of or incidental to any
securities, rights, moneys or other property previously accruing, offered
or arising as mentioned in this sub-clause (i); and
(ii) all proceeds of sale, dividends, interest and other distributions
or income hereafter paid or payable or made in respect of the same or the
securities, rights, moneys or other property falling within sub-clause (i)
above
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<PAGE>
or deriving from any investment of any such dividends, interest and other
distributions or income; also includes (without limitation):
(a) obligations of the United States of America having a
maturity of not more than one (1) year from the date of
issue and commonly known as "treasury bills";
(b) obligations of the United States of America having a
maturity greater than one year, but no more than ten (10)
years, from the date of issue and commonly known as
"treasury notes";
(c) obligations of the United States of America having a
maturity date in excess of ten (10) years, from the date of
issue and commonly known as "treasury bonds";
(d) U.S. Treasury Securities converted by the Department of the
Treasury into Separate Trading of Registered Interest and
Principal of Securities;
(e) obligations of Federal agencies of the government of the
United States of America which are backed as to payment of
interest and principal by the full faith and credit of the
United States of America; and
(f) repurchase agreements of government securities described in
sections (a) through (e) above with dealers approved by the
Lessor.
"ADVANCE" means an advance of funds by the Lessor and the Agent to the
Lessee pursuant to ARTICLE III of the Participation Agreement.
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<PAGE>
"AFFILIATE" means, when used with respect to any Person, any other Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common control with such Person.
"AFTER TAX BASIS" means, with respect to any payment to be received, the
amount of such payment increased so that, after deduction of the amount of all
taxes required to be paid by the recipient (less any tax savings realized and
the present value of any tax savings projected to be realized by the recipient
as a result of the payment of the indemnified amount) with respect to the
receipt by the recipient of such amounts, such increased payment (as so reduced)
is equal to the payment otherwise required to be made.
"AGENT" means The Sumitomo Bank, Limited, San Francisco Branch, in its
capacity as Agent, and any successors or assigns in such capacity.
"ALTERNATE BASE RATE" shall mean, for any day, the Federal Funds Rate for
such day PLUS 1/2 of 1%. In the event that on any day the Agent determines that
the Federal Funds Rate is not available, then for each such day the Alternate
Base Rate shall mean the rate of interest from time to time established by the
Agent as its prime commercial lending rate (which rate is not intended to be the
lowest rate of interest charged by the Agent in connection with extensions of
credit to debtors) (the "PRIME RATE"). Each change in any interest rate
provided for herein based upon the Alternate Base Rate resulting from a change
in the Alternate Base Rate shall take effect at the time of such change in the
Alternate Base Rate.
"ALTERNATE BASE RATE LOAN(S)/LESSOR AMOUNT(S)" means a Loan or Lessor
Amount, as the case may be, bearing interest at the Alternate Base Rate.
"APPLICABLE LAW" means all existing and future applicable laws, rules,
regulations (including Hazardous Materials Laws) statutes, treaties, codes,
ordinances, permits, certificates,
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<PAGE>
orders and licenses of and interpretations by, any Governmental Authority, and
applicable judgments, decrees, injunctions, writs, orders or like action of any
court, arbitrator or other administrative, judicial or quasi-judicial tribunal
or agency of competent jurisdiction (including those pertaining to health,
safety or the environment (including, without limitation, wetlands) and those
pertaining to the construction, use or occupancy of any Property) or in each
case affecting the Lessee, any Property or any material interests in any other
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, of the Lessee.
"APPRAISAL" means, with respect to each Property, an appraisal, prepared by
a reputable appraiser selected by the Agent and the Lessor, which Appraisal
complies in all material respects with all of the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules
and regulations adopted pursuant thereto, and all other applicable Requirements
of Law addressed to the Lessor and Lessee, and will appraise the Fair Market
Sales Value of such Property as of the Acquisition Date and as of the Expiration
Date for the Base Term.
"APPURTENANT RIGHTS" means, with respect to any Land, (i) all agreements,
easements, rights of way or use, rights of ingress or egress, privileges,
appurtenances, tenements, hereditaments and other rights and benefits at any
time belonging or pertaining to such Land or the Improvements thereon,
including, without limitation, the use of any streets, ways, alleys, vaults or
strips of land adjoining, abutting, adjacent or contiguous to such Land and (ii)
all permits, licenses and rights, whether or not of record, appurtenant to such
Land.
"ASSIGNMENT OF LEASE AND RENT" means the Assignment of Lease and Rent dated
as of October 18, 1996, and all supplements thereto, from the Lessor, as
assignor, to the Lenders, as assignees.
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<PAGE>
"BANKRUPTCY CODE" is defined in SECTION 6.1(e) of the Loan Agreement.
"BASIC RENT" means, for each Property, the sum of (i) the Lender Basic Rent
and (ii) the Lessor Basic Rent, calculated as of the applicable date on which
Basic Rent is due.
"BASIC RENT PAYMENT DATE" means each Scheduled Payment Date during the Base
Lease Term.
"BASE LEASE TERM" is defined in SECTION 2.3 of the Master Lease.
"BILL OF SALE" is defined in SECTION 2.1(j) of the Participation Agreement.
"BREAK COSTS" means an amount equal to the amount, if any, required to
compensate any Participant for any additional losses (including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or funds acquired by such Participant to fund its
obligations under the Operative Documents) it may reasonably incur as a result
of (v) the Lessee's payment of Rent other than on a Basic Rent Payment Date,
(x) any Advance not being made on the date specified therefor in the applicable
Funding Request as a result of any act or omission of Lessee (other than as a
result of a breach by such Participant, as the case may be, of its or any other
Participants obligation under SECTION 3.1, 3.2 or 3.3, as the case may be, of
the Participation Agreement to make Advances to the Lessee or make Lessor
Amounts or Loans available to the Lessor), (y) the Lessee's payment of the Lease
Balance on any date other than a Basic Rent Payment Date which date is not also
the end of the applicable Interest Period, or (z) as a result of any conversion
of the LIBO Rate in accordance with SECTION 13.7 of the Participation Agreement.
A statement as to the amount of such loss, cost or expense, prepared in good
faith and in reasonable detail and submitted by such Participant, as the case
may be, to the Lessee, shall be presumed correct and binding on
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<PAGE>
the Lessee absent demonstrable error.
"BUSINESS DAY" means (i) each day which is not a day on which banks in New
York, New York and San Francisco, California, are generally authorized or
obligated, by law or executive order, to close and (ii) any day which is a
Business Day under CLAUSE (i) and is also a day on which dealings in Dollars are
carried on in the London interbank eurodollar market.
"CAPITAL LEASE" means any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" means the capitalized lease obligations
relating to a Capital Lease determined in accordance with GAAP.
"CASUALTY" means any damage or destruction of all or any portion of a
Property as a result of a fire or other casualty.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Sections 9601 ET. SEQ., as amended by the
Superfund Amendments and Reauthorization Act of 1986.
"CERTIFYING PARTY" is defined in SECTION 22.1 of the Master Lease.
"CLAIMS" means any and all obligations, liabilities, losses, actions,
suits, judgments, penalties, fines, claims, demands, settlements, costs and
expenses (including, without limitation, reasonable legal fees and expenses) of
any nature whatsoever.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
"COLLATERAL AGENT" means Donaldson, Lufkin & Jenrette
-8-
<PAGE>
Securities Corporation, as Collateral Agent under the Pledge Agreement, and its
permitted successors and assigns.
"COMMITMENT" means (i) as to any Lender, the Loan Commitment, and (ii) as
to the Lessor, the Lessor Commitment.
"COMMITMENT PERCENTAGE" means, with respect to any Property, as to (i) each
Lender, its pro rata share of the Lenders' Percentage with respect to such
Property, and (ii) the Lessor, an amount, expressed as a percentage, equal to
100% MINUS such applicable Lenders' Percentage.
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not incorporated,
which is under common control with the Company within the meaning of Section
4001 of ERISA or is part of a group which includes the Company and which is
treated as a single employer under Section 414 of the Code.
"CONDEMNATION" means, with respect to any Property, any condemnation,
requisition, confiscation, seizure or other taking or sale of the use, access,
occupancy, easement rights or title to such Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including an action by a Governmental
Authority to change the grade of, or widen the streets adjacent to, such
Property or alter the pedestrian or vehicular traffic flow to such Property so
as to result in change in access to such Property, or by or on account of an
eviction by paramount title or any transfer made in lieu of any such proceeding
or action. A "CONDEMNATION" shall be deemed to have occurred on the earliest of
the dates that use, occupancy or title vests in the condemning authority.
"CONTROL" means (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, the possession directly or indirectly, of the power to direct or cause
the direction of the
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management policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"CREDIT AGREEMENT" means the Second Amended and Restated Credit Agreement
between the Lessee and Bank of America National Trust and Savings Association
dated as of March 28, 1996, and any successor agreement thereto or replacement
agreement thereof, as each may be from time to time amended, modified or
supplemented.
"CUSTODY AGREEMENT" means the letter agreement between the Lessor and the
Collateral Agent with respect to the Additional Collateral.
"DEED" means a grant deed with respect to the real property comprising the
applicable Property, in conformity with Applicable Law and appropriate for
recording with the applicable Governmental Authorities, conveying fee simple
title to such real property to the Lessor, subject only to Permitted Liens.
"DEFAULT" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"DEFICIENCY DATE" is defined in SECTION 6.1 of the Participation Agreement.
"DEFICIENCY COLLATERAL" is defined in SECTION 6.1 of the Participation
Agreement.
"DOCUMENTATION DATE" is defined in SECTION 2.1 of the Participation
Agreement.
"DOLLARS" and "$" mean dollars in lawful currency of the United States of
America.
"END OF THE TERM REPORT" is defined in SECTION 13.2(a) of the Participation
Agreement.
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"ENVIRONMENTAL AUDIT" means, with respect to each Property, a Phase One
environmental site assessment (the scope and performance of which meets or
exceeds the then most current ASTM Standard Practice E1527 for Environmental
Site Assessments: Phase One Environmental Site Assessment Process) of such
Property.
"ENVIRONMENTAL VIOLATION" means any activity, occurrence or condition that
violates or results in non-compliance with any Hazardous Materials Law.
"EQUIPMENT" means equipment, apparatus, furnishings, fittings and personal
property of every kind and nature whatsoever purchased, leased or otherwise
acquired by the Lessor using the proceeds of the Loans or the Lessor Amounts and
now or subsequently attached to, contained in or used or usable in any way in
connection with any operation or letting of a Property, including but without
limiting the generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows, shelving,
display cases, counters, furniture and furnishings, heating, electrical, switch
gear, uninterrupted power supply, and mechanical equipment, lighting,
switchboards, plumbing, ventilation, air conditioning and air-cooling apparatus,
refrigerating, and incinerating equipment, escalators, generators, elevators,
loading and unloading equipment and systems, stoves, ranges, laundry equipment,
cleaning systems (including window cleaning apparatus), telephones,
communication systems (including satellite dishes and antennae), televisions,
computers, sprinkler systems and other fire prevention and extinguishing
apparatus and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of every kind and
description.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
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"ERISA AFFILIATE" means each entity required to be aggregated with the
Lessee pursuant to the requirements of Section 414(b) or (c) of the Code.
"ERISA GROUP" means the Lessee and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Lessee, are treated as a single employer
under Section 414 of the Code.
"EVENT OF DEFAULT" means a Lease Event of Default or a Loan Agreement Event
of Default.
"EXCESS CASUALTY/CONDEMNATION PROCEEDS" means the excess, if any, of (x)
the aggregate of all awards, compensation or insurance proceeds payable in
connection with a Casualty or Condemnation MINUS (y) the Property Balance paid
by the Lessee pursuant to ARTICLE XV of the Master Lease with respect to such
Casualty or Condemnation.
"EXCESS SALES PROCEEDS" means the excess, if any, of (x) the aggregate of
all proceeds received by the Lessor in connection with any sale of the Property
pursuant to the Lessor's exercise of remedies under SECTION 16.2 of the Master
Lease or the Lessee's exercise of the Remarketing Option under ARTICLE XX of the
Master Lease, less all fees, costs and expenses of the Lessor in connection with
the exercise of its rights and remedies thereunder, MINUS (y) the Lease Balance.
"EXPIRATION DATE" means, with respect to the Master Lease, unless the
Master Lease shall have been earlier terminated in accordance with the
provisions of the Master Lease or other Operative Documents, the seventh (7th)
anniversary of the Documentation Date.
"EXPIRATION DATE PURCHASE OBLIGATION" means the Lessee's obligation,
pursuant to SECTION 18.2 of the Master Lease, to purchase all (but not less than
all) of the Properties on the
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Expiration Date.
"FAIR MARKET SALES VALUE" means, with respect to any Property, the amount,
which in any event shall not be less than zero, that would be paid in cash in an
arm's-length transaction between an informed and willing purchaser and an
informed and willing seller, neither of whom is under any compulsion to purchase
or sell, respectively, for the ownership of such Property. The Fair Market
Sales Value of any Property shall be determined based on the assumption that,
except for purposes of ARTICLE XVI of the Master Lease and SECTION 13.2 of the
Participation Agreement, such Property is in the condition and state of repair
required under SECTION 9.1 of the Master Lease and the Lessee is in compliance
with the other requirements of the Operative Documents relating to the condition
of the Property.
"FEDERAL FUNDS RATE" means, for any day or period, as applicable, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) at which
Federal funds in the amount equal to the principal amount as to which such rate
is offered in the interbank market to The Sumitomo Bank, Limited, acting through
its New York branch, for such period as of 11:00 A.M. New York time on such day
for such day or such period, as applicable.
"FEES" means the fees payable pursuant to the Fee Letter.
"FEE LETTER" means the letter agreement dated October 18, 1996 between the
Lessee and the Lessor.
"FIXED CHARGE COVERAGE RATIO" means the ratio of Consolidated Net Income
Available for Fixed Charges to Consolidated Fixed Charges.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"FUNDING OFFICE" means the office of each Participant
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identified on SCHEDULE II to the Participation Agreement as its Funding Office.
"FUNDING REQUEST" is defined in SECTION 3.4(a) of the Participation
Agreement.
"GAAP" means United States generally accepted accounting principles
(including principles of consolidation), in effect from time to time.
"GOVERNMENTAL ACTION" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, written
interpretations, decrees, licenses, exemptions, publications, filings, notices
to and declarations of or with, or required by, any Governmental Authority, or
required by any Applicable Law, and shall include, without limitation, all
environmental and operating permits and licenses that are required for the full
use, occupancy, zoning and operation of any Property.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GROSS REMARKETING PROCEEDS" is defined in SECTION 20.1(k) of the Master
Lease.
"GUARANTEE OBLIGATION" means as to any Person (the "guaranteeing person"),
any obligation of (i) the guaranteeing person or (ii) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly; provided, however, that the term
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Guarantee Obligation shall not include endorsements of instruments or documents
for deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Lessee in good
faith.
"GUARANTY" means the Guaranty dated as of October 18, 1996, made by the
Lessee in favor of the Agent, for the benefit of the Lenders.
"HAZARDOUS ACTIVITY" means any activity, process, procedure or undertaking
that directly or indirectly (i) produces, generates or creates any Hazardous
Material; (ii) causes or results in (or threatens to cause or result in) the
Release of any Hazardous Material into the environment (including air, water
vapor, surface water, groundwater, drinking water, land (including surface or
subsurface), plant, aquatic and animal life); (iii) involves the containment or
storage of any Hazardous Material; or (iv) would be regulated as hazardous waste
treatment, storage or disposal within the meaning of any Hazardous Materials
Law.
"HAZARDOUS MATERIALS" means any hazardous, toxic or dangerous materials,
substances, chemicals, wastes or pollutants that from time to time are defined
by or pursuant to or are regulated under any Hazardous Materials Laws, including
asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or by-
products, other hydrocarbons, urea formaldehyde and any
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material, substance, pollutant or waste that is defined as a hazardous waste
under RCRA or defined as a hazardous substance under CERCLA.
"HAZARDOUS MATERIALS LAWS" means all federal, state, regional, county or
local laws, statutes, rules, regulations or ordinances, now or hereafter in
effect, relating to the generation, recycling, use, reuse, sale, storage,
handling, transport, treatment or disposal of Hazardous Materials, including
CERCLA, RCRA, the Clean Air Act, 42 U.S.C. Section 7401, ET SEQ. ("CAA"), the
Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ. ("TSCA") and any
rules, regulations and guidance documents promulgated or published thereunder,
and any state, regional, county or local statute, law, rule, regulation or
ordinance now or hereafter in effect that relates to public health, safety or
the discharge, emission or disposal of Hazardous Materials in or to air, water,
land or groundwater, to the withdrawal or use of groundwater, to the use,
handling or disposal of asbestos, polychlorinated biphenyls, petroleum,
petroleum derivatives or by-products, other hydrocarbons or urea formaldehyde,
to the treatment, storage, disposal or management of Hazardous Materials, to
exposure to Hazardous Materials or to the transportation, storage, disposal,
management or release of gaseous or liquid substances, and any regulation,
order, injunction, judgment, declaration, notice or demand issued thereunder.
"IMPOSITIONS" means any and all liabilities, losses, expenses and costs of
any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever ("TAXES") (including,
without limitation, (i) real and personal property taxes, including personal
property taxes on any property covered by any Lease that is classified by
Governmental Authorities as personal property, and real estate or ad valorem
taxes in the nature of property taxes; (ii) sales taxes, use taxes and other
similar taxes (including rent taxes and intangibles taxes); (iii) any excise
taxes; (iv) real estate transfer taxes, conveyance taxes, mortgage taxes,
intangible
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taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are
or are in the nature of franchise, income, value added, gross receipts,
privilege and doing business taxes, license and registration fees; and
(vi) assessments on any Property, including all assessments for public
improvements or benefits, whether or not such improvements are commenced or
completed within the Lease Term), and in each case all interest, additions to
tax and penalties thereon, which at any time may be levied, assessed or imposed
by any Federal, state or local authority upon or with respect to (a) any Tax
Indemnitee, any Property or any part thereof or interest therein, or the Lessee
or any sublessee or user of any Property; (b) the financing, refinancing,
demolition, construction, substitution, subleasing, assignment, control,
condition, occupancy, servicing, maintenance, repair, ownership, possession,
purchase, rental, lease, activity conducted on, delivery, insuring, use,
operation, improvement, transfer, return or other disposition of such Property
or any part thereof or interest therein; (c) the Notes or other Indebtedness
with respect to any Property or any part thereof or interest therein or transfer
thereof; (d) the rentals, receipts or earnings arising from any Property or any
part thereof or interest therein; (e) the Operative Documents or any payment
made or accrued pursuant thereto; (f) the income or other proceeds received with
respect to any Property or any part thereof or interest therein upon the sale or
disposition thereof; (g) any contract relating to the construction, acquisition
or delivery of the Improvements or any part thereof or interest therein; (h) the
issuance of the Notes; or (i) otherwise in connection with the transactions
contemplated by the Operative Documents.
Notwithstanding anything in the first paragraph of this definition (except
as provided in the final paragraph of this definition) the term "IMPOSITION"
shall not mean or include:
(i) Taxes and impositions (other than Taxes that are, or are in the
nature of, sales, use, rental, transfer or property taxes) that are imposed
by any Governmental
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Authority and that are based upon or measured by or with respect to the
gross or net income or gross or net receipts (including, without
limitation, any minimum taxes, income or capital gains taxes, withholding
taxes or taxes on, measured by or with respect to or in the nature of
capital, net worth, excess profits, items of tax preference, capital stock,
franchise, business privilege or doing business taxes) and any interest,
additions to tax, penalties or other charges in respect thereof; PROVIDED
that this CLAUSE (i) shall not be interpreted to prevent a payment from
being made on an After Tax Basis if such payment is otherwise required to
be so made;
(ii) any Tax or imposition to the extent, but only to such extent, it
relates to any act, event or omission that occurs, or relates to a period,
after the termination of the Master Lease (but not any Tax or imposition
that relates to any period prior to the termination of the Master Lease
with respect to the Property to which such Imposition relates);
(iii) any Tax or imposition for so long as, but only for so long as,
it is being contested in accordance with the provisions of SECTION 13.5(b)
of the Participation Agreement, PROVIDED that the foregoing shall not limit
any Lessee's obligation under SECTION 13.5(b) of the Participation
Agreement to advance to such Tax Indemnitee amounts with respect to Taxes
that are being contested in accordance with SECTION 13.5(b) of the
Participation Agreement or any expenses incurred by such Tax Indemnitee in
connection with such contest;
(iv) any interest, additions to tax or penalties imposed on a Tax
Indemnitee as a result of a breach by such Tax Indemnitee of its
obligations under SECTION 13.5(e) of the Participation Agreement as a
result of a Tax Indemnitee's failure to file any return or other documents
timely and as prescribed by applicable law; PROVIDED that this CLAUSE (iv)
shall not apply (x) if such interest or
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penalties arise as a result of a position taken (or requested to be taken)
by the Lessee in a contest controlled by the Lessee under SECTION 13.5(b)
of the Participation Agreement or (y) if such failure is attributable to a
failure by the Lessee to fulfill its obligations under the Master Lease
with respect to any such return;
(v) any Taxes or impositions imposed on a Tax Indemnitee, to the
extent such Tax Indemnitee actually receives a credit (or otherwise has a
reduction in a liability for Taxes) in respect thereof against Taxes that
are not indemnified under the Participation Agreement (but only to the
extent such credit is not taken into account in calculating the indemnity
payment on an After Tax Basis);
(vi) Taxes imposed on or with respect to or payable by any Tax
Indemnitee based on, measured by or imposed with respect to any fees
received by such Tax Indemnitee;
(vii) any Taxes imposed against or payable by a Tax Indemnitee
resulting from, or that would not have been imposed but for, the gross
negligence or willful misconduct of such Tax Indemnitee;
(viii) Taxes imposed on or payable by a Tax Indemnitee to the extent
such Taxes result from or would not have been imposed but for, a breach by
the Tax Indemnitee or any Affiliate thereof of any representations,
warranties or covenants set forth in the Operative Documents (unless such
breach is caused by any Lessee's breach of its representations, warranties
or covenants set forth in the Operative Documents);
(ix) Taxes to the extent resulting from such Tax Indemnitee's failure
to comply with the provisions of SECTION 13.5(b) of the Participation
Agreement, which failure precludes or materially adversely affects the
ability to conduct a contest pursuant to SECTION 13.5(b) of
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the Participation Agreement (unless such failure is caused by the Lessee's
breach of its obligations);
(x) with respect to each Property, Taxes which are included in
applicable Property Acquisition Costs if and to the extent actually paid;
(xi) Taxes that would have been imposed in the absence of the
transactions contemplated by the Operative Documents and Taxes imposed on
or with respect to or payable as a result of activities of a Tax Indemnitee
or Affiliate thereof unrelated to the transactions contemplated by the
Operative Documents;
(xii) Taxes imposed on or with respect to or payable by a Tax
Indemnitee resulting from, or that would not have been imposed but for the
existence of, any Lessor Lien created by or through such Tax Indemnitee or
an Affiliate thereof and not caused by acts or omissions of any Lessee,
unless required to be removed by any Lessee;
(xiii) Any Tax imposed against or payable by a Tax Indemnitee to the
extent that the amount of such Tax exceeds the amount of such Tax that
would have been imposed against or payable by such Tax Indemnitee (or, if
less, that would have been subject to indemnification under SECTION 13.5 of
the Participation Agreement) if such Tax Indemnitee were not a direct or
indirect successor, transferee or assign of one of the original Tax
Indemnitees; PROVIDED, HOWEVER, that this EXCLUSION (xiii) shall not apply
if such direct or indirect successor, transferee or assign acquired its
interest as a result of a transfer while an Event of Default shall have
occurred and is continuing;
(xiv) Taxes imposed on or with respect to or payable by a Tax
Indemnitee that would not have been imposed but for an amendment,
supplement, modification, consent or waiver to any Operative Document not
initiated, requested or consented
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to by any Lessee unless such amendment, supplement, modification, consent
or waiver (A) arises due to, or in connection with there having occurred,
an Event of Default or (B) is required by the terms of the Operative
Documents or is executed in connection with any amendment to the Operative
Documents required by law;
(xv) Taxes in the nature of intangibles, stamp, documentary or
similar Taxes;
(xvi) Taxes imposed on or with respect to or payable by a Tax
Indemnitee or any Affiliate because such Tax Indemnitee or any Affiliate
thereof is not a United States person within the meaning of Section
7701(a)(30) of the Code; and
(xvii) Any tax imposed by its express terms in lieu of or in
substitution for a Tax not subject to indemnity pursuant to the provisions
of SECTION 13.5 of the Participation Agreement.
Notwithstanding the foregoing, the exclusions from the definition of Impositions
set forth in CLAUSES (i), (ii), (v), (vii), (xii) and (xvi) (to the extent that
any such tax is imposed by its express terms in lieu of or in substitution for a
Tax set forth in CLAUSES (i), (ii), (v), (vii), (xii) and (xvi)) above shall not
apply (but the other exclusions shall apply) to any Taxes or any increase in
Taxes imposed on a Tax Indemnitee net of any decrease in taxes realized by such
Tax Indemnitee, to the extent that such tax increase or decrease would not have
occurred if on the Acquisition Date the Lessor had advanced funds to the Lessee
in the form of a loan secured by the applicable Property in an amount equal to
the applicable Property Balance, with debt service for such loan equal to the
Basic Rent payable on each Scheduled Payment Date and a principal balance at the
maturity of such loan in an amount equal to the then outstanding amount of the
Advances at the end of the term of the Master Lease.
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"IMPROVEMENTS" means all buildings, structures, Fixtures, Equipment, and
other improvements of every kind existing at any time and from time to time on
or under any Land, or any parcel of Land to be acquired pursuant to the terms of
the Operative Documents, together with any and all appurtenances to such
buildings, structures or improvements, including sidewalks, utility pipes,
conduits and lines, parking areas and roadways, and including all Modifications
and other additions to or changes in the Improvements at any time.
"INDEBTEDNESS" means, of any Person at any date, (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all obligations of such Person as lessee under Capital
Leases, (iv) all obligations of such Person in respect of acceptances issued or
created for the account of such Person, (v) all liabilities secured by any Lien
on any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, (vi) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (vii) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements, (viii) all Guarantee
Obligations of such Person, (ix) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements,
commodity purchase or option agreements or other interest or exchange rate or
commodity price hedging agreements, and (x) all contingent or non-contingent
obligations of such Person in respect of letters of credit issued or bankers'
acceptances created for the account of such Person.
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"INDEMNITEE" means each Lender, the Lessor, the Collateral Agent, their
respective Affiliates and their respective successors, assigns, directors,
shareholders, partners, officers, employees and agents.
"INSOLVENCY" means, with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT" means pertaining to a condition of Insolvency.
"INSURANCE REQUIREMENTS" means all terms and conditions of any insurance
policy either required by the Master Lease to be maintained by the Lessee and
all requirements of the issuer of any such policy.
"INTEREST PERIOD" means,
(a) initially, the period commencing on each Acquisition Date
and ending on the fifteenth (15th) day of January, 1997; and
(b) and thereafter, each period commencing on the last day of
the preceding Interest Period applicable to such Loan or Lessor Amount
and the date falling three (3) six (6), nine (9) or twelve (12) months
from the first day of such Interest Period, pursuant to a written
notice to the Lessor and the Agent (the "INTEREST PERIOD SELECTION
NOTICE") delivered no later than 10:00 a.m. three Business Days prior
to the commencement of the Interest Period to be selected. In the
event the Lessee has not delivered an Interest Period Selection Notice
to the Lessor and the Agent within the required period of time, it
shall be deemed to have selected an Interest Period of three (3)
months.
The foregoing provisions relating to Interest Periods
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are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day; and
(iii) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date.
"LAND" means each parcel of real property described on SCHEDULE I to any
Lease Supplement, and includes all Appurtenant Rights attached thereto.
"LEASE" means, collectively, the Master Lease and each Lease Supplement.
"LEASE BALANCE" means, as of any date of determination, an amount equal to
the sum of the Loan Balance and the Lessor Balance and all other amounts owing
by the Lessee under the Operative Documents (including without limitation,
accrued and unpaid Rent and Supplemental Rent, if any).
"LEASE DEFAULT" means any event or condition which, with the lapse of time
or the giving of notice, or both, would constitute a Lease Event of Default.
"LEASE EVENT OF DEFAULT" means a "Lease Event of Default" as defined in
SECTION 16.1 of the Master Lease.
"LEASE SUPPLEMENT" means each Lease Supplement substantially in the form of
EXHIBIT A to the Master Lease, executed by the Lessee and Lessor, dated as of
the Acquisition Date and covering the Land and/or Improvements identified on
SCHEDULE I thereto.
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"LEASE TERM" means the period commencing on the first day of the Base Lease
Term and ending on the Expiration Date.
"LENDER BASIC RENT" means the sum of Lender Basic Rent (Interest) plus
Lender Basic Rent (Principal).
"LENDER BASIC RENT (INTEREST)" means, as determined as of any Basic Rent
Payment Date, the interest due on the Loans, determined in accordance with
SECTION 2.6 of the Loan Agreement and excluding any interest at the applicable
Overdue Rate on any installment of Basic Rent not paid when due and any fine,
penalty, interest or cost assessed or added under any agreement with a third
party for nonpayment or late payment of Basic Rent.
"LENDER BASIC RENT (PRINCIPAL)" means, with respect to any Basic Rent
Payment Date, the amount indicated on the Master Rent Schedule under the Lease,
as adjusted from time to time in accordance with the Lease.
"LENDERS' PERCENTAGE" is set forth with respect to each Property in the
Lease Supplement relating thereto.
"LENDERS" means, collectively, the various financial institutions as are or
may from time to time become parties to the Loan Agreement.
"LESSEE" means Symantec Corporation, a Delaware corporation, as lessee
under the Lease, and its successors and assigns expressly permitted under the
Operative Documents.
"LESSOR" means Sumitomo Bank Leasing and Finance, Inc., a Delaware
corporation.
"LESSOR AMOUNT" is defined at SECTION 3.2 of the Participation Agreement.
"LESSOR BALANCE" means as of any date of determination an amount equal to
the sum of the outstanding Lessor Amounts
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together with all accrued and unpaid Yield thereon.
"LESSOR BASIC RENT" means the sum of Lessor Basic Rent (Yield) plus Lessor
Basic Rent (Amortization).
"LESSOR BASIC RENT (AMORTIZATION)" means, with respect to any Basic Rent
Payment Date, the amount indicated on the Master Rent Schedule under the Lease,
as adjusted from time to time in accordance with the Lease.
"LESSOR BASIC RENT (YIELD)" means the amount of accrued Yield due on the
Lessor Amounts, determined in accordance with SECTION 4.1 of the Participation
Agreement as of any Basic Rent Payment Date and excluding any interest at the
applicable Overdue Rate on any installment of Lessor Basic Rent not paid when
due and any fine, penalty, interest or cost assessed or added under any
agreement with a third party for nonpayment or late payment of Lessor Basic
Rent.
"LESSOR COMMITMENT" means the Commitment of the Lessor in the amount set
forth on SCHEDULE I of the Participation Agreement, as such Schedule may be
amended from time to time.
"LESSOR FINANCING STATEMENTS" means UCC financing statements appropriately
completed and executed for filing in the applicable jurisdiction in order to
protect the Lessor's interest under the Master Lease and the Lease Supplements
to the extent the Master Lease and Lease Supplements are security agreements
with respect to personal property.
"LESSOR LIEN" means any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against any Participant not resulting
from the transactions contemplated by the Operative Documents, (b) any act or
omission of the any Participant which is not required or permitted by the
Operative Documents or is in violation of any of the terms of the Operative
Documents, (c) any claim against any Participant, with respect to Taxes or
Transaction Expenses against which Lessee is not
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required to indemnify any Participant, in its individual capacity, pursuant to
ARTICLE IX of the Participation Agreement or (d) any claim against the Lessor
arising out of any transfer by the Lessor of all or any portion of the interest
of the Lessor in the Properties or the Operative Documents other than the
transfer of title to or possession of the Properties by the Lessor pursuant to
and in accordance with the Master Lease, the Loan Agreement or the Participation
Agreement or pursuant to the exercise of the remedies set forth in SECTION 16.2
of the Master Lease.
"LESSOR MARGIN" means, with respect to any Property, the amount set forth
in the applicable Lease Supplement therefor.
"LESSOR MORTGAGE" means, with respect to any Property, the Lease Supplement
for such Property and any and all other security instruments in appropriate
recordable form in each relevant jurisdiction sufficient to grant to the Lessor
a first priority Lien on such Property.
"LEVERAGE RATIO" means the ratio of Consolidated Funded Debt to
Consolidated Net Worth.
"LIBO RATE" means, relative to any Loan or Lessor Amount for any Interest
Period, the rate determined by the Agent to be the average (rounded upward, if
necessary to the nearest multiple of one sixteenth of one percent) of the
offered rates per annum for deposits in Dollars for the particular Interest
Period that appears on the Reuters Screen LIBO Page (or any successor page), or
if such offered rate is not available, then the rate per annum at which deposits
in Dollars for the particular Interest Period are offered by The Sumitomo Bank,
Limited's London Branch to prime banks in the London interbank market, in each
case at 11:00 a.m. (London time) two Business Days prior to the beginning of
such Interest Period.
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan or Lessor Amount
for any Interest Period, a rate per annum
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(rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant
to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) -------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period will be determined
by the Agent, on the basis of the LIBOR Reserve Percentage in effect on, and the
applicable LIBO Rate obtained by the Agent, two Business Days before the first
day of such Interest Period. In the event that the Lessor or any Lender
requires payment of such additional amount calculated with respect to the LIBOR
Reserve Percentage, such party (x) shall so notify the Lessee, and (y) shall
furnish to the Lessee at least five Business Days prior to each date on which
Rent is payable a certificate setting forth the amount to which it is then
entitled to be paid (which shall be consistent with its good faith estimate of
the level at which the related reserves are maintained by it). Each such
certificate shall be accompanied by such information as the Lessee may
reasonably request as to the computation set forth therein.
"LIBO RATE (RESERVE ADJUSTED) LOAN(S)/LESSOR AMOUNT(S)" means a Loan or
Lessor Amount, as the case may be, bearing interest at the LIBO Rate (Reserve
Adjusted).
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal and
other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements) specified under regulations issued
from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
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"LIEN" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including, without
limitation, any irrevocable license, conditional sale or other title retention
agreement, any lease in the nature thereof, or any other right of or arrangement
with any creditor to have its claim satisfied out of any specified property or
asset with the proceeds therefrom prior to the satisfaction of the claims of the
general creditors of the owner thereof, whether or not filed or recorded, or the
filing of, or agreement to execute as "debtor", any financing or continuation
statement under the Uniform Commercial Code of any jurisdiction or any federal,
state or local lien imposed pursuant to any Environmental Law.
"LOAN AGREEMENT" means the Loan Agreement, dated as of October 18, 1996,
among the Lessor, as borrower thereunder, the Lenders, and the Agent.
"LOAN AGREEMENT EVENT OF DEFAULT" is defined in SECTION 5 of the Loan
Agreement.
"LOAN BALANCE" means as of any date of determination an amount equal to the
sum of the outstanding Loans together with all accrued and unpaid interest
thereon.
"LOAN COMMITMENT" means the Commitment of each Lender in the amount set
forth on SCHEDULE I to the Participation Agreement.
"LOAN DOCUMENTS" means the Loan Agreement and the Notes.
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"LOAN MARGIN" means, with respect to any Property, the amount set forth in
the Lease Supplement therefor.
"LOANS" is defined in SECTION 2.1 of the Loan Agreement.
"MARKETING PERIOD" means the period commencing on the date six months prior
to the Expiration Date and ending on the Expiration Date.
"MASTER LEASE" means the Master Lease and Open End Mortgage, dated as of
October 18, 1996, between the Lessor and the Lessee, as may be supplemented.
"MASTER RENT SCHEDULE" means the Master Rent Schedule attached to each
Lease Supplement as adjusted in accordance with the terms of the Master Lease.
"MATERIAL" and "MATERIALLY" mean material to (i) the ability of the Lessee
to perform its obligations under the Operative Documents to which it is a party,
or (ii) the value or condition of any Property.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, financial position or results of operations of the Lessee and its
Subsidiaries taken as a whole, (ii) the ability of the Lessee to perform any
material obligation under the Operative Documents or (iii) the material rights
and remedies of the Lenders and the Lessor under the Operative Documents.
"MATERIAL ASSETS" means with respect to any Person all material interests
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $1,000,000.
"MATURITY DATE" means with respect to the Loans and the
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Lessor Amounts, the seventh (7th) anniversary of the Documentation Date.
"MAXIMUM COMMITMENT AMOUNT" means an amount equal to $53,000,000.00.
"MINIMUM WORKING CAPITAL" means, at any date, Consolidated Current Assets
MINUS Consolidated Current Liabilities
"MODIFICATIONS" is defined in SECTION 10.1 of the Master Lease.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA and subject to Title IV thereof, that (a) is
maintained by the Lessee or an ERISA Affiliate and at least one Person other
than the Lessee and its ERISA Affiliates or (b) was so maintained previously,
but is not currently maintained by the Lessee or its ERISA Affiliates, and in
respect of which the Lessee or an ERISA Affiliate would still have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"NET PROCEEDS" means all amounts received by the Lessor in connection with
any Casualty or Condemnation or any sale of the Property pursuant to the
Lessor's exercise of remedies under SECTION 16.2 of the Master Lease or the
Lessee's exercise of the Remarketing Option under ARTICLE XX of the Master
Lease, and all interest earned thereon, less the expense of claiming and
collecting such amounts, including all costs and expenses in connection
therewith for which the Lessor or any Participant is
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entitled to be reimbursed pursuant to the Lease.
"NOTES" is defined in SECTION 2.4 of the Loan Agreement.
"OPERATIVE DOCUMENTS" means the following:
(a) the Participation Agreement;
(b) the Master Lease;
(c) each Lease Supplement;
(d) the Loan Agreement;
(e) the Guaranty;
(f) the Pledge Agreement;
(g) each Note;
(h) the Assignment of Lease and Rent;
(i) each Deed;
(j) the Lessor Mortgages;
(k) the Lessor Financing Statements; and
(l) the Custody Agreement.
"OVERDUE RATE" means, with respect to any Loan or Lessor Amount, the
Alternate Base Rate for such Loan or Lessor Amount PLUS two percent (2%).
"PARTICIPANTS" means, collectively, each Lender and the Lessor, and their
successor and assigns.
"PARTICIPATION AGREEMENT" means the Participation Agreement dated as of
October 18, 1996 among Lessee, as the Lessee and the Lessor, the Lenders and the
Agent.
"PARTICIPANT BALANCE" means, with respect to any Participant as of any date
of determination: (i) with respect to any Lender, an amount equal to the
aggregate outstanding Loans of such Lender, together with all accrued and unpaid
interest thereon or (ii) with respect to the Lessor, an amount equal to the
aggregate outstanding Lessor Amounts of the Lessor, together with all amounts of
accrued and unpaid Yield thereon.
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" means, with respect to any Property, any of the
following:
(i) the respective rights and interests of the parties to the
Operative Documents as provided in the Operative Documents;
(ii) the rights of any sublessee under a sublease permitted by the
terms of the Master Lease;
(iii) Liens for Taxes that either are not yet due or are being
contested in accordance with the provisions of SECTION 12.1 of the Master
Lease;
(iv) Liens arising by operation of law, materialmen's, mechanics',
workers', repairmen's, employees', carriers', warehousemen's and other like
Liens relating any Modifications or arising in the ordinary course of
business for amounts that either are not more than 60 days past due or are
being diligently contested in good faith by appropriate proceedings, so
long as such proceedings satisfy the conditions for the continuation of
proceedings to contest Taxes set forth in SECTION 12.1 of the Master Lease;
(v) Liens of any of the types referred to in CLAUSE (iv) above that
have been bonded for not less than the full amount in dispute (or as to
which other security arrangements reasonably satisfactory to the Lessor
have been made), which bonding (or arrangements) shall comply with
applicable Requirements of Law, and has effectively stayed any execution or
enforcement of such Liens;
(vi) Liens arising out of judgments or awards with respect to which
appeals or other proceedings for review are being prosecuted in good faith
and for the payment of which
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adequate reserves have been provided as required by GAAP or other
appropriate provisions have been made, so long as such proceedings have the
effect of staying the execution of such judgments or awards and satisfy the
conditions for the continuation of proceedings to contest set forth in
SECTION 12.1 of the Master Lease;
(vii) easements, rights of way and other encumbrances on title to
real property pursuant to SECTION 11.2 of the Master Lease;
(viii) Liens created by the Lessee with the consent of the Lessor;
and
(ix) Liens described on the title insurance policy delivered with
respect to such Property pursuant to SECTION 2.1(q) of the Participation
Agreement other than Liens described in CLAUSE (iv) or (vi) above that are
not removed within forty (40) days of their origination.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"PLEDGE AGREEMENT" means the Pledge Agreement, dated as of October 18,
1996, by and among the Lessee, as pledgor, the Agent, as pledgee, and the
Collateral Agent.
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"PROPERTY" means (i) the Lessor's interest in any Land, either as owner in
fee simple, and (ii) all of the Improvements at any time located on or under
such Land.
"PROPERTY BALANCE" means, with respect to any Property, an amount equal to
the outstanding principal amount of the Loans and Lessor Amounts related to such
Property, and all accrued and unpaid interest and Yield thereon, and any
Supplemental Rent related thereto.
"PROPERTY ACQUISITION COSTS" means, with respect to any Property, the
amount of the Advance funded to the Lessee or its designees for the purpose of
acquiring such Property, paying the amount of the pro rata portion of the Fees
attributable thereto, and paying the Transaction Expenses relating to such
funding and acquisition, as such amount is set forth in the Funding Request
relating to the acquisition of such Property.
"PROPERTY LEGAL REQUIREMENTS" means all Federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting any Property, the Improvements or
the demolition, use or alteration thereof, whether now or hereafter enacted and
in force, including any that require repairs, modifications or alterations in or
to any Property or in any way limit the use and enjoyment thereof (including all
building, zoning and fire codes and the Americans with Disabilities Act of 1990,
42 U.S.C. Section 1201 ET. SEQ. and any other similar Federal, state or local
laws or ordinances and the regulations promulgated thereunder) and any that may
relate to environmental requirements (including all Hazardous Materials Laws),
and all permits, certificates of occupancy, licenses, authorizations and
regulations relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments which are either of record or known to
the Lessee affecting any Property, the Appurtenant Rights and any easements,
licenses or other agreements entered into pursuant to SECTION 11.2 of the Master
Lease.
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<PAGE>
"PURCHASE NOTICE" means an irrevocable written notice by the Lessee
delivered to the Lessor pursuant to SECTION 18.1 of the Master Lease, notifying
the Lessor of the Lessee's intention to exercise its option pursuant to such
Section, and identifying the Property or Properties to be purchased in
accordance therewith and the proposed purchase date therefor.
"PURCHASE OPTION" means the Lessee's option to purchase a Property in
accordance with the provisions of SECTION 18.1 of the Master Lease.
"PURCHASE OPTION PRICE" is defined in SECTION 18.1 of the Master Lease.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as amended
by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. Section 6901 ET
SEQ.
"RELEASE" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Material.
"REMARKETING OPTION" is defined in SECTION 20.1 of the Master Lease.
"RENT" means, collectively, the Basic Rent and the Supplemental Rent, in
each case payable under the Master Lease.
"REQUESTING PARTY" is defined in SECTION 27.1 of the Master Lease.
"REQUIRED MODIFICATION" is defined in CLAUSE (i) of SECTION 10.1 of the
Master Lease.
"REQUIRED LENDERS" is defined in SECTION 5.2 of the Loan Agreement.
"REQUIRED PARTICIPANTS" means, at any time, (i) Lenders
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holding at least 51% of the aggregate outstanding principal amount of Loans, or
if no Loans are then outstanding, 51% of the aggregate amount of the Lenders'
Commitments, together with (ii) the Lessor.
"REQUIREMENT OF LAW" means, as to any Person, (a) the partnership
agreement, certificate of incorporation, bylaws or other organizational or
governing documents of such Person, (b) any federal, state or local law, treaty,
ordinance, rule or regulation and (c) any order, decree or determination of a
court, arbitrator or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"RESPONSIBLE OFFICER" means the President and Chief Executive Officer,
Executive Vice President, the Treasurer or any Assistant Treasurer, Secretary or
any Assistant Secretary of the of the Lessee.
"RESPONSIBLE OFFICER'S CERTIFICATE" means a certificate signed by any
Responsible Officer, which certificate shall certify as true and correct the
subject matter being certified to in such certificate.
"SCHEDULED PAYMENT DATE" means the fifteenth (15th) day of each January,
April, July, and October; PROVIDED, HOWEVER,
(i) if any Scheduled Payment Date would otherwise end on a day
that is not a Business Day, such Scheduled Payment Date shall be
extended to the next succeeding Business Day unless the result of such
extension would be to cause such Scheduled Payment Date into occur in
another calendar month in which event such Scheduled Payment Date
shall end on the immediately preceding Business Day; and
(iii) any Scheduled Payment Date that would otherwise occur
after the Maturity Date shall occur on
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the Maturity Date.
"SECURITIES ACT" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"SHORTFALL AMOUNT" means, as of the Expiration Date, an amount equal to (i)
the Lease Balance, MINUS (ii) the Loan Balance received by the Lessor from the
Lessee pursuant to SECTION 20.1(k) of the Lease, MINUS (iii) the aggregate
amount of the highest, binding, written, unconditional, irrevocable offer to
purchase each Property obtained by each Lessee pursuant to SECTION 20.1(f) of
the Lease; PROVIDED, HOWEVER, that if the sale of the Properties to the Person
submitting such offer is not consummated on or prior to the Expiration Date,
then the term "Shortfall Amount" shall mean an amount equal to (i) the Lease
Balance, MINUS (ii) the Loan Balance received by the Lessor pursuant to SECTION
20.1(k) of the Lease.
"SIGNIFICANT CONDEMNATION" means (a) a Condemnation that involves a taking
of the Lessor's entire title to the related Land, or (b) a Condemnation that in
the reasonable, good faith judgment of the Agent and the Lessor (i) renders the
related Property unsuitable for continued use as property of the type of such
Property immediately prior to such Condemnation, or (ii) is so substantial in
nature that restoration of the related property to substantially its condition
as it existed immediately prior to such Condemnation (y) would be impracticable
or impossible, or (z) cost in excess of 10% of the outstanding Lease Balance for
such Property.
"SOLVENT" means with respect to any Person on a particular date, that on
such date (i) the fair value of the property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they
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become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person is
engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability taking
into account any subrogation and contribution rights.
"SUBMITTED FINANCIAL STATEMENTS" means the financial statements of the
Lessee for the fiscal year ended March 31, 1996, which were audited by Ernst &
Young, copies of which have been delivered to the Lessor, the Agent and each
Lender.
"SUBSIDIARY" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of:
(a) the outstanding capital stock having Voting Power to elect a
majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might having Voting Power upon the occurrence of any
contingency),
(b) the interest in the capital or profits of such partnership or
joint venture, or
(c) the beneficial interest of such trust or estate,
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is at the time directly or indirectly owned by such Person, by such Person and
one or more of its Subsidiaries or by one or more of such Person's Subsidiaries.
"SUPPLEMENTAL RENT" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or any other
Person under the Master Lease, or under any of the other Operative Documents,
including, without limitation, Fees, Break Costs, the Loan Balance, the
Shortfall Amount, amounts due pursuant to SECTION 13.2 of the Participation
Agreement, payments pursuant to SECTIONS 15.2 of the Master Lease and ARTICLES
XVIII and XX of the Master Lease and all amounts payable to the Collateral Agent
under SECTION 7 of the Custody Agreement.
"SURPLUS COLLATERAL" is defined in SECTION 6.2 of the Participation
Agreement.
"TANGIBLE NET WORTH" means the gross book value of the assets of the Lessee
(exclusive of goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred income taxes,
deferred charges and other like intangibles) less (a) reserves applicable
thereto and (b) all liabilities (including accrued and deferred income taxes and
subordinated liabilities).
"TAX INDEMNITEE" means each Lender and the Lessor.
"TAXES" is defined in the definition of Impositions.
"TERMINATION DATE" is defined in SECTION 15.3 and SECTION 16.2(e) of the
Master Lease.
"TERMINATION NOTICE" is defined in SECTION 15.1 of the Master Lease.
"TRANSACTION EXPENSES" means all costs and expenses incurred in connection
with the preparation, execution and delivery of the
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Operative Documents and the transactions contemplated by the Operative Documents
including without limitation:
(a) the reasonable fees, out-of-pocket expenses and disbursements of
Mayer, Brown & Platt, special counsel for the Lessor, the Lenders and the
Lessor, and such other fees, expenses and disbursements of counsel for the
Lessee in negotiating the terms of the Operative Documents and the other
transaction documents, preparing for the closing under, and rendering
opinions in connection with, such transactions and in rendering other
services customary for counsel representing parties to transactions of the
types involved in the transactions contemplated by the Operative Documents;
(b) the reasonable fees, out-of-pocket expenses and disbursements of
any law firm or other external counsel of each of the Lessor and each
Lender in connection with (1) any amendment, supplement, waiver or consent
with respect to any Operative Documents requested or approved by the Lessee
and (2) any enforcement of any rights or remedies against the Lessee in
respect of the Operative Documents;
(c) any and all Taxes and fees incurred in recording, registering or
filing any Operative Document or any other transaction document, any deed,
declaration, mortgage, security agreement, notice or financing statement
with any public office, registry or governmental agency in connection with
the transactions contemplated by the Operative Documents;
(d) any title fees, premiums and escrow costs and other expenses
relating to title insurance and the closings contemplated by the Operative
Documents;
(e) all expenses relating to all Environmental Audits; and
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(f) fees and other expenses relating to Appraisals.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNIFORM COMMERCIAL CODE" and "UCC" means the Uniform Commercial Code as in
effect in any applicable jurisdiction.
"VOTING POWER" means, with respect to securities issued by any Person, the
combined voting power of all securities of such person which are issued and
outstanding at the time of determination and which are entitled to vote in the
election of directors of such Person, other than securities having such power
only by reason of the happening of a contingency.
"YIELD" is defined in SECTION 4.1(a) of the Participation Agreement.
"YIELD RATE" means, at the option of the Lessee, the sum of (i) the
Alternate Base Rate, or (ii) the LIBO Rate (Reserve Adjusted), PLUS the Lessor
Margin, as the case may be.
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EXECUTION COPY
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- --------------------------------------------------------------------------------
MASTER LEASE AND DEED OF TRUST
THIS DOCUMENT SECURES FUTURE ADVANCES
Dated as of October 18, 1996
between
SYMANTEC CORPORATION,
as the Lessee
and
SUMITOMO BANK LEASING AND FINANCE, INC.,
as the Lessor.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Master Lease and Deed of Trust is subject to a lien in favor of the Lenders
under the Loan Agreement. This Master Lease and Deed of Trust has been executed
in several counterparts. To the extent, if any, that this Master Lease and Deed
of Trust constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no lien on this
Master Lease and Deed of Trust may be created through the transfer or possession
of any counterpart other than the original counterpart containing the receipt
therefor executed by THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH as the
Agent for the Lenders, on or following the signature page hereof.
<PAGE>
MASTER LEASE AND DEED OF TRUST
THIS DOCUMENT SECURES FUTURE ADVANCES
THIS MASTER LEASE AND DEED OF TRUST (this "MASTER LEASE"), dated as of
October 18, 1996, between SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware
corporation, as the Lessor (in such capacity, the "LESSOR"), and SYMANTEC
CORPORATION, a Delaware corporation, as Lessee (in such capacity, the "LESSEE").
W I T N E S S E T H:
WHEREAS, pursuant to a Participation Agreement dated as of the date hereof
(as amended, modified, restated or supplemented from time to time, the
"PARTICIPATION AGREEMENT"), among the Lessee, the Lessor, the various financial
institutions (the "LENDERS") as are or may from time to time become Lenders
under the Loan Agreement, and The Sumitomo Bank, Limited, San Francisco Branch,
as Administrative Agent (in such capacity, the "AGENT") for the Lenders, the
Lenders and the Lessor have agreed to finance the Lessor's acquisition of each
Property;
WHEREAS, on each Acquisition Date, the Lessor will purchase from one or
more third parties designated by the Lessee certain parcels of Land, together
with the Improvements thereon, if any;
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires
to lease from the Lessor, each Property; and
WHEREAS, each Property will be subject to the terms of this Master Lease;
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
I.1. DEFINITIONS; INTERPRETATION. Capitalized terms used but not
otherwise defined in this Master Lease have the respective meanings specified in
APPENDIX A to this Master Lease; and the rules of interpretation set forth in
APPENDIX A to this Master Lease shall apply to this Master Lease.
ARTICLE II
MASTER LEASE
II.1. ACCEPTANCE AND LEASE OF PROPERTY. Subject to the conditions set
forth in the Participation Agreement, including without limitation the
satisfaction or waiver of the conditions set forth in Article II thereof, the
Lessor hereby agrees to accept pursuant to the terms of the Participation
Agreement delivery on the Closing the Land together with Improvements thereon,
if any, to be delivered by the seller thereof and simultaneously to demise and
lease to the Lessee hereunder and under the Lease Supplement for the Lease Term,
the Lessor's interest in such Land and in such Improvements together with any
Improvements which thereafter may be constructed on such Land pursuant this
Master Lease, and the Lessee hereby agrees, expressly for the direct benefit of
the Lessor, to lease from the Lessor for the Lease Term, the Lessor's interest
in such Land and in such Improvements together with any Improvements which
thereafter may be constructed on such Land pursuant and this Master Lease.
II.2. ACCEPTANCE PROCEDURE. The Lessee hereby agrees that the execution
and delivery by the Lessee on each Acquisition Date of an appropriately
completed Lease Supplement in the form of EXHIBIT A hereto covering the Land and
all Improvements thereon, if any, to be acquired by the Lessor on such
Acquisition Date and all other Improvements which thereafter may be constructed
thereon this Master Lease, shall, without further act, constitute the
irrevocable acceptance by the Lessee of all of the Property
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which is the subject of such Lease Supplement for all purposes of this Master
Lease and the other Operative Documents on the terms set forth therein and
herein, and that such Property, together with any Improvements constructed on
such Property pursuant to the this Master Lease, shall be deemed to be included
in the leasehold estate of this Master Lease and shall be subject to the terms
and conditions of this Master Lease as of the Acquisition Date.
II.3. LEASE TERM. The Base Lease Term (the "BASE LEASE TERM") of this
Master Lease with respect to any Property shall (i) begin on the Acquisition
Date, and (ii) shall end on the seventh (7th) anniversary of the Documentation
Date, unless earlier terminated in accordance with the provisions of this Master
Lease and the other Operative Documents.
II.4. TITLE. Each Property is leased to the Lessee without any
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, all Liens other than Lessor Liens) and all applicable Requirements
of Law and Property Legal Requirements. The Lessee shall in no event have any
recourse against the Lessor for any defect in or exception to title to any
Property other than resulting from Lessor Liens.
ARTICLE III
PAYMENT OF RENT
III.1. RENT.
(a) During the Lease Term, the Lessee shall pay Basic Rent on each
Basic Rent Payment Date, on the date required under SECTION 20.1(K) in
connection with the Lessee's exercise of the Remarketing Option and on any
date on which this Master Lease shall terminate with respect to any or all
Properties.
(b) The Lessee's inability or failure to take possession of all or
any portion of any Property when
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delivered by the Lessor, nor the Lessor's inability or failure to deliver
all or any portions of this Property to the Lessee where attributable to
any act or omission of the Lessee or any act or omission of the Lessor, or
for any other reason whatsoever, shall delay or otherwise affect the
Lessee's obligation to pay Rent for such Property in accordance with the
terms of this Master Lease.
III.2. PAYMENT OF RENT. Rent shall be paid absolutely net to the Lessor,
so that this Master Lease shall yield to the Lessor the full amount thereof,
without setoff, deduction or reduction.
III.3. SUPPLEMENTAL RENT. The Lessee shall pay to the Lessor or the
Person entitled thereto any and all Supplemental Rent promptly as the same shall
become due and payable, and if the Lessee fails to pay any Supplemental Rent,
the Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. The Lessee
shall pay to the Lessor, as Supplemental Rent, among other things, on demand, to
the extent permitted by applicable Requirements of Law, interest at the
applicable Overdue Rate on any installment of Basic Rent not paid when due for
the period for which the same shall be overdue and on any payment of
Supplemental Rent not paid when due or demanded by the Lessor for the period
from the due date or the date of any such demand, as the case may be, until the
same shall be paid. The expiration or other termination of the Lessee's
obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of the Lessee with respect to Supplemental Rent. Unless expressly
provided otherwise in this Master Lease, in the event of any failure on the part
of the Lessee to pay and discharge any Supplemental Rent as and when due, the
Lessee shall also promptly pay and discharge any fine, penalty, interest or cost
which may be assessed or added under any agreement with a third party for
nonpayment or late payment of such Supplemental Rent, all of which shall also
constitute Supplemental Rent.
III.4. METHOD OF PAYMENT. Each payment of Rent shall be
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made by the Lessee to the Agent prior to 11:00 a.m., San Francisco, California
time to the Agent's account specified on Schedule II to the Participation
Agreement in funds consisting of lawful currency of the United States of America
which shall be immediately available on the scheduled date when such payment
shall be due, unless such scheduled date shall not be a Business Day, in which
case such payment shall be made on the next succeeding Business Day. Payments
received after 12:00 p.m., San Francisco time on the date due shall for the
purpose of SECTION 16.1 hereof be deemed received on such day; PROVIDED,
however, that for the purposes of the second sentence of SECTION 3.3 hereof,
such payments shall be deemed received on the next succeeding Business Day and,
unless the Agent is otherwise able to invest or employ such funds on the date
received, subject to interest at the Overdue Rate as provided in such SECTION
3.3.
ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT
IV.1. QUIET ENJOYMENT. Subject to SECTIONS 2.4 and 4.2, and subject to
the rights of the Lessor contained in ARTICLE XV and the other terms of the
Operative Documents to which the Lessee is a party, the Lessee shall peaceably
and quietly have, hold and enjoy each Property for the Lease Term, free of any
claim or other action by the Lessor or anyone claiming by, through or under the
Lessor (other than the Lessee) with respect to any matters arising from and
after the applicable Acquisition Date. Such right of quiet enjoyment is
independent of, and shall not affect the Lessor's rights otherwise to initiate
legal action to enforce, the obligations of the Lessee under this Master Lease.
IV.2. RIGHT TO INSPECT. During the Lease Term, the Lessee shall upon
reasonable notice from the Lessor (except that no notice shall be required if a
Lease Event of Default has occurred and is continuing), permit the Lessor and
its authorized representatives to inspect any Property subject to this Master
Lease during normal business hours, provided that such
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inspections shall not unreasonably interfere with the Lessee's business
operations at such Property.
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ARTICLE V
NET LEASE, ETC.
V.1. NET LEASE. This Master Lease shall constitute a net lease. Any
present or future law to the contrary notwithstanding, this Master Lease shall
not terminate, nor shall the Lessee be entitled to any abatement, suspension,
deferment, reduction, setoff, counterclaim, or defense with respect to the Rent,
nor shall the obligations of the Lessee hereunder be affected (except as
expressly herein permitted and by performance of the obligations in connection
therewith) by reason of: (i) any defect in the condition, merchantability,
design, construction, quality or fitness for use of any Property or any part
thereof, or the failure of any Property to comply with all Requirements of Law
and Property Legal Requirements, including any inability to occupy or use any
such Property by reason of such non-compliance; (ii) any damage to, removal,
abandonment, salvage, loss, contamination of or Release from, scrapping or
destruction of or any requisition or taking of any Property or any part thereof;
(iii) any restriction, prevention or curtailment of or interference with any use
of any Property or any part thereof including eviction; (iv) any defect in title
to or rights to any Property or any Lien on such title or rights or on any
Property (other than Lessor Liens); (v) any change, waiver, extension,
indulgence or other action or omission or breach in respect of any obligation or
liability of or by the Lessor or any Participant; (vi) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to the Lessee, the Lessor, any Participant or
any other Person, or any action taken with respect to this Master Lease by any
trustee or receiver of the Lessee, the Lessor, any Participant or any other
Person, or by any court, in any such proceeding; (vii) any claim that the Lessee
has or might have against any Person, including without limitation the Lessor,
any Participant, or any vendor, manufacturer, contractor of or for any Property;
(viii) any failure on the part of the Lessor to perform or comply with any of
the terms of this Master Lease (other than performance by Lessor of its
obligations set
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forth in SECTION 2.1 hereof), of any other Operative Document or of any other
agreement; (ix) any invalidity or unenforceability or illegality or
disaffirmance of this Master Lease against or by the Lessee or any provision
hereof or any of the other Operative Documents or any provision of any thereof;
(x) the impossibility or illegality of performance by the Lessee, the Lessor or
both; (xi) any action by any court, administrative agency or other Governmental
Authority; (xii) any restriction, prevention or curtailment of or interference
with the construction on or any use of any Property or any part thereof; or
(xiii) any other cause or circumstances whether similar or dissimilar to the
foregoing and whether or not the Lessee shall have notice or knowledge of any of
the foregoing. The Lessee's agreement in the preceding sentence shall not
affect any claim, action or right the Lessee may have against the Lessor or any
Participant. The parties intend that the obligations of the Lessee hereunder
shall be covenants and agreements that are separate and independent from any
obligations of the Lessor hereunder or under any other Operative Documents and
the obligations of the Lessee shall continue unaffected unless such obligations
shall have been modified or terminated in accordance with an express provision
of this Master Lease.
V.2. NO TERMINATION OR ABATEMENT. The Lessee shall remain obligated under
this Master Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Master Lease (except as provided herein),
notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting the Lessor or any
Participant, or any action with respect to this Master Lease which may be taken
by any trustee, receiver or liquidator of the Lessor or any Participant or by
any court with respect to the Lessor or any Participant. The Lessee hereby
waives all right (i) to terminate or surrender this Master Lease (except as
provided herein) or (ii) to avail itself of any abatement, suspension,
deferment, reduction, setoff, counterclaim or defense with respect to any Rent.
The Lessee shall remain obligated under this Master Lease in accordance with its
terms and the Lessee hereby waives any and all rights now or hereafter
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conferred by statute or otherwise to modify or to avoid strict compliance with
its obligations under this Master Lease. Notwithstanding any such statute or
otherwise, the Lessee shall be bound by all of the terms and conditions
contained in this Master Lease.
ARTICLE VI
SUBLEASES
VI.1. SUBLETTING. Subject to Section 2.1(r) of the Participation
Agreement, the Lessee may sublease any Property or any portion thereof to any
Person; PROVIDED, HOWEVER, that no sublease or other relinquishment of
possession of any Property shall in any way discharge or diminish any of the
Lessee's obligations to the Lessor hereunder and the Lessee shall remain
directly and primarily liable under this Master Lease as to the Properties, or
portion thereof, so sublet. Each sublease of any Property shall expressly be
made subject to and subordinated to this Master Lease and to the rights of the
Lessor hereunder.
ARTICLE VII
LESSEE ACKNOWLEDGMENTS
VII.1. CONDITION OF THE PROPERTIES. THE LESSEE ACKNOWLEDGES AND AGREES
THAT IT IS LEASING EACH PROPERTY "AS IS" WITHOUT REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR OR THE LENDERS AND IN EACH CASE
SUBJECT TO (A) THE EXISTING STATE OF TITLE (EXCLUDING LESSOR LIENS), (B) THE
RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN
ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF
REQUIREMENTS OF LAW AND PROPERTY LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE
HEREOF OR ON THE ACQUISITION DATE FOR SUCH PROPERTY. NONE OF THE LESSOR OR THE
LENDERS HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY,
USE,
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CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND NONE OF THE
LESSOR OR THE LENDERS SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT
THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF ANY PROPERTY, OR ANY
PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW OR PROPERTY LEGAL
REQUIREMENT.
VII.2. RISK OF LOSS. During the Lease Term the risk of loss of or
decrease in the enjoyment and beneficial use of the Properties as a result of
the damage or destruction thereof by fire, the elements, casualties, thefts,
riots, wars or otherwise is assumed by the Lessee, and the Lessor shall in no
event be answerable or accountable therefor.
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTIES, ETC.
VIII.1. UTILITY CHARGES. The Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Properties during
the Lease Term. The Lessee shall be entitled to receive any credit or refund
with respect to any utility charge paid by the Lessee and the amount of any
credit or refund received by the Lessor on account of any utility charges paid
by the Lessee, net of the costs and expenses reasonably incurred by the Lessor
in obtaining such credit or refund, shall be promptly paid over to the Lessee.
VIII.2. POSSESSION AND USE OF THE PROPERTY. Each Property may be used in
all lawful manners consistent with the business of the Lessee and otherwise as
set forth in the applicable Appraisal. The Lessee shall pay, or cause to be
paid, all charges and costs required in connection with the use of the
Properties as contemplated by this Master Lease. The Lessee shall not commit or
permit any waste of the Properties or any part thereof.
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VIII.3. COMPLIANCE WITH REQUIREMENTS OF LAW, PROPERTY LEGAL REQUIREMENTS
AND INSURANCE REQUIREMENTS. Subject to the terms of ARTICLE XII relating to
permitted contests, the Lessee, at its sole cost and expense, shall (a) comply
in all material respects with all Requirements of Law (including all Hazardous
Materials Laws), Property Legal Requirements and Insurance Requirements relating
to the Properties, including the use, construction, operation, maintenance,
repair and restoration thereof and the remarketing thereof pursuant to ARTICLE
XX, whether or not compliance therewith shall require structural or
extraordinary changes in the Improvements or interfere with the use and
enjoyment of the Properties, 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 Properties and for
the use, operation, maintenance, repair and restoration of the Improvements.
Notwithstanding the preceding sentence, the Lessee shall be deemed to be in
compliance with all Hazardous Materials Laws for purposes of this Master Lease
notwithstanding any Environmental Violation if the severity of such
Environmental Violation is less than Federal, state or local standards requiring
remediation or removal or, if such standards are exceeded, remediation or
removal is proceeding in accordance with all applicable Hazardous Materials
Laws.
VIII.4. ASSIGNMENT BY LESSEE. The Lessee may not assign this Master Lease
or any of its rights or obligations hereunder in whole or in part to any Person,
except that the Lessee may sublease any Property or portion thereof as permitted
under SECTION 6.1.
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ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
IX.1. MAINTENANCE AND REPAIR; RETURN.
(a) The Lessee, at its sole cost and expense, shall maintain each
Property in good condition (ordinary wear and tear excepted) 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
Requirements of Law, Property Legal Requirements and Insurance Requirements
and in no event less than the standards applied by the Lessee in the
operation and maintenance of other comparable properties owned or leased by
the Lessee or its Affiliates.
(b) The Lessor shall under no circumstances be required to build any
improvements on any Property, make any repairs, replacements, alterations
or renewals of any nature or description to any Property, make any
expenditure whatsoever in connection with this Master Lease (other than for
Advances made in accordance with and pursuant to the terms of the
Participation Agreement) or maintain any Property in any way. The Lessee
waives any right to (i) require the Lessor to maintain, repair, or rebuild
all or any part of any Property or (ii) make repairs at the expense of the
Lessor pursuant to any Requirement of Law, Property Legal Requirement,
Insurance Requirement, contract, agreement, or covenant, condition or
restriction in effect at any time during the Lease Term.
(c) The Lessee shall, upon the expiration or earlier termination of
this Master Lease with respect to any Property (other than as a result of
the Lessee's purchase of such Property from the Lessor as provided herein),
vacate and surrender such Property to the Lessor in its then-current, "AS
IS" condition, subject to the Lessee's
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obligations under SECTIONS 8.3, 9.1(a), 10.1, 11.1, 14.1(e), 14.2 and 20.1.
ARTICLE X
MODIFICATIONS, ETC.
X.1. MODIFICATIONS, SUBSTITUTIONS AND REPLACEMENTS. During the Lease
Term, the Lessee, at its sole cost and expense, may at any time and from time to
time make alterations, renovations, improvements and additions to any Property
or any part thereof and substitutions and replacements therefor (collectively,
"MODIFICATIONS"); PROVIDED, HOWEVER, that:
(i) except for any Modification required to be made pursuant to a
Requirement of Law or Property Legal Requirement (a "REQUIRED
MODIFICATION"), no Modification shall adversely affect the value or useful
life of such Property or any part thereof from that which existed
immediately prior to such Modification;
(ii) the Modification shall be done in a good and workmanlike manner;
(iii) the Lessee shall comply in all material respects with all
Requirements of Law (including all Hazardous Materials Laws), Property
Legal Requirements and Insurance Requirements applicable to the
Modification, including the obtaining of all permits and certificates of
occupancy;
(iv) subject to the terms of ARTICLE XII relating to permitted
contests, the Lessee shall pay all costs and expenses and shall discharge
(or cause to be insured or bonded over) within sixty (60) days after the
same shall be filed (or otherwise become effective) any Liens arising with
respect to the Modification;
(v) such Modifications shall comply with Sections 8.3 and 9.1(a); and
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(vi) the Lessee shall be required to obtain the prior written approval
of the Lessor, which approval shall not be unreasonably withheld, and which
shall be deemed to have been given if no response from the Lessor to the
request for consent is received by the Lessee within ten (10) days of the
date of such request, with respect to any alterations that shall Materially
affect any structural element of any Improvements.
All Modifications shall remain part of the realty and shall be subject to this
Master Lease and title thereto shall immediately vest in the Lessor; PROVIDED,
HOWEVER, that Modifications that (x) are not Required Modifications, (y) were
not financed by the Lessor and (z) are readily removable without impairing the
value, utility or remaining useful life of the applicable Property, shall be the
property of the Lessee and shall not be subject to this Master Lease. So long
as no Lease Event of Default has occurred and is continuing, the Lessee may
place upon the Properties any trade fixtures, machinery, equipment, inventory or
other property belonging to the Lessee or third parties and may remove the same
at any time during the Lease Term, subject, however, to the terms of SECTION
9.1(a); PROVIDED, HOWEVER, that such trade fixtures, machinery, equipment,
inventory or other property do not impair the value or useful life of the
applicable Property; PROVIDED, FURTHER, HOWEVER, that the Lessee shall keep and
maintain at the Properties and shall not remove from the Properties any
Equipment financed or otherwise paid for (directly or indirectly) by the Lessor
or any Participant pursuant to the Participation Agreement.
X.2. NOTICE TO THE LESSOR. If the Lessee reasonably expects the cost of
any Modification to any Property to exceed $250,000.00, the Lessee shall deliver
to the Lessor a brief written narrative of the work to be performed in
connection with such Modification prior to making such Modification.
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ARTICLE XI
WARRANT OF TITLE; EASEMENTS
XI.1. WARRANT OF TITLE.
(a) The Lessee agrees that except as otherwise provided herein and
subject to the terms of ARTICLE XII relating to permitted contests, the
Lessee shall not directly or indirectly create or allow to remain, and
shall promptly discharge at its sole cost and expense, any Lien (other than
any Lessor Lien), defect, attachment, levy, title retention agreement or
claim upon any Property or any Lien, attachment, levy or claim with respect
to the Rent or with respect to any amounts held by the Lessor or the
Participants pursuant to the Loan Agreement or the other Operative
Documents, other than Permitted Property Liens and Liens on machinery,
equipment, general intangibles and other personal property not financed by
the proceeds of the Loans or Lessor Amounts.
(b) Nothing contained in this Master Lease shall be construed as
constituting the consent or request of the Lessor, expressed or implied, to
or for the performance by any contractor, mechanic, laborer, materialman,
supplier or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition
of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT
NONE OF THE LESSOR OR THE LENDERS IS OR SHALL BE LIABLE FOR ANY LABOR,
SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO
ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE,
AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR OR ANY
LENDER IN AND TO ANY PROPERTY.
XI.2. GRANTS AND RELEASES OF EASEMENTS; LESSOR'S WAIVERS. Provided that
no Lease Event of Default shall have occurred and
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be continuing and subject to the provisions of ARTICLES VII, IX and X and
SECTION 8.3 the Lessor hereby consents in each instance to the following actions
by the Lessee, in the name and stead of the Lessor, but at the Lessee's sole
cost and expense: (a) the granting of easements, licenses, rights-of-way and
other rights and privileges in the nature of easements reasonably necessary or
desirable for the use, repair, or maintenance of any Property as herein
provided; (b) the release of existing easements or other rights in the nature of
easements which are for the benefit of any Property; and (c) the execution of
amendments to any covenants and restrictions affecting any Property; PROVIDED,
HOWEVER, that in each case (i) such grant, release, dedication, transfer or
amendment does not materially impair the value or remaining useful life of the
applicable Property, (ii) such grant, release, dedication, transfer or amendment
that in the Lessee's judgment is reasonably necessary in connection with the
use, maintenance, alteration or improvement of the applicable Property, (iii)
such grant, release, dedication, transfer or amendment will not cause the
applicable Property or any portion thereof to fail to comply with the provisions
of this Master Lease or any other Operative Documents and all Property Legal
Requirements (including, without limitation, all applicable zoning, planning,
building and subdivision ordinances, all applicable restrictive covenants and
all applicable architectural approval requirements); (iv) all governmental
consents or approvals required prior to such grant, release, dedication,
transfer, annexation or amendment have been obtained, and all filings required
prior to such action have been made; (v) the Lessee shall remain obligated under
this Master Lease and under any instrument executed by the Lessee consenting to
the assignment of the Lessor's interest in this Master Lease as security for
indebtedness, in each such case in accordance with their terms, as though such
grant, release, dedication, transfer or amendment had not been effected and
(vi) the Lessee shall pay and perform any obligations of the Lessor under such
grant, release, dedication, transfer or amendment. The Lessor acknowledges the
Lessee's right to finance and to secure under the Uniform Commercial Code,
inventory, furnishings, furniture, equipment, machinery, leasehold improvements
and other personal
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property located at the Properties other than Equipment, and Lessor agrees to
execute Lessor waiver forms and release of Lessor's Liens in favor of any
purchase money seller, lessor or lender which has financed or may finance in the
future such items. Without limiting the effectiveness of the foregoing,
provided that no Lease Event of Default shall have occurred and be continuing,
the Lessor shall, upon the request of the Lessee, and at the Lessee's sole cost
and expense, execute and deliver any instruments necessary or appropriate to
confirm any such grant, release, dedication, transfer, annexation or amendment
to any Person permitted under this SECTION 11.2 including landlord waivers with
respect to any of the foregoing. So long as no Event of Default shall have
occurred and be continuing, Lessee is hereby granted an irrevocable power of
attorney (coupled with an interest) to execute the types of documents,
instruments and agreement referred to in this SECTION 11.2. In addition, Lessor
covenants to cooperate and to execute promptly any documents requested by Lessee
under this SECTION 11.2.
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ARTICLE XII
PERMITTED CONTESTS
XII.1. PERMITTED CONTESTS IN RESPECT OF APPLICABLE LAW. If, to the extent
and for so long as (a) a test, challenge, appeal or proceeding for review of any
Applicable Law relating to any Property shall be prosecuted diligently and in
good faith in appropriate proceedings by the Lessee or (b) compliance with such
Applicable Law shall have been excused or exempted by a valid nonconforming use,
variance permit, waiver, extension or forbearance, the Lessee shall not be
required to comply with such Applicable Law but only if and so long as any such
test, challenge, appeal, proceeding, waiver, extension, forbearance or
noncompliance shall not, in the reasonable opinion of the Lessor and the Agent,
involve (A) any risk of criminal liability being imposed on the Lessor or any
Lender or (B) any risk of (1) foreclosure, forfeiture or loss of such Property,
or sale of any Property or any material part thereof, or nonpayment of Rent
(2) civil liability being imposed on the Lessor, any Lender, or such Property,
or (3) enjoinment of, or interference with, the use, possession or disposition
of such Property in any material respect.
The Lessor will not be required to join in any proceedings pursuant to this
SECTION 12.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor; and in that event the
Lessor will join in the proceedings or permit them or any part thereof to be
brought in its name if and so long as (i) the Lessee has not elected the
Remarketing Option and (ii) the Lessee pays all related expenses and indemnifies
the Lessor and the Participants with respect to such proceedings.
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ARTICLE XIII
INSURANCE
XIII.1. PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE.
(a) During the Lease Term, the Lessee shall procure and carry, at the
Lessee's sole cost and expense, commercial general liability insurance for
claims for injuries or death sustained by persons or damage to property
while on the Properties and such other public liability coverages as are
ordinarily procured by the Lessee or its Affiliates who own or operate
similar properties, but in any case shall provide liability coverage of at
least combined single limit for bodily injury or property damage,
$5,000,000 per occurrence and aggregate. Such insurance shall be on terms
and in amounts that are no less favorable than insurance maintained by the
Lessee or such Affiliates with respect to similar properties that they own
and that are in accordance with normal industry practice. The policy shall
be endorsed to name the Lessor as additional insured. The policy shall
also specifically provide that the policy shall be considered primary
insurance which shall apply to any loss or claim before any contribution by
any insurance which the Lessor may have in force.
(b) The Lessee shall in the construction of any Modifications and the
operation of the Properties, comply with the applicable workers'
compensation laws.
XIII.2. HAZARD AND OTHER INSURANCE. During the Lease Term, the Lessee
shall keep, or cause to be kept, such Property insured against loss or damage by
fire, and other risks on terms and in amounts that are no less favorable than
insurance covering other similar properties owned by the Lessee or its
Affiliates and that are in accordance with normal industry practices, but at
least an amount sufficient to cover the replacement cost of the Improvements.
During the construction of any Improvements the
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Lessee shall also maintain or cause to be maintained builders' risk insurance.
All insurance proceeds in respect of any loss or occurrence for which the
proceeds related thereto are (i) less than or equal to $500,000.00, in the
absence of the occurrence and continuance of an Event of Default, shall be
adjusted by and paid to the Lessee for application toward the reconstruction,
repair or refurbishment of the applicable Property and (ii) greater than
$500,000.00, shall be adjusted by and held by the Lessor for application in
accordance with ARTICLE XIV.
XIII.3. INSURANCE COVERAGE.
(a) The Lessee shall furnish the Lessor and the Agent with
certificates showing the insurance required under SECTIONS 13.1 and 13.2 to
be in effect and naming the Lessor as additional insured with respect to
liability coverage (excluding worker's compensation insurance), naming the
Lessor and the Lessee as their interests may appear with respect to
property coverage and naming the Lessor as loss payee with respect to
property coverage and showing the mortgagee endorsement required by SECTION
13.3(c) with respect to such coverage. All such insurance shall be at the
cost and expense of the Lessee. Such certificates shall include a
provision for no less than thirty (30) days' advance written notice by the
insurer to the Lessor in the event of cancellation or reduction of such
insurance.
(b) The Lessee agrees that the insurance policy or policies required
by SECTIONS 13.2 shall include an appropriate clause pursuant to which such
policy shall provide that it will not be invalidated should the Lessee
waive, in writing, prior to a loss, any or all rights of recovery against
any party for losses covered by such policy, and that the insurance in
favor of the Lessor and its rights under and interests in said policies
shall not be invalidated or reduced by any act or omission (including
breach of warranty) or negligence of the Lessee or any other Person having
any interest in any Property other than the Lessor. The Lessee hereby
waives any and all such rights
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against the Lessor to the extent of payments made under such policies.
(c) All such insurance shall be written by reputable insurance
companies that are financially sound and solvent and otherwise reasonably
appropriate considering the amount and type of insurance being provided by
such companies. Any insurance company selected by the Lessee which is
rated in Best's Insurance Guide or any successor thereto (or if there be
none, an organization having a similar national reputation) shall have a
general policyholder rating of "A" and a financial rating of at least
"VIII" or be otherwise acceptable to the Lessor. All insurance policies
required by SECTION 13.2 shall include a standard form mortgagee
endorsement in favor of the Lessor.
(d) The Lessor shall not carry separate insurance concurrent in kind
or form or contributing in the event of loss with any insurance required
under this Article XIII except that the Lessor may, at the Lessor's
expense, carry separate liability insurance so long as (i) the Lessee's
insurance is designated as primary and in no event excess or contributory
to any insurance the Lessor may have in force which would apply to a loss
covered under the Lessee's policy and (ii) each such insurance policy will
not cause the Lessee's insurance required under this Article XIII to be
subject to a coinsurance exception of any kind.
(e) The Lessee shall pay as they become due all premiums for the
insurance required by SECTION 13.1 and SECTION 13.2, and shall renew or
replace each policy prior to the expiration date thereof. Throughout the
Lease Term, at the time each of the Lessee's insurance policies is renewed
(but in no event less frequently than once each year), the Lessee shall
deliver to the Lessor and the Agent certificates of insurance evidencing
that all insurance required by this ARTICLE XIII is being maintained by the
Lessee and is in effect.
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ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
XIV.1. CASUALTY AND CONDEMNATION.
(a) Subject to the provisions of this ARTICLE XIV, if all or a
portion of any Property is damaged or destroyed in whole or in part by a
Casualty or if the use, access, occupancy, easement rights or title to any
Property or any part thereof, is the subject of a Condemnation, then
(i) in the case of a Casualty, (x) any insurance proceeds less
than $500,000 payable with respect to such Casualty shall be paid
directly to the Lessee, or if received by the Lessor, shall be paid
over to such Lessee for the reconstruction, refurbishment and repair
of such Property, and (y) any insurance proceeds in excess of $500,000
payable with respect to such Casualty shall be paid to the Lessor to
be applied by disbursement to the Lessee to the restoration of such
Property, and
(ii) in the case of a Condemnation (that is not a Significant
Condemnation) of any part of any Land (not including the applicable
Improvements), any award or compensation relating thereto shall be
paid to the Lessee and in the case of a Significant Condemnation such
award or compensation shall be paid to the Lessor to be applied in the
Lessee's reasonable discretion to the restoration of such Property or
toward the payment of the applicable Lease Balance;
PROVIDED, HOWEVER, that, in each case, if a Lease Event of Default shall
have occurred and be continuing, such award, compensation or insurance
proceeds shall be paid directly to the Lessor or, if received by the
Lessee, shall be held in trust for the Lessor and the Lenders, and shall
be paid over by the Lessee to the Lessor to be distributed in accordance
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with the Article VII of the Participation Agreement. All amounts held by
the Lessor, or the Lenders when a Lease Event of Default exists hereunder
on account of any award, compensation or insurance proceeds either paid
directly to the Lessor or the Lenders or turned over to the Lessor or the
Lenders shall at the option of the Lessor either be (i) paid to the Lessee
for the repair of damage caused by such Casualty or Condemnation in
accordance with CLAUSE (d) of this SECTION 14.1, or (ii) applied to the
purchase price of the related Property on the Termination Date with respect
to such Property in accordance with ARTICLE XV, with any Excess
Casualty/Condemnation Proceeds being payable to the Lessee.
(b) The Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or
insurance payment on account of any such Casualty or Condemnation and shall
pay all expenses thereof. At the Lessee's reasonable request, and at the
Lessee's sole cost and expense, the Lessor and the Lenders shall
participate in any such proceeding, action, negotiation, prosecution or
adjustment. The Lessor and the Lessee agree that this Master Lease shall
control the rights of the Lessor and the Lessee in and to any such award,
compensation or insurance payment.
(c) If the Lessor or the Lessee shall receive notice of a Casualty or
of an actual, pending or threatened Condemnation of any Property or any
interest therein, the Lessor or the Lessee, as the case may be, shall give
notice thereof to the other and to the Lenders promptly after the receipt
of such notice.
(d) If pursuant to this SECTION 14.1 and SECTION 15.1 this Master
Lease shall continue in full force and effect following a Casualty or
Condemnation with respect to any Property, the Lessee shall, at its sole
cost and expense (and, without limitation, if any award, compensation or
insurance payment is not sufficient to restore such Property in accordance
with this CLAUSE (d), or is not covered by
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insurance as in the case of Casualty caused by earthquake, the Lessee shall
pay the shortfall), promptly and diligently repair any damage to such
Property caused by such Casualty or Condemnation in conformity with the
requirements of SECTIONS 9.1 and 10.1 (as modified to give effect to any
subsequent Modifications, any Condemnation affecting such Property and all
applicable Property Legal Requirements) so as to restore such Property to
at least the same condition, operation, function and value as existed
immediately prior to such Casualty or Condemnation with such Modification
as the Lessee may elect in accordance with SECTION 10.1. In such event,
title to such Property shall remain with the Lessor subject to the terms of
this Master Lease. Upon completion of such restoration, the Lessee shall
furnish the Lessor an architect's certificate of substantial completion and
a Responsible Employee's Certificate confirming that such restoration has
been completed pursuant to this Master Lease.
(e) In no event shall a Casualty or Condemnation affect the Lessee's
obligations to pay Rent pursuant to SECTION 3.1 or to perform its
obligations and pay any amounts due on the Expiration Date or pursuant to
ARTICLES XVIII and XXI.
(f) Any Excess Casualty/Condemnation Proceeds received by the Lessor
or the Lenders in respect of a Casualty or Condemnation shall be turned
over to the Lessee.
XIV.2. ENVIRONMENTAL MATTERS. Promptly upon the Lessee's knowledge of the
existence of an Environmental Violation with respect to any Property, the Lessee
shall notify the Lessor in writing of such Environmental Violation. If the
Lessor elects not to terminate this Master Lease with respect to such Property
pursuant to SECTION 15.1, at the Lessee's sole cost and expense, the Lessee
shall promptly and diligently commence any response, clean up, remedial or other
action necessary to remove, clean up or remediate the Environmental Violation in
accordance with the terms of SECTION 8.3 (including the last sentence thereof).
The
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Lessee shall, upon completion of remedial action by the Lessee, cause to be
prepared by an environmental consultant reasonably acceptable to the Lessor a
report describing the Environmental Violation and the actions taken by the
Lessee (or its agents) in response to such Environmental Violation, and a
statement by the consultant that the Environmental Violation has been remedied
in compliance in all material respects with applicable Hazardous Materials Laws.
Each such Environmental Violation shall be remedied prior to the Expiration Date
unless each Property with respect to which an Environmental Violation has
occurred but has not been remedied has been purchased by the Lessee in
accordance with SECTION 18.1 or 18.2. Nothing in this ARTICLE XIV shall reduce
or limit the Lessee's obligations under Sections 13.1, 13.2 or 13.3 of the
Participation Agreement.
XIV.3. NOTICE OF ENVIRONMENTAL MATTERS. Promptly, but in any event within
sixty (60) Business Days from the date the Lessee has actual knowledge thereof,
the Lessee shall provide to the Lessor written notice of any pending or
threatened claim, action or proceeding involving any Hazardous Materials Laws or
any Release on or in connection with any Property. All such notices shall
describe in reasonable detail the nature of the claim, action or proceeding and
the Lessee's proposed response thereto. In addition, the Lessee shall provide
to the Lessor, within sixty (60) Business Days of receipt, copies of all written
communications with any Governmental Authority relating to any Environmental
Violation in connection with any Property. The Lessee shall also promptly
provide such detailed reports of any such material environmental claims as may
reasonably be requested by the Lessor or the Lenders. In the event that the
Lessor receives written notice of any pending or threatened claim, action or
proceeding involving any Hazardous Materials Laws or any Release on or in
connection with any Property, the Lessor shall promptly give notice thereof to
the Lessee.
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ARTICLE XV
TERMINATION OF LEASE
XV.1. PARTIAL TERMINATION UPON CERTAIN EVENTS. If any of the following
occurs with respect to any Property:
(i) a Significant Condemnation occurs; or
(ii) an Environmental Violation occurs or is discovered the cost of
remediation of which would exceed $5,000,000;
and the Lessor shall have given written notice (a "TERMINATION NOTICE") to the
Lessee that, as a consequence of such event, (x) the Lease Supplement relating
to such Property is to be terminated and (y) this Master Lease is to be
terminated with respect to such Property, then the Lessee shall be obligated to
purchase the Lessor's interest in such affected Property on or prior to the next
occurring Basic Rent Payment Date by paying the Lessor an amount equal to the
Property Balance for such affected Property.
XV.2. TERMINATION PROCEDURES. On the date of the payment by the Lessee of
the Property Balance, or the Lease Balance, as the case may be, with respect to
any Property or all Properties, as the case may be, in accordance with SECTION
15.1 (such date, the "TERMINATION DATE"), the Lease Supplement relating to each
such affected Property shall terminate and this Master Lease shall terminate
with respect to each such Property and, concurrent with the Lessor's receipt of
such payment,
(a) the Lessor shall execute and deliver to the Lessee (or to the
Lessee's designee) at the Lessee's cost and expense a special warranty deed
with respect to each such Property, a bill of sale with respect to the
Equipment located on each such Property and an assignment of the Lessor's
entire interest in each such Property (which shall include an assignment of
all of the Lessor's right, title
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and interest in and to any Net Proceeds with respect to each such Property
not previously received by the Lessor), in each case in recordable form and
otherwise in conformity with local custom and free and clear of the Lien of
the Lessor Mortgage and any Lessor Liens attributable to the Lessor;
(b) each such Property shall be conveyed to the Lessee (or to the
Lessee's designee) "AS IS" and in its then present physical condition; and
(c) in the case of a termination pursuant to CLAUSE (i) or (ii) of
SECTION 15.1(a), the Lessor shall convey to the Lessee any Net Proceeds
with respect to the Casualty or Condemnation giving rise to the termination
of this Master Lease with respect to such Property theretofore received by
the Lessor or at the request of the Lessee, such amounts shall be applied
against sums due hereunder.
ARTICLE XVI
EVENTS OF DEFAULT
XVI.1. LEASE EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (whether such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall constitute a "LEASE EVENT OF
DEFAULT":
(a) the Lessee shall fail to make payment of (i) any Basic Rent
within five (5) days after the same has become due and payable, or (ii) any
Property Balance, Purchase Option Price, Loan Balance or Lease Balance,
including, without limitation, amounts due pursuant to SECTIONS 15.1, 15.2,
18.1, 18.2, or 20.1;
(b) the Lessee shall fail to make payment of any
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Supplemental Rent due and payable within five (5) days after receipt of
notice thereof;
(c) the Lessee shall fail to maintain insurance as required by
ARTICLE XIII of this Master Lease;
(d) the Lessee shall fail to deposit with the Collateral Agent,
within the time set forth in Section 6.1 of the Participation Agreement,
the Deficiency Collateral;
(e) the Lessee shall not be in compliance with Section 10.1(f)(i),
(ii) or (iii) of the Participation Agreement;
(f) the Lessee shall fail to observe or perform any term, covenant or
condition of the Lessee under this Lease or the Operative Documents to
which it is party other than those described in SECTION 20.1(a), (b), (c),
(d) or (e) hereof, and such failure shall have continued for thirty (30)
days after the earlier of (i) delivery to the Lessee of written notice
thereof from the Lessor or (ii) a Responsible Employee of the Lessee shall
have knowledge of such failure; PROVIDED FURTHER, that failure by the
Lessee to fully comply with the requirements of SECTION 20.1 hereof shall
not be subject to any cure period; provided, however, that no Event of
Default shall be deemed to have occurred under this subsection until one
hundred twenty (120) days has elapsed so long as throughout such time, the
Lessee is diligently pursuing a cure for such breach (to the extent such
breach may be cured);
(g) any representation or warranty made by the Lessee in any of the
Operative Documents to which it is a party shall prove to have been
Materially inaccurate at the time made, and if such inaccuracy can be
cured, it shall not have been cured within thirty (30) days after the
earlier of (i) delivery to the Lessee of written notice thereof from the
Lessor or (ii) a Responsible Employee of the Lessee shall have knowledge of
such inaccuracy; provided, however, that no Event of Default shall be
deemed to have occurred
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under this subsection until one hundred twenty (120) days has elapsed so
long as throughout such time, the Lessee is diligently pursuing a cure for
such breach (to the extent such breach may be cured);
(h) the Lessee shall (i) admit in writing its inability to pay its
debts generally as they become due, (ii) file a petition under the United
States bankruptcy laws or any other applicable insolvency law or statute of
the United States of America or any State or Commonwealth thereof,
(iii) make a general assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or the whole or any
substantial part of its property, (v) fail to cause the discharge of any
custodian, trustee or receiver appointed for the Lessee or the whole or a
substantial part of its property within sixty (60) days after such
appointment, or (vi) file a petition or answer seeking or consenting to
reorganization under the United States bankruptcy laws or any other
applicable insolvency law or statute of the United States of America or any
State or Commonwealth thereof;
(i) insolvency proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency law or statute of the
United States of America or any State or Commonwealth thereof shall be
filed against the Lessee and not dismissed within ninety (90) days from the
date of its filing, or a court of competent jurisdiction shall enter an
order or decree appointing, without the consent of the Lessee a receiver of
the Lessee or the whole or a substantial part of any of its property and
such order or decree shall not be vacated or set aside within ninety (90)
days from the date of the entry thereof;
(j) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $5,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
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member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $5,000,000;
(k) any judgments or orders for the payment of money, in any case not
covered by insurance, individually or in the aggregate in excess of
$5,000,000 shall be rendered against the Lessee, and such judgment or order
shall continue unsatisfied and unstayed (pursuant to laws, rules or court
orders) for a period of thirty (30) days;
(l) an event of default, as defined in any agreement, mortgage,
indenture or instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness of the Lessee with respect to
any Property, whether such indebtedness now exists or shall hereafter be
created, shall happen and such indebtedness individually or in the
aggregate shall exceed $5,000,000 and shall be due and payable prior to its
stated maturity;
(m) any Lien granted under any Operative Document shall, in whole or
in part, terminate, cease to be effective against, or cease to be the
legal, valid, binding and enforceable obligation of, the Lessee;
(n) the Lessee shall directly or indirectly contest the validity of
any Operative Document in any manner in any court of competent jurisdiction
or any lien granted by any
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Operative Document; or
(o) a Loan Agreement Event of Default, a Guaranty Event of Default or
a Construction Agency Agreement Event of Default shall have occurred and be
continuing.
XVI.2. REMEDIES. Upon the occurrence of any Lease Event of Default and at
any time thereafter, the Lessor may, so long as such Lease Event of Default is
continuing, do one or more of the following as the Lessor in its sole discretion
shall determine, without limiting any other right or remedy the Lessor may have
on account of such Lease Event of Default (including, without limitation, the
obligation of the Lessee to purchase the Properties as set forth in SECTION
18.2:
(a) The Lessor may, by notice to the Lessee, rescind or terminate
this Master Lease as to any Property or all of the Properties as of the
date specified in such notice; however, (i) no reletting, reentry or taking
of possession of any Property (or any portion thereof) by the Lessor will
be construed as an election on the Lessor's part to terminate this Master
Lease unless a written notice of such intention is given to the Lessee,
(ii) notwithstanding any reletting, reentry or taking of possession, the
Lessor may at any time thereafter elect to terminate this Master Lease for
a continuing Lease Event of Default and (iii) no act or thing done by the
Lessor or any of its agents, representatives or employees and no agreement
accepting a surrender of the Properties shall be valid unless the same be
made in writing and executed by the Lessor;
(b) The Lessor may (i) demand that the Lessee, and the Lessee shall
upon the written demand of the Lessor, return any Property promptly to the
Lessor in the manner and condition required by, and otherwise in accordance
with all of the provisions of, ARTICLES VII and IX and SECTION 8.3 hereof
as if such Property were being returned at the end of the Lease Term, and
the Lessor shall not be liable for the reimbursement of the Lessee for any
costs and expenses
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incurred by the Lessee in connection therewith and (ii) without prejudice
to any other remedy which the Lessor may have for possession of any
Property, and to the extent and in the manner permitted by Applicable Law,
enter upon such Property and take immediate possession of (to the exclusion
of the Lessee) such Property or any part thereof and expel or remove the
Lessee and any other Person who may be occupying such Property, by summary
proceedings or otherwise, all without liability to the Lessee for or by
reason of such entry or taking of possession, whether for the restoration
of damage to property caused by such taking or otherwise and, in addition
to the Lessor's other damages, the Lessee shall be responsible for all
costs and expenses incurred by the Lessor and/or the Lenders in connection
with any reletting, including, without limitation, reasonable brokers' fees
and all costs of any alterations or repairs made by the Lessor;
(c) The Lessor may (i) sell all or any part of any Property at public
sale free and clear of any rights of the Lessee and without any duty to
account to the Lessee with respect to such action or inaction or any
proceeds (except that Excess Proceeds are payable to and shall be paid to
the Lessee) with respect thereto (except to the extent required by CLAUSE
(ii) below if the Lessor shall elect to exercise its rights thereunder) in
which event the Lessee's obligation to pay Basic Rent hereunder for periods
commencing after the date of such sale shall be terminated or
proportionately reduced, as the case may be; and (ii) if the Lessor shall
so elect, demand that the Lessee pay to the Lessor, and the Lessee shall
pay to the Lessor, on the date of such sale, as liquidated damages for loss
of a bargain and not as a penalty (the parties agreeing that the Lessor's
actual damages would be difficult to predict, but the aforementioned
liquidated damages represent a reasonable approximation of such amount) or
(in lieu of Basic Rent due for periods commencing on or after the Payment
Date coinciding with such date of sale (or, if the sale date is not a Basic
Rent Payment Date, the Basic Rent Payment Date
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next preceding the date of such sale)), an amount equal to (A) the excess,
if any, of (1) the Lease Balance calculated as of such Basic Rent Payment
Date (including all Rent due and unpaid to and including such Basic Rent
Payment Date and), over (2) the net proceeds of such sale (that is, after
deducting all costs and expenses incurred by the Lessor incident to such
conveyance, including, without limitation, repossession costs, brokerage
commissions, prorations, transfer taxes, fees and expenses for counsel,
title insurance fees, survey costs, recording fees, and any repair costs);
plus (B) interest at the Overdue Rate on the foregoing amount from such
Basic Rent Payment Date until the date of payment;
(d) The Lessor may, at its option, elect not to terminate this Master
Lease with respect to any Property or all of the Properties and continue to
collect all Basic Rent, Supplemental Rent, and all other amounts due the
Lessor (together with all costs of collection) and enforce the Lessee's
obligations under this Master Lease as and when the same become due, or are
to be performed, and at the option of the Lessor, upon any abandonment of
any Property by the Lessee or re-entry of same by the Lessor, the Lessor
may, in its sole and absolute discretion, elect not to terminate this
Master Lease and may make the necessary repairs in order to relet such
Property, and relet such Property or any part thereof for such term or
terms (which may be for a long term extending beyond the Lease Term of this
Master Lease) and at such rental or rentals and upon such other terms and
conditions as the Lessor in its reasonable discretion may deem advisable;
and upon each such reletting all rentals actually received by the Lessor
from such reletting shall be applied to the Lessee's obligations hereunder
and the other Operative Documents in such order, proportion and priority as
the Lessor may elect in the Lessor's sole and absolute discretion. If such
rentals received from such reletting during any period are less than the
Rent with respect to such Property to be paid during that period by the
Lessee hereunder, the Lessee shall pay
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any deficiency, as calculated by the Lessor, to the Lessor on the next
Basic Rent Payment Date;
(e) Unless all of the Properties have been sold in their entirety,
the Lessor may, whether or not the Lessor shall have exercised or shall
thereafter at any time exercise any of its rights under CLAUSE (b), (c) or
(d) of this SECTION 16.2 with respect to any Properties or any portions
thereof, demand, by written notice to the Lessee specifying a date (a
"TERMINATION DATE") not earlier than twenty (20) days after the date of
such notice, that the Lessee purchase, on such Termination Date, all unsold
Properties and all unsold portions of Properties in accordance with the
provisions of ARTICLE XXI and SECTION 18.2;
(f) The Lessor may exercise any other right or remedy that may be
available to it under Applicable Law, or proceed by appropriate court
action (legal or equitable) to enforce the terms hereof or to recover
damages for the breach hereof. Separate suits may be brought to collect
any such damages for any period(s), and such suits shall not in any manner
prejudice the Lessor's right to collect any such damages for any subsequent
period(s), or the Lessor may defer any such suit until after the expiration
of the Lease Term, in which event such suit shall be deemed not to have
accrued until the expiration of the Lease Term;
(g) The Lessor may retain and apply against the Lease Balance all
sums which the Lessor would, absent such Lease Event of Default, be
required to pay to, or turn over to, the Lessee pursuant to the terms of
this Master Lease;
(h) If a Lease Event of Default shall have occurred and be
continuing, the Lessor, to the extent permitted by Applicable Law, as a
matter of right and with notice to the Lessee, shall have the right to
apply to any court having jurisdiction to appoint a receiver or receivers
of any Property, and the Lessee hereby irrevocably consents to any
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such appointment. Any such receiver(s) shall have all of the usual powers
and duties of receivers in like or similar cases and all of the powers and
duties of the Lessor in case of entry, and shall continue as such and
exercise such powers until the date of confirmation of the sale of such
Property unless such receivership is sooner terminated;
(i) To the maximum extent permitted by law, the Lessee hereby waives
the benefit of any appraisement, valuation, stay, extension, reinstatement
and redemption laws now or hereafter in force and all rights of marshalling
in the event of any sale of any Property or any interest therein;
(j) The Lessor shall be entitled to enforce payment of the
indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of the
other Operative Documents or other agreement or any laws now or hereafter
in force, notwithstanding some or all of the obligations secured hereby may
now or hereafter be otherwise secured, whether by mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance
of this instrument nor its enforcement, shall prejudice or in any manner
affect the Lessor's right to realize upon or enforce any other security now
or hereafter held by the Lessor, it being agreed that the Lessor shall be
entitled to enforce this instrument and any other security now or hereafter
held by the Lessor in such order and manner as the Lessor may determine in
its absolute discretion. No remedy herein conferred upon or reserved to
the Lessor is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute. Every power or remedy given by any of
the Operative Documents to the Lessor or to which it may otherwise be
entitled, may be exercised, concurrently or independently, from time to
time and as often as may be deemed expedient by the Lessor. In no event
shall the Lessor, in the exercise of the remedies provided in this
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instrument (including, without limitation, in connection with the
assignment of rents to Lessor, or the appointment of a receiver and the
entry of such receiver onto all or any part of the Properties), be deemed a
"mortgagee in possession," and the Lessor shall not in any way be made
liable for any act, either of commission or omission, in connection with
the exercise of such remedies.
If, pursuant to the exercise by the Lessor of its remedies pursuant to this
SECTION 16.2, the Lease Balance and all other amounts due and owing from the
Lessee under this Master Lease and the other Operative Documents have been paid
in full, then the Lessor shall remit to the Lessee any excess amounts received
by the Lessor.
(k) FORECLOSURE; POWER OF SALE. Lessee hereby grants to First
American Title Guaranty Company, as trustee (together with all successor
trustees, the "TRUSTEE"), IN TRUST, WITH POWER OF SALE, all of Lessee's
right, title and interest in and to the Properties and, upon the occurrence
of a Lease Event of Default, Lessor shall have the power and authority,
after proper notice and lapse of such time as may be required by law, to
cause Trustee to sell any Property or the Properties by notifying Trustee
of that election and depositing with Trustee this instrument and receipts
and evidence of expenditures made and secured hereby as Trustee may
reasonably require. Upon receipt of any such notice from Lessor, Trustee
shall cause to be recorded, published and delivered to Lessee such Notice
of Default and Election to Sell as is then required by applicable statutory
authority and by this instrument, which notice shall set forth, among other
things, the nature of the breach(es) or default(s), the action(s) required
to effect a cure thereof and the time period within which that cure may be
effected. If no cure is effected within the statutory time limits
following recordation of the Notice of Default and Election to Sell and
after Notice of Sale has been given as required by the above-referenced
statutes, Trustee may without further notice or demand sell and convey any
Property or the
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Properties in accordance with the above-referenced statutes. Each Property
may be sold as a whole or in separate lots, parcels or items and in such
order as Lessor may direct, at public auction to the highest bidder for
cash in lawful money of the United States payable at the time of sale.
Trustee shall deliver to such purchaser(s) a good and sufficient deed or
deeds conveying the property so sold, but without any covenant or warranty
express or implied. The recitals in such deed of any matter or fact shall
be conclusive proof of the truthfulness thereof. Any Person, including
Lessee, Trustee or Lessor, may purchase at any sale. After deducting all
costs, fees and expenses of Lessor and Trustee, including costs of evidence
of title in connection with any sale, Lessor shall apply the proceeds of
sale, in the following order of priority, to payment of the following
(collectively, the "OBLIGATIONS"): (i) FIRST, all amounts expended by or
for the account of Lessor under the terms hereof and not then repaid, with
accrued interest at the Overdue Rate; and (ii) SECOND, all other amounts
then due and owing hereunder including, without limitation, all Basic Rent,
Supplemental Rent, the full amount of the Lease Balance as of the date of
sale as if this Lease had been terminated with respect to all of the
Properties then subject to this Lease under SECTION 18.1, and all other
amounts then payable by Lessee under this Lease and the other Operative
Documents, with Lessor having the right to apply the proceeds of sale to
the amounts described above in this clause (ii) in such order, proportion
and priority as Lessor may elect in its sole and absolute discretion. To
the extent permitted by applicable statutes, Trustee may postpone the sale
of all or any portion of any Property or the Properties by public
announcement at the time and place of sale, and from time to time
thereafter may again postpone that sale by public announcement or
subsequently noticed sale, and without further notice may make such sale at
the time fixed at the last postponement or may, in its discretion, give a
new notice of sale. A sale of less than all of any Property or the
Properties or any defective or irregular sale made hereunder shall not
exhaust the power of
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sale provided for herein, and subsequent sales may be made hereunder until
all of the Obligations have been satisfied or all the Properties have been
sold, without defect or irregularity. No action of Lessor or Trustee based
upon the provisions contained herein or contained in the applicable
statutes, including, without limitation, the giving of the Notice of
Default and Election to Sell or the Notice of Sale, shall constitute an
election of remedies which would preclude Lessor from pursuing judicial
foreclosure before a completed sale pursuant to the power of sale contained
herein. Lessor shall have the right, with the irrevocable consent of
Lessee hereby given and evidenced by the execution of this instrument, to
obtain appointment of a receiver by any court of competent jurisdiction
without further notice to Lessee, which receiver shall be authorized and
empowered to enter upon and take possession of any Property or the
Properties, including all personal property used upon or in connection with
the real property herein conveyed, to let any Property or the Properties,
to receive all the rents, issues and profits, if any, which may be due or
become due in respect to the leasing of any Property or the Properties to
another party ("PROPERTY RENTS"), and apply the Property Rents after
payment of all necessary charges and expenses to reduction of the
Obligations in such order, proportion and priority as Lessor may elect. At
the option of Lessor, the receiver shall accomplish entry and taking
possession of any Property or the Properties by actual entry and possession
or by notice to Lessee. The receiver so appointed by a court of competent
jurisdiction shall be empowered to issue receiver's certificates for funds
advanced by Lessor for the purpose of protecting the value of any Property
or the Properties as security for the Obligations. The amounts evidenced
by receiver's certificates shall bear interest at the Overdue Rate and may
be added to the Obligations if the Lessee or a junior lienholder purchases
any Property or the Properties at the trustee's sale. Trustee or any
successor acting hereunder may resign and thereupon be discharged of the
trusts hereunder upon thirty (30) days' prior written notice to
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Lessor. Regardless of whether Trustee resigns, Lessor may, from time to
time, substitute a successor or successors to any Trustee named herein or
acting hereunder in accordance with any statutory procedure for such
substitution; or if Lessor, in its sole and absolute discretion, so elects,
and if permitted by law, Lessor may substitute such successors or
successors by recording, in the office of the recorder of the county or
counties where such Property is located, a document executed by Lessor and
containing the name of the original Lessee and Lessor hereunder, the book
and page where this instrument (or a memorandum hereof) is recorded (and/or
instrument number, as applicable) and the name of the new Trustee, which
instrument shall be conclusive proof of proper substitution of such
successor Trustee or Trustees, who shall, without conveyance from the
predecessor Trustee, succeed to the rights, powers and duties hereunder.
It is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS
INSTRUMENT; A POWER OF SALE MAY ALLOW LESSOR TO TAKE THE PROPERTIES AND
SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY
LESSEE UNDER THIS INSTRUMENT.
Notwithstanding any of the foregoing, the Lessor acknowledges that upon the
occurrence and continuance of a Lease Event of Default solely under CLAUSE (e)
of SECTION 16.1, the Lessor's remedies for such default shall be limited to
recovery of the Loan Balance by liquidation of the Additional Collateral or
through other appropriate means.
XVI.3. WAIVER OF CERTAIN RIGHTS. If this Master Lease shall be terminated
pursuant to SECTION 16.2, the Lessee waives, to the fullest extent permitted by
law, (a) any notice of re-entry or the institution of legal proceedings to
obtain re-entry or possession; (b) any right of redemption, re-entry or
repossession; (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt or limiting the Lessor with respect
to the election of remedies; and (d) any other rights which might otherwise
limit or modify any of the Lessor's rights or remedies under this ARTICLE XVI.
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ARTICLE XVII
LESSOR'S RIGHT TO CURE
XVII.1. THE LESSOR'S RIGHT TO CURE THE LESSEE'S LEASE DEFAULTS. The
Lessor, without waiving or releasing any obligation or Lease Event of Default,
may (but shall be under no obligation to) remedy any Lease Event of Default for
the account and at the sole cost and expense of the Lessee, including the
failure by the Lessee to maintain the insurance required by ARTICLE XIII, and
may, to the fullest extent permitted by law, and notwithstanding any right of
quiet enjoyment in favor of the Lessee, enter upon any Property for such purpose
and take all such action thereon as may be necessary or appropriate therefor.
No such entry shall be deemed an eviction of the Lessee. All reasonable
out-of-pocket costs and expenses so incurred (including fees and expenses of
counsel), together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid by the Lessor, shall be paid by the Lessee
to the Lessor as Supplemental Rent.
ARTICLE XVIII
PURCHASE PROVISIONS
XVIII.1. PURCHASE OF ALL OR SOME OF THE PROPERTIES. Subject to the
conditions contained herein, and without limitation of the Lessee's purchase
obligation pursuant to SECTION 18.2, the Lessee shall have the irrevocable
option on any Business Day to purchase all or some of the Properties subject to
this Master Lease at a price equal to the Lease Balance for such Properties on
the date of such purchase relating to such Property. The Lessee's exercise of
its option pursuant to this SECTION 18.1 shall be subject to the following
conditions:
(i) the Lessee shall have delivered a Purchase Notice to the Lessor
not less than thirty (30) days prior to such purchase, specifying the date
of such purchase, which date shall be a Basic Rent Payment Date;
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(ii) the Lessee shall not have given notice of its intention to
exercise the Remarketing Option.
If the Lessee exercises its option pursuant to this SECTION 18.1 then, upon the
Lessor's receipt of all amounts due in connection therewith, including Break
Costs, if any, the Lessor shall transfer to the Lessee or its designee all of
the Lessor's right, title and interest in and to the applicable Properties in
accordance with the procedures set forth in SECTION 21.1(a), such transfer to be
effective as of the date specified in the Purchase Notice. The Lessee may
designate, in a notice given to the Lessor not less than ten (10) Business Days
prior to the closing of such purchase (time being of the essence), the
transferee or transferees to whom the conveyance shall be made (if other than to
the Lessee), in which case such conveyance shall (subject to the terms and
conditions set forth herein) be made to such designee; PROVIDED, HOWEVER, that
such designation of a transferee or transferees shall not cause the Lessee to be
released, fully or partially, from any of its obligations under this Master
Lease, including, without limitation, the obligation to pay the Lessor the Lease
Balance on such Expiration Date.
XVIII.2. EXPIRATION DATE PURCHASE OBLIGATION. Unless (a) the Lessee shall
have properly exercised its option pursuant to SECTION 18.1 and purchased the
Properties pursuant thereto, or (b) the Lessee shall have properly exercised the
Remarketing Option and shall have fulfilled all of the conditions of CLAUSES (a)
through (l) of SECTION 20.1 hereof and the Lessor shall have sold its interest
in all of the Properties pursuant thereto, then, subject to the terms,
conditions and provisions set forth in this Article, and in accordance with the
terms of SECTION 21.1(a), the Lessee shall purchase from the Lessor, and the
Lessor shall convey to the Lessee, on the Expiration Date all of the Lessor's
interest in all of the Properties for an amount equal to the Lease Balance. The
Lessee may designate, in a notice given to the Lessor not less than ten (10)
Business Days prior to the closing of such purchase (time being of the essence),
the transferee or transferees to whom the conveyance shall be made (if other
than to the Lessee), in which case such
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conveyance shall (subject to the terms and conditions set forth herein) be made
to such designee; PROVIDED, HOWEVER, that such designation of a transferee or
transferees shall not cause the Lessee to be released, fully or partially, from
any of its obligations under this Master Lease, including, without limitation,
the obligation to pay the Lessor the Lease Balance on such Expiration Date.
ARTICLE XIX
RENEWAL TERMS
XIX.1. RENEWAL. Prior to the final Expiration Date, the parties hereto
may agree to renew this Master Lease for one or more additional terms upon terms
and conditions to be mutually agreed upon; PROVIDED, HOWEVER, that nothing
herein shall be construed as a commitment by either party to renew this Master
Lease beyond the Expiration Date.
ARTICLE XX
REMARKETING OPTION
XX.1. OPTION TO REMARKET. Subject to the fulfillment of each of the
conditions set forth in this SECTION 20.1, the Lessee shall have the option (the
"REMARKETING OPTION") to market and complete the sale of all of the Properties
for the Lessor.
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The Lessee's effective exercise and consummation of the Remarketing Option
shall be subject to the due and timely fulfillment of each of the following
provisions as to each of the Properties as of the dates set forth below.
(a) Not later than one hundred and eighty (180) days prior to the
Expiration Date, the Lessee shall give to the Lessor written notice of the
Lessee's exercise of the Remarketing Option, which exercise shall be
irrevocable. Failure by the Lessee to give timely notice shall be deemed
to be an election by the Lessee, without further act thereby, of its
Purchase Option for all of the Properties.
(b) Not later than one hundred and twenty (120) days prior to the
Expiration Date, the Lessee shall deliver to the Lessor an Environmental
Audit for each of the Properties. Such Environmental Audit shall be
prepared by an environmental consultant selected by the Lessor in the
Lessor's reasonable discretion and shall contain conclusions reasonably
satisfactory to the Lessor as to the environmental status of the
Properties. If any such Environmental Audit indicates any exceptions, the
Lessee shall have also delivered prior to the Expiration Date a Phase Two
environmental assessment by such environmental consultant and a written
statement by such environmental consultant indicating that all such
exceptions have been remedied in compliance with Applicable Law.
(c) The Lessee shall have completed all Modifications, restoration
and rebuilding of the affected Properties pursuant to SECTIONS 10.1 and
14.1 (as the case may be) and shall have fulfilled all of the conditions
and requirements in connection therewith pursuant to said Sections, in each
case prior to the date on which the Lessor receives the Lessee's notice of
the Lessee's intention to exercise the Remarketing Option (time being of
the essence), regardless of whether the same shall be within the Lessee's
control. The Lessee shall have also paid the cost of all Modifications
commenced prior to the Expiration Date. The
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Lessee shall not have been excused pursuant to SECTION 12.1 from complying
with any Applicable Law that involved the extension of the ultimate
imposition of such Applicable Law beyond the Expiration of the Term. Any
Permitted Property Liens (other than Lessor Liens) on any Property that
were contested by the Lessee shall have been removed.
(d) During the Marketing Period, the Lessee shall, as nonexclusive
agent for the Lessor, use its best efforts to sell the Lessor's interest in
the Properties and will attempt to obtain the highest purchase price
therefor and for not less than the Fair Market Sales Value. The Lessee
will be responsible for hiring brokers and making the Properties available
for inspection by prospective purchasers. The Lessee shall promptly upon
request permit inspection of any Property and any maintenance records
relating to any Property by the Lessor, any Participant and any potential
purchasers, and shall otherwise do all things necessary to sell and deliver
possession of the Properties to any purchaser. All such marketing of the
Properties shall be at the Lessee's sole expense. The Lessee shall allow
the Lessor and any potential qualified purchaser reasonable access to the
Properties for the purpose of inspecting the same.
(e) The Lessee shall procure bids from one or more bona fide
prospective purchasers and shall deliver to the Lessor and the Participants
not less than ninety (90) days prior to the Expiration Date a binding
written unconditional (except as set forth below), irrevocable offer by
such purchaser or purchasers offering the highest bid to purchase the
Properties. No such purchaser shall be the Lessee or any Subsidiary or
Affiliate of the Lessee. The written offer must specify the Expiration
Date as the closing date unless the Lessor and the Participants shall
otherwise agree in their sole discretion.
(f) The Lessee shall submit all bids to the Lessor and the
Participants, and the Lessor will have the right to
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submit any one or more bids. Any sale by the Lessee shall be for the
highest cash bid submitted to the Lessor. The determination of the highest
bid shall be made by the Lessor prior to the end of the Marketing Period,
but in any event, the Lessor shall have no obligation to approve any bid
for any Property unless each highest bid plus an amount that may be paid by
the Lessee in its sole and absolute discretion (in addition to its
obligations under SECTION 20.1(i)), together with such bid, equals or
exceeds the Property Balance. All bids shall be on an all-cash basis
unless the Lessor and the Participants shall otherwise agree in their sole
discretion.
(g) The Lessee shall have obtained, at its cost and expense, all
required governmental and regulatory consents and approvals and shall have
made all filings as required by Applicable Law in order to carry out and
complete the transfer of each of the Properties. As to the Lessor, any
such sale shall be made on an "as is, with all faults" basis without
representation or warranty by the Lessor other than the absence of Lessor
Liens. Any agreement as to such sale shall be made subject to the Lessor's
rights hereunder.
(h) As between the Lessor and the Lessee the Lessee shall pay
directly, and not from the sale proceeds, all prorations, credits, costs
and expenses of the sale of the Properties, whether incurred by the Lessor
or the Lessee, including without limitation, the cost of all title
insurance, surveys, environmental reports, appraisals, transfer taxes, the
Lessor's reasonable attorneys' fees, the Lessee's attorneys' fees,
commissions, escrow fees,recording fees, and all applicable documentary and
other transfer taxes.
(i) The Lessee shall pay to the Lessor on or prior to the Expiration
Date (or in the case of Supplemental Rent, to the Person entitled thereto)
an amount equal to the Loan Balance PLUS all accrued and unpaid Rent
(including Supplemental Rent, if any) and all other amounts hereunder
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which have accrued or will accrue prior to or as of the Expiration Date, in
the type of funds specified in SECTION 3.4 hereof.
(j) The Lessee shall pay to the Lessor on or prior to the Expiration
Date the amounts, if any, required to be paid pursuant to Section 13.2 of
the Participation Agreement.
(k) The purchase of all of the Properties shall be consummated on the
Expiration Date and the gross proceeds (the "GROSS REMARKETING PROCEEDS")
of the sale of the Properties (less any marketing, closing or other costs,
prorations or commissions) shall be paid directly to the Lessor; PROVIDED,
HOWEVER, that if the sum of (x) the Gross Remarketing Proceeds from such
sale PLUS (y) the Loan Balance received by the Lessor exceeds the Lease
Balance as of such date, then the excess shall be paid to the Lessee on the
Expiration Date.
If the Lessee effectively elects the Remarketing Option and no sale of any
Property is consummated prior to the end of the Marketing Period, Lessee may
exercise its purchase option pursuant to SECTION 18.2 or Lessee shall, in
addition to making the payment required pursuant to SECTION 20.1(i) above, at
its own cost and expense, do each of the following:
(i) execute and deliver to Lessor and the Lessor's title insurance
company an affidavit as to the absence of any Liens (other than Permitted
Liens of the type described in CLAUSE (i), (viii) or (x)), and shall
execute and deliver to the Lessor a statement of termination of this Master
Lease to the extent relating to such Property;
(ii) on the Expiration Date, transfer possession of such Property to
the Lessor or any Person designated by the Lessor, by surrendering the same
into the possession of the Lessor or such Person, as the case may be, in
the condition required by this SECTION 20.1 and in compliance with
Applicable Law; and
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(iii) for a period of up to one year after the Expiration Date,
cooperate reasonably with the Lessor and/or any Person designated by the
Lessor to receive such Property, which cooperation shall include reasonable
efforts with respect to the following, all of which the Lessee shall do on
or before the Expiration Date for such Property or as soon thereafter as is
reasonably practicable: providing copies of all books and records
regarding the maintenance and ownership of such Property and all know-how,
data and technical information relating thereto, providing a current copy
of the applicable Plans and Specifications, granting or assigning all
assignable licenses necessary for the operation and maintenance of such
Property and cooperating reasonably in seeking and obtaining all necessary
Governmental Action. The obligations of the Lessee under this paragraph
shall survive the expiration or termination of this Master Lease.
Except as expressly set forth herein, the Lessee shall have no right, power
or authority to bind the Lessor in connection with any proposed sale of any
Property.
If one or more of the foregoing provisions shall not be fulfilled as of the
date set forth above with respect to any Property, then the Lessor shall declare
by written notice to the Lessee the Remarketing Option to be null and void
(whether or not it has been theretofore exercised by the Lessee) as to all of
the Properties, in which event all of the Lessee's rights under this SECTION
20.1 shall immediately terminate and the Lessee shall be obligated to purchase
all of the Properties pursuant to SECTION 18.2 on the Expiration Date.
XX.2. CERTAIN OBLIGATIONS CONTINUE. During the Marketing Period, the
obligation of the Lessee to pay Rent with respect to each Property (including
the installment of Rent due on the Expiration Date) shall continue undiminished
until payment in full of the Loan Balance and all other amounts due to the
Lessor with respect to the Properties under the Operative Documents to which the
Lessee is a party. The Lessor shall have the right,
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but shall be under no duty, to solicit bids, to inquire into the efforts of the
Lessee to obtain bids or otherwise to take action in connection with any such
sale, other than as expressly provided in this ARTICLE XX.
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
XXI.1. PROVISIONS RELATING TO THE EXERCISE OF PURCHASE OPTION OR
OBLIGATION AND CONVEYANCE UPON REMARKETING AND CONVEYANCE UPON CERTAIN OTHER
EVENTS.
(a) In connection with any termination of this Master Lease with
respect to any Property pursuant to the terms of ARTICLE XV, in connection
with any purchase or in connection with the Lessee's purchase of any
Property in accordance with SECTION 18.1 or in connection with the Lessee's
Expiration Date Purchase Obligation or obligations under SECTION 16.2(e),
then, upon the date on which this Master Lease is to terminate with respect
to the applicable Property and upon the payment of all amounts due under
Section 5.1 of the Construction Agency Agreement, as applicable, and upon
tender by the Lessee of the amounts set forth in ARTICLE XV, SECTIONS
16.2(e), 18.1 or 18.2, as applicable:
(i) the Lessor shall execute and deliver to the Lessee (or to
the Lessee's designee) at the Lessee's cost and expense a grant deed
with respect to such Property or Properties containing representations
and warranties of grantor to the Lessee regarding Lessor Liens, a bill
of sale with respect to the Equipment located on such Property or
Properties and an assignment of the Lessor's entire interest in such
Property or Properties (which shall include an assignment of all of
the Lessor's right, title and interest in and to any Net Proceeds with
respect to such Property or Properties not previously received by
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the Lessor and an assignment of leases of the Properties), in each
case in recordable form and otherwise in conformity with local custom
and free and clear of the Lien of the Lessor Deed of Trust and any
Lessor Liens;
(ii) such Property or Properties shall be conveyed to the Lessee
"AS IS" and in its then present physical condition; and
(iii) the Lessor shall execute and deliver to Lessee and the
Lessee's title insurance company an affidavit as to the Lessor's title
and Lessor Liens and shall execute and deliver to Lessee a statement
of termination of this Master Lease.
(b) If the Lessee properly exercises the Remarketing Option, then the
Lessee shall, on the Expiration Date, and at its own cost, transfer
possession of all of the Properties to the independent purchaser(s)
thereof, in each case by surrendering the same into the possession of the
Lessor or such purchaser(s), as the case may be, free and clear of all
Liens other than Lessor Liens and the lien of the Lessor Mortgage, in good
condition (as modified by Modifications permitted by this Master Lease),
ordinary wear and tear excepted, and in compliance with Applicable Law.
The Lessee shall, on and within a reasonable time before and up to one year
after the Expiration Date, cooperate reasonably with the Lessor and the
independent purchaser(s) of the Properties in order to facilitate the
purchase by such purchaser(s) of the Properties, which cooperation shall
include the following, all of which the Lessee shall do on or before the
Expiration Date or as soon thereafter as is reasonably practicable:
providing copies of all books and records regarding the maintenance and
ownership of the Properties and all know-how, data and technical
information relating thereto, providing a current copy of the Plans and
Specifications for each Property, granting or assigning all licenses
necessary for the operation and maintenance of each
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Property and cooperating reasonably in seeking and obtaining all necessary
Governmental Action. The obligations of the Lessee under this paragraph
shall survive the expiration or termination of this Master Lease.
ARTICLE XXII
ESTOPPEL CERTIFICATES
XXII.1. ESTOPPEL CERTIFICATES. At any time and from time to time upon not
less than ten (10) Business Days' prior request by the Lessor or the Lessee (the
"REQUESTING PARTY"), the other party (whichever party shall have received such
request, the "CERTIFYING PARTY") shall furnish to the Requesting Party a
certificate signed by an individual having the office of vice president or
higher in the Certifying Party certifying that this Master Lease is in full
force and effect (or that this Master Lease is in full force and effect as
modified and setting forth the modifications); the dates to which the Basic Rent
and Supplemental Rent have been paid; to the best knowledge of the signer of
such certificate, whether or not the Requesting Party is in default under any of
its obligations hereunder (and, if so, the nature of such alleged default); and
such other matters under this Master Lease as the Requesting Party may
reasonably request. Any such certificate furnished pursuant to this ARTICLE
XXII may be relied upon by the Requesting Party, and any existing or prospective
mortgagee, purchaser or lender, and any accountant or auditor, of, from or to
the Requesting Party (or any Affiliate thereof).
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ARTICLE XXIII
ACCEPTANCE OF SURRENDER
XXIII.1. ACCEPTANCE OF SURRENDER. No surrender to the Lessor of this
Master Lease or of all or any of the Properties or of any part of any thereof or
of any interest therein shall be valid or effective unless agreed to and
accepted in writing by the Lessor and, prior to the payment or performance of
all obligations under the Loan Agreement and termination of the Commitments, the
Lenders, and no act by the Lessor or the Lenders or any representative or agent
of the Lessor or the Lenders, other than a written acceptance, shall constitute
an acceptance of any such surrender.
ARTICLE XXIV
NO MERGER OF TITLE
XXIV.1. NO MERGER OF TITLE. There shall be no merger of this Master Lease
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, in whole or in part,
(a) this Master Lease or the leasehold estate created hereby or any interest in
this Master Lease or such leasehold estate, (b) the fee or groundleasehold
estate in any Property, except as may expressly be stated in a written
instrument duly executed and delivered by the appropriate Person or (c) a
beneficial interest in the Lessor.
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ARTICLE XXV
INTENT OF THE PARTIES
XXV.1. OWNERSHIP OF THE PROPERTIES. (a) The parties hereto intend that
(i) for financial accounting purposes with respect to the Lessee, the Lessor
will be treated as the owner and the lessor of the Properties and the Lessee
will be treated as the lessee of the Properties and (ii) for all other purposes,
including federal and all state and local income tax purposes, state real estate
and commercial law and bankruptcy purposes, (A) this Lease will be treated as a
financing arrangement, (B) the Lessor and the Lenders will be deemed lenders
making loans to the Lessee in an amount equal to the sum of the Lessor Amount
and the outstanding principal amount of the Loans and (C) the Lessee will be
treated as the owner of the Properties and will be entitled to all tax benefits
ordinarily available to an owner of properties like the Properties for such tax
purposes. Nevertheless, the Lessee acknowledges and agrees that neither the
Lessor nor any of the Lenders has made any representations or warranties to the
Lessee concerning the tax, accounting or legal characteristics of the Operative
Documents and that the Lessee has obtained and relied upon such tax, accounting
and legal advice concerning the Operative Documents as it deems appropriate.
(b) It is the intent of the parties hereto that this Lease grants a
security interest and mortgage, as the case may be, on the Properties to the
Lessor to secure Lessee's performance under and payment of all amounts under
this Lease and the other Operative Documents.
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ARTICLE XXVI
MISCELLANEOUS
XXVI.1. SURVIVAL; SEVERABILITY; ETC. Anything contained in this Master
Lease to the contrary notwithstanding, all claims against and liabilities of the
Lessee or the Lessor arising from events commencing prior to the expiration or
earlier termination of this Master Lease shall survive such expiration or
earlier termination for a period of one year except as to indemnification which
shall continue to survive; provided that any such right shall be exercised
within 54 years from the date hereof. If any term or provision of this Master
Lease or any application thereof shall be declared invalid or unenforceable, the
remainder of this Master Lease and any other application of such term or
provision shall not be affected thereby. If any right or option of the Lessee
provided in this Master Lease, including any right or option described in
ARTICLE XIV, XV, XVIII or XX, would, in the absence of the limitation imposed by
this sentence, be invalid or unenforceable as being in violation of the rule
against perpetuities or any other rule of law relating to the vesting of an
interest in or the suspension of the power of alienation of property, then such
right or option shall be exercisable only during the period which shall end
twenty-one (21) years after the date of death of the last survivor of the
descendants of Franklin D. Roosevelt, the former President of the United States,
Henry Ford, the deceased automobile manufacturer, and John D. Rockefeller, the
founder of the Standard Oil Company, known to be alive on the date of the
execution, acknowledgement and delivery of this Master Lease.
XXVI.2. AMENDMENTS AND MODIFICATIONS. Subject to the requirements,
restrictions and conditions set forth in the Participation Agreement, neither
this Master Lease nor any provision hereof may be amended, waived, discharged or
terminated except by an instrument in writing in recordable form signed by the
Lessor and the Lessee.
XXVI.3. NO WAIVER. No failure by the Lessor or the Lessee
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to insist upon the strict performance of any term hereof or to exercise any
right, power or remedy upon a default hereunder, and no acceptance of full or
partial payment of Rent during the continuance of any such default, shall
constitute a waiver of any such default or of any such term. To the fullest
extent permitted by law, no waiver of any default shall affect or alter this
Master Lease, and this Master Lease shall continue in full force and effect with
respect to any other then existing or subsequent default.
XXVI.4. NOTICES. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing and directed to the address
described in, and deemed received in accordance with the provisions of, Section
14.3 of the Participation Agreement.
XXVI.5. SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Master Lease shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
XXVI.6. HEADINGS AND TABLE OF CONTENTS. The headings and table of
contents in this Master Lease are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
XXVI.7. COUNTERPARTS. This Master Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
XXVI.8. GOVERNING LAW. THIS MASTER LEASE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
XXVI.9. LIMITATIONS ON RECOURSE. The parties hereto agree that except as
specifically set forth in this Lease or in any other Operative Document, Lessor
shall have no personal liability
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<PAGE>
whatsoever to the Lessee or its respective successors and assigns for any claim
based on or in respect of this Master Lease or any of the other Operative
Documents or arising in any way from the transactions contemplated hereby or
thereby and the recourse shall be solely had against the Lessor's interest in
the Property; PROVIDED, HOWEVER, that Lessor shall be liable in its individual
capacity (a) for its own willful misconduct or gross negligence (or negligence
in the handling of funds), (b) breach of any of its representations, warranties
or covenants under the Operative Documents, or (c) for any Tax based on or
measured by any fees, commission or compensation received by it for acting as
the Lessor as contemplated by the Operative Documents. It is understood and
agreed that, except as provided in the preceding sentence: (i) Lessor shall
have no personal liability under any of the Operative Documents as a result of
acting pursuant to and consistent with any of the Operative Documents; (ii) all
obligations of Lessor to the Lessee are solely nonrecourse obligations except to
the extent that it has received payment from others; and (iii) all such personal
liability of Lessor is expressly waived and released as a condition of, and as
consideration for, the execution and delivery of the Operative Documents by
Lessor.
XXVI.10. ORIGINAL LEASE. The single executed original of this Master
Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the
signature page thereof and containing the receipt thereof of The Sumitomo Bank,
Limited, San Francisco Branch, as Agent for the Lenders therefor on or following
the signature page thereof shall be the Original Executed Counterpart of this
Master Lease (the "ORIGINAL EXECUTED COUNTERPART"). To the extent that this
Master Lease constitutes chattel paper, as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction, no security
interest in this Master Lease may be created through the transfer or possession
of any counterpart other than the Original Executed Counterpart.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Master Lease be duly
executed and delivered as of the date first above written.
SYMANTEC CORPORATION,
as Lessee
By
-------------------------------
Name:
Title:
S-1
<PAGE>
SUMITOMO BANK LEASING AND FINANCE,
INC., as Lessor
By
-------------------------------
Name:
Title:
S-2
<PAGE>
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
THE SUMITOMO BANK, LIMITED,
SAN FRANCISCO, as Agent for
the Lenders
By
-------------------------------
Name:
Title:
S-3
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
ARTICLE I
DEFINITIONS
1.1..........................................Definitions; Interpretation 1
ARTICLE II
MASTER LEASE
2.1.....................................Acceptance and Lease of Property 2
2.2.................................................Acceptance Procedure 2
2.3...........................................................Lease Term 2
2.4................................................................Title 2
ARTICLE III
PAYMENT OF RENT
3.1.................................................................Rent 3
3.2......................................................Payment of Rent 3
3.3....................................................Supplemental Rent 3
3.4....................................................Method of Payment 4
ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT
4.1......................................................Quiet Enjoyment 4
4.2.....................................................Right to Inspect 4
ARTICLE V
NET LEASE, ETC.
5.1............................................................Net Lease 5
5.2..........................................No Termination or Abatement 6
ARTICLE VI
1
<PAGE>
TABLE OF CONTENTS
(continued)
Section Page
------- ----
SUBLEASES
6.1...........................................................Subletting 6
ARTICLE VII
LESSEE ACKNOWLEDGMENTS
7.1..........................................Condition of the Properties 7
7.2.........................................................Risk of Loss 7
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTIES, ETC.
8.1......................................................Utility Charges 7
8.2...................................Possession and Use of the Property 8
8.3 Compliance with Requirements of Law, Property Legal Requirements
and Insurance Requirements.............................................. 8
8.4.................................................Assignment by Lessee 8
ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
9.1.......................................Maintenance and Repair; Return 8
ARTICLE X
MODIFICATIONS, ETC.
10.1.......................Modifications, Substitutions and Replacements 9
10.2................................................Notice to the Lessor 11
ARTICLE XI
WARRANT OF TITLE; EASEMENTS
11.1....................................................Warrant of Title 11
11.2..................Grants and Releases of Easements; Lessor's Waivers 11
2
<PAGE>
TABLE OF CONTENTS
(continued)
Section Page
------- ----
ARTICLE XII
PERMITTED CONTESTS
12.1.....................Permitted Contests in Respect of Applicable Law 13
ARTICLE XIII
INSURANCE
13.1................Public Liability and Workers' Compensation Insurance 13
13.2..........................................Hazard and Other Insurance 14
13.3..................................................Insurance Coverage 14
ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
14.1...........................................Casualty and Condemnation 16
14.2...............................................Environmental Matters 18
14.3.....................................Notice of Environmental Matters 18
ARTICLE XV
TERMINATION OF LEASE
15.1.............................Partial Termination upon Certain Events 19
15.2..............................................Termination Procedures 19
ARTICLE XVI
EVENTS OF DEFAULT
16.1.............................................Lease Events of Default 20
16.2............................................................Remedies 23
16.3............................................Waiver of Certain Rights 30
17.1..............The Lessor's Right to Cure the Lessee's Lease Defaults 30
ARTICLE XVIII
3
<PAGE>
TABLE OF CONTENTS
(continued)
Section Page
------- ----
PURCHASE PROVISIONS
18.1...........................Purchase of All or Some of the Properties 31
18.2.................................Expiration Date Purchase Obligation 31
ARTICLE XIX
RENEWAL TERMS
19.1.............................................................Renewal 32
ARTICLE XX
REMARKETING OPTION
20.1..................................................Option to Remarket 32
20.2........................................Certain Obligations Continue 36
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
21.1. Provisions Relating to the Exercise of Purchase Option or
Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain
Other Events........................................................... 37
ARTICLE XXII
ESTOPPEL CERTIFICATES
22.1...............................................Estoppel Certificates 38
ARTICLE XXIII
ACCEPTANCE OF SURRENDER
23.1.............................................Acceptance of Surrender 39
ARTICLE XXIV
NO MERGER OF TITLE
4
<PAGE>
TABLE OF CONTENTS
(continued)
Section Page
------- ----
24.1..................................................No Merger of Title 39
ARTICLE XXV
INTENT OF THE PARTIES
25.1.........................................Ownership of the Properties 39
ARTICLE XXVI
MISCELLANEOUS
26.1........................................Survival; Severability; Etc. 40
26.2........................................Amendments and Modifications 41
26.3...........................................................No Waiver 41
26.4.............................................................Notices 41
26.5..............................................Successors and Assigns 41
26.6......................................Headings and Table of Contents 41
26.7........................................................Counterparts 41
26.8.......................................................GOVERNING LAW 41
26.9.............................................Limitations on Recourse 41
26.10.....................................................Original Lease 42
EXHIBIT A Form of Lease Supplement
5
<PAGE>
EXECUTION COPY
This instrument prepared by,
recording requested by,
and when recorded return to:
MAYER, BROWN & PLATT
1675 Broadway
New York, New York 10019
Attention: Michael Sloyer, Esq.
LEASE SUPPLEMENT NO. 2 AND
MEMORANDUM OF LEASE AND DEED OF TRUST
dated as of October 22, 1996
among
SYMANTEC CORPORATION,
as the Lessee,
SUMITOMO BANK LEASING AND FINANCE, INC.,
as the Lessor,
and
FIRST AMERICAN TITLE INSURANCE COMPANY,
as Trustee
Location of Premises:
County of Santa Clara
State of California
<PAGE>
This Lease Supplement is a supplement to
that certain Lease (as hereinafter defined)
recorded on October 21, 1996, in the Official Records
of Santa Clara County, California,
as Instrument No. ______________
<PAGE>
THIS LEASE SUPPLEMENT NO. 2 AND MEMORANDUM OF LEASE AND DEED OF TRUST (this
"MEMORANDUM") dated as of October 22, 1996, among SYMANTEC CORPORATION, a
Delaware corporation, having a principal office at 10101 Torre Avenue,
Cupertino, California 95014, as the Lessee and as Mortgagor (the "LESSEE"),
SUMITOMO BANK LEASING AND FINANCE, INC., as the Lessor (the "LESSOR"), having an
address at 277 Park Avenue, New York, New York 10172, and FIRST AMERICAN TITLE
INSURANCE COMPANY (the "TRUSTEE").
W I T N E S S E T H:
WHEREAS, the Lessor is the owner in fee simple of the land described on
EXHIBIT A attached hereto and all Improvements thereon (together, the
"PROPERTY");
WHEREAS, the Lessor wishes to lease the Property to the Lessee and the
Lessee wishes to lease the Property from the Lessor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree to enter
into this Memorandum, as follows:
I. CERTAIN TERMS. Capitalized terms used but not otherwise defined in
this Memorandum have the meanings specified in APPENDIX A to the Master Lease
and Security Agreement dated as of October 18, 1996 (as amended, restated,
supplemented or otherwise modified from time to time, the "LEASE"), between the
Lessee and the Lessor; and the rules of interpretation specified in APPENDIX A
to the Lease shall apply to this Memorandum.
2. PROPERTY. Attached hereto as EXHIBIT A is the description of the
Property. Effective upon the execution and delivery of this Memorandum by the
Lessor and the Lessee, the Property shall be subject to the terms and provisions
of the Lease. Subject to the terms and conditions of the Lease, the Lessor
hereby leases the Property to the Lessee for the Term (as defined below) of this
Memorandum, and the Lessee hereby agrees, expressly for the direct benefit of
the Lessor, to lease the Property from the Lessor for the Term.
<PAGE>
3. LEASE TERM. The term of this Memorandum (the "TERM") shall begin on
the date hereof and shall end on October 18, 2003 unless the Term with respect
to the Property is renewed or earlier terminated in accordance with the
provisions of the Lease or the other Operative Documents. For and in
consideration of good and valuable consideration paid by the Lessee to the
Lessor as described in the Lease, the Lessor hereby grants to the Lessee the
right to purchase the Property or to market and sell the Property during the
Term of this Memorandum on the terms set forth in the Lease.
4. OWNERSHIP OF THE PROPERTY. (a) The parties hereto intend that (i) for
financial accounting purposes with respect to the Lessee, the Lessor will be
treated as the owner and the lessor of the Properties and the Lessee will be
treated as the lessee of the Properties and (ii) for all other purposes,
including federal and all state and local income tax purposes, state real estate
and commercial law and bankruptcy purposes, (A) the Lease will be treated as a
financing arrangement, (B) the Lessor and the Lenders will be deemed lenders
making loans to the Lessee in an amount equal to the sum of the Lessor Amount
and the outstanding principal amount of the Loans, which loans are secured by
the Properties and (C) the Lessee will be treated as the owner of the Properties
and will be entitled to all tax benefits ordinarily available to an owner of
properties like the Properties for such tax purposes. Nevertheless, the Lessee
acknowledges and agrees that neither the Lessor nor any of the Lenders has made
any representations or warranties to the Lessee concerning the tax, accounting
or legal characteristics of the Operative Documents and that the Lessee has
obtained and relied upon such tax, accounting and legal advice concerning the
Operative Documents as it deems appropriate.
(b) It is the intent of the parties hereto that the Lease grants a
security interest and deed of trust or lien, as the case may be, on the Property
for the benefit of the Lessor to secure the Lessee's performance under and
payment of all amounts advanced by the Lessor for the acquisition of the
Property (corresponding to the value of the Property as indicated on the
Appraisal) under the Lease and the other Operative Documents,
-2-
<PAGE>
together with interest thereon, and all other amounts payable under the
Operative Documents in connection therewith.
(c) Specifically, without limiting the generality of SUBSECTION (b), the
Lessor and the Lessee intend and agree that with respect to the nature of the
transactions evidenced by the Lease in the context of the exercise of remedies
under the Operative Documents, including, without limitation, in the case of any
insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting the Lessee and
the Lessor, or any enforcement or collection actions, the transactions evidenced
by the Lease are loans made by the Lessor as unrelated third party lender to the
Lessee secured by the Property (it being understood that the Lessee hereby
mortgages, grants, bargains, sells, releases, confirms, conveys, assigns,
transfers and sets over to the Trustee for the benefit of the Lessor, and grants
a security interest in, the Property (consisting of a fee deed of trust with
respect to all right, title and interest of the Lessee in and to the fee title
to, and reversionary interest in, the Land and Improvements, if any, and a
leasehold deed of trust on the Lessee's leasehold estate under the Lease), all
to secure such loans, effective on the date hereof, to have and to hold such
interests in the Property unto the Trustee for the benefit of the Lessor and its
successors and assigns, forever, provided always that these presents are upon
the express condition that, if all amounts due under the Lease shall have been
paid and satisfied in full, then this instrument and the estate hereby granted
shall cease and become void.
As additional security for the Rent, the Lease Balance and all other sums
owed to the Lessor by the Lessee under the Lease, the Lessee does hereby grant,
bargain, sell, transfer and convey unto the Trustee, its successors in trust and
assigns, IN TRUST, WITH POWER OF SALE, for the benefit of the Lessor, all of the
Lessee's right, title and interest in and to the Property, including, without
limitation, all buildings, structures and other improvements, and all fixtures
and other property now or hereafter attached to or affixed to any such
buildings, structures or other improvements, and any additions and
-3-
<PAGE>
alterations thereto or replacements thereof, now or hereafter built, constructed
or located upon the Property, all rents, additional rents, issues, income,
revenues, distributions, royalties and profits now or in the future payable in
respect of the Property, together with all of the right, power and authority of
the Lessee to alter, modify or change the terms, conditions and provisions of
the Lease and any other lease pertaining to the Property, to consent to any
request made by a tenant or landlord pursuant thereto, or to surrender, cancel
or terminate the same or to accept any surrender, cancellation or termination of
the same, together with all of the options, rights, powers and privileges of the
Lessee under any lease pertaining to the Property, whether heretofore or
hereafter existing, including, without limitation, the rights and options to
purchase the Property contained in Articles XVIII and XX of the Lease, and all
present and future right, title and interest of the Lessee in and to (i) all
refunds, tax abatement agreements, rebates, reserves, deferred payments,
deposits, cost savings, awards and payments of any kind due from or payable by
(a) any Governmental Authority, or (b) any insurance or utility company, in each
case under clause (a) or (b) above in respect of the Property, and (ii) all
refunds, rebates and payments of any kind due from or payable by any
Governmental Authority for any taxes, assessments, or governmental or quasi-
governmental charges or levies imposed upon the Lessee in respect of the
Property, and all plans and specifications, designs, drawings and other
information, materials and matters heretofore or hereafter prepared relating to
the Property or any construction on the Property, all proceeds (including claims
and demands therefor) of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including without limitation the
proceeds of insurance and condemnation awards in respect of the Property or any
portion thereof, all additional estates, rights and interests hereafter acquired
by the Lessee in the Property, or any portion thereof, together with all
proceeds of the conversion, whether voluntary or involuntary, of any of the
Property into cash or other liquid claims, including without limitation, all
awards, payments or proceeds, including interest thereon, and the right to
receive the same, which may be made as a result of any casualty, any exercise of
the right of eminent domain or deed in lieu thereof, any injury to the Property
and any defect in title
-4-
<PAGE>
in the Property or other matter insured under any policy of title insurance,
together with attorney's fees, costs and disbursements incurred by the Lessor in
connection with the collection of such awards, payments and proceeds, and the
Lessee further grants to the Lessor, pursuant to the California Uniform
Commercial Code (the "UCC"), a security interest in all present and future
right, title and interest of the Lessee in and to any portion of the foregoing
property for which a security interest may be created under the UCC.
To have and to hold the same whether now owned or held or hereafter
acquired unto the Trustee, its successors-in-trust forever, IN TRUST, WITH POWER
OF SALE, to secure to the Lessor the payment of the Rent, the Lease Balance and
all other sums owing to the Lessor under the Lease and the performance and
observance of the terms, covenants, warranties, conditions, agreements and
obligations under the Lease. If the Lessee shall pay all sums due under the
Lease when due according to the terms thereof and shall otherwise fully and
properly perform and comply with all of the obligations, agreements, terms and
conditions of the Lease, then this conveyance shall become null and void.
In the event of the occurrence of an Event of Default, then the entire
unpaid balance of all sums due under the Lease and the interest accrued thereon
shall, at the option of the owner thereof and without notice, immediately become
due and payable for all purposes, whether or not due according to the maturity
date or dates thereof; and all other indebtedness, the payment of which is
secured hereby, shall likewise become due and payable. The Trustee and the
Lessor and each of them are authorized prior or subsequent to the institution of
any foreclosure proceedings to enter upon the Property or any part thereof and
to take possession of the Property and exercise without interference from the
Lessee, any and all rights which the Lessee has with respect to the management,
possession, operation, protection or preservation of the Property.
Upon the occurrence of an Event of Default, Lessor shall have the power and
authority, after proper notice and lapse of such time as may be required by law,
to cause Trustee to sell the Property by notifying Trustee of that election and
depositing with Trustee
-5-
<PAGE>
this instrument and receipts and evidence of expenditures made and secured
hereby as Trustee may reasonably require. Upon receipt of any such notice from
Lessor, Trustee shall cause to be recorded, published and delivered to Lessee
such Notice of Default and Election to Sell as is then required by applicable
statutory authority and by this instrument, which notice shall set forth, among
other things, the nature of the breach(es) or default(s), the action(s) required
to effect a cure thereof and the time period within which that cure may be
effected. If no cure is effected within the statutory time limits following
recordation of the Notice of Default and Election to Sell and after Notice of
Sale has been given as required by the above-referenced statutes, Trustee may
without further notice or demand sell and convey the Property in accordance with
the above-referenced statutes. The Property may be sold as a whole or in
separate lots, parcels or items and in such order as Lessor may direct, at
public auction to the highest bidder for cash in lawful money of the United
States payable at the time of sale. Trustee shall deliver to such purchaser(s)
a good and sufficient deed or deeds conveying the property so sold, but without
any covenant or warranty express or implied. The recitals in such deed of any
matter or fact shall be conclusive proof of the truthfulness thereof. Any
Person, including Lessee, Trustee or Lessor, may purchase at any sale. After
deducting all costs, fees and expenses of Lessor and Trustee, including costs of
evidence of title in connection with any sale, Lessor shall apply the proceeds
of sale, in the following order of priority, to payment of the following
(collectively, the "OBLIGATIONS"): (i) FIRST, all amounts expended by or for
the account of Lessor under the terms hereof and not then repaid, with accrued
interest at the Overdue Rate; and (ii) SECOND, all other amounts then due and
owing hereunder including, without limitation, all Basic Rent, Supplemental
Rent, the full amount of the Lease Balance as of the date of sale as if the
Lease had been terminated with respect to all of the Properties then subject to
the Lease under SECTION 18.1, and all other amounts then payable by Lessee under
the Lease and the other Operative Documents, with Lessor having the right to
apply the proceeds of sale to the amounts described above in this clause (ii) in
such order, proportion and priority as Lessor may elect in its sole and absolute
discretion. To the extent permitted by applicable statutes, Trustee may
postpone the
-6-
<PAGE>
sale of all or any portion of the Property by public announcement at the time
and place of sale, and from time to time thereafter may again postpone that sale
by public announcement or subsequently noticed sale, and without further notice
may make such sale at the time fixed at the last postponement or may, in its
discretion, give a new notice of sale. A sale of less than all of the Property
or any defective or irregular sale made hereunder shall not exhaust the power of
sale provided for herein, and subsequent sales may be made hereunder until all
of the Obligations have been satisfied or the entire Property has been sold,
without defect or irregularity. No action of Lessor or Trustee based upon the
provisions contained herein or contained in the applicable statutes, including,
without limitation, the giving of the Notice of Default and Election to Sell or
the Notice of Sale, shall constitute an election of remedies which would
preclude Lessor from pursuing judicial foreclosure before a completed sale
pursuant to the power of sale contained herein. Lessor shall have the right,
with the irrevocable consent of Lessee hereby given and evidenced by the
execution of this instrument, to obtain appointment of a receiver by any court
of competent jurisdiction without further notice to Lessee, which receiver shall
be authorized and empowered to enter upon and take possession of the Property,
including all personal property used upon or in connection with the real
property herein conveyed, to let the Property, to receive all the rents, issues
and profits, if any, which may be due or become due in respect to the leasing of
the Property to another party ("PROPERTY RENTS"), and apply the Property Rents
after payment of all necessary charges and expenses to reduction of the
Obligations in such order, proportion and priority as Lessor may elect. At the
option of Lessor, the receiver shall accomplish entry and taking possession of
the Property by actual entry and possession or by notice to Lessee. The
receiver so appointed by a court of competent jurisdiction shall be empowered to
issue receiver's certificates for funds advanced by Lessor for the purpose of
protecting the value of the Property as security for the Obligations. The
amounts evidenced by receiver's certificates shall bear interest at the Overdue
Rate and may be added to the Obligations if the Lessee or a junior lienholder
purchases the Property at the trustee's sale. Trustee or any successor acting
hereunder may resign and thereupon be discharged of the trusts
-7-
<PAGE>
hereunder upon thirty (30) days' prior written notice to Lessor. Regardless of
whether Trustee resigns, Lessor may, from time to time, substitute a successor
or successors to any Trustee named herein or acting hereunder in accordance with
any statutory procedure for such substitution; or if Lessor, in its sole and
absolute discretion, so elects, and if permitted by law, Lessor may substitute
such successors or successors by recording, in the office of the recorder of the
county or counties where the Property is located, a document executed by Lessor
and containing the name of the original Lessee and Lessor hereunder, the book
and page where this instrument (or a memorandum hereof) is recorded (and/or
instrument number, as applicable) and the name of the new Trustee, which
instrument shall be conclusive proof of proper substitution of such successor
Trustee or Trustees, who shall, without conveyance from the predecessor Trustee,
succeed to the rights, powers and duties hereunder. It is acknowledged that A
POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW
LESSOR TO TAKE THE PROPERTY AND SELL THEM WITHOUT GOING TO COURT IN A
FORECLOSURE ACTION UPON DEFAULT BY LESSEE UNDER THIS INSTRUMENT.
If (a) the Property shall consist of one or more parcels, whether or not
contiguous and whether or not located in the same county, or (b) in addition to
this Memorandum, the Lessor shall now or hereafter hold one or more additional
mortgages, liens, deeds of trust or other security (directly or indirectly) for
the Obligations upon other property in the State in which the Property is
located (whether or not such property is owned by Lessor or by others) or (c)
both the circumstances described in clauses (a) and (b) shall be true, then to
the fullest extent permitted by law, the Lessor may, in its sole discretion,
commence or consolidate in a single foreclosure action all foreclosure
proceedings against all such collateral securing the Obligations (including the
Property), which action may be brought or consolidated in the courts of any
county in which any of such collateral is located. The Lessee acknowledges that
the right to maintain a consolidated foreclosure action is a specific inducement
to the Lessor to extend the Advances, and the Lessor expressly and irrevocably
waives any objections to the commencement or consolidation of the foreclosure
proceedings in a single action and any objections to the laying of venue or
based
-8-
<PAGE>
on the grounds of FORUM NON CONVENIENS which it may now or hereafter have. The
Lessee further agrees that if the Lessor shall be prosecuting one or more
foreclosure or other proceedings against a portion of the Property or against
any collateral other than the Property, which collateral directly or indirectly
secures the Obligations, or if the Lessor shall have obtained a judgment of
foreclosure and sale or similar judgment against such collateral, then, whether
or not such proceedings are being maintained or judgments were obtained in or
outside the State in which the Property is located, the Lessor may commence or
continue foreclosure proceedings and exercise its other remedies granted in this
Memorandum against all or any part of the Property and the Lessor waives any
objections to the commencement or continuation of a foreclosure of this
Memorandum or exercise of any other remedies hereunder based on such other
proceedings or judgments, and waives any right to seek to dismiss, stay, remove,
transfer or consolidate either any action under this Memorandum or such other
proceedings on such basis. Neither the commencement nor continuation of
proceedings to foreclose this Memorandum nor the exercise of any other rights
hereunder nor the recovery of any judgment by the Lessor in any such proceedings
shall prejudice, limit or preclude the Lessor's right to commence or continue
one or more foreclosure or other proceedings or obtain a judgment against any
other collateral (either in or outside the State in which the Property is
located) which directly or indirectly secures the Obligations, and the Lessor
expressly waives any objections to the commencement of, continuation of, or
entry of a judgment in such other proceedings or exercise of any remedies in
such proceedings based upon any action or judgment connected to this Memorandum,
and the Lessor also waives any right to seek to dismiss, stay, remove, transfer
or consolidate either such other proceedings or any action under this Memorandum
on such basis.
If the Lessor so elects, the Trustee may sell any personal property covered
by this instrument at one or more separate sales in any manner permitted by the
UCC. One or more exercises of the powers herein granted shall not extinguish
nor exhaust such powers until the entire Property is sold or until the entire
amounts evidenced and/or secured by the Lease and the Operative Documents is
paid in full.
-9-
<PAGE>
(d) Specifically, but without limiting the generality of SUBSECTION (b),
the Lessor and the Lessee further intend and agree that, with respect to that
portion of the Property constituting personal property, for the purpose of
securing the Lessee's obligations for the repayment of the above-described
obligations from the Lessor to the Lessee, (i) the Lease shall also be deemed to
be a security agreement and financing statement within the meaning of Article 9
of the UCC; (ii) the conveyance provided for hereby shall be deemed to be a
grant by the Lessee to the Lessor of a lien and security interest in all of the
Lessee's present and future right, title and interest in and to such portion of
the Property, including but not limited to the Lessee's leasehold estate therein
and all proceeds of the conversion, voluntary or involuntary, of the foregoing
into cash, investments, securities or other property, whether in the form of
cash, investments, securities or other property to secure such obligations,
effective on the date hereof, to have and to hold such interests in the Property
unto the Lessor and its successors and assigns, forever, provided always that
these presents are upon the express condition that, if all amounts due under the
Lease shall have been paid and satisfied in full, then this instrument and the
estate hereby granted shall cease and become void; (iii) the possession by the
Lessor of notes and such other items of property as constitute instruments,
money, negotiable documents or chattel paper shall be deemed to be "possession
by the secured party" for purposes of perfecting the security interest pursuant
to Section 9-305 of the UCC; and (iv) notifications to Persons holding such
property, and acknowledgements, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of the Lessee shall be deemed
to have been given for the purpose of perfecting such security interest under
Applicable Law. The Lessor and the Lessee shall, to the extent consistent with
this Memorandum, take such actions and execute, deliver, file and record such
other documents, financing statements, mortgages and deeds of trust as may be
necessary to ensure that, if the Lease were deemed to create a security
interest in the Property in accordance with this Section, such security interest
would be deemed to be a perfected security interest with priority over all Liens
other than Permitted Liens, under Applicable Law and will be maintained as such
throughout the Term.
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<PAGE>
SECTION 5. RATIFICATION. The terms and provisions of the Lease are hereby
ratified and confirmed and remain in full force and effect. In the event of any
conflict between the terms of the Lease and the terms of this Memorandum, the
terms of the Lease shall control.
SECTION 6. SUPPLEMENTAL LEASE TERM.
(a) The Lenders' Percentage for the Lease Supplement is 84.8469%.
(b) The Lessor Margin for this Lease Supplement is 0.695%
(c) The Loan Margin for the Lease Supplement is 0.20%.
SECTION 7. COUNTERPART EXECUTION. This Memorandum may be executed in any
number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
SECTION 8. FUTURE ADVANCES; REVOLVING CREDIT. In the event a court of
competent jurisdiction rules that this instrument constitutes a mortgage, deed
of trust or other secured financing as is the intent of the parties pursuant to
Section 4 hereof, then this instrument will be deemed given to secure not only
existing financing, but also future advances made pursuant to or as provided in
the Lease, whether such advances are obligatory or to be made at the option of
the Lessor, or otherwise, to the same extent as if such future advances were
made on the date of execution of this instrument, although there may be no
advance made at the time of execution hereof, and although there may be no
financing outstanding at the time any advance is made. To the fullest extent
permitted by law, the lien of this instrument shall be valid as to all such
amounts, including all future advances, from the time this instrument is
recorded. Notwithstanding anything in this instrument to the contrary, although
the amount of the financing secured by this instrument may increase or decrease
from time to time, the maximum principal amount of the financing secured by this
instrument at any one time shall not exceed Fifty Three Million Dollars
($53,000,000),
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<PAGE>
which amount shall be payable as set forth in the Lease, and in any event the
final payment shall be payable no later than October 18, 2003, plus all costs of
enforcement and collection of this instrument, the Lease and the other Operative
Documents, plus the total amount of any advances made pursuant thereto to
protect the collateral and the security interest and lien created hereby,
together with interest on all of the foregoing as provided in the Operative
Documents.
SECTION 9. GOVERNING LAW. THE LEASE AND THIS MEMORANDUM SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Memorandum
of Lease and Deed of Trust to be duly executed by an officer thereunto duly
authorized as of the date and year first above written.
SYMANTEC CORPORATION, as
the Lessee
By:
-----------------------------
Name:
Title:
SUMITOMO BANK LEASING AND
FINANCE, INC., as the Lessor
By:
-----------------------------
Name:
Title:
<PAGE>
ALL-PURPOSE ACKNOWLEDGEMENT
State of ___________________ )
)
County of __________________ )
On _______________________ before me, _______________________________________,
Date Name, Title of Officer, e.g., "Jane Doe,
Notary Public
personally appeared _________________________________________________________,
/ / personally known to me - OR -
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged
to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed
the instrument.
Witness my hand and official seal.
___________________________________
Signature of Notary
CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
/ / INDIVIDUAL(S) ______________________________
______________________________
/ / CORPORATE OFFICER(S) ______________________________
______________________________
TITLE
______________________________
TITLE
/ / PARTNER(S)
/ / ATTORNEY-IN-FACT
/ / TRUSTEE(S)
/ / SUBSCRIBING WITNESS
/ / GUARDIAN/CONSERVATOR
/ / OTHER _______________________
______________________________
______________________________
<PAGE>
______________________________
- --------------------------------------------------------------------------------
ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT
COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED
DOCUMENT.
THIS CERTIFICATE Title or Type of Document_____________________________
MUST BE ATTACHED Number of Pages _____ Date of Document________________
TO THE DOCUMENT Signer(s) Other Than Named Above _____________________
DESCRIBED AT RIGHT:
<PAGE>
ALL-PURPOSE ACKNOWLEDGEMENT
State of ___________________ )
)
County of __________________ )
On _______________________ before me, _______________________________________,
Date Name, Title of Officer, e.g., "Jane Doe,
Notary Public
personally appeared _________________________________________________________,
/ / personally known to me - OR -
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged
to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed
the instrument.
Witness my hand and official seal.
___________________________________
Signature of Notary
CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
/ / INDIVIDUAL(S) ______________________________
______________________________
/ / CORPORATE OFFICER(S) ______________________________
______________________________
TITLE
______________________________
TITLE
/ / PARTNER(S)
/ / ATTORNEY-IN-FACT
/ / TRUSTEE(S)
/ / SUBSCRIBING WITNESS
/ / GUARDIAN/CONSERVATOR
/ / OTHER _______________________
______________________________
<PAGE>
______________________________
- --------------------------------------------------------------------------------
ATTENTION NOTARY: ALTHOUGH THE INFORMATION REQUESTED BELOW IS OPTIONAL, IT
COULD PREVENT FRAUDULENT ATTACHMENT OF THIS CERTIFICATE TO UNAUTHORIZED
DOCUMENT.
THIS CERTIFICATE Title or Type of Document_____________________________
MUST BE ATTACHED Number of Pages _____ Date of Document________________
TO THE DOCUMENT Signer(s) Other Than Named Above _____________________
DESCRIBED AT RIGHT:
<PAGE>
EXHIBIT A-1
TO MEMORANDUM OF LEASE
LEGAL DESCRIPTION OF LAND
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTY
dated as of October 18, 1996
made by
SYMANTEC CORPORATION
in favor of
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders
and
THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH
as Agent for the Lenders.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GUARANTY
THIS GUARANTY (this "GUARANTY") dated as of October 18, 1996 is made by
SYMANTEC CORPORATION, a Delaware corporation (the "GUARANTOR"), in favor of the
various financial institutions as are or may from time to time become Lenders
under the Loan Agreement (together with their respective successors and assigns,
the "LENDERS") and THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH as agent (in
such capacity, the "AGENT") for the Lenders (the Lenders, the Agent and their
respective successors and assigns, collectively, the "LENDER PARTIES").
W I T N E S S E T H:
WHEREAS, pursuant to a Loan Agreement, dated as of the date hereof
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "LOAN AGREEMENT"), among Sumitomo Bank Leasing and
Finance, Inc., (the "LESSOR") the Lenders and the Agent, the Lenders have
agreed, subject to the terms and conditions thereof, to extend Loans to the
Lessor;
WHEREAS, as a condition to the occurrence of the Documentation Date under
the Participation Agreement dated as of the date hereof (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "PARTICIPATION AGREEMENT"), among the Guarantor, the Lessor, the
Lenders and the Agent, the Guarantor is required to execute and deliver this
Guaranty in favor of the Lenders;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial benefits from the
transactions contemplated by the Loan Agreement;
<PAGE>
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders to enter into the Loan
Agreement, the Guarantor agrees, for the benefit of Lenders, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. DEFINITIONS. Capitalized terms used but not otherwise
defined in this Guaranty have the respective meanings specified in APPENDIX A
hereto; and the rules of interpretation set forth in APPENDIX A hereto shall
apply to this Guaranty.
ARTICLE II
GUARANTY PROVISIONS
SECTION II.1. GUARANTY OF LESSOR OBLIGATIONS. The Guarantor acknowledges
that it is in Guarantor's best interests to execute this Guaranty as Guarantor
will derive substantial direct and indirect benefits from the loans provided by
the Lenders to the Lessor. Guarantor absolutely, irrevocably and unconditionally
guarantees and promises to pay to Agent, or order, on demand in lawful money of
the United States of America, any obligations of the Lessor to make payments
under the Loan Agreement as a result of a Lease Event of Default ("LESSOR
OBLIGATIONS").
SECTION II.2. INDEPENDENT OBLIGATIONS. Guarantor's obligations hereunder
are independent of the obligations of Lessor, any other guarantor or any other
person, and Agent may enforce any of its rights hereunder independently of any
other right or remedy that Agent may at any time hold with respect to the Lessor
Obligations or any security or other guaranty therefor. This Guaranty is a
guaranty of payment when due and
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<PAGE>
not of collection. Without limiting the generality of the foregoing, Agent may
bring a separate action against Guarantor without first proceeding against
Lessor, any other guarantor, any other person or any security held by Agent,
and regardless of whether Lessor, any other guarantor or any other person is
joined in any such action. Guarantor's liability hereunder shall at all times
remain effective with respect to the full amount of the Lessor Obligations,
notwithstanding any limitations on the liability of Lessor to Agent contained in
the Loan Agreement or elsewhere. Agent's rights hereunder shall not be
exhausted by any action taken by Agent until all Lessor Obligations have been
fully paid and performed. The liability of Guarantor hereunder shall be
reinstated and revived, and the rights of Agent shall continue, with respect to
any amount at any time paid on account of the Lessor Obligations which shall
thereafter be required to be restored or returned by Agent upon the bankruptcy,
insolvency or reorganization of Lessor, any other guarantor or any other person,
or otherwise, all as though such amount had not been paid.
SECTION II.3. AUTHORITY TO MODIFY LESSOR OBLIGATIONS. Guarantor
authorizes Agent, at any time and from time to time without notice and without
affecting the liability of Guarantor hereunder, to:
(a) alter the terms of all or any part of the Lessor Obligations and
any security and guaranties therefor including without limitation
modification of times for payment and rates of interest;
(b) accept new or additional instruments, documents, agreements,
security or guaranties in connection with all or any part of the Lessor
Obligations;
(c) accept partial payments on the Lessor Obligations;
(d) waive, release, reconvey, terminate, abandon, subordinate,
exchange, substitute, transfer, compound,
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<PAGE>
compromise, liquidate and enforce all or any part of the Lessor Obligations
and any security or guaranties therefor, and apply any such security and
direct the order or manner of sale thereof (and bid and purchase at any
such sale), as Agent in its discretion may determine;
(e) release Lessor, Guarantor or any other person from any personal
liability with respect to all or any part of the Lessor Obligations; and
(f) assign this Guaranty in whole or in part to any person.
SECTION II.4. CONTINUING GUARANTY; CONFIRMATION OF NO REVOCATION. This
Guaranty is not revocable prior to October 18, 2003 and is not revocable
thereafter without 30 days' prior written notice to Agent. Termination of this
Guaranty for any reason shall not affect any obligations of Guarantor hereunder
which have accrued as of the date of termination, and such accrued obligations
shall survive this Guaranty's termination. At Agent's written request from time
to time, Guarantor agrees to confirm in writing within 10 days of receiving such
request that no revocation of this Guaranty has occurred.
SECTION II.5. WAIVERS. In addition to any other waivers provided in this
Guaranty, Guarantor hereby waives each of the following, to the fullest extent
allowed by law:
(a) all statutes of limitations as a defense to any action brought by
Agent against Guarantor;
(b) any defense based upon:
(i) the unenforceability or invalidity of all or any part of the
Loan Agreement or the Lessor Obligations, or any security or other
guaranty for the Lessor Obligations or the lack of perfection or
failure of priority of any security for the Lessor Obligations; or
(ii) any act or omission of Lessor or any other
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<PAGE>
person that directly or indirectly results in the discharge or release
of Lessor or any other person or any of the Lessor Obligations or any
security therefor; or
(iii) any disability or any other defense of Lessor or any other
person with respect to the Lessor Obligations, whether consensual or
arising by operation of law or any bankruptcy, insolvency or debtor-
relief proceeding, or from any other cause;
(c) any right (whether now or hereafter existing) to require Agent,
as a condition to the enforcement of this Guaranty, to:
(i) accelerate the Lessor Obligations; or
(ii) give notice to Guarantor of the terms, time and place of any
public or private sale of any security for the Lessor Obligations; or
(iii) proceed against Lessor, Guarantor or any other person, or
proceed against or exhaust any security for the Lessor Obligations;
(d) all rights of subrogation and reimbursement, all rights to
enforce any remedy that Agent now or hereafter has against Lessor or any
other person, and any benefit of, and right to participate in, any security
now or hereafter held by Lessor with respect to the Lessor Obligations;
(e) presentment, demand, protest and notice of any kind, including
without limitation notices of default and notice of acceptance of this
Guaranty;
(f) all suretyship defenses and rights of every nature otherwise
available under California law and the laws of any other jurisdiction,
including without limitation all defenses arising under Sections 2787
through 2855, inclusive, and Sections 2899 and 3433 of the California Civil
Code and any successor provisions of those
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<PAGE>
Sections; and
(g) all other rights and defenses the assertion or exercise of which
would in any way diminish the liability of Guarantor hereunder.
SECTION II.6. DEED OF TRUST ON REAL PROPERTY; ADDITIONAL WAIVERS.
(a) Guarantor authorizes Agent, at its sole option, without notice or
demand and without affecting the liability of Guarantor hereunder, to
release and reconvey (with or without the receipt of any consideration) any
lien against any or all real or personal property security for the Loan
Agreement, to foreclose any or all deeds of trust, mortgages, security
agreements or other instruments or agreements by judicial or nonjudicial
sale, and to exercise any other remedy against Lessor, any security or any
other guarantor, all without affecting the liability of Guarantor
hereunder.
(b) Guarantor waives any defenses or benefits that may be derived
from California Code of Civil Procedure Sections 580a, 580b, 580d or 726,
or comparable provisions of the laws of the State of California or any
other jurisdiction, and all other suretyship defenses it would otherwise
have under California law or the laws of any other jurisdiction. Guarantor
waives any right to receive notice of any judicial or nonjudicial sale or
foreclosure of any real property, and the failure of Guarantor to receive
such notice shall not impair or affect Guarantor's liability hereunder.
(c) Guarantor waives all rights and defenses arising out of an
election of remedies by Agent, even though that election of remedies, such
as nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against Lessor or any other principal by operation of Section
580d of the Code of Civil Procedure or otherwise.
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<PAGE>
(d) Guarantor acknowledges that it has, in this Guaranty, waived any
and all rights of subrogation and reimbursement and any other rights and
defenses available to Guarantor by reason of Sections 2787 to 2855,
inclusive, of the California Civil Code, including, without limitation:
(i) any defenses Guarantor may have to its guaranty obligations
by reason of an election of remedies by Agent; and
(ii) any rights or defenses Guarantor may have by reason of
protection afforded to Lessor or any other principal with respect to
the obligation so guaranteed pursuant to the antideficiency or other
laws of the State of California limiting or discharging Lessor's
indebtedness, including, without limitation, Section 580a, 580b, 580d,
or 726 of the California Code of Civil Procedure.
SECTION II.7. REASONABLENESS AND EFFECT OF WAIVERS. Guarantor warrants
and agrees that each of the waivers set forth in this Guaranty is made with full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any of such waivers are determined to be contrary to any applicable law
or public policy, such waivers shall be effective only to the maximum extent
permitted by law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants unto each Lender as set forth in Section 8.2 of the
Participation Agreement, which representations and warranties are hereby
incorporated by reference.
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<PAGE>
ARTICLE IV
COVENANTS
SECTION IV.1. COVENANTS. The Guarantor covenants and agrees that, so long
as any portion of the Lessor Obligations shall remain unpaid under the Loan
Agreement or the other Operative Documents, the Guarantor will perform the
covenants set forth in Section 10.1 of the Participation Agreement, which
covenants are hereby incorporated by reference.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION V.1. OPERATIVE DOCUMENT. This Guaranty is an Operative Document
executed pursuant to the Participation Agreement and shall (unless expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Participation Agreement, including, without
limitation, Article XIV thereof.
SECTION V.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT OF
GUARANTY. This Guaranty shall be binding upon the Guarantor and its successors,
transferees and assigns and shall inure to the benefit of and be enforceable by
each Lender and each holder of a Note and their respective successors and
assigns; PROVIDED, HOWEVER, that the Guarantor may not assign any of its
obligations hereunder without the prior written consent of the Required Lenders.
SECTION V.3. AMENDMENTS, ETC. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by the Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION V.4. ADDRESSES FOR NOTICES TO THE GUARANTOR. All notices,
demands, requests, consents, approvals and other
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<PAGE>
communications hereunder shall be in writing (including by facsimile) and
directed to the address or facsimile number described in, and deemed received in
accordance with the provisions of, Section 14.3 of the Participation Agreement.
SECTION V.5. NO WAIVER; REMEDIES. In addition to, and not in limitation
of, SECTION 2.2 and SECTION 2.4, no failure on the part of any Lender or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION V.6. SECTION CAPTIONS. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION V.7. SETOFF. In addition to, and not in limitation of, any rights
of any Lender or any holder of a Note under applicable law, each Lender and each
such holder shall, upon the occurrence of any Event of Default, have the right
to appropriate and apply to the payment of the obligations of the Guarantor
owing to it hereunder, whether or not then due, and the Guarantor hereby grants
to each Lender and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Lender or such holder; provided, however, that
any such appropriation and application shall be subject to the provisions of
Section 8.6 of the Loan Agreement.
SECTION V.8. SEVERABILITY. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION V.9. TERMINATION OF GUARANTY. The Guarantor's
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<PAGE>
obligations under this Guaranty shall terminate on the date upon which all
Lessor Obligations have been paid in full.
SECTION V.10. GOVERNING LAW. THIS GUARANTY SHALL BE ENFORCED AND
INTERPRETED ACCORDING TO THE LAWS OF THE STATE OF CALIFORNIA, IRRESPECTIVE OF
ITS CONFLICTS OF LAWS RULES. FOR PURPOSES OF ANY ACTION OR PROCEEDING INVOLVING
THIS GUARANTY, THE GUARANTOR HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF ALL
FEDERAL AND STATE COURTS LOCATED IN THE STATE OF CALIFORNIA AND CONSENTS THAT IT
MAY BE SERVED WITH ANY PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF CALIFORNIA.
SECTION V.11. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE LOAN
AGREEMENT AND THE PARTICIPATION AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
SYMANTEC CORPORATION
By
--------------------------------
Name:
Title:
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<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty of Lessor Obligations. . . . . . . . . . . . . . 2
SECTION 2.2. Independent Obligations.. . . . . . . . . . . . . . . . . 2
SECTION 2.3. Authority to Modify Lessor Obligations. . . . . . . . . . 3
SECTION 2.4. Continuing Guaranty; Confirmation of No Revocation. . . . 3
SECTION 2.5. Waivers.. . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.6. Deed of Trust on Real Property; Additional Waivers. . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. . . . . . . . . . . . . . 6
ARTICLE IV
COVENANTS
SECTION 4.1. Covenants . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Operative Document. . . . . . . . . . . . . . . . . . . . 6
<PAGE>
SECTION 5.2. Binding on Successors, Transferees and Assigns;
Assignment of Guaranty . . . . . . . . . . . . . . . 7
SECTION 5.3. Amendments, etc.. . . . . . . . . . . . . . . . . . . . . 7
SECTION 5.4. Addresses for Notices to the Guarantor. . . . . . . . . . 7
SECTION 5.5. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . 7
SECTION 5.6. Section Captions. . . . . . . . . . . . . . . . . . . . . 7
SECTION 5.7. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5.8. Severability. . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5.9. Termination of Guaranty . . . . . . . . . . . . . . . . . 8
SECTION 5.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5.11. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . 8
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<PAGE>
EXECUTION COPY
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (together with all amendments, supplements and other
modifications made from time to time, this "PLEDGE AGREEMENT"), dated as of
October 18, 1996, made by SYMANTEC CORPORATION, a Delaware corporation (the
"PLEDGOR"), in favor of SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH, as Agent
for the benefit of the Lenders (the "AGENT"), and Donaldson, Lufkin & Jenrette
Securities Corporation, as collateral agent (the "COLLATERAL AGENT").
W I T N E S S E T H:
WHEREAS, as a condition to the occurrence of the Documentation Date under
the Participation Agreement dated as of the date hereof (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "PARTICIPATION AGREEMENT"), among the Pledgor, the Lessor, the
Lenders and the Agent, the Pledgor is required to execute and deliver this
Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this Pledge
Agreement inasmuch as the Pledgor will derive substantial benefits from the
transactions contemplated by the Participation Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
<PAGE>
SECTION I.1 CERTAIN TERMS. Capitalized terms used but not otherwise
defined in this Pledge Agreement have the respective meanings specified in
APPENDIX A hereto; and the rules of interpretation set forth in APPENDIX A
hereto shall apply to this Pledge Agreement.
ARTICLE II
PLEDGE
SECTION II.1 GRANT OF SECURITY INTEREST. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and
transfers to the Agent, for the ratable benefit of each of
the Lenders, and hereby grants to the Agent, for the ratable
benefit of the Lenders, a continuing security interest in,
all of its right, title and interest in, to and under the
following property (the "COLLATERAL"):
(a) all Additional Collateral identified in SCHEDULE I;
(b) all other Pledged Property, whether now or hereafter delivered to
the Collateral Agent in connection with this Pledge Agreement or any other
Operative Document;
(c) all interest and other payments and rights with respect to any
Pledged Property; and
(d) all proceeds of any of the foregoing.
SECTION II.2 SECURITY FOR OBLIGATIONS. The security interest granted by
the Pledgor under this Pledge Agreement secures the payment in full of all the
Pledgor's obligations under the Master Lease and other Operative Documents to
which it is a party now or hereafter existing.
SECTION II.3 DELIVERY OF PLEDGED PROPERTY. All
-2-
<PAGE>
certificates or instruments representing or evidencing any Collateral, shall be
delivered to and held by or on behalf of the Collateral Agent pursuant hereto,
shall be in suitable form for transfer by delivery, and shall be accompanied by
all necessary instruments of transfer or assignment, duly executed in blank, all
in form and substance satisfactory to the Agent.
SECTION II.4 VALUATION; DEFICIENCY OR SURPLUS.
(a) The Collateral Agent shall determine the fair market value of the
Additional Collateral held as Collateral daily during the Term in
accordance with its customary practices and procedures with respect to
similar property. Each such valuation by the Collateral Agent shall be
binding on the Participants, the Agent and the Lessee, absent manifest
error. In the event that any such valuation shall indicate that such fair
market value of the Collateral shall be less than 102.0% of the then
outstanding Loan Balance, the Collateral Agent shall give written notice to
each of the Agent, the Lessee and the Lessor of such deficiency.
(b) In the event that any deficiency in the fair market value of the
Additional Collateral shall occur as set forth in SECTION 2.4(a) and
Section 6.1 of the Participation Agreement, the Pledgor shall take such
actions required pursuant to Section 6.1 of the Participation Agreement.
In the event that any surplus in the fair market value of the Collateral
shall occur as set forth in Section 6.1 of the Participation Agreement, the
Agent shall direct in writing the Collateral Agent to take such actions
contemplated by Section 6.1 of the Participation Agreement.
SECTION II.5 CONTINUING SECURITY INTEREST. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment in full of all
Lessor Obligations,
(b) be binding upon the Pledgor and its successors,
-3-
<PAGE>
transferees and assigns, and
(c) inure, together with the rights and remedies of the Agent
hereunder, to the benefit of each Lender.
Upon the payment in full of all Lessor Obligations, the security interest
granted herein shall terminate and all rights to the Collateral shall revert to
the Pledgor. Upon any such termination, the Collateral Agent will, at the sole
expense of the Pledgor, and upon written instruction of the Agent, deliver to
the Pledgor, without any representations, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Additional Collateral owned by the Pledgor, together with all other Collateral
held by the Collateral Agent hereunder and execute and deliver to the Pledgor
such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION II.6 SECURITY INTEREST ABSOLUTE. All rights of the Agent and the
security interests granted to the Agent hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of the Pledge Agreement or
any other Operative Document,
(b) the failure of any Lender to assert any claim or demand or to
enforce any right or remedy against Lessee, the Lessor or any other Person
under the provisions of any Operative Document or otherwise, or
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of obligations the Lessor Obligations or any
other extension, compromise or renewal of any Lessor Obligation,
(d) any reduction, limitation, impairment or termination of any
Lessor Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and
-4-
<PAGE>
the Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the Lessor
or otherwise,
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the any Operative
Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Lessor Obligations, or
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Lessee, the
Lessor or any other Person.
SECTION II.7 WAIVER OF SUBROGATION. The Pledgor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against the
Lessee, the Lessor or any other Person that arise from the existence, payment,
performance or enforcement of the Pledgor's obligations under this Pledge
Agreement or any other Operative Document, including any right of subrogation,
reimbursement, exoneration, or indemnification, any right to participate in any
claim or remedy of the Lenders against the Lessee, the Lessor or any other
Person or any collateral which the Agent now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including the right to take or receive from the Lessee, the
Lessor or any other Person, directly or indirectly, in cash or other property or
by set-off or in any manner, payment or security on account of such claim or
other rights. If any amount shall be paid to the Pledgor in violation of the
preceding sentence and the Lessor Obligations shall not have been paid in cash
in full, such amount shall be deemed to have been paid to the Pledgor for the
benefit of, and held in
-5-
<PAGE>
trust for, the Lenders, and shall forthwith be paid to the Lenders to be
credited and applied upon the Lessor Obligations, whether matured or unmatured.
The Pledgor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Pledge Agreement and that the
waiver set forth in this Section is knowingly made in contemplation of such
benefits.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1 WARRANTIES, ETC. The Pledgor represents and warrants for
itself unto the Agent and each Lender, as at the date of each pledge and
delivery hereunder by the Pledgor to the Collateral Agent of any Collateral
pledged by the Pledgor pursuant to this Pledge Agreement as follows:
(a) OWNERSHIP, NO LIENS, ETC. The Pledgor is the legal and
beneficial owner of, and has good and valid title to (and has full right
and authority to pledge and assign) the Collateral, free and clear of all
Liens, security interests, options, or other charges or encumbrances,
except any Lien or security interest granted pursuant hereto in favor of
the Agent.
(b) VALID SECURITY INTEREST. The delivery of the Collateral to the
Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Lessor Obligations. No filing or other action will be necessary to perfect
or protect such security interest.
(c) AUTHORIZATION, APPROVAL, ETC. No authorization, approval, or
other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(i) for the pledge by the Pledgor of any
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<PAGE>
Collateral pursuant to this Pledge Agreement or for the execution,
delivery, and performance of this Pledge Agreement by the Pledgor, or
(ii) for the exercise by the Agent of any of the rights provided
for in this Pledge Agreement, or, except as may be required in
connection with a disposition of Additional Collateral by laws
affecting the offering and sale of securities generally, the remedies
in respect of the Collateral pursuant to this Pledge Agreement.
ARTICLE IV
COVENANTS
SECTION IV.1 CERTAIN COVENANTS. The Pledgor covenants and agrees that, so
long as any portion of the Lessor Obligations shall remain unpaid:
(a) except as permitted by the Operative Documents, it will not sell,
assign, transfer, pledge, or encumber in any other manner the Collateral
owned by it (except in favor of the Agent hereunder);
(b) the Pledgor will warrant and defend the right and title herein
granted unto the Agent in and to the Collateral (and all right, title, and
interest represented by the Collateral) against the claims and demands of
all Persons whomsoever;
(c) at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby
or to enable the Agent to exercise and enforce its rights and remedies
hereunder with respect to
-7-
<PAGE>
any Collateral.
ARTICLE V
THE AGENT
SECTION V.1 AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
irrevocably appoints the Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time upon the occurrence and during the continuance
of any Event of Default, to take any action and to execute any instrument which
the Agent may deem necessary or advisable to accomplish the purposes of this
Pledge Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION V.2 AGENT MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by the Pledgor pursuant to SECTION 6.5.
-8-
<PAGE>
SECTION V.3 NO DUTY. (a) The powers conferred on the Agent and Collateral
Agent hereunder are solely to protect the interests of the Lenders in the
Collateral and shall not impose any duty on them to exercise any such powers.
Except (i) as set forth in SECTION 2.4, and (ii) for reasonable care of any
Collateral in its possession by the Collateral Agent and the accounting by the
Collateral Agent or the Agent for moneys actually received by it hereunder,
neither the Agent nor the Collateral Agent shall have any duty as to any
Collateral or responsibility for
(i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Agent or the Collateral Agent has or is deemed
to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
(b) Notwithstanding anything to the contrary, the Collateral Agent shall
have no duties, obligations or responsibilities except as expressly set forth in
this Agreement or as may be directed in writing by the Agent. The Collateral
Agent shall have no liability whatsoever for any action taken or omitted by it
or in connection herewith (including by direction, whether oral or written, of
the Agent) unless caused by its gross negligence or willful misconduct. The
Collateral Agent shall have no fiduciary duty, obligation or responsibility in
respect of any party hereto or any indirect beneficiary of this Agreement or the
Collateral.
SECTION V.4 REASONABLE CARE. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; PROVIDED, HOWEVER, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than
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<PAGE>
upon the occurrence and during the continuance of any Event of Default, but
failure of the Collateral Agent to comply with any such request at any time
shall not in itself be used as a factor in determining whether the Collateral
Agent has exercised reasonable care.
ARTICLE VI
REMEDIES
SECTION VI.1 CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the
U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and
also may, without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any
of the Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agent may deem commercially
reasonable. The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it
was so adjourned.
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<PAGE>
(b) The Agent may
(i) transfer all or any part of the Collateral into the name of
the Agent or its nominee, with or without disclosing that such
Collateral is subject to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Agent of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION VI.2 SECURITIES LAWS. If the Agent shall exercise its right to
sell all or any of the Collateral on behalf of the Lenders pursuant to SECTION
6.1, the Pledgor agrees that, upon request of the Agent, the Pledgor will, at
its own expense do or cause to be done all such acts and things as may be
necessary to make such sale of the Collateral owned by the Pledgor or any part
thereof valid and binding and in compliance with applicable law.
SECTION VI.3 COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that in any
sale of any of the Collateral owned by the
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<PAGE>
Pledgor whenever an Event of Default shall have occurred and be continuing, the
Agent is hereby authorized to comply with any limitation or restriction in
connection with such sale as it may be advised by counsel is necessary in order
to avoid any violation of applicable law (including compliance with such
procedures as may restrict the number of prospective bidders and purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION VI.4 APPLICATION OF PROCEEDS. All cash proceeds received by the
Agent in respect of any sale of, collection from, or other realization upon, all
or any part of the Collateral may, in the discretion of the Agent and the
Lessor, be held by the Agent as additional collateral security for, or then or
at any time thereafter be applied in whole or in part by the Agent against, all
or any part of the Lessor Obligations PRO RATA in such order as determined
pursuant to Section 7.6 of the Participation Agreement. Any surplus of such
cash or cash proceeds held by the Agent and remaining after payment in full of
all the Lessor Obligations, shall be paid over to the Pledgor or to whomsoever
may be lawfully entitled to receive such surplus.
SECTION VI.5 INDEMNITY AND EXPENSES. The Pledgor hereby jointly and
severally indemnifies and holds harmless each of the Agent and the Collateral
Agent from and against any and all claims, losses, and liabilities arising out
of or resulting from this Pledge Agreement (including enforcement of this Pledge
Agreement), except the claims, losses, or liabilities of the Agent resulting
from the Agent's gross negligence or wilful misconduct, and except the claims,
losses or liabilities of the Collateral Agent, resulting from the Collateral
Agent's gross negligence or willful
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<PAGE>
misconduct, as the case may be. Upon demand, the Pledgor will pay to the Agent
or the Collateral Agent, as the case may be, the amount of any and all
reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the Agent or the Collateral Agent,
as the case may be, may incur in connection with:
(a) the administration of this Pledge Agreement, including the
valuations of Additional Collateral pursuant to SECTION 2.4;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
including pursuant to SECTION 7.3;
(c) the exercise or enforcement of any of the rights of the Agent or
Collateral Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION VII.1 OPERATIVE DOCUMENT. This Pledge Agreement is an Operative
Document executed pursuant to the Participation Agreement and shall (unless
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions of the Participation Agreement, including, without
limitation, Article XIV thereof.
SECTION VII.2 SUCCESSORS, TRANSFEREES AND ASSIGNS. This Pledge Agreement
shall be binding upon the Pledgor and its successors, transferees and assigns
and shall inure to the benefit of and be enforceable by each the Agent, each
Lender and
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<PAGE>
each holder of a Note and their respective successors and assigns); PROVIDED,
HOWEVER, that the Pledgor may not assign any of its obligations hereunder
without the prior written consent of the Required Lenders.
SECTION VII.3 AMENDMENTS, ETC. No amendment to or waiver of any provision
of this Pledge Agreement, nor consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION VII.4 PROTECTION OF COLLATERAL. The Agent may from time to time,
at its option, perform any act which the Pledgor agrees hereunder to perform and
which the Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of an Event of Default) and the Agent may
from time to time take any other action which the Agent reasonably deems
necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION VII.5 ADDRESSES FOR NOTICES TO THE PLEDGOR. All notices, demands,
requests, consents, approvals and other communications hereunder shall be in
writing (including by facsimile) and directed to the address or facsimile number
described in, and deemed received in accordance with the provisions of, Section
14.3 of the Participation Agreement.
SECTION VII.6 NO WAIVER; REMEDIES. In addition to, and not in limitation
of, SECTION 2.2 and SECTION 2.4, no failure on the part of the Agent, any Lender
or any holder of a Note to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
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<PAGE>
SECTION VII.7 SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION VII.8 SEVERABILITY. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION VII.9 GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
SECTION VII.10 WAIVER OF JURY TRIAL. THE PLEDGOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS PLEDGE AGREEMENT. THE PLEDGOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
LOAN AGREEMENT AND THE PARTICIPATION AGREEMENT.
SECTION VII.11 EXECUTION IN COUNTERPARTS. This Pledge Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
SYMANTEC CORPORATION,
as Pledgor
By
-------------------------
Name:
Title:
SUMITOMO BANK, LIMITED, SAN
FRANCISCO BRANCH, as Agent
By
-------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION, as
Collateral Agent
By
-------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
TO PLEDGE AGREEMENT
LIST OF ADDITIONAL COLLATERAL
<PAGE>
EXHIBIT 11.01
SYMANTEC CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------- ----------------------
(In thousands, except per share data) 1996 1995 1996 1995
- ------------------------------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME (LOSS) PER SHARE
Net income (loss) $ 882 $ (17,786) $ 3,917 $ (10,920)
-------- --------- -------- ---------
-------- --------- -------- ---------
Weighted average number of common
shares outstanding during the period 54,729 52,498 54,346 52,033
Shares issuable from assumed exercise
of options 222 -- 696 --
Shares assumed repurchased with proceeds,
not to exceed 20% of total shares
outstanding -- -- -- --
-------- --------- -------- ---------
Common and common stock equivalent
shares outstanding for purpose of
calculating primary net income (loss)
per share 54,951 52,498 55,042 52,033
-------- --------- -------- ---------
-------- --------- -------- ---------
Primary net income (loss) per share $ .02 $ (0.34) $ .07 $ (0.21)
-------- --------- -------- ---------
-------- --------- -------- ---------
FULLY DILUTED NET INCOME (LOSS) PER SHARE
Net income (loss) $ 882 $ (17,786) $ 3,917 $ (10,920)
Interest on short-term and long-term
borrowings and U.S. government
securities, net of income tax effect -- -- -- --
-------- --------- -------- ---------
Net income (loss), as adjusted $ 882 $ (17,786) $ 3,917 $ (10,920)
-------- --------- -------- ---------
-------- --------- -------- ---------
Weighted average number of common
shares outstanding during the period 54,729 52,498 54,346 52,033
Shares issuable from assumed exercise
of options 222 -- 696 --
Shares issuable from assumed conversion
of convertible subordinated debentures -- -- -- --
Shares assumed repurchased with proceeds,
not to exceed 20% of total shares
outstanding -- -- -- --
-------- --------- -------- ---------
Total shares for purpose of calculating
fully diluted net income (loss) per
share 54,951 52,498 55,042 52,033
-------- --------- -------- ---------
-------- --------- -------- ---------
Fully diluted net income (loss) per share $ .02 $ (0.34) $ .07 $ (0.21)
-------- --------- -------- ---------
-------- --------- -------- ---------
</TABLE>
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SYMANTEC CORPORATION'S QUARTERLY REPORT ON THE PERIOD ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000849399
<NAME> SYMANTEC CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 24,607
<SECURITIES> 115,671
<RECEIVABLES> 71,429
<ALLOWANCES> (6,051)
<INVENTORY> 2,480
<CURRENT-ASSETS> 234,278
<PP&E> 130,088
<DEPRECIATION> (76,561)
<TOTAL-ASSETS> 297,630
<CURRENT-LIABILITIES> 93,310
<BONDS> 15,298
0
0
<COMMON> 548
<OTHER-SE> 188,474
<TOTAL-LIABILITY-AND-EQUITY> 297,630
<SALES> 218,396
<TOTAL-REVENUES> 218,396
<CGS> 42,214
<TOTAL-COSTS> 42,214
<OTHER-EXPENSES> 174,265
<LOSS-PROVISION> 1,426
<INTEREST-EXPENSE> 668
<INCOME-PRETAX> 4,352
<INCOME-TAX> 435
<INCOME-CONTINUING> 3,917
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,917
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
