<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
-------------------
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended March 31, 1997
Commission File Number 0-21626
ELECTROGLAS, INC.
(exact name of registrant as specified in its charter)
DELAWARE 77-0336101
(state or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
2901 Coronado Drive
Santa Clara, CA 95054
Telephone: (408) 727-6500
(address of principal executive
offices and telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
----- -----
As of April 30, 1997, 17,559,019 shares of the Registrant's common stock, $0.01
par value, were issued and outstanding.
<PAGE> 2
INDEX
ELECTROGLAS, INC.
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Consolidated condensed statements of income -- Three
months ended March 31, 1997 and March 31, 1996 ........................ 3
Consolidated condensed balance sheets -- March 31, 1997
and December 31, 1996 ................................................. 4
Consolidated condensed statements of cash flows -- Three months
ended March 31, 1997 and March 31, 1996 ............................... 5
Notes to consolidated condensed financial statements --
March 31, 1997 ........................................................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ......................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ...................................... 12
SIGNATURES .......................................................................... 13
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 25,551 $ 51,835
Cost of sales 15,667 23,845
-------- --------
Gross profit 9,884 27,990
-------- --------
Operating expenses:
Engineering, research and development 4,485 4,631
Selling, general and administrative 6,335 7,294
-------- --------
Total operating expenses 10,820 11,925
-------- --------
Operating income (loss) (936) 16,065
Interest income 1,222 1,153
Other income (expense), net (246) 49
-------- --------
Income before income taxes 40 17,267
Provision for income taxes 14 6,043
-------- --------
Net income $ 26 $ 11,224
======== ========
Net income per share $ 0.00 $ 0.62
======== ========
Shares used in per share calculations 17,857 18,155
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE> 4
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- -----------
(Unaudited) (1)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 34,785 $ 11,141
Short-term investments 92,263 117,961
Accounts receivable, net 19,136 16,663
Inventories 23,593 22,578
Prepaid expenses and other current assets 3,663 8,231
Deferred income taxes 7,017 7,017
--------- ---------
Total current assets 180,457 183,591
Deferred income taxes 2,668 2,669
Equipment and leasehold improvements, net 12,048 10,184
Other assets 1,191 1,422
--------- ---------
Total assets $ 196,364 $ 197,866
========= =========
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ 1,988 $ 1,790
Accounts payable 6,712 4,754
Accrued liabilities 13,502 17,061
Income taxes payable 379 610
--------- ---------
Total current liabilities 22,581 24,215
Stockholders' equity:
Preferred stock, $0.01 par value;
authorized 1,000,000; none outstanding -- --
Common stock, $0.01 par value;
authorized 40,000,000; issued and outstanding 18,259,000 at
March 31, 1997 and 18,203,000 at December 31, 1996 183 182
Additional paid in capital 90,329 89,825
Deferred stock compensation (1,204) (1,278)
Retained earnings 94,699 94,673
--------- ---------
184,007 183,402
Less cost of common stock in treasury;
700,000 at March 31, 1997 and 674,000 at December 31, 1996 10,224 9,751
--------- ---------
Total stockholders' equity 173,783 173,651
--------- ---------
Total liabilities and stockholders' equity $ 196,364 $ 197,866
========= =========
</TABLE>
(1) The information in this column was derived from the Company's audited
consolidated financial statements for the year ended December 31, 1996.
See accompanying notes to consolidated condensed financial statements
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<PAGE> 5
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26 $ 11,224
Changes to income not affecting cash 1,421 720
Net changes in current assets and current liabilities (752) (5,438)
-------- --------
Cash provided by operating activities 695 6,506
Cash flow from investing activities:
Capital expenditures (2,851) (1,557)
Purchase of investments (32,363) (60,906)
Maturities of investments 57,636 55,925
Other assets 96 (16)
-------- --------
Cash provided by (used in) investing activities 22,518 (6,554)
Cash flow from financing activities:
Short-term borrowings 198 394
Sales of common stock, net of issuance costs 696 507
Purchase of treasury stock (473) --
-------- --------
Cash provided by financing activities 421 901
Effect of exchange rate changes 10 (17)
-------- --------
Net increase in cash and cash equivalents 23,644 836
Cash and cash equivalents at beginning of period 11,141 6,796
-------- --------
Cash and cash equivalents at end of period $ 34,785 $ 7,632
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE> 6
ELECTROGLAS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE: 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete consolidated
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for fair presentation have
been included. These consolidated condensed financial statements should be read
in conjunction with the audited consolidated financial statements for the year
ended December 31, 1996, included in the Company's Annual Report on Form 10-K.
Certain reclassifications to the Consolidated Condensed Statement of Cash Flows
for the three months ended March 31, 1996 have been made to conform to the
current quarter presentation.
Operating results for the three month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
The Company's fiscal year end is December 31. The Company's fiscal quarters end
on the Saturday nearest the end of the calendar quarter. For convenience, the
Company has indicated that its quarters end on March 31, June 30 and September
30.
USE OF ESTIMATES - The preparation of the accompanying unaudited consolidated
condensed financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from those estimates.
NOTE: 2 - INVENTORIES
Inventories comprised the following:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 9,030 $ 7,671
Work in process 8,334 8,766
Finished goods 6,229 6,141
- -----------------------------------------------------------------------------------
$23,593 $22,578
===================================================================================
</TABLE>
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<PAGE> 7
NOTE: 3 - NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
shares and dilutive common equivalent shares attributable to stock options using
the treasury stock method.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share," which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute net income per share and to restate all prior periods. Under the new
requirements for calculating primary net income per share, the dilutive effect
of stock options will be excluded. There will be no impact to primary income per
share for first quarters ending March 31, 1997 and 1996. The impact of Statement
128 on the calculation of fully diluted net income per share for these quarters
is also not material.
NOTE: 4 - LEASE AGREEMENT
In March 1997, the Company entered into a five-year operating lease for
approximately 21.5 acres of undeveloped land in San Jose, California. The
monthly payments are based on the London Interbank Offering Rate (LIBOR). At
current interest rates, the annual lease payments represent approximately
$710,000. At the end of the lease, the Company has the option to acquire the
property at its original cost of approximately $12,000,000 and any current rent
due and payable.
The guaranteed residual payment on the lease is approximately $12,000,000. The
lease contains certain restrictive covenants. The Company was in compliance with
these covenants at March 31, 1997. The lease also contains an optional
collateral period, which the Company has the option to reduce rent expense
related to the lease.
At March 31, 1997, the Company pledged cash of approximately $12,000,000 which
is included in cash and cash equivalents, since the Company can withdraw the
cash with ten days notice.
NOTE: 5 - ACQUISITION OF KNIGHTS TECHNOLOGY
In March 1997, the Company entered into an agreement, whereby, if consummated,
Electroglas will purchase Knights Technology for approximately $31,500,000 in
common stock and cash. The acquisition will be accounted for by the purchase
method. Accordingly, upon consummation of the agreement which is expected to
occur in the second quarter ending June 30, 1997, Electroglas will record
Knights Technology's fair market value of its net assets, acquired intangible
assets and approximately $23,000,000 charge to income for acquired in-process
research and development. Electroglas will amortize the cost of the intangible
assets over the estimated life of such assets, ranging from three to five years.
For the year ended December 31, 1996, Knights Technology, Inc. had total
revenues of $6,100,000, a net loss of $406,000 and total assets of $4,200,000.
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<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The statements contained in this Form 10-Q that are not purely historical are
forward-looking statements, including statements regarding the Company's
expectations, hopes or intentions regarding the future. Forward-looking
statements include, but are not limited to, statements about gross profits,
current levels of taxable income, liquidity, anticipated cash needs and
availability. All forward-looking statements included in this document are made
as of the date hereof, based on information available to the Company as of the
date hereof, and Electroglas assumes no obligation to update any forward-looking
statement. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements. You should
consult the risk factors listed from time to time in the Company's Annual Report
on Form 10-K, as well as those disclosed in this discussion and analysis
included under the sections titled "Factors That May Affect Results and
Financial Condition" and "Volatility of Stock Price."
The components of the Company's statements of income, expressed as a percentage
of net sales, are as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1997 1996
----- -----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 61.3 46.0
----- -----
Gross profit 38.7 54.0
----- -----
Operating expenses:
Engineering, research and development 17.6 8.9
Selling, general and administrative 24.8 14.1
----- -----
Total operating expenses 42.4 23.0
----- -----
Operating income (loss) (3.7) 31.0
Interest income 4.8 2.2
Other income (expense), net (0.9) 0.1
----- -----
Income before income taxes 0.2 33.3
Provision for income taxes 0.1 11.6
----- -----
Net income 0.1% 21.7%
===== =====
</TABLE>
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended March 31, 1997 were $25,551,000, a 50.7% decline
from net sales of $51,835,000 in the comparable period last year. The decrease
was due primarily to lower system unit sales.
For the quarters ended March 31, 1997 and 1996, net sales comprised of the
Horizon 4000 series (66.8% and 60.5%, respectively), the 2000 series (12.2% and
26.9%, respectively), and aftermarket sales, consisting primarily of service,
spare parts and upgrades (21.0% and 12.6%, respectively).
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<PAGE> 9
For the first quarter of 1997, international sales accounted for 45.2% of net
sales as compared to 41.3% for the same period last year. The increase in the
percentage of international sales was related to a smaller decline in European
sales as compared to other geographic regions. During the quarter, the Company
experienced sales declines, in absolute dollars, across all major geographic
regions.
The semiconductor industry has been experiencing volatility in product demand
and pricing which have caused semiconductor manufacturers to exercise caution in
making capital equipment decisions. As a result of the uncertainties in this
market environment, any rescheduling or cancellations of planned capital
purchases by semiconductor manufacturers will cause the Company's sales to
fluctuate on a quarterly basis.
Gross Profit
Gross profit, as a percentage of sales, was 38.7% for the first quarter of 1997,
compared to 54.0% for the first quarter of 1996. Due to lower sales for the
quarter, gross profit was negatively impacted by underutilization of
manufacturing capacity as production volume decreased. In addition, higher
material costs, as a percentage of sales, and lower selling prices affected the
decline in gross profit.
The Company believes that its gross profit will continue to be affected by a
number of factors, including competitive pressures, changes in demand for
semiconductors, changes in product mix, and excess manufacturing capacity costs.
Engineering, Research and Development
Engineering, research and development expenses were $4,485,000 for the first
quarter of 1997, down 3.2% from $4,631,000 in the comparable quarter of a year
ago. Engineering, research and development expenses consist primarily of
salaries, project materials and other costs associated with the Company's
ongoing efforts in product development and enhancement. As a percentage of
sales, these expenses increased to 17.6% in the first quarter of 1997 from 8.9%
in the same period last year due to lower sales in the current quarter. These
expenses reflect the Company's commitment to engineering resources to meet
changing industry needs.
Selling, General and Administrative
Selling, general and administrative expenses were $6,335,000 for the first
quarter of 1997, down 13.1% from $7,294,000 in the comparable quarter last year.
This decrease was attributable to a significant amount of employee incentive
compensation recorded in a much more profitable first quarter in 1996 as
compared to the first quarter of 1997, offset partially by increased marketing
support and higher worldwide customer operations expenses in the first quarter
of 1997.
Income Taxes
The Company's estimated effective tax rate for the quarter ended March 31, 1997
was 34.0% compared to 35.0% for the comparable period in 1996. The decrease in
the effective tax rate is due primarily to the impact of research and
development tax credits and tax exempt income offset by foreign earnings taxed
at rates in excess of the U.S. tax rate.
-9-
<PAGE> 10
FACTORS THAT MAY AFFECT RESULTS AND FINANCIAL CONDITION
The Company's future operating results may be affected by inherent uncertainties
that exist in the worldwide semiconductor equipment industry. Such uncertainties
include, but are not limited to, capital expenditures of semiconductor
manufacturers, changes in demand for semiconductor products, competitive pricing
pressures, product volume and mix, development of new products, enhancement of
existing products, global economic conditions, availability of needed
components, availability of skilled employees, timing of orders received,
fluctuations in foreign exchange rates, and introduction of competitor products
having technological and/or pricing advantages. In addition, the Company has
experienced, and may in the future experience, significant fluctuations in its
quarterly financial results. Accordingly, recent historical operating results
should only be one source of information when evaluating the future financial
performance of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term investments were
$127,048,000 at March 31, 1997, a decrease of $2,054,000 from December 31, 1996.
Operating activities provided cash of $695,000 during the first quarter of 1997.
This was due to noncash charges to income of $1,421,000, offset by a net
increase in current assets and liabilities of $752,000. Accounts receivable
increased by $2,473,000 due primarily to a higher level of shipments during the
current quarter, while inventories increased by $1,015,000 to support the
Horizon 4090 production ramp up. Other current assets decreased due to an income
tax refund of $4,900,000 received during the quarter. Current liabilities
decreased $1,634,000, mainly in accrued liabilities, offset partially by an
increase in accounts payable.
Cash provided by investing activities was $22,518,000 due primarily from the net
sales of investments of $25,273,000, offset partially by capital expenditures of
$2,851,000 for engineering design and test equipment, manufacturing leasehold
improvements, and enhancement of the Company's information technology
infrastructure.
Cash provided by financing activities was $421,000. This was due to the sale of
common stock under employee stock plans generating $696,000 and additional
short-term borrowings of $198,000 by the Company's Japanese subsidiary. These
were partially offset by the repurchase of an additional 26,000 shares of the
Company's common stock at a cost of $473,000 during the quarter.
At March 31, 1997, the Company's Japanese subsidiary had lines of credit with
Japanese banks with a total borrowing capacity of approximately $4,870,000
(denominated in Yen). Amounts outstanding under these facilities at March 31,
1997 were $1,988,000. These facilities enable the Company's Japanese subsidiary
to finance its working capital requirements locally.
In March 1997, the Company entered into an agreement to lease land with an
investment value of $12,000,000, which, if consummated, will result in an
increase in future operating lease commitments. Based on current interest rates,
the annual lease payments will be approximately $710,000.
In March 1997, the Company entered into an agreement, whereby, if consummated,
the Company will purchase Knights Technology for approximately $31,500,000 in
common stock and cash. The acquisition will be accounted for by the purchase
method.
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<PAGE> 11
Historically, the Company has generated cash in an amount sufficient to fund its
operations. The Company believes that cash on hand and cash generated from
operations will be sufficient to meet the Company's working capital and capital
expenditure requirements at least through the next twelve months.
VOLATILITY OF STOCK PRICE
The Company believes that any of the following factors can cause the price of
the Company's Common Stock to fluctuate, perhaps substantially: announcements of
developments related to the Company's business, fluctuations in the Company's
operating results, sales of substantial amounts of securities of the Company in
the marketplace, general conditions in the semiconductor industry or worldwide
economy, a shortfall in revenue or earnings from or changes in analysts'
expectations, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in patents or other
intellectual property rights, and changes in the Company's relationships with
certain customers and suppliers. In addition, in recent years, the stock market
in general, and the market for the shares of small capitalization stocks in
particular, including the Company's, have experienced extreme price fluctuations
which have often been unrelated to the operating performance of affected
companies. There can be no assurance that the market price of the Company's
Common Stock will not continue to experience significant fluctuations in the
future, including fluctuations that are unrelated to the Company's performance.
-11-
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Lease Agreement between BNP Leasing
Corporation and Electroglas, Inc. dated
March 31, 1997.
10.2 Agreement and Plan of Reorganization among
Knights Technology, Inc., certain
shareholders of Knights Technology, Inc.,
and Electroglas, Inc. dated March 12, 1997,
incorporated by reference to Appendix A of
the Company's Form S-4 as filed with the
Securities and Exchange Commission on April
15, 1997 (Registration No. 333Q4587).
27 Financial Data Schedule
(b) Reports on Form 8-K: None
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<PAGE> 13
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.
ELECTROGLAS, INC.
(Registrant)
DATE: May 9, 1997 BY: /s/ Armand J. Stegall
------------------------------------------
Armand J. Stegall
Duly authorized officer of the registrant,
and Chief Financial Officer
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<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
10.1 Lease Agreement between BNP Leasing Corporation and
Electroglas, Inc. dated March 31, 1997.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
$12,000,000
LEASE AGREEMENT
BETWEEN
BNP LEASING CORPORATION,
("BNPLC")
AND
ELECTROGLAS, INC.,
("ELECTROGLAS")
MARCH 31, 1997
(EDENVALE TECHNOLOGY PARK, SAN JOSE, CALIFORNIA)
PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN PARAGRAPH 0 OF THIS LEASE,
THIS LEASE AND THE PURCHASE AGREEMENT REFERENCED HEREIN ARE TO CONSTITUTE, FOR
INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS
PROVIDED IN PARAGRAPH 0 OF THIS LEASE, BNPLC AND ELECTROGLAS EXPECT THAT
ELECTROGLAS (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY
FOR INCOME TAX PURPOSES, THEREBY ENTITLING ELECTROGLAS (AND NOT BNPLC) TO TAKE
DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. No Lease Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Status of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Waiver by Electroglas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Use and Condition of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Condition of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Consideration for and Scope of Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Base Rent Payments Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Calculation of and Due Dates for Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(i) Determination of Payment Due Dates Generally . . . . . . . . . . . . . . . . . . . . . . 5
(ii) Special Adjustments to Base Rent Payment Dates and Periods . . . . . . . . . . . . . . . 5
(iii) Base Rent Formula for Periods During Which The Collateral Percentage is Zero . . . . . . 7
(iv) Base Rent Formula for Periods During Which The Collateral Percentage is Greater Than
Zero . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Base Rent Formula for Transitional Base Rent Periods . . . . . . . . . . . . . . . . . . 8
(c) Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) No Demand or Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Upfront Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Default Interest and Order of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. Payment of Executory Costs and Losses Related to the Property . . . . . . . . . . . . . . . . . . . . . . 9
(a) "Net" Lease Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Increased Costs; Capital Adequacy Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Electroglas' Payment of Other Losses; General Indemnification . . . . . . . . . . . . . . . . . . 11
(e) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Advances Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Requirement of a Construction Funding Agreement. . . . . . . . . . . . . . . . . . . . . 14
(ii) Funding of Construction Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Construction Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Preconstruction Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(ii) Scope Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iii) Failure by BNPLC to Respond to a Request for Approval . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(iv) Responsibility for Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) Value Added. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vi) Estoppel Letters Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vii) Advances Not a Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Conditions to Construction Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(i) Prior Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(ii) Amount of the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(iii) Other Restrictions on the Amount of Advances . . . . . . . . . . . . . . . . . . . . . . 17
(iv) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
a) Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
b) Builder's Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(v) Progress of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(vi) Evidence of Costs and Expenses to be Reimbursed . . . . . . . . . . . . . . . . . . . . . 18
(vii) No Sale of BNPLC's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(viii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(ix) Certificate of No Default and Other Matters . . . . . . . . . . . . . . . . . . . . . . . 18
(x) Funding by Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Breakage Costs for Construction Advances Requested But Not Taken . . . . . . . . . . . . . . . . . 19
7. Other Obligations of and Limited Representations by BNPLC . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Cooperation of BNPLC to Facilitate Construction and Development . . . . . . . . . . . . . . . . . 19
(b) Actions Permitted by Electroglas Without BNPLC's Consent . . . . . . . . . . . . . . . . . . . . . 20
(c) Limited Representations by BNPLC Concerning Accounting Matters . . . . . . . . . . . . . . . . . . 21
(d) Other Limited Representations by BNPLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i) No Default or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(ii) No Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(iii) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(iv) Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(v) Continued Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(vi) No Prior Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(vii) No Funding With Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(viii) Not a Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(e) Keeping Proprietary Information Confidential . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Partial Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8. Status of Property Acquired With Funds Provided by BNPLC . . . . . . . . . . . . . . . . . . . . . . . . . 24
9. Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Environmental Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Environmental Covenants by Electroglas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Right of BNPLC to do Remedial Work Not Performed by Electroglas . . . . . . . . . . . . . . . . . 25
(d) Environmental Inspections and Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Communications Regarding Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10. Insurance Required and Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Property Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Failure to Obtain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11. Application of Insurance and Condemnation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
(a) Collection of Insurance and Condemnation Proceeds Generally . . . . . . . . . . . . . . . . . . . 29
(b) Administration of Remaining Proceeds; Electroglas' Obligation to Restore . . . . . . . . . . . . . 29
(c) Special Provisions Concerning Event of Defaults and Qualified Payments . . . . . . . . . . . . . . 30
(d) Takings of All or Substantially All of the Property . . . . . . . . . . . . . . . . . . . . . . . 30
(e) Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12. Additional Representations, Warranties and Covenants of Electroglas Concerning the Property . . . . . . . 31
(a) Compliance with Covenants and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Defense of Adverse Title Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Prohibition Against Consensual Liens Against the Leased Property . . . . . . . . . . . . . . . . . 32
(e) Operation of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Debts for Construction, Maintenance, Operation or Development . . . . . . . . . . . . . . . . . . 33
(g) Repair, Maintenance, Alterations and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(h) Compliance With Permitted Encumbrances and Development Contracts . . . . . . . . . . . . . . . . . 34
(i) Modification of Permitted Encumbrances and Development Contracts . . . . . . . . . . . . . . . . . 34
(j) Books and Records Concerning the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(k) Compliance With the Existing Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13. Assignment and Subletting by Electroglas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) BNPLC's Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Standard for BNPLC's Consent to Assignments and Certain Other Matters . . . . . . . . . . . . . . 35
(c) Consent Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14. Assignment by BNPLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Restrictions on Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Effect of Permitted Transfer or other Assignment by BNPLC . . . . . . . . . . . . . . . . . . . . 36
15. BNPLC's Right of Access; Right to Perform at the Expense of Electroglas . . . . . . . . . . . . . . . . . 36
16. Other Representations, Warranties and Covenants of Electroglas . . . . . . . . . . . . . . . . . . . . . . 37
(a) Financial Statements; Required Notices; Certificates as to Default . . . . . . . . . . . . . . . . 37
(b) No Default or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) No Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(d) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(e) Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(f) Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(g) Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(i) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(j) Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(k) Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(l) Not a Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(m) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(n) Affirmative Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(o) Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(i) Merger and Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(ii) Change in Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(iii) Sales, Etc. of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(iv) Multiemployer ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C> <C>
(v) Prohibited ERISA Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(vi) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(vii) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Definition of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Alternative Cure of Certain Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
18. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Basic Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(b) Collections Under the Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(c) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(d) Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(e) Waiver by Electroglas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
19. Default by BNPLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
20. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
21. Surrender Upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
22. Holding Over by Electroglas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
23. Independent Obligations Evidenced by Purchase Documents . . . . . . . . . . . . . . . . . . . . . . . . . 50
24. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
25. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(a) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(b) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(c) No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(d) No Implied Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(e) NO IMPLIED REPRESENTATIONS BY BNPLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(f) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(g) Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(h) Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(j) Paragraph Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(k) Other Terms and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(l) Not a Partnership, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
26. Income Tax Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
27. Proprietary Information and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
(iv)
<PAGE> 6
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Description
Exhibit B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permitted Encumbrance List
Exhibit C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractor's Estoppel Letter
Exhibit D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Architect's Estoppel Letter
Exhibit E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Draw Request Forms
Exhibit F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compliance Certificate
Exhibit G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Libor Period Election Form
Exhibit H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notice of Request Requiring an Expedited Response
Schedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Development Documents
Schedule 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Covenants
List of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shared Definitions
</TABLE>
(v)
<PAGE> 7
LEASE AGREEMENT
This LEASE AGREEMENT (this "LEASE"), by and between BNP LEASING
CORPORATION, a Delaware corporation ("BNPLC"), and ELECTROGLAS, INC., a
Delaware corporation ("ELECTROGLAS"), is dated as of the Effective Date.
("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in
this Lease are intended to have the meanings assigned to them in the List of
Defined Terms attached to and made a part of this Lease.)
RECITALS
Pursuant to the Existing Contracts, which cover the Land described in
Exhibit 0, BNPLC is acquiring the Land and any appurtenances thereto from
Sellers contemporaneously with the execution of this Lease.
In anticipation of BNPLC's acquisition of the Land, BNPLC and
Electroglas have reached agreement as to the terms and conditions upon which
BNPLC is willing to lease the Land to Electroglas and to lease to Electroglas
the Improvements to be constructed on the Land as hereinafter provided, and by
this Lease BNPLC and Electroglas desire to evidence such agreement.
GRANTING CLAUSES
In consideration of the rent to be paid and the covenants and
agreements to be performed by Electroglas, as hereinafter set forth, BNPLC does
hereby LEASE, DEMISE and LET unto Electroglas for the term hereinafter set
forth the Land, together with:
(1) BNPLC's interest in any and all Improvements;
(2) all easements and other rights appurtenant to the
Land or to the Improvements, whether now owned or hereafter acquired
by BNPLC;
(3) all right, title and interest of BNPLC, now owned or
hereafter acquired, in and to (A) any land lying within the
right-of-way of any street, open or proposed, adjoining the Land, (B)
any sidewalks and alleys adjacent to the Land and (C) any strips and
gores between the Land and abutting land.
The Land and BNPLC's interest in all property described in clauses 0 through 0
above are hereinafter referred to collectively as the "REAL PROPERTY".
To the extent, but only to the extent, that assignable rights or
interests in, to or under the following have been or will be acquired by BNPLC
under the Existing Contracts or acquired by BNPLC pursuant to Paragraph 0
below, BNPLC also hereby grants and assigns to Electroglas for the term of this
Lease the right to use and enjoy (and, in the case of contract rights, to
enforce) such rights or interests of BNPLC:
(a) any goods, equipment, furnishings, furniture and
other tangible personal property of whatever nature that are located
on the Real Property and all renewals or replacements of or
substitutions for any of the foregoing;
(b) the benefits, if any, conferred upon the owner of the
Real Property by the Permitted Encumbrances and Development Documents;
and
(c) any permits, licenses, franchises, certificates, and
other rights and privileges related to the Real Property.
Such rights and interests of BNPLC, whether now existing or hereafter arising,
are hereinafter collectively called the "PERSONAL PROPERTY". The Real Property
and the Personal Property are hereinafter sometimes collectively
<PAGE> 8
called the "PROPERTY."
Provided, however, the leasehold estate conveyed hereby and
Electroglas' rights hereunder are expressly made subject and subordinate to the
terms and conditions of this Lease, to the matters listed in Exhibit 0 and all
other Permitted Encumbrances and to any other claims or encumbrances not
constituting Liens Removable by BNPLC.
GENERAL TERMS AND CONDITIONS
The Property is leased by BNPLC to Electroglas and is accepted and is
to be used and possessed by Electroglas upon and subject to the following terms
and conditions:
1. Term. The term of this Lease (the "TERM") shall commence on
and include the Effective Date, and end on the first Business Day of April,
2002, unless sooner terminated as expressly herein provided. Electroglas shall
be entitled to accelerate the Designated Sale Date (and thus accelerate the
purchase of BNPLC's interest in the Property by Electroglas or by an Applicable
Purchaser pursuant to the Purchase Agreement) by sending a notice to BNPLC as
provided in clause (2) of the definition of "Designated Sale Date" in the List
of Defined Terms. In the event, because of Electroglas' election to so
accelerate the Designated Sale Date or for any other reason, the Designated
Sale Date occurs before the end of the scheduled Term, Electroglas may
terminate this Lease on or after the Designated Sale Date; provided, however,
as a condition to any such termination by Electroglas, Electroglas must have
done the following prior to the termination:
(a) purchased or caused an Applicable Purchaser to
purchase the Property pursuant to the Purchase Agreement and satisfied all of
Electroglas' other obligations under the Purchase Agreement;
(b) paid to BNPLC all Base Rent, Administrative Fees,
Commitment Fees and other Rent accrued on the Designated Sale Date; and
(c) paid any Breakage Costs caused by BNPLC's sale of the
Property pursuant to the Purchase Agreement.
The Term may be extended at the option of Electroglas for two
successive periods of five (5) years each; provided, however, that prior to any
such extension the following conditions must have been satisfied: (A) at least
one hundred eighty (180) days prior to the commencement of any such extension,
BNPLC and Electroglas must have agreed in writing upon, and received the
written consent and approval of BNPLC's Parent and all other Participants to
(1) a corresponding extension of the date specified in clause (iii) of the
definition of Designated Sale Date in the List of Defined Terms for purposes of
both this Lease and the Purchase Documents, and (2) an adjustment to the Rent
that Electroglas will be required to pay for the extension, it being expected
that the Rent for the extension may be different than the Rent required for the
original Term, and it being understood that the Rent for any extension must in
all events be satisfactory to both BNPLC and Electroglas, each in its sole and
absolute discretion; (B) there must be no Event of Default continuing hereunder
at the time of Electroglas' exercise of its option to extend; and (C)
immediately prior to any such extension, this Lease must remain in effect.
With respect to the condition that BNPLC and Electroglas must have agreed upon
the Rent required for any extension of the Term, neither Electroglas nor BNPLC
is willing to submit itself to a risk of liability or loss of rights hereunder
for being judged unreasonable. Accordingly, both Electroglas and BNPLC hereby
disclaim any obligation express or implied to be reasonable in negotiating the
Rent for any such extension. Subject to the changes to the Rent payable during
any extension of the Term as provided in this Paragraph, if Electroglas
exercises its option to extend the Term as provided in this Paragraph, this
Lease shall continue in full force and effect, and the leasehold estate hereby
granted to Electroglas shall continue without interruption and without any loss
of priority over other interests in or claims against the Property that may be
created or arise after the date hereof and before the extension.
-2-
<PAGE> 9
2. No Lease Termination.
(a) Status of Lease. Except as expressly provided
herein, this Lease shall not terminate, nor shall Electroglas have any right to
terminate this Lease, nor shall Electroglas be entitled to any abatement of the
Rent, nor shall the obligations of Electroglas under this Lease be excused, for
any reason whatsoever, including any of the following: (i) any damage to or the
destruction of all or any part of the Property from whatever cause, (ii) the
taking of the Property or any portion thereof by eminent domain or otherwise
for any reason, (iii) the prohibition, limitation or restriction of
Electroglas' use of all or any portion of the Property or any interference with
such use by governmental action or otherwise, (iv) any eviction of Electroglas
or of anyone claiming through or under Electroglas (provided, that if
Electroglas is wrongfully evicted by BNPLC or by any third party lawfully
exercising its rights under a Lien Removable by BNPLC, then Electroglas will
have the remedies described in Paragraph 0 below), (v) any default on the part
of BNPLC under this Lease or under any other agreement to which BNPLC and
Electroglas are parties, (vi) the inadequacy in any way whatsoever of the
design, construction, assembly or installation of any improvements, fixtures or
tangible personal property included in the Property, it being understood that
BNPLC has not made, does not make and will not make any representation express
or implied as to the adequacy thereof, (vii) any latent or other defect in the
Property or any change in the condition thereof or the existence with respect
to the Property of any violations of Applicable Laws or (viii) any other cause
whether similar or dissimilar to the foregoing. It is the intention of the
parties hereto that the obligations of Electroglas hereunder shall be separate
and independent of the covenants and agreements of BNPLC, that the Base Rent
and all other sums payable by Electroglas hereunder shall continue to be
payable in all events and that the obligations of Electroglas hereunder shall
continue unaffected, unless the requirement to pay or perform the same shall
have been terminated or limited pursuant to an express provision of this Lease.
(b) Waiver by Electroglas. Without limiting the
foregoing, Electroglas waives to the extent permitted by Applicable Laws,
except as otherwise expressly provided herein, all rights to which Electroglas
may now or hereafter be entitled by law (including any such rights arising
because of any implied "warranty of suitability" or other warranty under
Applicable Laws) (i) to quit, terminate or surrender this Lease or the Property
or any part thereof or (ii) to any abatement, suspension, deferment or
reduction of the Rent.
However, nothing in this Paragraph 0 shall be construed as a waiver by
Electroglas of any right Electroglas may have at law or in equity to the
following remedies, whether because of BNPLC's failure to remove a Lien
Removable by BNPLC or because of any other default by BNPLC under this Lease
that continues beyond the period for cure provided in Paragraph 0: (i) the
recovery of monetary damages, (ii) injunctive relief in case of the violation,
or attempted or threatened violation, by BNPLC of any of the express covenants,
agreements, conditions or provisions of this Lease which are binding upon BNPLC
(including the confidentiality provisions set forth in subparagraph 0 below),
or (iii) a decree compelling performance by BNPLC of any of the express
covenants, agreements, conditions or provisions of this Lease which are binding
upon BNPLC.
3. Use and Condition of the Property.
(a) Use. Subject to the Permitted Encumbrances, the
Development Documents and the terms hereof, Electroglas may use and occupy the
Property during the Term, but only for such development as Electroglas may
elect to undertake in accordance with this Lease and for use for the following
purposes and other lawful purposes incidental thereto:
(i) research and development of computer-related and other
products;
(ii) administrative and office space;
(iii) distribution and warehouse storage of computer-related
and other products;
(iv) assembly and manufacture (including the operation of a
machine shop in connection therewith) of computer-related and other
products that, as of the Effective Date, Electroglas is currently
manufacturing and selling in the ordinary course of its business; and
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<PAGE> 10
(v) assembly of computer-related and other products, in
addition to those described in the preceding clause (iv), using
components manufactured elsewhere, but not including on-site
manufacturing that involves the use of Hazardous Substances in
significantly greater quantities or in a manner that is subject to
significantly greater regulation or reporting requirements under
Environmental Laws than the use of Hazardous Materials reasonably
required for any assembly and manufacture permitted by the preceding
clause (iv); and
(vi) cafeteria, library, fitness center and other support
function uses that Electroglas may provide to its employees.
Although the phrase "computer-related and other products" as used in this
subparagraph may include products designed to detect, monitor, neutralize,
handle or process Hazardous Substances, the use of the Property by Electroglas
shall not include bringing Hazardous Substances onto the Property for the
purpose of researching, testing or demonstrating any such products.
(b) Condition of the Property. ELECTROGLAS ACKNOWLEDGES
THAT IT HAS CAREFULLY AND FULLY INSPECTED THE PROPERTY AND ACCEPTS THE PROPERTY
IN ITS PRESENT STATE, AS IS, WHERE IS AND WITH ALL FAULTS, AND WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE CONDITION OF SUCH
PROPERTY OR AS TO THE USE WHICH MAY BE MADE THEREOF. ELECTROGLAS ALSO ACCEPTS
THE PROPERTY WITHOUT ANY COVENANT, REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, BY BNPLC OR ITS AFFILIATES REGARDING THE TITLE THERETO OR THE RIGHTS
OF ANY PARTIES IN POSSESSION OF ANY PART THEREOF, EXCEPT AS SET FORTH IN
PARAGRAPH 0. BNPLC SHALL NOT BE RESPONSIBLE FOR ANY LATENT OR OTHER DEFECT OR
CHANGE OF CONDITION IN THE LAND, IMPROVEMENTS, FIXTURES AND PERSONAL PROPERTY
FORMING A PART OF THE PROPERTY OR FOR ANY VIOLATIONS WITH RESPECT THERETO OF
APPLICABLE LAWS. NOR SHALL BNPLC BE REQUIRED TO FURNISH TO ELECTROGLAS ANY
FACILITIES OR SERVICES OF ANY KIND, INCLUDING WATER, STEAM, HEAT, GAS, AIR
CONDITIONING, ELECTRICITY, LIGHT OR POWER.
(c) Consideration for and Scope of Waiver. The provisions
of subparagraph 0 above have been negotiated by BNPLC and Electroglas after due
consideration for the Rent payable hereunder and are intended to be a complete
exclusion and negation of any representations or warranties of BNPLC or its
Affiliates, express or implied, with respect to the Property that may arise
pursuant to any law now or hereafter in effect or otherwise, except as
expressly set forth herein.
However, such exclusion of representations and warranties by BNPLC and
its Affiliates is not intended to impair any representations or warranties made
by other parties, including Sellers, any architects, engineers or contractors
engaged to work on Construction Projects, the benefit of which is to pass to
Electroglas during the Term because of the definition of Personal Property and
Property above.
4. Rent.
(a) Base Rent Payments Required. On each Base Rent Date
through the end of the Term, Electroglas shall pay BNPLC rent ("BASE RENT").
Each payment of Base Rent must be received by BNPLC no later that 12:00 noon
(Pacific time) on the date it becomes due; if received after 12:00 noon
(Pacific time) it will be considered for purposes of this Lease as received on
the next following Business Day. BNPLC shall notify Electroglas of the amount
of each payment of Base Rent (calculated as provided in subparagraph 0) at
least three days before the date upon which it first becomes due. However, any
failure by BNPLC to so notify Electroglas shall not constitute a waiver of
BNPLC's right to payment, but absent such notice Electroglas shall not be in
default for any underpayment resulting therefrom if Electroglas, in good faith,
reasonably estimates the payment required, makes a timely payment of the amount
so estimated and corrects any underpayment within three Business Days after
being notified by BNPLC of the underpayment.
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<PAGE> 11
(b) Calculation of and Due Dates for Base Rent. Payments
of Base Rent shall be calculated and become due as follows:
(i) Determination of Payment Due Dates Generally. For
all Base Rent Periods subject to a LIBOR Period Election of one month
or three months, Base Rent shall be due in one installment on the Base
Rent Date upon which the Base Rent Period ends. For Base Rent Periods
subject to a LIBOR Period Election of six months, Base Rent shall be
payable in two installments, with the first installment becoming due
on the Base Rent Date that occurs on the first Business Day of the
third calendar month following the commencement of such Base Rent
Period, and with the second installment becoming due on the Base Rent
Date upon which the Base Rent Period ends.
(ii) Special Adjustments to Base Rent Payment Dates and
Periods. Notwithstanding the foregoing:
a) Any Base Rent Period that begins before, and does
not otherwise end before, a Failed Collateral Test Date shall
end upon but not include such Failed Collateral Test Date, and
such Failed Collateral Test Date shall constitute a Base Rent
Date, upon which Electroglas must pay all accrued, unpaid Base
Rent for the Base Rent Period just ended.
b) Consistent with clause (3) of the definition of
LIBOR Period Election in the List of Defined Terms, each
successive Base Rent Date after any such Failed Collateral
Test Date shall be the first Business Day of the first
calendar month following the calendar month which includes the
preceding Base Rent Date, so long as any Mandatory Collateral
Period shall continue.
c) In addition to Base Rent due on a Failed
Collateral Test Date, Electroglas must pay the Breakage Costs,
if any, resulting from any early ending of a Base Rent Period
on the Failed Collateral Test Date pursuant to the preceding
clause 0.
d) Any Base Rent Period that begins before, and does
not otherwise end before, an Extraordinary Collateral
Percentage Reduction Date shall end upon but not include such
Extraordinary Collateral Percentage Reduction Date, and such
Extraordinary Collateral Percentage Reduction Date shall
constitute a Base Rent Date, upon which Electroglas must pay
all accrued, unpaid Base Rent for the Base Rent Period just
ended. Further, notwithstanding the LIBOR Period Election
then in effect, the Base Rent Period beginning on and
including such an Extraordinary Collateral Percentage
Reduction Date (a "TRANSITIONAL BASE RENT PERIOD") shall end
on but not include the first Business Day of the next calendar
month, which first Business Day shall also constitute a Base
Rent Date, upon which Electroglas must pay all Base Rent for
such Transitional Base Rent Period.
e) In addition to Base Rent due on an Extraordinary
Collateral Percentage Reduction Date, Electroglas must pay the
Breakage Costs, if any, resulting from any early ending of a
Base Rent Period on the Extraordinary Collateral Percentage
Reduction Date pursuant to the preceding clause 0.
f) If Electroglas or any Applicable Purchaser
purchases BNPLC's interest in the Property pursuant to the
Purchase Agreement, any accrued unpaid Base Rent and all
outstanding Additional Rent shall be due on the date of
purchase in addition to the purchase price and other sums due
BNPLC under the Purchase Agreement.
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<PAGE> 12
(iii) Base Rent Formula for Periods During Which The
Collateral Percentage is Zero. Each installment of Base Rent payable
for any Base Rent Period (excluding a Transitional Base Rent Period)
during which the Collateral Percentage is zero shall equal:
o Stipulated Loss Value on the first day of such Base
Rent Period, times
o the sum of (a) the Effective Rate with respect to
such Base Rent Period, plus (b) the Unsecured Spread,
times
o the number of days in the period from and including
the preceding Base Rent Date to but not including the
Base Rent Date upon which the installment is due,
divided by
o three hundred sixty.
Assume, only for the purpose of illustration: that the
Collateral Percentage for a hypothetical Base Rent Period is zero
percent (0%); that the Initial Funding Advance of $12,000,000 has been
fully funded; that prior to the first day of such Base Rent Period,
BNPLC and Electroglas have entered into a Construction Funding
Agreement setting the Maximum Construction Allowance at $38,000,000
and the Construction Allowance has been fully funded, but a total of
$10,000,000 of Qualified Payments have been received by BNPLC, leaving
a Stipulated Loss Value of $40,000,000; that the Effective Rate for
the Base Rent Period is 5.65%; that the Unsecured Spread is one
hundred thirty-five basis points (135/100 of 1%); and that such Base
Rent Period contains exactly thirty days. Under such assumptions, the
Base Rent for the hypothetical Base Rent Period will equal:
$40,000,000 x (5.65% + 1.35%) x 30/360 = $233,333
(iv) Base Rent Formula for Periods During Which The
Collateral Percentage is Greater Than Zero. Each installment of Base
Rent payable for any Base Rent Period (excluding a Transitional Base
Rent Period) during which the Collateral Percentage is greater than
zero shall equal:
o Stipulated Loss Value on the first day of such Base
Rent Period, times
o the sum of:
(A) the product of:
(1) the Collateral Percentage for
such Base Rent Period, times
(2) the Secured Spread for such
Base Rent Period, plus
(B) the product of:
(1) 100% minus the Collateral
Percentage for such Base Rent
Period, times
(2) the sum of (a) the Effective
Rate with respect to such
Base Rent Period, plus (b)
the Unsecured Spread, times
o the number of days in the period from and including
the preceding Base Rent Date to but not including the
Base Rent Date upon which the installment is due,
divided by
o three hundred sixty.
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<PAGE> 13
Assume, only for the purpose of illustration: that the
Collateral Percentage for a hypothetical Base Rent Period is forty
percent (40%); that the Initial Funding Advance of $12,000,000 has
been fully funded; that prior to the first day of such Base Rent
Period, BNPLC and Electroglas have entered into a Construction Funding
Agreement setting the Maximum Construction Allowance at $38,000,000
and the Construction Allowance has been fully funded, but a total of
$20,000,000 of Qualified Payments have been received by BNPLC, leaving
a Stipulated Loss Value of $30,000,000; that the Effective Rate for
the Base Rent Period is 5.65%; that the Secured Spread is one hundred
thirty-five basis points (135/100 of 1%); that the Unsecured Spread is
twenty-two and one half basis points (22.5/100 of 1%); and that such
Base Rent Period contains exactly thirty days. Under such
assumptions, the Base Rent for the hypothetical Base Rent Period will
equal:
$30,000,000 x {(40% x .225%) + ([100% - 40%] x
[5.65% + 1.35%])} x 30/360 = $72,250
(v) Base Rent Formula for Transitional Base Rent Periods.
The Base Rent payable for any Transitional Base Rent Period shall
equal the sum of Base Rent required for all days during such period,
and the Base Rent for each day during a Transitional Base Rent Period
shall equal:
o Stipulated Loss Value on first day of such Base Rent
Period (i.e., the Extraordinary Collateral Percentage
Reduction Date upon which such period began), times
o the sum of (a) the Fed Funds Rate on such day, plus
(b) fifty basis points (50%), plus (c) the Unsecured
Spread, divided by
o three hundred sixty.
(c) Additional Rent. All amounts which Electroglas is
required to pay to or on behalf of BNPLC pursuant to this Lease, together with
every charge, premium, interest and cost set forth herein which may be added
for nonpayment or late payment thereof, shall constitute rent (all such
amounts, other than Base Rent, are herein called "ADDITIONAL RENT", and
together Base Rent and Additional Rent are herein sometimes called "RENT").
(d) No Demand or Setoff. Except as expressly provided
herein, Electroglas shall pay all Rent without notice or demand and without
counterclaim, deduction, setoff or defense.
(e) Upfront Fee. Upon execution and delivery of this
Lease by BNPLC, Electroglas shall pay BNPLC an upfront fee (the "UPFRONT FEE")
as provided in the letter dated March 4, 1997 from BNPLC and BNPLC's Parent to
Electroglas (less the deposit already paid by Electroglas pursuant to that
letter which will be applied against the Upfront Fee). The Upfront Fee shall
represent Additional Rent for the first Base Rent Period.
(f) Administrative Fees. Electroglas may agree, as part
of any Construction Funding Agreement, to pay BNPLC periodic administrative
fees ("ADMINISTRATIVE FEES") to compensate BNPLC for overhead required to
process Electroglas' requests for Construction Draws and to administer this
Lease during the construction of any Construction Project. Each payment of
Administrative Fees, if any, shall represent Additional Rent for the Base Rent
Period during which it first becomes due. However, absent a Construction
Funding Agreement providing for such fees, there shall be no accrual of
Administrative Fees under this Lease.
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<PAGE> 14
(g) Commitment Fees. For each Base Rent Period that will
end on an Advance Date, Electroglas may agree, as part of any Construction
Funding Agreement, to pay BNPLC a fee (a "COMMITMENT FEE") equal to:
(i) a percentage established in any such agreement, times
(ii) the difference at the end of the first day of such
Base Rent Period between (A) the Maximum Construction
Allowance and (B) the sum (computed without deduction
for any Qualified Payments) of all Construction
Advances made by or on behalf of BNPLC and any
Carrying Costs added to and made a part of the
Construction Allowance, times
(iii) the number of days in such Base Rent Period, divided
by
(iv) three hundred sixty.
Absent a Construction Funding Agreement providing for such fees, there shall be
no accrual of Commitment Fees under this Lease.
(h) Default Interest and Order of Application. All Rent
shall bear interest, if not paid when first due, at the Default Rate in effect
from time to time from the date due until paid; provided, that nothing herein
contained will be construed as permitting the charging or collection of
interest at a rate exceeding the maximum rate permitted under Applicable Laws.
BNPLC shall be entitled to apply any amounts paid by or on behalf of
Electroglas against any Rent then past due in the order the same became due or
in such other order as BNPLC may elect.
5. Payment of Executory Costs and Losses Related to the Property.
(a) "Net" Lease Generally. It is the intention of BNPLC
and Electroglas that the Base Rent, Administrative Fees, Commitment Fees, the
Upfront Fee and other payments herein specified shall be absolutely net to
BNPLC and that, except as expressly provided to the contrary herein or in the
Purchase Documents, Electroglas shall pay all costs, expenses and obligations
of every kind relating to the Property or this Lease which may arise or become
due, including: (i) any taxes payable by virtue of BNPLC's receipt of amounts
paid to or on behalf of BNPLC in accordance with this Paragraph 0; (ii) any
amount for which BNPLC is or becomes liable with respect to the Permitted
Encumbrances or the Development Documents; and (iii) any costs incurred by
BNPLC (including Attorneys' Fees) because of BNPLC's acquisition or ownership
of any interest in the Property or because of this Lease or the transactions
contemplated herein.
However, the preceding sentence shall not be construed to make
Electroglas liable for (1) damages, costs, expenses or obligations suffered by
BNPLC because of (and attributed by any applicable principles of comparative
fault to) BNPLC's own Established Misconduct, (2) Excluded Taxes, (3)
withholding taxes permitted by subparagraph 0, (4) general overhead or internal
administrative expenses of BNPLC or any other Interested Party, except to the
extent allowed by subparagraph 0 because of changes described in that
subparagraph after the Effective Date, or (5) Liens Removable by BNPLC.
(b) Impositions. Electroglas shall pay or cause to be
paid prior to delinquency all ad valorem taxes assessed against the Property
and other Impositions. If requested by BNPLC from time to time, Electroglas
shall furnish BNPLC with receipts showing payment of all Impositions prior to
the applicable default date therefor.
Notwithstanding the foregoing, Electroglas may in good faith, by
appropriate proceedings, contest the validity, applicability or amount of any
asserted Imposition, and pending such contest Electroglas shall not be deemed
in default hereunder if (1) Electroglas diligently prosecutes such contest to
completion in a manner reasonably satisfactory to BNPLC, and (2) Electroglas
promptly causes to be paid any amount adjudged by a court of competent
jurisdiction to be due, with all costs, penalties and interest thereon,
promptly after such judgment becomes final; provided, however, in any event
each such contest shall be concluded and the contested Impositions must be paid
by Electroglas prior to the earlier of (i) the date that any criminal action is
overtly threatened or instituted against BNPLC or its directors, officers or
employees because of the nonpayment thereof
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<PAGE> 15
or (ii) the date any writ or order is issued under which any property owned or
leased by BNPLC (including the Property) may be seized or sold or any other
action is taken or overtly threatened against BNPLC or against any property
owned or leased by BNPLC because of the nonpayment thereof, or (iii) any
Designated Sale Date upon which, for any reason, Electroglas or an Affiliate of
Electroglas or any Applicable Purchaser shall not purchase BNPLC's interest in
the Property pursuant to the Purchase Agreement for a net price to BNPLC (when
taken together with any additional payments made by Electroglas pursuant to
Paragraph 1(a)(ii) of the Purchase Agreement, in the case of a purchase by an
Applicable Purchaser) equal to Stipulated Loss Value.
(c) Increased Costs; Capital Adequacy Charges.
(i) If, after the Effective Date, there shall be any
increase in the cost to BNPLC's Parent or any other Participant
agreeing to make or making, funding or maintaining advances to BNPLC
in connection with the Property because of any Banking Rules Change,
then Electroglas shall from time to time, pay to BNPLC for the account
of BNPLC's Parent or such other Participant, as the case may be,
additional amounts sufficient to compensate BNPLC's Parent or the
Participant for such increased cost. An increase in costs resulting
from any imposition or increase of reserve requirements applicable to
Collateral held from time to time by BNPLC's Parent or other
Participants pursuant to the Pledge Agreement would be an increase
covered by the preceding sentence. A certificate as to the amount of
such increased cost, submitted to BNPLC and Electroglas by BNPLC's
Parent or the other Participant, shall be conclusive and binding upon
Electroglas, absent clear and demonstrable error.
(ii) BNPLC's Parent or any other Participant may demand
additional payments ("CAPITAL ADEQUACY CHARGES") if BNPLC's Parent or
the other Participant determines that any Banking Rules Change affects
the amount of capital to be maintained by it and that the amount of
such capital is increased by or based upon the existence of advances
made or to be made to BNPLC to permit BNPLC to maintain BNPLC's
investment in the Property or to make Construction Advances. To the
extent that BNPLC's Parent or another Participant demands Capital
Adequacy Charges as compensation for the additional capital
requirements reasonably allocable to such investment or advances,
Electroglas shall pay to BNPLC for the account of BNPLC's Parent or
the other Participant, as the case may be, the amount so demanded.
Without limiting the foregoing, BNPLC and Electroglas hereby
acknowledge and agree that the provisions for calculating Base Rent
set forth herein reflect the assumption that the Pledge Agreement will
cause a risk weight of no more than twenty percent (20%) to be
assigned to a percentage (equal to the Collateral Percentage) of the
collective investment of BNPLC and the Participants in the Property
pursuant to 12 Code of Federal Regulations, part 225, as from time to
time supplemented or amended, or pursuant to any other similar or
successor statute or regulation applicable to BNPLC and the
Participants. If and so long as such risk weight is increased because
of a Banking Rules Change, Capital Adequacy Charges may be collected
to yield the same rate of return to BNPLC, BNPLC's Parent and any
other Participants (net of their costs of maintaining required capital
related to the Property or this Lease) that they would have enjoyed
from this Lease absent such increase.
(iii) Any amount to be paid by Electroglas under this
subparagraph 0 shall be due within ten days after a demand for such
payment is made upon Electroglas.
(d) Electroglas' Payment of Other Losses; General
Indemnification.
(i) Except for costs paid by BNPLC with the proceeds of
the Initial Funding Advance as part of the Transaction Expenses, all
Losses (including Environmental Losses) asserted against or incurred
or suffered by BNPLC or other Interested Parties at any time and from
time to time by reason of, in connection with or arising out of (A)
their ownership or alleged ownership of any interest in the Property
or the Rents, (B) the use and operation of the Property, (C) the
negotiation or administration of this Lease or the Purchase Documents,
(D) the making of Funding Advances, (E) any Construction Project, (F)
the breach by Electroglas of this Lease or any other document executed
by Electroglas in connection herewith, (G) any failure of the Property
or Electroglas itself to comply with Applicable Laws, (H) Hazardous
Substance Activities, including those occurring prior to Effective
Date or (I) any bodily or personal injury or death or property damage
occurring in or upon or in the vicinity of the Property through any
cause whatsoever, shall be paid by Electroglas, and Electroglas shall
indemnify and defend
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<PAGE> 16
BNPLC and other Interested Parties from and against all such Losses.
(ii) THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE
BENEFIT OF BNPLC AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY
SET FORTH IN THE PRECEDING SUBPARAGRAPH 0, SHALL, SUBJECT ONLY TO
SUBPARAGRAPH 0, APPLY EVEN IF AND WHEN THE SUBJECT MATTERS OF THE
INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE
OR STRICT LIABILITY OF BNPLC OR ANOTHER INTERESTED PARTY.
(iii) Costs and expenses for which Electroglas shall be
responsible pursuant to this subparagraph 0 will include appraisal
fees incurred in connection with BNPLC's acquisition of the Land or
with any appraisal contemplated herein, filing and recording fees,
inspection fees, survey fees, taxes, brokerage fees and commissions,
abstract fees, title policy fees, Uniform Commercial Code search fees,
escrow fees and Attorneys' Feesincurred by BNPLC with respect to the
Property, whether such costs and expenses are incurred at the time of
execution of this Lease or at any time during the Term. Such costs
and expenses will also include Attorneys' Fees or other costs incurred
to evaluate lien releases and other information submitted by
Electroglas with requests for Construction Advances.
(iv) Subject to the limitation concerning the Loss Cutoff
Date in the definition of "Losses" as set forth in the List of Defined
Terms, Electroglas' obligations under this subparagraph 0 shall
survive the termination or expiration of this Lease. Any amount to be
paid by Electroglas under this subparagraph 0 shall be due within ten
days after a demand for such payment is made upon Electroglas.
(v) If an Interested Party notifies Electroglas of any
claim or proceeding included in, or any investigation or allegation
concerning, Losses for which Electroglas is responsible pursuant to
this subparagraph 0, Electroglas shall assume on behalf of the
Interested Party and conduct with due diligence and in good faith the
investigation and defense thereof and the response thereto with
counsel selected by Electroglas, but reasonably satisfactory to the
Interested Party; provided, that the Interested Party shall have the
right to be represented by advisory counsel of its own selection and
at its own expense; and provided further, that if any such claim,
proceeding, investigation or allegation involves both Electroglas and
the Interested Party and the Interested Party shall have been advised
in writing by counsel that there may be legal defenses available to it
which are inconsistent with those available to Electroglas, then the
Interested Party shall have the right to select separate counsel to
participate in the investigation and defense of and response to such
claim, proceeding, investigation or allegation on its own behalf, and
Electroglas shall pay or reimburse the Interested Party for all
Attorney's Fees incurred by the Interested Party because of the
selection of such separate counsel. If Electroglas fails to assume
promptly (and in any event within fifteen days after being notified of
the applicable claim, proceeding, investigation or allegation) the
defense of the Interested Party, then the Interested Party may contest
(or settle, with the prior written consent of Electroglas, which
consent will not be unreasonably withheld) the claim, proceeding,
investigation or allegation at Electroglas' expense using counsel
selected by the Interested Party. Moreover, if any such failure by
Electroglas continues for thirty days or more after Electroglas is
notified of any such claim, proceeding, investigation or allegation,
the Interested Party may elect not to contest or continue contesting
the same and instead settle (or pay in full) all claims related
thereto without Electroglas' consent and without releasing Electroglas
from any obligations to the Interested Party under this subparagraph 0
so long as, in the written opinion of reputable counsel to the
Interested Party, the settlement or payment in full is clearly
advisable.
(vi) Notwithstanding the foregoing, Electroglas shall not
be required by this subparagraph 0 to pay (1) Losses incurred or
suffered by Participants in connection with their negotiation or
execution of the Participation Agreement or Pledge Agreement (or
supplements making them parties thereto or any amendment thereto) or
in connection with any due diligence they may undertake before
entering into the Participation Agreement or Pledge Agreement, (2) an
allocation of general overhead or internal administrative expenses of
BNPLC or any other Interested Party, (3) Excluded Taxes, (4) Losses
incurred or suffered by any Interested Party that are proximately
caused by (and attributed by any applicable principles of comparative
fault to) the Established Misconduct of that Interested Party, (5)
damages for the breach by any Interested Party of the express
provisions of any of the Lease, the Purchase Documents or the
Participation Agreement to which such Interested Party is bound, or
(6) any amount by which the
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<PAGE> 17
value of the Property is less than Stipulated Loss Value because of
general market conditions and not because of a breach of this Lease by
Electroglas. Further, Electroglas shall not be required by this
subparagraph 0 to remove, discharge or pay any Liens Removable by
BNPLC. Further, if an Interested Party receives a written notice of
Losses that such Interested Party believes are covered by subparagraph
0, then such Interested Party will be expected to promptly furnish a
copy of such notice to Electroglas. The failure to so provide a copy
of the notice to Electroglas shall not excuse Electroglas from its
obligations under subparagraph 0; provided, that if Electroglas is
unaware of the matters described in the notice and such failure
renders unavailable defenses that Electroglas might otherwise assert,
or precludes actions that Electroglas might otherwise take, to
minimize its obligations, then Electroglas shall be excused from its
obligation to indemnify such Interested Party (and any Affiliate of
such Interested Party) against the Losses, if any, which would not
have been incurred or suffered but for such failure. For example, if
BNPLC fails to provide Electroglas with a copy of a notice of an
obligation covered by the indemnity set out in subparagraph 0 and
Electroglas is not otherwise already aware of such obligation, and if
as a result of such failure BNPLC becomes liable for penalties and
interest covered by the indemnity in excess of the penalties and
interest that would have accrued if Electroglas had been promptly
provided with a copy of the notice, then Electroglas will be excused
from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the
excess.
(e) Withholding Taxes. Notwithstanding anything to the
contrary in Paragraph 0, and notwithstanding anything else to the contrary in
this Paragraph 0, but subject to the provisions of this subparagraph 0, to the
extent required by law Electroglas may deduct United States of America
withholding taxes imposed as a way of collecting or in lieu of Excluded Taxes
on payments of Base Rent, Administrative Fees, Commitment Fees, the Upfront
Fee, any Carrying Costs and any interest payable pursuant to subparagraph 0 or
any additional compensation claimed by BNPLC pursuant to subparagraph 0
(collectively, "INCOME PAYMENTS") from Income Payments, without obligation to
gross up, indemnify or otherwise increase payments in consequence thereof.
Such withholding, without obligation to gross up, indemnify or otherwise
increase payments in consequence thereof, will be permitted if, but only if:
(i) in the case of withholding for Excluded Taxes imposed
by the United States of America, the Person entitled to receive Income
Payments (whether BNPLC, as the original landlord named herein, or an
assignee of the original landlord's rights hereunder, a "PAYEE") is
not exempt from withholding by reason of having been organized under
the laws of the United States of America or any State thereof, and
such Person shall not have provided Electroglas with three
counterparts of each of the forms prescribed by the Internal Revenue
Service (Form 1001 or 4224, or successor forms, as the case may be)
claiming for Payee an exemption from federal withholding on all Income
Payments;
(ii) at least thirty days prior to any withholding from or
reduction of Income Payments, Electroglas shall have notified the
Payee that Electroglas believes the withholding is required and
permitted by this subparagraph; and
(iii) the withholding taxes on the Income Payments would
have been assessed even if the applicable taxing authorities had
characterized the transactions evidenced by this Lease and the
Purchase Agreement as a financing arrangement.
Any Payee exempt from withholding for Excluded Taxes imposed by the United
States of America by reason of having been organized under the laws of the
United States of America or any State thereof shall provide to Electroglas
statements conforming to the requirements of Treasury Regulation 1.1441-5(b) or
any successor thereto (which statements may be made on a Form W-9). If
Electroglas shall ever be required to pay Excluded Taxes that BNPLC has failed
to pay when due because of Electroglas' failure to withhold from payments made
under this Lease, BNPLC shall reimburse Electroglas for such Excluded Taxes and
for any penalties or interest thereon charged to Electroglas. Nothing in this
subparagraph 0 shall excuse Electroglas from its obligation under subparagraph
0 to compensate BNPLC for increased costs attributable to any change in law
relating to withholding taxes after the Effective Date (including, for example,
any increase in the cost of complying with requirements for obtaining a refund
of withholding taxes, in contrast to the withholding taxes themselves).
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6. Construction.
(a) Advances Generally.
(i) Requirement of a Construction Funding Agreement. By
a Construction Funding Agreement modifying this Lease, BNPLC may
approve of plans or renderings submitted for an initial Construction
Project and the Maximum Construction Allowance may be increased to an
amount above zero; provided, however, that before agreeing to any such
increase, BNPLC must be satisfied in its sole and absolute discretion
with the financial condition of Electroglas, and the form and
substance of any such Construction Funding Agreement must be in form
and substance satisfactory to both BNPLC and Electroglas, each in its
sole and absolute discretion. Neither Electroglas nor BNPLC is
willing to submit itself to a risk of liability or loss of rights
hereunder for being judged unreasonable in negotiating any
Construction Funding Agreement. Accordingly, both Electroglas and
BNPLC hereby disclaim any obligation express or implied to be
reasonable in negotiating any such agreement.
(ii) Funding of Construction Advances. If BNPLC and
Electroglas do hereafter execute a Construction Funding Agreement,
then BNPLC shall, subject to the conditions set forth below, make
Construction Advances on Advance Dates from time to time as requested
by Electroglas to reimburse Electroglas for or to pay the cost of
Construction Projects incurred on behalf of BNPLC and for any
Commitment Fees and Administrative Fees. To the extent, if any,
expressly so provided in a Construction Funding Agreement, charges
(herein collectively called "CARRYING COSTS") shall accrue in lieu of
all or part of the Base Rent that would otherwise be required for
construction periods and shall be added to (and thereafter be included
in) the Outstanding Construction Allowance on Advance Dates. As used
herein, references to the "OUTSTANDING CONSTRUCTION ALLOWANCE" mean
the difference on the date in question (but not less than zero) of (A)
the total Construction Advances made by BNPLC on or prior to the date
in question, plus (B) any Carrying Costs added on or prior to the date
in question, less (C) any funds received and applied as Qualified
Payments on or prior to the date in question; provided, that BNPLC
will not be under any obligation to readvance any portion of the
Construction Allowance repaid by Qualified Payments. Notwithstanding
the foregoing, if for any reason Stipulated Loss Value (and thus the
Outstanding Construction Allowance included as a component thereof)
must be determined under this Lease as of any date between Advance
Dates, the Outstanding Construction Allowance determined on such date
shall equal the Outstanding Construction Allowance on the immediately
preceding Advance Date computed in accordance with the preceding
sentence, plus any Carrying Costs accruing on and after such preceding
Advance Date to but not including the date in question.
(b) Construction Projects.
(i) Preconstruction Approvals. Electroglas shall submit
and obtain BNPLC's written approval of plans or renderings for any
Construction Project prior to commencement of the Construction
Project. BNPLC may disapprove of such plans or other items if, but
only if, BNPLC believes in good faith that the Construction Project
proposed by Electroglas will (1) fail to satisfy the requirements set
forth in subparagraph 0, (2) change the general character of the
Property from that needed to accommodate the uses permitted by
subparagraph 0 or (3) cause Electroglas or the Property to violate
some other express provision of this Lease; but no approval given by
BNPLC in connection with any Construction Project, prior to or after
the Effective Date, shall constitute a waiver of subparagraph 0 or of
any other provision of this Lease. Any items hereafter submitted by
Electroglas to satisfy this subparagraph shall be sufficiently
detailed to allow BNPLC to make a reasonable determination of whether
the applicable Construction Project will satisfy subparagraph 0, but
need not include all detailed construction specifications and drawings
of the work to be included in the Construction Project. All
Construction Projects commenced by Electroglas, including any initial
Construction Project which is contemplated in a Construction Funding
Agreement, and all construction contracts and other agreements
executed or adopted by Electroglas in connection therewith, must be
not materially inconsistent with the plans or other items submitted to
and approved by BNPLC as described above in this subparagraph, except
to the extent otherwise provided by any Scope Changes approved as
described below.
(ii) Scope Changes. Before making a Scope Change to any
Construction Project, Electroglas
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<PAGE> 19
shall provide to BNPLC a reasonably detailed written description of
the Scope Change, a revised construction budget (only if such Scope
Change will result in an increase in the anticipated cost of the
applicable Project, such that Construction Advances required for such
project could exceed any limit to which Electroglas had previously
agreed pursuant to subparagraph 0) and a copy of any changes to the
drawings, plans and specifications for the Improvements required in
connection therewith, all of which must be approved in writing by
BNPLC (or by any construction representative appointed by BNPLC from
time to time) before the Scope Change is implemented. BNPLC may
disapprove of any Scope Change if, but only if, BNPLC believes in good
faith that the Construction Project proposed by Electroglas, as
modified by the Scope Change, will (1) fail to satisfy the
requirements set forth in subparagraph 0, (2) change the general
character of the Property from that needed to accommodate the uses
permitted by subparagraph 0 or (3) cause Electroglas or the Property
to violate some other express provision of this Lease; but BNPLC's
approval shall not constitute a waiver of subparagraph 0 or of any
other provision of this Lease.
(iii) Failure by BNPLC to Respond to a Request for
Approval. If, after the execution of a Construction Funding
Agreement, Electroglas submits any request for BNPLC's approval of a
Construction Project or a Scope Change pursuant to the preceding
subparagraphs more than twelve months before the scheduled end of the
Term, yet BNPLC fails to respond to such request within ten days after
BNPLC's receipt of the request, then Electroglas may proceed as if
BNPLC had approved the applicable Construction Project or Scope
Change; provided, however:
a) Electroglas may not proceed if any Event of
Default has occurred and is continuing.
b) Electroglas must notify BNPLC that
Electroglas will proceed with the Construction Project or
Scope Change, notwithstanding BNPLC's failure to respond, and
in the notice Electroglas must certify that in Electroglas'
good faith judgement BNPLC cannot, in accordance with the
criteria specified in subparagraph 0 or subparagraph 0, as the
case may be, decline to give its approval.
c) If Electroglas does proceed without BNPLC's
express approval, BNPLC may at any time within six months
prior to the scheduled end of the Term obtain an appraisal of
the Property in form and scope reasonably satisfactory to
BNPLC from an independent appraiser satisfactory to BNPLC, and
if the appraisal indicates that the Construction Project for
which Electroglas requested the approval did not (or when
completed will not) satisfy the requirements of subparagraph
0, then Electroglas must upon demand pay to BNPLC as a
Qualified Payment any amount needed to reduce the sum of (A)
Stipulated Loss Value, plus (B) Carrying Costs (if any)
projected by BNPLC to accrue prior to completion of the
applicable Construction Project, to no more than two hundred
percent (200%) of the Current Value of the Property indicated
by such appraisal.
(iv) Responsibility for Construction. Electroglas shall
have sole responsibility for contracting for and administering all
Construction Projects, it being understood that although title to all
Improvements will pass directly to BNPLC (as more particularly
provided in Paragraph 0), BNPLC's obligation with respect to
Construction Projects shall be limited to the making of advances under
and subject to the conditions set forth in this Paragraph 0. No
contractor or other third party shall be entitled to require BNPLC to
make advances as a third party beneficiary of this Lease or otherwise.
Notwithstanding delays beyond Electroglas' control, and even if the
Construction Allowance is not sufficient to pay for completion of any
Construction Project, Electroglas warrants that on the Designated Sale
Date it shall have (1) caused all Construction Projects which are
commenced prior to such date to have been completed in a good and
workmanlike manner, substantially in accordance with Applicable Laws,
and otherwise in compliance with (x) the provisions of this Lease, (y)
the material provisions of the Permitted Encumbrances and (z) the
material provisions of the Development Documents, and (2) obtained
with respect to then existing Improvements any final certificates of
occupancy required for the use and occupancy thereof.
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<PAGE> 20
(v) Value Added. Any Construction Project commenced by
Electroglas must, upon completion and taken as a whole, enhance the
value of the Property such that the Current Value of BNPLC's interest
in the Property shall be no less than fifty percent (50%) of
Stipulated Loss Value when the Construction Project is complete;
however:
(1) this subparagraph 0 will not preclude
Electroglas from obtaining Construction Advances for soft
costs (such as architectural fees, consultant fees, Attorneys'
Fees, design costs, permitting costs and other amounts paid to
any governmental authority), demolition costs, environmental
remediation costs, payroll costs or other costs that do not,
individually, add value to the Property but that are incurred
in connection with a Construction Project which will in the
aggregate satisfy this subparagraph 0;
(2) to address any concerns BNPLC may express about
Electroglas' ability to satisfy this subparagraph 0 for a
Construction Project, Electroglas may by a notice to BNPLC
stipulate a maximum amount of Construction Advances that BNPLC
will be required to make for such Construction Project, in
which case BNPLC shall not be required to make Construction
Advances for such project in excess of the amount so
stipulated; and
(3) if BNPLC invokes this subparagraph 0 as
justification for disapproving of a Construction Project (or
Scope Change), then Electroglas may satisfy this subparagraph
0 by (A) stipulating a maximum amount of Construction Advances
that BNPLC will be required to make for the applicable
Construction Project as provided in the preceding clause, and
(B) establishing that the Current Value of the Property will
be no less than fifty percent (50%) of Stipulated Loss Value
upon completion of the Construction Project and after BNPLC
provides Construction Advances equal to the maximum so
stipulated.
(vi) Estoppel Letters Required. Upon the execution of
each general construction contract for the initial Construction
Project and any material subsequent Construction Projects, Electroglas
shall cause the contractor thereunder to execute and deliver to BNPLC
an estoppel letter substantially in the form of Exhibit 0 attached
hereto. Electroglas shall also cause the architect and engineer under
any material architectural or engineering contract for a Construction
Project to execute and deliver to BNPLC an estoppel letter
substantially in the form of Exhibit 0 attached hereto.
(vii) Advances Not a Waiver. No funding of Construction
Advances and no failure of BNPLC to object to any Construction Project
proposed or constructed by Electroglas shall constitute a waiver by
BNPLC of the requirements contained in this subparagraph 0.
(c) Conditions to Construction Advances. BNPLC's
obligation to make Construction Advances from time to time under this Paragraph
0 shall be subject to the following terms and conditions, all of which are
intended for the sole benefit of BNPLC:
(i) Prior Notice. Electroglas must make a request in
substantially the form attached to this Lease as Exhibit 0 for any
Construction Advance at least five Business Days prior to the Advance
Date upon which the advance is to be paid. BNPLC shall consider in
good faith any changes to the Construction Advance request forms
attached hereto that Electroglas may reasonably request for a
particular Construction Project, provided the requested changes do not
impair BNPLC's rights or create or increase any liability BNPLC may
have in connection with the applicable Construction Project.
(ii) Amount of the Advances. No Construction Advance
shall exceed the lesser of:
a) the Maximum Construction Allowance, less the
then Outstanding Construction Allowance (computed after adding
any Carrying Costs accrued for the period ending on the
Advance Date upon which such Construction Advance is to be
made) and less any Qualified Payments previously deducted for
purposes of computing such Outstanding Construction Allowance;
or
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<PAGE> 21
b) (1) the actual costs and expenses previously
incurred or paid by Electroglas (in addition to expenses
already included in Transaction Expenses) for the preparation,
negotiation and execution of this Lease and the Purchase
Documents, for Construction Projects (including soft costs),
or as Commitment Fees or Administrative Fees, less (2) the sum
of all prior Construction Advances made under this Paragraph 0
to Electroglas as reimbursement for such costs and expenses.
(iii) Other Restrictions on the Amount of Advances. No
Construction Advance shall be required that would cause the cost of
completing any Construction Project previously commenced, as estimated
by BNPLC in good faith, to exceed the difference computed by
subtracting (1) the Carrying Costs then projected by BNPLC to be added
to the Construction Allowance, from (2) the Construction Allowance
remaining to be advanced. Nor shall any Construction Advance (other
than the final Construction Advance) be requested for an amount less
than $500,000.
(iv) Insurance. Electroglas shall have obtained and
provided certificates (or, in the case of clause a) below, title
policies or binders) reasonably satisfactory to BNPLC evidencing
insurance covering the Property as follows (in addition to the
liability insurance required under subparagraph 0):
a) Title Insurance. An owner's title
insurance policy (or binder committing the applicable title
insurer to issue an owner's title insurance policy, without
the payment of further premiums) in the amount of no less than
sum of the Initial Funding Advance plus the Maximum
Construction Allowance, in form and substance satisfactory to
BNPLC, written by one or more title insurance companies
satisfactory to BNPLC and insuring BNPLC's fee interest in the
Land and Improvements to be constructed on the Land; and
b) Builder's Risk Insurance. Builder's
Completed Value Risk and such other hazard insurance as is
reasonably required to protect BNPLC's and Electroglas'
interests in the Improvements under construction against risks
of physical loss, such insurance to be maintained by
Electroglas (or by its general contractor) at all times until
completion of the initial Construction Project or any
subsequent Construction Projects in accordance with the
standards and requirements set forth in subparagraph 0.
(v) Progress of Construction. Each Construction Project
which has commenced but not yet been completed shall be progressing in
a good and workmanlike manner and substantially in accordance with
Applicable Laws, with Permitted Encumbrances, with Development
Documents and with the requirements of this Lease, and Electroglas
shall have corrected or be diligently pursuing the correction of any
significant defect in the construction thereof of which Electroglas
has received notice.
(vi) Evidence of Costs and Expenses to be Reimbursed. To
the extent contemplated by the Construction Advance request forms
attached as Exhibit 0, or otherwise reasonably required by BNPLC at
the time a Construction Advance is to be made, Electroglas shall have
submitted invoices, requests for payment from contractors and other
evidence that all costs and expenses for which Electroglas requests
reimbursement constitute actual costs and expenses incurred by
Electroglas for a Construction Project.
(vii) No Sale of BNPLC's Interest. No sale of BNPLC's
interest in the Property shall have occurred pursuant to the Purchase
Agreement.
(viii) No Event of Default. No Event of Default shall have
occurred and be continuing under this Lease.
(ix) Certificate of No Default and Other Matters.
Electroglas shall have provided to BNPLC, with the notice requesting
the Construction Advance described in clause (i) above, a current
certificate of an officer of Electroglas in the form included in
Exhibit 0 [with no significant exceptions listed in part b) of the
certificate] and shall have provided a copy of such certificate to the
Participants. Without limiting
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<PAGE> 22
the foregoing, BNPLC may decline to advance any amount when
Electroglas is unable to truthfully certify, as contemplated in
Exhibit 0, that no liens are being asserted against any part of or
interest in the Property that in the aggregate secure or allegedly
secure more than $1,000,000 of claims by Potential Lien Claimants,
regardless of whether any such liens have caused an Event of Default
to occur hereunder or are being contested by Electroglas as permitted
by subparagraph 0. (As used in this subparagraph a lien will be
considered as "being asserted" if a claim of lien relating thereto
shall have been recorded and not discharged by payment or settlement.)
(x) Funding by Participants. Any condition set forth in
the Construction Funding Agreement concerning funding by Participants
shall have been satisfied.
(d) Breakage Costs for Construction Advances Requested
But Not Taken. If Electroglas requests but thereafter declines to accept any
Construction Advance, or if Electroglas requests a Construction Advance that it
is not permitted to take because of its failure to satisfy any of the
conditions specified in subparagraph 0, Electroglas shall pay upon demand any
resulting Breakage Costs. However, for purposes of this subparagraph, a
request for a Construction Advance by Electroglas will be considered as if it
had never been made if BNPLC actually receives written notice from Electroglas,
no later than three Business Days prior to the Advance Date upon which the
requested advance is to be made, stating that Electroglas unconditionally
rescinds the request.
7. Other Obligations of and Limited Representations by BNPLC.
(a) Cooperation of BNPLC to Facilitate Construction and
Development. During the Term BNPLC shall take any action reasonably requested
by Electroglas to facilitate the construction or development of the Property
permitted by this Lease; provided, however, that:
(i) This subparagraph 0 shall not impose upon BNPLC the
obligation to take any action that can be taken by Electroglas,
Electroglas' Affiliates or anyone else other than BNPLC as the owner
of the Land, the Improvements or any other interests in the Property.
(ii) Without limiting BNPLC's obligations under Paragraph 0,
BNPLC shall not be required by this subparagraph 0 to make any payment
to another Person unless BNPLC shall first have received funds from
Electroglas, in excess of any other amounts due from Electroglas
hereunder, sufficient to make the payment.
(iii) BNPLC shall have no obligations whatsoever under this
subparagraph at any time when an Event of Default shall have occurred
and be continuing.
(iv) Electroglas must request any action to be taken by BNPLC
pursuant to this subparagraph, and such request must be specific and
in writing, if required by BNPLC at the time the request is made.
(v) No action may be required of BNPLC pursuant to this
subparagraph 0 that could constitute a violation of any Applicable
Laws or compromise or constitute a waiver of BNPLC's rights under
other provisions of this Lease or the Purchase Documents or that for
any other reason is reasonably objectionable to BNPLC.
The actions BNPLC shall take pursuant to this subparagraph 0 if
reasonably requested by Electroglas will include, subject to the conditions
listed in the proviso above, joining in or consenting to any (I) grant of
easements, licenses, rights of way, and other rights in the nature of easements
encumbering the Real Property, (II) release or termination of easements,
licenses, rights of way or other rights in the nature of easements which are
for the benefit of the Real Property or any portion thereof, (III) dedication
or transfer of portions of the Land not improved with a building, for road,
highway or other public purposes, (IV) agreements (other than with Electroglas
or its Affiliates) for the use and maintenance of common areas, for reciprocal
rights of parking, for ingress and egress and for amendments to any Permitted
Encumbrances or Development Documents (including amendments to the Development
Documents that Electroglas may reasonably request to facilitate construction or
development on land owned by it or its Affiliates other than the Land), (V)
instruments necessary or desirable for
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<PAGE> 23
the exercise or enforcement of rights under the Permitted Encumbrances, the
Development Documents or any contract, permit, license, franchise or other
right included within the term "Property", (VI) permit applications or other
documents reasonably required to accommodate the construction or alteration of
Improvements otherwise permitted by this Lease, (VII) confirmations of
Electroglas' rights under any particular provisions of this Lease which
Electroglas may wish to provide to a third party, (IX) execution or filing of a
tract or parcel map subdividing the Real Property into lots or parcels or
reconfiguring existing parcels, (X) agreements providing development incentives
or tax abatements with respect to the Property. However, the determination of
whether any such action is reasonably requested or reasonably objectionable to
BNPLC may depend in whole or in part upon the extent to which the requested
action shall result in a lien to secure payment or performance obligations
against BNPLC's interest in the Property, shall cause a decrease in the Current
Value of the Property to less than fifty percent (50%) of Stipulated Loss Value
after any Qualified Payments that may result from such action are taken into
account, or shall impose upon BNPLC any present or future obligations greater
than the obligations BNPLC is willing to accept in reliance on the
indemnifications provided by Electroglas hereunder.
Upon request by Electroglas, BNPLC shall also provide a statement in
writing certifying that this Lease is unmodified and in full effect (or, if
there have been modifications, that this Lease is in full effect as modified,
and setting forth such modifications) and the dates to which the Base Rent and
other amounts payable by Electroglas hereunder have been paid and stating
whether BNPLC is aware of any default by Electroglas that may exist hereunder;
it being intended that any such statement by BNPLC may be relied upon by anyone
with whom Electroglas may intend to enter into an agreement for construction of
the Improvements or other significant agreements concerning the Property.
Any Losses incurred by BNPLC because of any action taken pursuant to
this subparagraph 0 shall be covered by the indemnification set forth in
subparagraph 0. Further, for purposes of such indemnification, any action
taken by BNPLC will be deemed to have been made at the request of Electroglas
if made pursuant to any request of counsel to or any officer of Electroglas (or
with their knowledge, and without their objection) in connection with the
execution or administration of this Lease or the closings under the Existing
Contracts.
To avoid construction delays or for other reasonable cause,
Electroglas may ask BNPLC for an expedited response to any request for action
made by Electroglas pursuant to this subparagraph 0 by delivering such request
with a notice substantially in the form attached hereto as Exhibit 0. BNPLC
shall endeavor in good faith to respond promptly to any such notice after the
receipt of any such notice by an officer of BNPLC.
(b) Actions Permitted by Electroglas Without BNPLC's
Consent. No refusal by BNPLC to execute or join in the execution of any
agreement, application or other document requested by Electroglas pursuant to
the preceding subparagraph 0 shall preclude Electroglas from itself executing
such agreement, application or other document; provided, that in doing so
Electroglas is not purporting to act for BNPLC and does not thereby create or
expand any obligations or restrictions that encumber BNPLC's interest in the
Property. Further, subject to the other terms and conditions of this Lease,
Electroglas shall be entitled to do any of the following in Electroglas' own
name and to the exclusion of BNPLC during the Term without any notice to or
consent of BNPLC so long as no Event of Default has occurred and is outstanding
and so long as Electroglas is not purporting to act for BNPLC and does not
thereby create or expand any obligations or restrictions that encumber BNPLC's
interest in the Property:
(i) to perform obligations arising under and to exercise
and enforce the rights of Electroglas or the owner of the Real
Property under the Development Documents, the Permitted Encumbrances
and the Existing Contracts;
(ii) to perform obligations arising under and to exercise
and enforce the rights of Electroglas or the owner of the Real
Property with respect to any other contracts or documents (such as
building permits) included within the Personal Property; and
(iii) to recover and retain any monetary damages or other
benefit inuring to Electroglas or the owner of the Real Property
through the enforcement of any rights, contracts or other documents
included within the Personal Property (including the Development
Documents and Permitted Encumbrances); provided, that to the extent
any such monetary damages may become payable as compensation for an
adverse impact on value of the Property, the rights of BNPLC and
Electroglas hereunder with respect to
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<PAGE> 24
the collection and application of such monetary damages shall be the
same as for condemnation proceeds payable because of a taking of all
or any part of the Property.
(c) Limited Representations by BNPLC Concerning
Accounting Matters. BNPLC is not expected or required to represent or warrant
that this Lease or the Purchase Documents will qualify for any particular
accounting treatment under GAAP. However, to permit Electroglas to determine
for itself the appropriate accounting for this Lease and the Purchase
Documents, BNPLC does represent to Electroglas the following as of the
Effective Date:
(i) BNPLC is one hundred percent (100%) owned, directly or
indirectly, by BNPLC's Parent, Banque Nationale de Paris.
(ii) BNPLC leases properties of substantial value to more
than fifteen tenants.
(iii) All parties to whom BNPLC has any material obligations
known to BNPLC are (and are expected to be) Affiliates of Banque
Nationale de Paris, Participants or participants with BNPLC in other
leasing deals or loans made by BNPLC, or other tenants or borrowers in
such other leasing deals or loans.
(iv) BNPLC has substantial assets in addition to the
Property, assets which BNPLC believes to have a value far in excess of
the value of the Property.
(v) Other than any Funding Advances provided from time to
time by Participants under the Participation Agreement, BNPLC expects
to obtain all Funding Advances from Banque Nationale de Paris or other
Affiliates of BNPLC (including Funding Advances to cover Carrying
Costs, if any, and other amounts to be capitalized as part of the
Outstanding Construction Allowance, and assuming that Electroglas uses
the Maximum Construction Allowance under this Lease), and to the
extent that Banque Nationale de Paris or such other Affiliates
themselves borrow or accept bank deposits to obtain the funds needed
to provide such Funding Advances, the obligation to repay such funds
shall not be limited, by agreement or corporate structure, to payments
collected from Electroglas or otherwise recovered from the Property.
BNPLC does not presently anticipate any change after the Effective Date in any
of the facts listed above in this subparagraph.
(d) Other Limited Representations by BNPLC. BNPLC
represents that:
(i) No Default or Violation. The execution, delivery and
performance by BNPLC of this Lease and the Purchase Documents do not
and will not constitute a breach or default under any material
contract or agreement to which BNPLC is a party or by which BNPLC is
bound and do not, to the knowledge of BNPLC, violate or contravene any
law, order, decree, rule or regulation to which BNPLC is subject. (As
used in this subparagraph 0, "BNPLC'S KNOWLEDGE" means the present
actual knowledge of Lloyd Cox, the current officer of BNPLC having
primary responsibility for the negotiation of this Lease.)
(ii) No Suits. There are no judicial or administrative
actions, suits, proceedings or investigations pending or, to BNPLC's
knowledge, threatened against BNPLC that are reasonably likely to
affect BNPLC's interest in the Property or the validity,
enforceability or priority of this Lease or the Purchase Documents,
and BNPLC is not in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental or
regulatory authority that could materially and adversely affect the
business or assets of BNPLC or its interest in the Property.
(iii) Enforceability. The execution, delivery and
performance of this Lease and the Purchase Documents by BNPLC are duly
authorized, are not in contravention of or conflict with any term or
provision of BNPLC's articles of incorporation or bylaws and do not,
to BNPLC's knowledge, require the consent or approval of any
governmental body or other regulatory authority that has not
heretofore been obtained or conflict with any Applicable Laws. This
Lease and the Purchase Documents are valid,
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<PAGE> 25
binding and legally enforceable obligations of BNPLC except as such
enforcement is affected by bankruptcy, insolvency and similar laws
affecting the rights of creditors, generally, and equitable principles
of general application; provided, BNPLC makes no representation or
warranty that conditions imposed by zoning ordinances or other state
or local Applicable Laws to the purchase, ownership, lease or
operation of the Property have been satisfied.
(iv) Organization. BNPLC is duly incorporated and legally
existing under the laws of Delaware and is duly qualified to do
business in the State of California. BNPLC has or will obtain on a
timely basis, at Electroglas' expense to the extent so provided in the
other provisions of this Lease, all requisite power and all
governmental certificates of authority, licenses, permits,
qualifications and other documentation necessary to own and lease the
Property and to perform its obligations under this Lease.
(v) Continued Existence. During the Term, BNPLC will
continuously maintain its existence and qualification to do business
in the State of California to the extent necessary for the performance
of BNPLC's obligations hereunder.
(vi) No Prior Assignment. As of the Effective Date, BNPLC
has not assigned or transferred any of its right, title or interest in
or under the Lease or the Purchase Documents except to BNPLC's Parent
in accordance with this Lease.
(vii) No Funding With Plan Assets. BNPLC is not acquiring
its interests in the Property with, and will not knowingly accept any
Funding Advances which constitute, the assets of any employee benefit
plan (or its related trust).
(viii) Not a Foreign Person. BNPLC is not a "foreign
person" within the meaning of Sections 1445 and 7701 of the Code
(i.e., BNPLC is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are
defined in the Code and regulations promulgated thereunder).
(e) Keeping Proprietary Information Confidential. BNPLC
agrees to use reasonable precautions to keep confidential any "proprietary
information" (as defined in Paragraph 0) that BNPLC may receive from
Electroglas or otherwise discover with respect to Electroglas or Electroglas'
business pursuant to this Lease or any investigation by BNPLC hereunder, except
for disclosures: (i) specifically and previously authorized in writing by
Electroglas; (ii) to any permitted assignee of BNPLC as to any interest in the
Property so long as the assignee has agreed in writing to use its reasonable
efforts to keep such information confidential in accordance with the terms of
this subparagraph; (iii) to legal counsel, accountants, auditors, environmental
consultants and other professional advisors to BNPLC so long as BNPLC shall
inform such persons in writing (if practicable) of the confidential nature of
such information and shall direct them to treat such information
confidentially; (iv) to regulatory officials having jurisdiction over BNPLC or
BNPLC's Parent (provided that the disclosing party shall request confidential
treatment of the disclosed information, if practicable); (v) as required by
legal process (provided that the disclosing party shall request confidential
treatment of the disclosed information, if practicable); (vi) of information
which has previously become publicly available through the actions or inactions
of a person other than BNPLC not, to BNPLC's knowledge, in breach of an
obligation of confidentiality to Electroglas; and (vii) to any Participant so
long as the Participant has not repudiated the confidentiality provision
concerning Electroglas' proprietary information set forth in the Participation
Agreement between BNPLC and such Participant.
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(f) Partial Releases. So long as no Event of Default
shall have occurred and be continuing, Electroglas shall have the option from
time to time during the Term to purchase or to designate one or more assignees
to purchase one or more unimproved portions of the Land consisting of one or
more tracts or lots that can be sold under Applicable Laws separate and apart
from the rest of the Land (each, a "PARCEL"), for an amount (such amount with
respect to each Parcel being referred to herein as the "PARCEL RELEASE PRICE")
equal to the higher of (1) the Current Value thereof, or (2) the square footage
thereof times $12,000,000 divided by the square footage of all the Land
described in Exhibit A. Electroglas may exercise such option by delivering to
BNPLC not less than ninety (90) days prior written notice, which written notice
shall describe the Parcel or Parcels to be purchased, the date such Parcels are
to be conveyed by BNPLC and whether the conveyance will be to Electroglas or an
assignee designated in such notice. In each case BNPLC's obligations to convey
such Parcels to Electroglas or Electroglas' assignee shall be subject to
Electroglas' and/or such assignee's satisfaction of each of the following
conditions:
1) BNPLC, Electroglas and, if applicable, such assignee
shall have agreed upon, entered into and recorded such reciprocal
easements, each in form and substance satisfactory to BNPLC, relating
to the Land and the Parcel to be so sold as they shall deem necessary
or reasonably required to preserve usefulness of the Parcels and the
remaining Land after the conveyance;
2) It shall have been established that, following such
conveyance and the application of the Partial Release Price as a
Qualified Payment, the Current Value of the Property retained by BNPLC
will be no less than fifty percent (50%) of Stipulated Loss Value.
3) Electroglas or such assignee shall have paid to BNPLC
the Parcel Release Price for such Parcels; and
4) In addition to the Partial Release Price, Electroglas
or such assignee shall have paid any Breakage Costs resulting from a
sale on any date other than the day upon which ends a Base Rent Period
and all costs and expenses necessary to consummate the sale, including
all Attorneys' Fees of BNPLC.
Upon Electroglas' or such assignee's satisfaction of each of the foregoing
conditions, BNPLC shall convey such Parcel or Parcels to Electroglas or such
assignee pursuant to a quitclaim transfer of all of BNPLC's right, title and
interest therein on an "AS IS, WHERE IS AND WITH ALL FAULTS" basis free and
clear of this Lease, the Purchase Agreement and any Liens Removable by BNPLC,
but otherwise without recourse, representation or warranty of any kind.
8. Status of Property Acquired With Funds Provided by BNPLC.
Subject in each case to Electroglas' rights under the other provisions of this
Lease, all Improvements and all furnishings, furniture, chattels, permits,
licenses, franchises, certificates and other personal property of whatever
nature shall have been acquired on behalf of BNPLC by Electroglas, shall be
owned by BNPLC and shall constitute "Property" covered by this Lease, to the
extent heretofore or hereafter acquired, in whole or in part, with any portion
of the Initial Funding Advance provided to Electroglas or with any Construction
Advances or other funds for which Electroglas has received or hereafter
receives reimbursement from the Initial Funding Advance or Construction
Advances, as shall all renewals or replacements of or substitutions for the
Improvements or any such other Property. Electroglas shall not authorize or
permit the transfer of title to the Improvements or to any other such Property
to pass through Electroglas or Electroglas' Affiliates before it is transferred
to BNPLC from contractors, suppliers, vendors or other third Persons. Nothing
herein shall constitute authorization of Electroglas by BNPLC to bind BNPLC to
any construction contract or other agreement with a third Person, but any
construction contract or other agreement executed by Electroglas for the
acquisition or construction of Improvements or other components of the Property
may provide for the transfer of title as required by the preceding sentence.
Upon request of BNPLC made when any Event of Default has occurred and is
continuing, Electroglas shall deliver to BNPLC an inventory describing all
significant items of Personal Property (and, in the case of tangible personal
property, showing the make, model, serial number and location thereof) other
than Improvements, with a certification by Electroglas that such inventory is
true and complete and that all items specified in the inventory are covered by
this Lease free and clear of any Lien other than the Permitted Encumbrances or
Liens Removable by BNPLC.
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<PAGE> 27
9. Environmental.
(a) Environmental Representations. To the knowledge of
Electroglas, except as otherwise disclosed in the Environmental Report: (i) no
Hazardous Substances Activity has occurred prior to the Effective Date; (ii) no
owner or operator of the Property has reported or been required to report any
release of any Hazardous Substances on or from the Property pursuant to any
Environmental Law; and (iii) no owner or operator of the Property has received
from any federal, state or local governmental authority any warning, citation,
notice of violation or other communication regarding a suspected or known
release or discharge of Hazardous Substances on or from the Property or
regarding a suspected or known violation of Environmental Laws concerning the
Property. Further, Electroglas represents that to its knowledge, the
Environmental Report is not misleading or inaccurate in any material respect.
(b) Environmental Covenants by Electroglas. Electroglas
covenants that:
(i) Electroglas shall not conduct or permit
others to conduct Hazardous Substance Activities, except Permitted
Hazardous Substance Use and Remedial Work.
(ii) Electroglas shall not discharge or permit the
discharge of anything (including Permitted Hazardous Substances) on or
from the Property that would require any permit under applicable
Environmental Laws, other than (1) storm water runoff, (2) waste water
discharges through a publicly owned treatment works, (3) discharges
that are a necessary part of any Remedial Work, and (4) other similar
discharges consistent with the definition herein of Permitted
Hazardous Substance Use, in each case in strict compliance with
Environmental Laws.
(iii) Following any discovery that Remedial Work is
required by Environmental Laws or otherwise reasonably required, and
to the extent not inconsistent with the other provisions of this
Lease, Electroglas shall promptly perform and diligently and
continuously pursue such Remedial Work, in each case in strict
compliance with Environmental Laws.
(iv) If requested by BNPLC in connection with any
significant Remedial Work required by this subparagraph, Electroglas
shall retain an independent Environmental Consultant or Industrial
Hygienist, as appropriate, to evaluate any significant new information
generated during Electroglas' implementation of the Remedial Work and
to discuss with Electroglas whether such new information indicates the
need for any additional measures that Electroglas should take to
protect the health and safety of persons (including, without
limitation, employees, contractors and subcontractors and their
employees) or to protect the environment. Electroglas shall implement
any such additional measures to the extent required with respect to
the Property by Environmental Laws or otherwise reasonably required
and to the extent not inconsistent with the other provisions of this
Lease.
(c) Right of BNPLC to do Remedial Work Not Performed by
Electroglas. If Electroglas' failure to cure any breach of the covenants set
forth in subparagraph 0 continues beyond the Environmental Cure Period (as
defined below), BNPLC may, in addition to any other remedies available to it,
after notifying Electroglas of the Remedial Work BNPLC believes is needed,
conduct all or any part of the Remedial Work. To the extent that Remedial Work
done by BNPLC pursuant to the preceding sentence (including any removal of
Hazardous Substances) is reasonably required, or is required or believed by
BNPLC in good faith to be required by Applicable Law or by any demand,
regulation or guideline of any governmental authority (whether or not having
the force of law), the cost thereof shall be a demand obligation owing by
Electroglas to BNPLC. As used in this subparagraph, "ENVIRONMENTAL CURE
PERIOD" means the period ending on the earlier of: (1) one hundred eighty days
after Electroglas is notified of the breach which must be cured within such
period, (2) the date that any writ or order is issued for the levy or sale of
any property owned by BNPLC (including the Property), (3) the date that any
criminal action is overtly threatened or instituted against BNPLC or any of its
directors, officers or employees because of the breach which must be cured
within such period, or (4) any Designated Sale Date upon which, for any reason,
Electroglas or an Affiliate of Electroglas or any Applicable Purchaser shall
not purchase BNPLC's interest in the Property pursuant to the Purchase
Agreement for a net price to BNPLC (when taken together with any additional
payments made by Electroglas pursuant to Paragraph 1(a)(ii) of the Purchase
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Agreement, in the case of a purchase by an Applicable Purchaser) equal to
Stipulated Loss Value.
(d) Environmental Inspections and Reviews. BNPLC
reserves the right to retain an Environmental Consultant or Industrial
Hygienist to review any report prepared by Electroglas or to conduct BNPLC's
own investigation to confirm whether Electroglas is complying with the
requirements of this Paragraph 0. Electroglas grants to BNPLC and to BNPLC's
agents, employees, consultants and contractors the right during reasonable
business hours and after reasonable notice to enter upon the Property to
inspect the Property and to perform such tests as BNPLC deems necessary or
appropriate to review or investigate Hazardous Substances in, on, under or
about the Property or any discharge or suspected discharge of Hazardous
Substances into groundwater or surface water from the Property. Electroglas
shall promptly reimburse BNPLC for the reasonable fees of its Environmental
Consultants and Industrial Hygienists and the costs of any such inspections and
tests; provided, however, BNPLC's right to reimbursement for the reasonable
fees of any consultant engaged as provided in this subparagraph or for the
costs of any inspections or test undertaken as provided in this subparagraph
shall be limited to the following circumstances: (1) an Event of Default shall
have occurred; (2) BNPLC shall have retained the consultant to establish the
condition of the Property just prior to any conveyance thereof pursuant to the
Purchase Agreement or just prior to the expiration of this Lease; (3) BNPLC
shall have retained the consultant to satisfy any regulatory requirements
applicable to BNPLC or its Affiliates; or (4) BNPLC shall have retained the
consultant because BNPLC has been notified of a violation of Environmental Laws
concerning the Property or BNPLC otherwise reasonably believes that Electroglas
has not complied with the requirements of this Paragraph 0.
(e) Communications Regarding Environmental Matters.
(i) Electroglas shall immediately advise BNPLC
and Participants of (1) any discovery of any event or circumstance
which would render any of the representations of Electroglas herein
concerning environmental matters materially inaccurate or misleading
if made at the time of such discovery and assuming that Electroglas
was aware of all relevant facts, (2) any Remedial Work (or change in
Remedial Work) required or undertaken by Electroglas or its Affiliates
in response to any (A) discovery of any Hazardous Substances on, under
or about the Property other than Permitted Hazardous Substances or (B)
any claim for damages resulting from Hazardous Substance Activities,
(3) Electroglas' discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Property which would or
could reasonably be expected to cause the Property or any part thereof
to be subject to any ownership, occupancy, transferability or use
restrictions under Environmental Laws, or (4) any investigation or
inquiry of any failure or alleged failure by Electroglas to comply
with Environmental Laws affecting the Property by any governmental
authority responsible for enforcing Environmental Laws. In such
event, Electroglas shall deliver to BNPLC within thirty days after
BNPLC's request (or such longer period as may be reasonably required,
but in any event within ninety days after BNPLC's request), a
preliminary written environmental plan setting forth a general
description of the action that Electroglas proposes to take with
respect thereto, if any, to bring the Property into compliance with
Environmental Laws or to correct any breach by Electroglas of this
Paragraph 0, including any proposed Remedial Work, the estimated cost
and time of completion, the name of the contractor and a copy of the
construction contract, if any, and such additional data, instruments,
documents, agreements or other materials or information as BNPLC may
reasonably request.
(ii) Electroglas shall provide BNPLC and
Participants with copies of all material written communications with
federal, state and local governments, or agencies relating to the
matters listed in the preceding clause (i). Electroglas shall also
provide BNPLC and Participants with copies of any correspondence from
third Persons which threaten litigation over any significant failure
or alleged significant failure of Electroglas to maintain or operate
the Property in accordance with Environmental Laws.
(iii) Prior to Electroglas' submission of a
Material Environmental Communication to any governmental or regulatory
agency or third party, Electroglas shall, to extent practicable,
deliver to BNPLC and Participants a draft of the proposed submission
(together with the proposed date of submission), and in good faith
assess and consider any comments of BNPLC regarding the same.
Promptly after BNPLC's request, Electroglas shall meet with BNPLC to
discuss the submission, shall provide any additional information
reasonably requested by BNPLC and shall provide a written
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explanation to BNPLC addressing the issues raised by comments (if any)
of BNPLC regarding the submission, including a reasoned analysis
supporting any decision by Electroglas not to modify the submission in
accordance with comments of BNPLC.
10. Insurance Required and Condemnation.
(a) Liability Insurance. Throughout the Term Electroglas
shall maintain commercial general liability insurance against claims for bodily
and personal injury, death and property damage occurring in or upon or
resulting from any occurrence in or upon the Property, in standard form and
with an insurance company or companies reasonably acceptable to BNPLC (and
BNPLC may reasonably require that such insurance be provided through insurance
or reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey
as having a policyholder's rating of A- or better and a reported financial
information rating of VI or better), such insurance to afford immediate
protection, to the limit of not less than $20,000,000 combined single limit for
bodily and personal injury, death and property damage in respect of any one
accident or occurrence, with not more than $2,000,000 self-insured retention.
Such commercial general liability insurance shall include blanket contractual
liability coverage which insures contractual liability under the
indemnifications set forth in this Lease, but such coverage or the amount
thereof shall in no way limit such indemnifications. The policy evidencing
such insurance shall name as additional insureds BNPLC and all Participants of
which Electroglas has been notified (including BNPLC's Parent). Electroglas
shall maintain with respect to each policy or agreement evidencing such
commercial general liability insurance such endorsements as may be reasonably
required by BNPLC and shall at all times deliver and maintain with BNPLC
written confirmation (in form reasonably satisfactory to BNPLC) with respect to
such insurance from the applicable insurer or its authorized agent, which
confirmation must provide that insurance coverage will not be canceled or
reduced without at least thirty days notice to BNPLC. Not less than fifteen
days prior to the expiration date of each policy of insurance required of
Electroglas pursuant to this subparagraph, Electroglas shall deliver to BNPLC a
certificate evidencing a paid renewal policy or policies.
(b) Property Insurance. Throughout the Term Electroglas
will keep all Improvements (including all alterations, additions and changes
made to the Improvements) which are located within the Property insured under
an "all-risk" property insurance policy (which may exclude from coverage
earthquake damage, but which shall not exclude from coverage other perils
normally included within the definitions of extended coverage, vandalism,
malicious mischief and, if the Property is in a flood zone, flood) in the
amount no less than eighty percent (80%) of the replacement value (exclusive of
land, foundation, footings, excavations and grading) with endorsements for
contingent liability from operation of building laws, increased cost of
construction and demolition costs which may be necessary to comply with
building laws. Subject to the reasonable approval of BNPLC, Electroglas will
be responsible for determining the amount of property insurance to be
maintained from time to time, but Electroglas must maintain such coverage on an
agreed value basis to eliminate the effects of coinsurance. Such insurance
must be issued by an insurance company or companies reasonably acceptable to
BNPLC, and BNPLC may reasonably require that the insurance or reinsurance
companies providing such insurance be rated by the A.M. Best Company of
Oldwick, New Jersey as having (1) a policyholder's rating of A- or better, (2)
a reported financial information rating of no less than VI, and (3) in the case
of each such company, a reported financial information rating which indicates
an adjusted policyholders' surplus equal to or greater than the underwriting
exposure that such company has under the insurance or reinsurance it is
providing for the Property. Any deductible applicable to such insurance shall
not exceed $1,000,000. Such insurance shall cover not only the value of
Electroglas' interest in the Improvements, but also the interest of BNPLC, and
such insurance shall include provisions that BNPLC must be notified at least
fifteen days prior to any cancellation or reduction of insurance coverage. The
policies under which Electroglas maintains such insurance may be "blanket"
policies covering not only the Property but other properties occupied or owned
by Electroglas and may be builders' risk policies obtained to satisfy
subparagraph 0; however, all policies must provide that proceeds paid
thereunder with respect to the Property will be payable to BNPLC and
Electroglas as their interests may appear, it being understood between BNPLC
and Electroglas that such proceeds shall be paid to BNPLC as Escrowed Proceeds
and will be applied in accordance with Paragraph 0 of this Lease. In the event
any of the Property is destroyed or damaged by fire, explosion, windstorm, hail
or by any other casualty against which insurance shall have been required
hereunder, (i) BNPLC may, but shall not be obligated to, make proof of loss if
not made promptly by Electroglas after notice from BNPLC, (ii) each insurance
company concerned is hereby authorized and directed to make payment for such
loss directly to BNPLC for application as required by Paragraph 0, and (iii)
BNPLC may settle, adjust or compromise any and all claims for loss, damage or
destruction under any policy
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or policies of insurance (provided, that so long as no Event of Default shall
have occurred and be continuing, BNPLC must obtain Electroglas' consent to any
such settlement). If any casualty shall result in damage to or loss or
destruction of the Property, Electroglas shall give immediate notice thereof to
BNPLC and Paragraph 0 shall apply.
Notwithstanding the foregoing, however, if any insurance claim for
damage to the Property is for less than $3,000,000 and no Event of Default
shall have occurred and be continuing, Electroglas shall have the right to
settle, adjust or compromise the claim as Electroglas deems appropriate; and
Electroglas may directly receive and hold the proceeds of such claim so long as
no Event of Default shall have occurred and be continuing and so long as
Electroglas applies such proceeds as required by subparagraph 0.
(c) Failure to Obtain Insurance. If Electroglas fails to
obtain any insurance or to provide confirmation of any such insurance as
required by this Lease, BNPLC shall be entitled (but not required) to obtain
the insurance that Electroglas has failed to obtain or for which Electroglas
has not provided the required confirmation and, without limiting BNPLC's other
remedies under the circumstances, BNPLC may require Electroglas to reimburse
BNPLC for the cost of such insurance and to pay interest thereon computed at
the Default Rate from the date such cost was paid by BNPLC until the date of
reimbursement by Electroglas.
(d) Condemnation. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Property or
any portion thereof, or any other similar governmental or quasi-governmental
proceedings arising out of injury or damage to the Property or any portion
thereof, each party shall notify the other (provided, however, BNPLC shall have
no liability for its failure to provide such notice) of the pendency of such
proceedings. Electroglas shall, at its expense, diligently prosecute any such
proceedings and shall consult with BNPLC, its attorneys and experts and
cooperate with them as reasonably requested in the carrying on or defense of
any such proceedings. All proceeds of condemnation awards or proceeds of sale
in lieu of condemnation with respect to the Property and all judgments, decrees
and awards for injury or damage to the Property shall be paid to BNPLC as
Escrowed Proceeds for application as provided in Paragraph 0. BNPLC is hereby
authorized, in the name of Electroglas, at any time when an Event of Default
shall have occurred and be continuing, or otherwise with Electroglas' prior
consent, to execute and deliver valid acquittances for, and to appeal from, any
such judgment, decree or award concerning condemnation of any of the Property.
BNPLC shall not be in any event or circumstances liable or responsible for
failure to collect, or to exercise diligence in the collection of, any such
proceeds, judgments, decrees or awards.
Notwithstanding the foregoing provisions of this subparagraph, if
condemnation proceeds totaling not more than $1,000,000 are to be recovered as
a result of a taking of less than all or substantially all of the Property,
Electroglas may directly receive and hold such proceeds so long as no Event of
Default shall have occurred and be continuing and so long as Electroglas
applies such proceeds as required by subparagraph 0.
11. Application of Insurance and Condemnation Proceeds.
(a) Collection of Insurance and Condemnation Proceeds
Generally. Subject to BNPLC's rights under this Paragraph 0, and so long as no
Event of Default shall have occurred and be continuing, Electroglas shall be
entitled to use all property insurance and condemnation proceeds payable with
respect to the Property during the Term for the restoration and repair of the
Property or any remaining portion thereof. Except as provided in the last
sentence of subparagraph 0 and the last sentence of subparagraph 0, all
insurance and condemnation proceeds received with respect to the Property
(including proceeds payable under any insurance policy covering the Property
which is maintained by Electroglas) shall be paid to BNPLC and then applied as
follows:
(i) First, such proceeds shall be used to
reimburse BNPLC for any costs and expenses, including Attorneys' Fees,
incurred in connection with the collection of such proceeds.
(ii) Second, the remainder of such proceeds (the
"REMAINING PROCEEDS") shall be held by BNPLC as Escrowed Proceeds and
used to reimburse Electroglas for the actual cost of the repair,
restoration or replacement of the Property. However, any Remaining
Proceeds not needed for such purpose shall be applied by BNPLC as
Qualified Payments, as provided in subparagraph 0, after
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Electroglas notifies BNPLC that they are not needed for repairs,
restoration or replacement.
(b) Administration of Remaining Proceeds; Electroglas'
Obligation to Restore. Any Remaining Proceeds held by BNPLC as Escrowed
Proceeds shall be deposited by BNPLC in an interest bearing account as provided
in the definition of Escrowed Proceeds in the attached List of Defined Terms
and shall be paid to Electroglas or to third parties as Electroglas may direct
as the applicable repair, restoration or replacement progresses and upon
compliance by Electroglas with such terms, conditions and requirements as may
be reasonably imposed by BNPLC, but in no event shall BNPLC be required to pay
any Escrowed Proceeds to Electroglas in excess of the actual cost to
Electroglas of the applicable repair, restoration or replacement, as evidenced
by invoices or other documentation reasonably satisfactory to BNPLC, it being
understood that BNPLC may retain and, as provided in subparagraph 0, apply any
such excess as a Qualified Payment. In any event, Electroglas will not be
entitled to any abatement or reduction of the Base Rent or any other amount due
hereunder except to the extent that such excess Remaining Proceeds result in
Qualified Payments which reduce Stipulated Loss Value (and thus payments
computed on the basis of Stipulated Loss Value) as provided in the definitions
set out in the attached List of Defined Terms. Further, notwithstanding the
inadequacy of the Remaining Proceeds held by BNPLC as Escrowed Proceeds, if
any, or anything herein to the contrary, Electroglas must, after any taking of
less than all or substantially all of the Property by condemnation and after
any damage to the Property by fire or other casualty, either:
(1) promptly restore or improve the Property or
the remainder thereof to a Current Value of no less than fifty percent
(50%) of Stipulated Loss Value (computed after the application of any
Remaining Proceeds as a Qualified Payment) and to a reasonably safe
and sightly condition; or
(2) promptly restore the Property to a reasonably
safe and sightly condition and pay to BNPLC for application as a
Qualified Payment the amount (if any), as determined by BNPLC, needed
to reduce Stipulated Loss Value (computed after the application of
such amount and any available Remaining Proceeds as Qualified
Payments) to no more than two hundred percent (200%) of the Current
Value of the Property or remainder thereof.
(c) Special Provisions Concerning Event of Defaults and
Qualified Payments. If an Event of Default shall have occurred and be
continuing, then notwithstanding the foregoing, BNPLC shall be entitled to
receive and collect all insurance or condemnation proceeds payable with respect
to the Property, and BNPLC shall be entitled to either, at the discretion of
BNPLC, (A) hold all Remaining Proceeds as Escrowed Proceeds until paid to
Electroglas as reimbursement for the actual and reasonable cost of repairing,
restoring or replacing the Property when Electroglas has completed such repair,
restoration or replacement, or (B) apply such proceeds as Qualified Payments
when and to the extent deemed appropriate by BNPLC.
When no Event of Default shall have occurred and be continuing, BNPLC
shall apply any Remaining Proceeds paid to it (or other amounts available for
application as a Qualified Payment) as a Qualified Payment on any date that
BNPLC is directed to do by a notice from Electroglas; provided, that if such a
notice from Electroglas specifies an effective date for a Qualified Payment
that is less than five (5) Business Days after BNPLC's actual receipt of the
notice, BNPLC may postpone the date of the Qualified Payment to any date not
later than five (5) Business Days after BNPLC's receipt of the notice. In any
event, except when BNPLC is required by the preceding sentence to apply
Remaining Proceeds or other amounts as a Qualified Payment at the end of a Base
Rent Period, BNPLC may deduct Breakage Costs incurred in connection with any
Qualified Payment from the Remaining Proceeds or other amounts available for
application as the Qualified Payment, and Electroglas will reimburse BNPLC upon
request for any such Breakage Costs that BNPLC incurs but does not deduct.
(d) Takings of All or Substantially All of the Property.
In the event of any taking of all or substantially all of the Property, BNPLC
shall be entitled to apply all Remaining Proceeds as a Qualified Payment,
notwithstanding the foregoing. In addition, if Stipulated Loss Value
immediately prior to any taking of all or substantially all of the Property by
condemnation exceeds the sum of the Remaining Proceeds resulting from such
condemnation, then BNPLC shall be entitled to recover the excess from
Electroglas upon demand as an additional Qualified Payment, whereupon this
Lease shall terminate. Any taking of so much of the Real Property as, in
BNPLC's reasonable good faith judgment, makes it impracticable to restore or
improve the remainder thereof as
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required by part (1) of subparagraph 0 shall be considered a taking of
substantially all the Property for purposes of this Paragraph 0.
(e) Waiver of Subrogation. Without limiting Electroglas'
obligations to make repairs under other provisions of this Lease, BNPLC and
Electroglas each waive any right of recovery against the other, and the other's
agents, officers or employees, for any damage to the Property or to the
personal property situated from time to time in or on the Real Property
resulting from fire or other casualty covered by a valid and collectible
insurance policy; provided, however, that the waiver set forth in this
subparagraph 0 shall be effective insofar, but only insofar, as compensation
for such damage or loss is actually recovered by the waiving party (net of
costs of collection) under the policy notwithstanding the waivers set out in
this subparagraph. Electroglas shall cause the insurance policies required of
Electroglas by this Lease to be properly endorsed, if necessary, to prevent any
loss of coverage because of the waivers set forth in this subparagraph. If
such endorsements are not available at commercially reasonable rates, the
waivers set forth in this subparagraph shall be ineffective to the extent that
such waivers would cause required insurance with respect to the Property to be
impaired.
12. Additional Representations, Warranties and Covenants of
Electroglas Concerning the Property. Electroglas represents, warrants and
covenants as follows:
(a) Compliance with Covenants and Laws. The use of the
Property permitted by this Lease complies, or will comply after Electroglas
obtains available permits as the tenant under this Lease, in all material
respects with all Applicable Laws. Electroglas has obtained or will promptly
obtain all utility, building, health and operating permits as may be required
by any governmental authority or municipality having jurisdiction over the
Property for the use of the Property for the purposes permitted by the Lease.
(b) Condition of Property. The Land as described in
Exhibit 0 is the same as the land shown on the plat included as part of the
survey prepared by Michael B. Marx, Registered Professional Land Surveyor #
5181, dated February 21, 1997, which was delivered to BNPLC at the request of
Electroglas. Electroglas is not aware of any latent or patent material defects
or deficiencies in the Property that, either individually or in the aggregate,
could materially and adversely affect the use or occupancy of the Property as
permitted by the Lease or could reasonably be anticipated to endanger life or
limb. No part of the Real Property is within a flood plain as designated by
any governmental authority. When the initial Construction Project has been
completed in accordance with the requirements of this Lease, adequate provision
will have been made for the Property to be served by electric, gas, storm and
sanitary sewers, sanitary water supply, telephone and other utilities. All
streets, alleys and easements necessary to serve the Property have been
completed and are serviceable or will be so when the initial Construction
Project is complete. Access to the Land, sufficient for its development in a
manner that would justify the purchase price required by the Existing
Contracts, is available over adjacent dedicated public streets or over private,
perpetual right-of-way easements appurtenant to the Land. The Property will
be, when the initial Construction Project is complete, in a condition
satisfactory for its use and occupancy.
(c) Defense of Adverse Title Claims. If any encumbrance
or title defect affecting the Property is claimed or discovered (excluding
Permitted Encumbrances and any Liens Removable by BNPLC) or if any legal
proceedings are instituted with respect to title to the Property, Electroglas
shall give prompt notice thereof to BNPLC and at Electroglas' own cost and
expense will promptly remove (or provide a Statutory Bond to release BNPLC and
Property from) any such encumbrance and cure any such defect and will take all
necessary and proper steps for the defense of any such legal proceedings,
including the employment of counsel, the prosecution or defense of litigation
and the release or discharge of all adverse claims. If Electroglas fails to
promptly remove any encumbrance or cure any title defect, BNPLC (whether or not
named as a party to legal proceedings with respect thereto) shall be entitled
to take such additional steps as in its judgment may be necessary or proper to
remove such encumbrance or cure such defect or for the defense of any such
attack or legal proceedings or the protection of BNPLC's interest in the
Property, including the employment of counsel, the prosecution or defense of
litigation, the compromise or discharge of any adverse claims made with respect
to the Property, the removal of prior liens or security interests, and all
expenses (including Attorneys' Fees) so incurred of every kind and character
shall be a demand obligation owing by Electroglas.
For purposes of this subparagraph 0, Electroglas shall be deemed to be
acting promptly to remove any encumbrance or to cure any title defect, other
than a Lien which Electroglas or any of its Affiliates has granted or
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authorized, so long as Electroglas is in good faith by appropriate proceedings
contesting (or causing a title insurer to contest) the validity and
applicability of the encumbrance or defect, and pending such contest
Electroglas shall not be deemed in default under this subparagraph because of
the encumbrance or defect, provided that Electroglas must satisfy the following
conditions and requirements:
(1) Electroglas must diligently prosecute (or cause a title
insurer to diligently prosecute) the contest to completion in a manner
reasonably satisfactory to BNPLC.
(2) Electroglas must immediately remove (or cause a title
insurer to immediately remove) the encumbrance or cure the defect upon
a final determination by a court of competent jurisdiction that it is
valid and applicable to the Property.
(3) Electroglas must in any event conclude the contest and
remove the encumbrance or cure the defect and pay any claims asserted
against BNPLC or the Property because of such encumbrance or defect,
all prior to the earlier of (i) the date that any criminal charges is
overtly threatened or instituted against BNPLC or any of its
directors, officers or employees because of such encumbrance or
defect, (ii) the date that any action is taken or threatened against
BNPLC or any property owned by BNPLC (including the Property) by any
governmental authority or any other Person who has or claims rights
superior to BNPLC because of the encumbrance or defect, or (iii) any
Designated Sale Date upon which, for any reason, Electroglas or an
Affiliate of Electroglas or any Applicable Purchaser shall not
purchase BNPLC's interest in the Property pursuant to the Purchase
Agreement for a net price to BNPLC (when taken together with any
additional payments made by Electroglas pursuant to Paragraph 1(a)(ii)
of the Purchase Agreement, in the case of a purchase by an Applicable
Purchaser) equal to Stipulated Loss Value.
(d) Prohibition Against Consensual Liens Against the
Leased Property. Electroglas shall not, without the prior consent of BNPLC,
create, place or authorize, any deed of trust, mortgage or other Lien against
or covering the Property or any part thereof (other than Permitted Encumbrances
and Liens Removable by BNPLC), regardless of whether the same are expressly or
otherwise subordinate to this Lease or BNPLC's interest in the Property.
(e) Operation of Property. Electroglas shall operate the
Property in a good and workmanlike manner and in a manner that causes it to
comply in all material respects with Applicable Laws. (For purposes of this
Lease, "material" noncompliance with Applicable Law will include any
noncompliance, the correction of which has been requested by a governmental
authority, or because of which a threat of action against the Property or BNPLC
has been asserted by a governmental authority.) Electroglas shall not use or
occupy or allow the use or occupancy of the Property in any manner which
violates any Applicable Law in any material respect or which constitutes a
public or private nuisance or which makes void, voidable or cancelable any
insurance then in force with respect thereto. To the extent that any of the
following could, individually or in the aggregate, reduce the value of the
Property and leave the Property with a Current Value of less than fifty percent
(50%) of Stipulated Loss Value, Electroglas shall not: (i) initiate or permit
any zoning reclassification of the Property; (ii) seek any variance under
existing zoning ordinances applicable to the Property; (iii) use or permit the
use of the Property in a manner that would result in such use becoming a
nonconforming use under applicable zoning ordinances or similar laws, rules or
regulations; (iv) execute or file any subdivision plat affecting the Property;
or (v) consent to the annexation of the Property to any municipality. If a
change in the zoning or other Applicable Laws affecting the permitted use or
development of the Property shall occur that BNPLC determines will reduce the
value of the Property, and if after such reduction the Current Value of the
Property shall be less than fifty percent (50%) of Stipulated Loss Value, then
Electroglas shall before the Designated Sale Date pay BNPLC an amount equal to
such excess for application as a Qualified Payment. Electroglas shall not
cause or consent to any drilling or exploration for, or extraction, removal or
production of, minerals from the surface or subsurface of the Property. If
Electroglas receives a notice or claim from any federal, state or other
governmental authority that the Property is not in compliance with any
Applicable Law in any material respect, or that any action may be taken against
BNPLC because the Property does not comply with any Applicable Law, Electroglas
shall promptly furnish a copy of such notice or claim to BNPLC.
Notwithstanding the foregoing, Electroglas may in good faith, by
appropriate proceedings, contest the validity and applicability of any
Applicable Law with respect to the Property, and pending such contest
Electroglas
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shall not be deemed in default hereunder because of a violation of such
Applicable Law, if Electroglas diligently prosecutes such contest to completion
in a manner reasonably satisfactory to BNPLC, and if Electroglas promptly
causes the Property to comply with any such Applicable Law upon a final
determination by a court of competent jurisdiction that the same is valid and
applicable to the Property; provided, however, in any event such contest shall
be concluded and the violation of such Applicable Law must be corrected by
Electroglas and any claims asserted against BNPLC or the Property because of
such violation must be paid by Electroglas, all prior to the earlier of (i) the
date that any criminal action is overtly threatened or instituted against BNPLC
or any of its directors, officers or employees because of such violation, (ii)
the date that any action is taken or overtly threatened by any governmental
authority against BNPLC or any property owned by BNPLC (including the Property)
because of such violation, or (iii) any Designated Sale Date upon which, for
any reason, Electroglas or an Affiliate of Electroglas or any Applicable
Purchaser shall not purchase BNPLC's interest in the Property pursuant to the
Purchase Agreement for a net price to BNPLC (when taken together with any
additional payments made by Electroglas pursuant to Paragraph 1(a)(ii) of the
Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal
to Stipulated Loss Value.
(f) Debts for Construction, Maintenance, Operation or
Development. Electroglas shall cause all debts and liabilities incurred in the
construction, maintenance, operation or development of the Property, including
all debts and liabilities for labor, material and equipment and all debts and
charges for utilities servicing the Property, to be promptly paid; provided,
nothing in this subparagraph will be construed to make Electroglas liable for
Liens Removable by BNPLC or Excluded Taxes.
Notwithstanding the foregoing, Electroglas may in good faith, by
appropriate proceedings, contest the validity, applicability or amount of any
asserted mechanic's or materialmen's lien and pending such contest Electroglas
shall not be deemed in default under this subparagraph (or subparagraphs 0 or
0) because of the contested lien if (1) within thirty days after being asked to
do so by BNPLC, Electroglas provides one or more Statutory Bonds to release the
Property and BNPLC from all contested liens alleged to secure an amount in
excess of $1,000,000 (individually or in the aggregate), (2) Electroglas
diligently prosecutes such contest to completion in a manner reasonably
satisfactory to BNPLC, and (3) Electroglas promptly causes to be paid any
amount adjudged by a court of competent jurisdiction to be due, with all costs
and interest thereon, promptly after such judgment becomes final; provided,
however, that in any event each such contest shall be concluded and the lien,
interest and costs must be paid by Electroglas prior to the earlier of (i) the
date that any criminal action is overtly threatened or instituted against BNPLC
or its directors, officers or employees because of the nonpayment thereof, (ii)
the date that any writ or order is issued under which the Property or any other
property in which BNPLC has an interest may be seized or sold or any other
action is taken or overtly threatened against BNPLC or any property in which
BNPLC has an interest because of the nonpayment thereof, or (iii) any
Designated Sale Date upon which, for any reason, Electroglas or an Affiliate of
Electroglas or any Applicable Purchaser shall not purchase BNPLC's interest in
the Property pursuant to the Purchase Agreement for a net price to BNPLC (when
taken together with any additional payments made by Electroglas pursuant to
Paragraph 1(a)(ii) of the Purchase Agreement, in the case of a purchase by an
Applicable Purchaser) equal to Stipulated Loss Value.
(g) Repair, Maintenance, Alterations and Additions.
Electroglas shall keep the Property in good order, operating condition and
appearance, causing all necessary repairs, renewals and replacements to be
promptly made, and will not allow any of the Property to be materially misused,
abused or wasted. To the extent that any of the following could, individually
or in the aggregate, reduce the value of the Property and leave the Property
with a Current Value of less than fifty percent (50%) of Stipulated Loss Value,
Electroglas shall not: (i) fail to promptly replace any worn-out fixtures or
material items of tangible Personal Property covered by this Lease with
fixtures or other tangible Personal Property comparable to the replaced
fixtures or Personal Property when new, (ii) remove from the Property any
fixtures or tangible Personal Property of significant value covered by this
Lease except such as are replaced by Electroglas by articles of equal
suitability and value, free and clear of any Lien other than Permitted
Encumbrances or Liens Removable by BNPLC, or (iii) make any significant
alterations to any Improvements after they are completed. Without limiting the
foregoing, Electroglas will notify BNPLC before making any alterations to the
Improvements which could materially and adversely reduce the market value of or
which change the general character of the Property or which impair in any
significant manner the useful life or utility of any Improvements.
Nothing in this subparagraph is intended to limit Electroglas' rights
and obligations under other provisions of this Lease with respect to the
construction of the initial or any subsequent Construction Project permitted by
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other provisions of this Lease.
(h) Compliance With Permitted Encumbrances and
Development Contracts. Electroglas shall comply with and will cause to be
performed all of the covenants, agreements and obligations imposed upon the
owner of the Property by the Permitted Encumbrances or the Development
Contracts.
(i) Modification of Permitted Encumbrances and
Development Contracts. Electroglas shall not enter into, initiate, approve or
consent to any modification of any Permitted Encumbrance or Development
Contract that would create or expand or purport to create or expand obligations
or restrictions which would encumber the Property or any improvements
constructed thereon without the prior consent of BNPLC. Whether BNPLC must
give any such consent requested by Electroglas during the term of the Lease
shall be governed by subparagraph 0.
(j) Books and Records Concerning the Property.
Electroglas shall keep books and records that are accurate and complete in all
material respects for the Property and will, subject to Paragraph 0, permit
all such books and records (including all contracts, statements, invoices,
bills and claims for labor, materials and services supplied for the
construction and operation of any Improvements) to be inspected and copied by
BNPLC or any of the Participants.
(k) Compliance With the Existing Contracts. Electroglas
shall comply with and will cause to be performed all of the covenants,
agreements and obligations imposed upon the owner of the Property by the
Existing Contracts and the deeds and other documents delivered in connection
with the closings thereunder.
13. Assignment and Subletting by Electroglas.
(a) BNPLC's Consent Required. Except as required to
satisfy subparagraphs 0 and 0, Electroglas shall not, without the prior consent
of BNPLC in each case, assign, transfer, mortgage, pledge or hypothecate this
Lease or any interest of Electroglas hereunder or sublet all or any part of the
Property, by operation of law or otherwise; provided, that, so long as no Event
of Default has occurred and is continuing, Electroglas shall be entitled
without the consent of BNPLC to (1) assign Electroglas' rights under this Lease
and the Purchase Documents to an Affiliate of Electroglas pursuant to a written
assignment unconditionally providing that the Affiliate assumes Electroglas'
obligations hereunder and thereunder and that Electroglas ratifies and confirms
for the benefit of BNPLC Electroglas' responsibility and liability to BNPLC
under this Lease and the Purchase Documents, and (2) sublet all or any portion
of the Property if:
(i) any sublease by Electroglas is made expressly
subject and subordinate to the terms hereof;
(ii) no sublease has a term longer than the
remainder of the then effective term of this Lease;
(iii) each sublease expressly prohibits any use not
consistent with subparagraph 0, and, with respect to any sublessee not
an Affiliate of Electroglas, expressly prohibits any manufacturing use
not approved in advance by BNPLC as a use that will not present any
extraordinary risk of environmental or other uninsured liability; and
(iv) the subleases by Electroglas to anyone other
than its own Affiliates are limited to sixty-five percent (65%) of the
square footage of completed building Improvements.
(b) Standard for BNPLC's Consent to Assignments and
Certain Other Matters. Consents and approvals of BNPLC which are required by
this Paragraph 0 will be in BNPLC's reasonable discretion. Without limiting
the foregoing, Electroglas acknowledges that BNPLC's withholding of such
consent or approval shall be reasonable if BNPLC determines in good faith that
(1) giving the approval may increase BNPLC's risk of liability for any existing
or future environmental problem, (2) giving the approval is likely to
substantially increase BNPLC's administrative burden of complying with or
monitoring Electroglas' compliance with the requirements of this Lease, or (3)
any transaction for which Electroglas has requested the consent or approval
would negate
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Electroglas' representations in this Lease regarding ERISA or cause this Lease
or the Purchase Documents (or any exercise of BNPLC's rights hereunder or
thereunder) to constitute a violation of any provision of ERISA.
(c) Consent Not a Waiver. No consent by BNPLC to a sale,
assignment, transfer, mortgage, pledge or hypothecation of this Lease or
Electroglas' interest hereunder, and no assignment or subletting of the
Property or any part thereof in accordance with this Lease or otherwise with
BNPLC's consent, shall release Electroglas from liability hereunder; and any
such consent shall apply only to the specific transaction thereby authorized
and shall not relieve Electroglas from any requirement of obtaining the prior
consent of BNPLC to any further sale, assignment, transfer, mortgage, pledge or
hypothecation of this Lease or any interest of Electroglas hereunder.
14. Assignment by BNPLC.
(a) Restrictions on Transfers. Except by a Permitted
Transfer, BNPLC shall not assign, transfer, mortgage, pledge, encumber or
hypothecate this Lease or the Purchase Documents or any interest of BNPLC in
and to the Property during the Term without the prior consent of Electroglas,
which consent Electroglas may withhold in its sole and absolute discretion.
(b) Effect of Permitted Transfer or other Assignment by
BNPLC. If, without breaching subparagraph 0, BNPLC sells or otherwise
transfers the Property and assigns all of its rights under this Lease and the
Purchase Documents, and if BNPLC's successor in interest to all such rights
assumes in writing for the benefit of Electroglas BNPLC's obligations under
this Lease and the Purchase Documents on and subject to the express terms and
conditions set out herein and therein, then BNPLC shall thereby be released
from any obligations arising after such assumption under this Lease (other than
any liability for a breach of the landlord's obligation to provide Construction
Advances) or under the Purchase Documents, and Electroglas shall look solely to
each successor in interest of BNPLC for performance of such obligations.
15. BNPLC's Right of Access; Right to Perform at the Expense of
Electroglas.
(a) BNPLC and BNPLC's representatives may enter the Property,
after three Business Days advance notice to Electroglas (except in the event of
an emergency, when no advance notice will be required), for the purpose of
performing any work BNPLC is authorized to undertake by the next subparagraph
or for the purpose confirming whether Electroglas has complied with the
requirements of this Lease at any time BNPLC may reasonably question such
compliance. So long as Electroglas remains in possession of the Property,
BNPLC or BNPLC's representative will, before making any such inspection or
performing any such work on the Property, if then requested to do so by
Electroglas to maintain security: (i) sign in at Electroglas' security or
information desk if Electroglas has such a desk on the premises, (ii) wear a
visitor's badge or other reasonable identification provided by Electroglas when
BNPLC or BNPLC's representative first arrives at the Property, (iii) permit an
employee of Electroglas to observe such inspection or work, and (iv) comply
with other similar reasonable nondiscriminatory security, health or safety
requirements of Electroglas, as Electroglas may establish from time to time in
accordance with good industry practices, provided that such other requirements
do not, individually or in the aggregate, substantially interfere with or delay
inspections or work of BNPLC authorized by this Lease.
(b) If Electroglas fails to perform any act or to take any action
which hereunder Electroglas is required to perform or take, or to pay any money
which hereunder Electroglas is required to pay, and if such failure or action
constitutes an Event of Default or causes BNPLC or any director, officer,
employee or Affiliate of BNPLC to be overtly threatened with criminal
prosecution or renders BNPLC's interest in the Property or any part thereof at
risk of forfeiture by forced sale or otherwise, then in addition to any other
remedies specified herein or otherwise available, BNPLC may, perform or cause
to be performed such act or take such action or pay such money. Any expenses
so incurred by BNPLC, and any money so paid by BNPLC, shall be a demand
obligation owing by Electroglas to BNPLC. Further, BNPLC, upon making such
payment, shall be subrogated to all of the rights of the person, corporation or
body politic receiving such payment. But nothing herein shall imply any duty
upon the part of BNPLC to do any work which under any provision of this Lease
Electroglas may be required to perform, and the performance thereof by BNPLC
shall not constitute a waiver of Electroglas' default. BNPLC may during the
progress of any such work permitted by BNPLC hereunder on or in the Property
keep and store upon the Property all necessary materials, tools, and equipment.
BNPLC shall not in any event be liable for
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inconvenience, annoyance, disturbance, loss of business, or other damage to
Electroglas or the subtenants of Electroglas by reason of making such repairs
or the performance of any such work on or in the Property, or on account of
bringing materials, supplies and equipment into or through the Property during
the course of such work (except for liability in connection with death or
injury or damage to the property of third parties caused by [and attributed by
any applicable principles of comparative fault to] the Established Misconduct
of BNPLC), and the obligations of Electroglas under this Lease shall not
thereby be excused in any manner.
16. Other Representations, Warranties and Covenants of
Electroglas. Electroglas represents, warrants and covenants as follows:
(a) Financial Statements; Required Notices; Certificates
as to Default. Electroglas shall deliver to BNPLC and to each Participant of
which Electroglas has been notified:
(i) as soon as available and in any event within sixty
days after the end of each of the first three fiscal quarters of each
fiscal year of Electroglas, the unaudited consolidated balance sheet
of Electroglas and its Subsidiaries as of the end of such quarter and
consolidated unaudited statements of income, stockholders' equity and
cash flow of Electroglas and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the
end of such quarter, setting forth in comparative form figures for the
corresponding period in the preceding fiscal year, in the case of such
statements of income, stockholders' equity and cash flow, and figures
for the preceding fiscal year in the case of such balance sheet, all
in reasonable detail, in accordance with GAAP, and certified in a
manner acceptable to BNPLC by a Responsible Financial Officer of
Electroglas (subject to normal year-end adjustments); provided, that
so long as Electroglas is a company subject to the periodic reporting
requirements of Section 12 of the Securities Exchange Act of 1934, as
amended, Electroglas shall be deemed to have satisfied its obligations
under this clause (i) if Electroglas delivers to BNPLC the same
quarterly reports, certified by a Responsible Financial Officer of
Electroglas (subject to year-end adjustments), that Electroglas
delivers to its shareholders;
(ii) as soon as available and in any event within one
hundred twenty days after the end of each fiscal year of Electroglas,
the consolidated balance sheet of Electroglas and its Subsidiaries as
of the end of such fiscal year and consolidated statements of income,
stockholders' equity and cash flow of Electroglas and its Subsidiaries
for the period commencing at the end of the previous fiscal year and
ending with the end of such fiscal year, setting forth in comparative
form figures for the preceding fiscal year, all in reasonable detail,
in accordance with GAAP, and certified in a manner acceptable to BNPLC
by Ernst & Young or other independent public accountants of recognized
national standing reasonably acceptable to BNPLC; provided, that so
long as Electroglas is a company subject to the periodic reporting
requirements of Section 12 of the Securities Exchange Act of 1934, as
amended, Electroglas shall be deemed to have satisfied its obligations
under this clause (ii) if Electroglas delivers to BNPLC the same
annual report and report and opinion of accountants that Electroglas
delivers to its shareholders;
(iii) together with the financial statements furnished in
accordance with subparagraph 0 and 0, a certificate of a Responsible
Financial Officer of Electroglas in the form of certificate attached
hereto as Exhibit 0 (a) representing and warranting on behalf of
Electroglas that no Event of Default or material Default by
Electroglas has occurred and is continuing (or, if an Event of Default
or material Default by Electroglas has occurred, stating the nature
thereof and the action which Electroglas proposes to take with respect
thereto), and (b) stating on behalf of Electroglas that the
representations and warranties by Electroglas contained herein are
true and correct in all material respects on and as of the date of
such certificate as though made on and as of such date (or if not, a
detailed description of how and why any such representations or
warranties are not true and correct);
(iv) as soon as possible and in any event within five days
after the occurrence of each Event of Default or material Default
known to a Responsible Financial Officer of Electroglas, a statement
of Electroglas setting forth details of such Event of Default or
material Default and the action which Electroglas has taken and
proposes to take with respect thereto;
(v) promptly after the sending or filing thereof, copies
of all such financial statements, proxy
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statements, notices and reports which Electroglas or any Material
Subsidiary sends to its public stockholders, and copies of all reports
and registration statements (without exhibits) which Electroglas or
any Subsidiary files with the Securities and Exchange Commission (or
any governmental body or agency succeeding to the functions of the
Securities and Exchange Commission) or any national securities
exchange;
(vi) as soon as practicable and in any event within thirty
days after a Responsible Financial Officer of Electroglas knows or has
reason to know that any ERISA Termination Event with respect to any
Plan has occurred, a statement of a Responsible Financial Officer of
Electroglas describing such ERISA Termination Event and the action, if
any, which Electroglas proposes to take with respect thereto;
(vii) upon request by BNPLC, a statement in writing
certifying that this Lease is unmodified and in full effect (or, if
there have been modifications, that this Lease is in full effect as
modified, and setting forth such modifications) and the dates to which
the Base Rent, Administrative Fees and Commitment Fees have been paid
and either stating that no default exists hereunder or specifying each
such default; it being intended that any such statement by Electroglas
may be relied upon by any prospective purchaser or mortgagee of the
Property or any prospective Participant; and
(viii) subject to Paragraph 0, such other information
respecting the condition or operations, financial or otherwise, of
Electroglas, of its Subsidiaries or of the Property as BNPLC or any
Participant may from time to time reasonably request.
BNPLC is hereby authorized to deliver a copy of any information or certificate
delivered to it pursuant to this subparagraph 0 to any Participant and to any
regulatory body having jurisdiction over BNPLC, BNPLC's Parent or any other
Participant that requires or requests it.
(b) No Default or Violation. The execution, delivery and
performance by Electroglas of this Lease and the Purchase Documents do not and
will not constitute a breach or default under any other material agreement or
contract to which Electroglas is a party or by which Electroglas is bound or
which affects the Property, and do not violate or contravene any law, order,
decree, rule or regulation to which Electroglas is subject, and such execution,
delivery and performance by Electroglas will not result in the creation or
imposition of (or the obligation to create or impose) any lien, charge or
encumbrance on, or security interest in, Electroglas' property pursuant to the
provisions of any of the foregoing.
(c) No Suits. There are no judicial or administrative
actions, suits, proceedings or investigations pending or, to Electroglas'
knowledge, threatened that will adversely affect the Property or the validity,
enforceability or priority of this Lease or the Purchase Documents, and
Electroglas is not in default with respect to any order, writ, injunction,
decree or demand of any court or other governmental or regulatory authority
that could materially and adversely affect the use, occupancy or operation of
the Property. No condemnation or other like proceedings are pending or, to
Electroglas' knowledge, threatened against the Property.
(d) Enforceability. The execution, delivery and
performance by Electroglas of this Lease and the Purchase Agreement are duly
authorized and do not require the consent or approval of any governmental body
or other regulatory authority that has not heretofore been obtained and are not
in contravention of or conflict with any applicable laws or any term or
provision of Electroglas' articles of incorporation or bylaws. This Lease and
the Purchase Agreement are valid, binding and legally enforceable obligations
of Electroglas, each in accordance with its terms, except as such enforcement
is affected by bankruptcy, insolvency and similar laws affecting the rights of
creditors, generally, and equitable principles of general application.
(e) Financial Matters. Electroglas is not "insolvent" on
the date hereof (that is, the sum of Electroglas' absolute and contingent
liabilities, including the obligations of Electroglas under this Lease and the
Purchase Documents, does not exceed the fair market value of Electroglas'
assets) and has no outstanding liens, suits, garnishments or court actions
which could render Electroglas insolvent or bankrupt. Electroglas' capital is
adequate for the businesses in which Electroglas is engaged and intends to be
engaged. Electroglas has not incurred (whether hereby or otherwise), nor does
Electroglas intend to incur or believe that it will incur, debts
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which will be beyond its ability to pay as such debts mature. There has not
been filed by or, to Electroglas' knowledge, against Electroglas a petition in
bankruptcy or a petition or answer seeking an assignment for the benefit of
creditors, the appointment of a receiver, trustee, custodian or liquidator with
respect to Electroglas or any significant portion of Electroglas' property,
reorganization, arrangement, rearrangement, composition, extension, liquidation
or dissolution or similar relief under the federal Bankruptcy Code or any state
law. The financial statements and all financial data heretofore delivered to
BNPLC relating to Electroglas are true, correct and complete in all material
respects as of the respective dates thereof.
(f) Organization. Electroglas is duly incorporated and
legally existing under the laws of the State of Delaware and is duly qualified
to do business in the State of California. Electroglas has all requisite power
and has procured or will procure on a timely basis all governmental
certificates of authority, licenses, permits, qualifications and other
documentation required to fulfill its obligations under this Lease or under the
Purchase Documents. Electroglas has the corporate power and adequate
authority, rights and franchises to own Electroglas' property and to carry on
Electroglas' business as now conducted and is duly qualified and in good
standing in each state in which the character of Electroglas' business makes
such qualification necessary or, if it is not so qualified in a state other
than California, such failure does not have a material adverse effect on the
properties, assets, operations or businesses of Electroglas and its
Subsidiaries, taken as a whole.
(g) Payment of Taxes Generally. Electroglas shall comply
and cause its Material Subsidiaries to comply with all applicable tax laws and
pay before the same become delinquent all taxes imposed upon any of them or
upon any of their properties where the failure to so comply or so pay would
have a material adverse effect on the financial condition or operations of
Electroglas and its Subsidiaries taken as a whole.
Notwithstanding the foregoing, Electroglas or any applicable
Subsidiary may in good faith by appropriate proceedings contest the validity,
applicability or amount of any such taxes and pending such contest Electroglas
shall not be deemed in default under this subparagraph if (1) Electroglas
provides security to BNPLC's satisfaction for the payment of any lien asserted
against the Property and alleged to secure the contested tax, (2) Electroglas
or the Subsidiary diligently prosecutes such contest to completion in an
appropriate manner, and (3) Electroglas or the Subsidiary promptly causes to be
paid any tax adjudged by a court of competent jurisdiction to be due, with all
costs, penalties, and interest thereon, promptly after such judgment becomes
final; provided, however, that in any event such contest shall be concluded and
the tax, penalties, interest and costs must be paid by Electroglas or its
Subsidiaries prior to the date any writ or order is issued under which any
property of Electroglas or its Subsidiaries that is material to the business of
Electroglas and its Subsidiaries taken as a whole may be seized or sold because
of the nonpayment thereof.
(h) ERISA. Electroglas is not and will not become an
"employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject
to Title I of ERISA. The assets of Electroglas do not and will not in the
future constitute "plan assets" of one or more such plans within the meaning of
29 C.F.R. Section 2510.3-101. Electroglas is not and will not become a
"governmental plan" within the meaning of Section 3(32) of ERISA. Transactions
by or with Electroglas are not subject to state statutes regulating investments
of and fiduciary obligations with respect to governmental plans. No ERISA
Termination Event has occurred with respect to any Plan and Electroglas and all
Material Subsidiaries are in compliance with ERISA in all material respects.
Neither Electroglas nor any Material Subsidiary is required to contribute to,
or has any other absolute or contingent liability in respect of, any
"multiemployer plan" as defined in Section 4001 of ERISA. As of the Effective
Date no "accumulated funding deficiency" (as defined in Section 412(a) of the
Code) exists with respect to any Plan, whether or not waived by the Secretary
of the Treasury or his delegate, and the current value of the benefits of each
Plan, if any, equals or is less than the current value of such Plan's assets
available for the payment of such benefits.
(i) Use of Proceeds. In no event shall the funds from
any Construction Advance be used directly or indirectly by any Persons for
personal, family, household or agricultural purposes or for the purpose,
whether immediate, incidental or ultimate, of purchasing, acquiring or carrying
any "margin stock" or any "margin securities" (as such terms are defined
respectively in Regulation U and Regulation G promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock
or margin securities. Electroglas represents and warrants that Electroglas is
not engaged principally, or as one of Electroglas' important activities, in the
business
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of extending credit to others for the purpose of purchasing or carrying such
margin stock or margin securities.
(j) Investment Company Act. Electroglas is not an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(k) Omissions. None of Electroglas' representations or
warranties contained in this Lease or in the Purchase Documents or in any other
document, certificate or written statement furnished to BNPLC by or on behalf
of Electroglas in connection with this Lease or the Purchase Documents contains
any untrue statement of a material fact or omits a material fact necessary in
order to make the statements contained herein or therein (when taken in their
entireties) not misleading.
(l) Not a Foreign Person. Electroglas is not a "foreign
person" within the meaning of Sections 1445 and 7701 of the Code (i.e.
Electroglas is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined in the
Code and regulations promulgated thereunder).
(m) Further Assurances. Electroglas shall, on request of
BNPLC, (i) promptly correct any error or omission which may be discovered in
the contents of this Lease or in any other instrument executed in connection
herewith or in the execution or acknowledgment thereof; (ii) execute,
acknowledge, deliver and record or file such further instruments and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Lease and to subject to this Lease any
property intended by the terms hereof to be covered hereby, including any
renewals, additions, substitutions, replacements or appurtenances to the
Property; (iii) execute, acknowledge, deliver, procure and record or file any
document or instrument deemed advisable by BNPLC to protect its rights in and
to the Property against the rights or interests of third persons; and (iv)
provide such certificates, documents, reports, information, affidavits and
other instruments and do such further acts as may be necessary, desirable or
proper in the reasonable determination of BNPLC to enable BNPLC, BNPLC's Parent
and any other Participants to comply with the requirements or requests of any
agency or authority having jurisdiction over them.
(n) Affirmative Financial Covenants. Electroglas shall
comply with the requirements set forth in Part II of Schedule 2.
(o) Negative Covenants. Electroglas shall not, without
the prior consent of BNPLC in each case, do any of the following:
(i) Merger and Consolidation. Merge into or consolidate
with or into a corporation, or permit any Material Subsidiary to do
so, except that subject to the other provisions of this Lease:
a) any Subsidiary may merge or consolidate with any
other Subsidiary, and any Subsidiary may merge into
Electroglas; and
b) Electroglas or any of its Subsidiaries may merge or
consolidate with any other corporation, provided that:
(1) either (a) Electroglas shall continue after
or as the surviving corporation or (b) the successor
corporation to Electroglas shall be a solvent
corporation organized under the laws of any State of
the United States of America; such corporation shall
expressly assume in writing all of the obligations of
Electroglas under this Lease and the Purchase
Documents; and such assumption shall not violate any
other term, condition or provision of this Lease or
the Purchase Documents; and
(2) after giving effect to such merger or
consolidation, Electroglas or its successor
corporation shall be in compliance with the
requirements set forth in Part II of Schedule 2.
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(ii) Change in Nature of Business. Make, or permit any
Subsidiary to do anything that would result in, a material change in
the nature of the business of Electroglas and its Subsidiaries, taken
as whole, as carried on at the Effective Date.
(iii) Sales, Etc. of Assets. Sell, lease, transfer or
otherwise dispose of, or permit any Material Subsidiary to sell,
lease, transfer or otherwise dispose of, substantially all of its
assets (in a single transaction or series of related transactions),
except that, subject to the other provisions of this Lease:
a) any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to Electroglas or to
another Subsidiary;
b) any Subsidiary may sell or otherwise dispose
of all or substantially all of its assets if after giving
effect to the sale or other disposition, Electroglas continues
to satisfy the requirements set forth in Part II of Schedule
2, and no Default or Event of Default shall have occurred and
be continuing hereunder; and
c) Electroglas may sell or dispose of its
interest in the Property with all or substantially all of its
assets to any other corporation, provided that:
(1) the acquiring corporation shall be a solvent
corporation organized under the laws of any State of
the United States of America; such acquiring
corporation shall expressly assume in writing all of
the obligations of Electroglas under this Lease and
the Purchase Documents; and such assumption shall not
violate any other term, condition or provision of
this Lease or the Purchase Documents; and
(2) after giving effect to such sale or
disposition the financial condition of the acquiring
corporation shall satisfy the requirements set forth
in Part II of Schedule 2, and no Default or Event of
Default shall have occurred and be continuing;
provided, however, that no such sale shall release Electroglas
from any of its obligations and liabilities under this Lease
or the Purchase Documents unless such sale is followed by the
complete liquidation of Electroglas and substantially all the
assets of Electroglas are distributed in such liquidation as
soon as reasonably possible (but not more than thirty days)
following such sale.
(iv) Multiemployer ERISA Plans. Incur or permit any
Material Subsidiary to incur any obligation to contribute to any
"multiemployer plan" as defined in Section 4001 of ERISA.
(v) Prohibited ERISA Transaction. Subject to the
representation of BNPLC set forth in subparagraph 0, enter into any
transaction which would cause this Lease, the Purchase Documents or
any other document executed in connection herewith (or any exercise of
BNPLC's rights hereunder or thereunder) to constitute a non-exempt
prohibited transaction under ERISA.
(vi) Liens. Create, incur, assume or suffer to exist, or
permit any Material Subsidiary to create, incur, assume or suffer to
exist, any Lien upon or with respect to any of its properties, now
owned or hereafter acquired other than Liens created by this Lease or
the Purchase Documents; provided, however, that the following shall be
permitted except to the extent that they would encumber any interest
in the Property in violation of other provisions of this Lease or
would encumber Collateral in violation of the Pledge Agreement:
a) Liens for taxes or assessments or other government
charges or levies if not yet delinquent or if they are being
contested in good faith by appropriate proceedings and for
which appropriate reserves are maintained;
b) Liens that secure obligations incurred in the
ordinary course of business, that are not past due for more
than sixty days (or that are being contested in good faith by
appropriate
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proceedings and for which appropriate reserves have been
established) and that:
(1) are imposed by law, such as mechanic's,
materialmen's, landlord's, warehousemen's and
carrier's Liens, and other similar Liens; or
(2) encumber only equipment or other tangible
personal property and any proceeds thereof (including
Liens created by equipment leases) and are imposed to
secure the payment of the purchase price or other
direct costs of acquiring the equipment or other
tangible personal property they encumber;
c) Liens under workmen's compensation, unemployment
insurance, social security or similar legislation (other than
ERISA);
d) Liens, deposits or pledges to secure the
performance of bids, tenders, contracts (other than contracts
for the payment of money), leases, public or statutory
obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or other similar obligations arising in
the ordinary course of business;
e) judgment and other similar Liens arising in
connection with court proceedings; provided that the execution
or other enforcement of such Liens which, individually or in
the aggregate, exceed $1,000,000 is effectively stayed and the
claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
f) easements, rights-of-way, restrictions and other
similar encumbrances which, in the aggregate, do not
materially interfere with the occupation, use and enjoyment by
Electroglas or any such Material Subsidiary of the property or
assets encumbered thereby in the normal course of its business
or materially impair the value of the property subject
thereto;
g) Liens securing obligations of such a Subsidiary to
Electroglas or to another such Subsidiary;
h) Liens incurred after the date of this Lease given
to secure the payment of the purchase price or other direct
costs incurred in connection with the acquisition,
construction, improvement or rehabilitation of assets,
including Liens existing on such assets at the time of
acquisition thereof or at the time of acquisition by
Electroglas or a Subsidiary of any business entity (including
a Subsidiary) then owning such assets, whether or not such
existing Liens were given to secure the payment of the
purchase price of the assets to which they attach, provided
that (i) except in the case of Liens existing on assets at the
time of acquisition of a Subsidiary then owning such assets,
the Lien shall be created within six (6) months of the later
of the acquisition of, or the completion of the construction
or improvement in respect of, such assets and shall attach
solely to such assets, and (ii) except in the case of Liens
existing on assets at the time of acquisition of a Subsidiary
then owning such assets, at the time such Liens are imposed,
the aggregate amount remaining unpaid on any such Debt secured
by Liens on such assets (whether or not assumed by Electroglas
or a Subsidiary) shall not exceed (1) an amount, in the case
of any such Lien that secures Debt for which Electroglas or
the applicable Subsidiary has no personal liability beyond its
interest in such assets, equal to one hundred percent (100%)
of the total purchase price, at the time such Debt is
incurred, of such assets or (2) an amount, in the case of any
such Lien that secures Debt for which Electroglas or the
applicable Subsidiary has personal liability beyond its
interest in such assets, equal to seventy-five percent (75%)
of the lesser of the total purchase price or fair market
value, at the time such Debt is incurred, of such assets;
i) mortgages, deeds of trust, equipment leases and
other Liens existing as of the date of this Lease, excluding
any such Liens that constitute Liens against Electroglas'
interest in any Material Subsidiary or that constitute blanket
Liens against all or substantially all of the inventory,
receivables, general intangibles or equipment of Electroglas
or of any Material Subsidiary;
j) leases and subleases granted by Electroglas or any
such Subsidiary to third parties in
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the ordinary course of business;
k) Liens not otherwise permitted by this subsection 0
(and not encumbering the Leased Property or any Collateral)
which secure the payment of Debt or any judgment rendered
against Electroglas or a Material Subsidiary, provided that
(i) at no time does the sum of the aggregate amount of all
outstanding Debt and judgments secured by such Liens exceed
ten percent of the Consolidated Tangible Net Worth (as defined
in Part I of Schedule 2) of Electroglas, and (ii) such Liens
do not constitute (A) Liens against Electroglas' interest in
any Material Subsidiary or (B) blanket Liens against all or
substantially all of the inventory, receivables, general
intangibles or equipment of (I) Electroglas or (II) any
Material Subsidiary whose inventory, receivables, general
intangibles or equipment, as the case may be, represent more
than ten percent of the total inventory, receivables, general
intangibles or equipment, as the case may be, of Electroglas
and its Subsidiaries determined on a consolidated basis;
l) Liens incurred in connection with any renewals,
extensions or refundings of any Debt secured by Liens
described in the other clauses of this subsection 0 set forth
above, provided that there is no increase in the aggregate
principal amount of Debt secured thereby from that which was
outstanding as of the date of such renewal, extension or
refunding and no additional property is encumbered; and
m) Liens granted or created by Electroglas or such
Material Subsidiary to secure the payment of money borrowed by
Electroglas or such Material Subsidiary from a third party not
an Affiliate of Electroglas and also to secure, equally and
ratably and otherwise in a manner reasonably acceptable to
BNPLC, Electroglas' obligations under this Lease and the
Purchase Agreement.
(vii) Transactions with Affiliates. Enter into, or permit any
Material Subsidiary to enter into, any transactions that individually
or in the aggregate are material to Electroglas or such Material
Subsidiary (including the purchase, sale or exchange of property or
the rendering of any service) with Affiliates of Electroglas (other
than Subsidiaries of Electroglas), except upon fair and reasonable
terms no less favorable to Electroglas or the Material Subsidiary (as
determined in good faith by the board of directors of Electroglas)
than would be obtained in a comparable arm's length transaction with a
Person not an Affiliate of Electroglas.
17. Events of Default.
(a) Definition of Events of Default. Each of the
following events shall be deemed to be an "EVENT OF DEFAULT" by Electroglas
under this Lease:
(i) Electroglas shall fail to pay when first due any Base
Rent, Administrative Fees or Commitment Fees and such failure shall
continue for three Business Days after Electroglas is notified
thereof.
(ii) Electroglas shall fail to pay when first due any Rent
other than Base Rent, Administrative Fees or Commitment Fees, and such
failure shall continue for thirty days after Electroglas is notified
thereof.
(iii) Electroglas shall fail to comply with any term,
provision or covenant of this Lease, other than as described in the
other clauses of this subparagraph 0, and shall not cure such failure
prior to the earlier of (A) thirty days after notice thereof is sent
to Electroglas, or (B) the date any writ or order is issued for the
levy or sale of any property owned by BNPLC (including the Property)
because of such failure or any criminal action is overtly threatened
or instituted against BNPLC or any of its directors, officers or
employees because of such failure; provided, however, that so long as
no such writ or order is issued and no such criminal action is overtly
threatened or instituted, the period within which such failure may be
cured by Electroglas shall be extended for a further period (not to
exceed an additional ninety days) as shall be necessary for the curing
thereof with diligence, if (but only if) (x) such failure is
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susceptible of cure but cannot with reasonable diligence be cured
within such thirty day period, (y) Electroglas shall promptly have
commenced to cure such failure and shall thereafter continuously
prosecute the curing thereof with reasonable diligence and (z) the
extension of the period for cure will not, in the case of such a
failure that occurs or commences more than thirty-five days prior to
the expiration of this Lease, cause the period for cure to extend
beyond five days prior to the expiration of this Lease.
(iv) Electroglas shall fail to comply with any term,
provision or condition of the Purchase Documents and, if the Purchase
Documents expressly provide a time within which Electroglas may cure
such failure, Electroglas shall not cure the failure within such time.
(v) Electroglas shall abandon the Property.
(vi) Electroglas or any Material Subsidiary shall fail to
make any payment of principal, premium, interest or other amounts, on
any Debt described in the next sentence when due (taking into
consideration the time Electroglas may have to cure such failure, if
any, under the documents governing such Debt). As used in this clause
0, "Debt" shall mean only a Debt of Electroglas or a Material
Subsidiary now existing or arising in the future, (A) payable to BNPLC
or any Participant or any Affiliate of BNPLC or any Participant, the
outstanding balance of which has become due by reason of acceleration
or maturity, or (B) payable to any Person, with respect to which
$1,000,000 or more is actually due and payable because of acceleration
or otherwise.
(vii) Electroglas or any Material Subsidiary shall
generally not pay its debts as such debts become due, or shall admit
in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against Electroglas or any Material
Subsidiary seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of sixty consecutive days, or any of the actions
sought in such proceeding (including the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property)
shall occur; or Electroglas or any Material Subsidiary shall take any
corporate action to authorize any of the actions set forth above in
this clause 0.
(viii) Any order, judgment or decree is entered in any
proceedings against Electroglas or any Material Subsidiary decreeing
its dissolution and such order, judgment or decree remains unstayed
and in effect for more than sixty days.
(ix) Any order, judgment or decree is entered in any
proceedings against Electroglas or any of its Subsidiaries decreeing a
divestiture of the stock of any Material Subsidiary or a divestiture
of any assets that represent a substantial part of the total assets of
Electroglas and its Subsidiaries (determined on a consolidated basis
in accordance with GAAP) or that have contributed a substantial part
of the net income of Electroglas and its Subsidiaries (determined on a
consolidated basis in accordance with GAAP) for any of the three
fiscal years then most recently ended, and such order, judgment or
decree remains unstayed and in effect for more than sixty days.
(x) A final judgment or order for the payment of money in
an amount (not covered by insurance) which exceeds $1,000,000 shall be
rendered against Electroglas or any Material Subsidiary (excluding any
such judgment or order for which a Statutory Bond has been provided
sufficient to release not only the Property and BNPLC, but also
Electroglas or the Material Subsidiary, as applicable) and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment or order, or (ii) within sixty days after the entry
thereof, such judgment or order is not paid or otherwise discharged or
execution thereof stayed pending appeal, or within sixty days after
the expiration of any such stay, such judgment or order is not paid or
otherwise discharged.
(xi) Any ERISA Termination Event that BNPLC determines in
good faith would constitute
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grounds for a termination of any Plan or for the appointment by the
appropriate United States district court of a trustee to administer
any Plan shall have occurred and be continuing thirty days after
notice to such effect shall have been given to Electroglas by BNPLC,
or any Plan shall be terminated, or a trustee shall be appointed by an
appropriate United States district court to administer any Plan, or
the Pension Benefit Guaranty Corporation shall institute proceedings
to terminate any Plan or to appoint a trustee to administer any Plan.
(xii) Electroglas shall enter into any transaction which
would cause this Lease, the Purchase Documents or any other document
executed in connection herewith (or any exercise of BNPLC's rights
hereunder or thereunder) to constitute a non-exempt prohibited
transaction under ERISA for any reason other than a breach by BNPLC of
the representation set forth in subparagraph 0.
(xiii) Electroglas shall fail to comply with any of the
requirements set forth in Part II of Schedule 2.
(xiv) Any merger or consolidation or sale of assets shall
occur that is prohibited by subparagraph 0 and that is not approved in
advance by BNPLC.
(b) Alternative Cure of Certain Defaults.
Notwithstanding the foregoing, any Default that could become an Event of
Default under subparagraph 0 may be cured during the Term by Electroglas'
delivery to BNPLC no later than fifteen days before the expiration of the
period for cure specified in that subparagraph of a notice irrevocably
exercising Electroglas' option under the Purchase Agreement to purchase BNPLC's
interest in the Property and designating as the Designated Sale Date any
Business Day which is at least five days before the expiration of the period
for cure specified in subparagraph 0; provided, however, Electroglas must, as a
condition to the effectiveness of its cure, on the date so designated as the
Designated Sale Date satisfy all obligations of Electroglas under the Purchase
Agreement in accordance with its terms and tender to BNPLC all Rent and all
other amounts then due or accrued and unpaid hereunder (including reimbursement
for any Breakage Costs or other Losses incurred by BNPLC in connection with the
applicable Default hereunder, regardless of whether BNPLC shall have been
reimbursed for such costs in whole or in part by any Participants) and
Electroglas must also on the Designated Sale Date furnish written confirmation
that all indemnities set forth herein (including the indemnity set forth in
subparagraph 0) shall survive the payment of such amounts by Electroglas to
BNPLC and the conveyance of BNPLC's interest in the Property to Electroglas.
18. Remedies.
(a) Basic Remedies. At any time when an Event of Default
has occurred and is continuing, BNPLC may notify Electroglas that, after the
expiration of sixty days following the date of such notice, BNPLC may exercise
remedies provided in this subparagraph 0. At any time after sixty days
following the date of any such notice to Electroglas, and regardless of whether
any Event of Default continues throughout or after such sixty days, BNPLC shall
be entitled at BNPLC's option and without limiting BNPLC in the exercise of any
other right or remedy BNPLC may have, and without any further demand or notice
except as expressly described in this subparagraph 0, to exercise the following
remedies:
(i) By notice to Electroglas, BNPLC may terminate
Electroglas' right to possession of the Property. A notice given in
connection with unlawful detainer proceedings specifying a time within
which to cure a default shall terminate Electroglas' right to
possession if Electroglas fails to cure the default within the time
specified in the notice.
(ii) Upon termination of Electroglas' right to
possession and without further demand or notice, BNPLC may re-enter
the Property and take possession of all improvements, additions,
alterations, equipment and fixtures thereon and remove any persons in
possession thereof. Any property in the Property may be removed and
stored in a warehouse or elsewhere at the expense and risk of and for
the account of Electroglas.
(iii) Upon termination of Electroglas' right to
possession, this Lease shall terminate and BNPLC may recover from
Electroglas an award equal to the sum of:
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a) The worth at the time of award of the
unpaid Rent which had been earned at the time of termination;
b) The worth at the time of award of
the amount by which the unpaid Rent which would have been
earned after termination until the time of award exceeds the
amount of such rental loss that Electroglas proves could have
been reasonably avoided;
c) The worth at the time of award of
the amount by which the unpaid Rent for the balance of the
scheduled Term after the time of award exceeds the amount of
such rental loss that Electroglas proves could be reasonably
avoided; and
d) Any other amount necessary to
compensate BNPLC for all the detriment proximately caused by
Electroglas' failure to perform Electroglas' obligations under
this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, the
costs and expenses (including Attorneys' Fees, advertising
costs and brokers' commissions) of recovering possession of
the Property, removing persons or property therefrom, placing
the Property in good order, condition, and repair, preparing
and altering the Property for reletting, all other costs and
expenses of reletting, and any loss incurred by BNPLC as a
result of Electroglas' failure to perform Electroglas'
obligations under the Purchase Agreement.
The "WORTH AT THE TIME OF AWARD" of the amounts referred to in
subparagraph 0 and subparagraph 0 shall be computed by
allowing interest at ten percent (10%) per annum or such other
rate as may be the maximum interest rate then permitted to be
charged under California law at the time of computation. The
"WORTH AT THE TIME OF AWARD" of the amount referred to in
subparagraph 0 shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%).
e) Such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time
by applicable California law, including to the extent so
permitted, any other amounts necessary to compensate BNPLC for
all the detriment proximately caused by Electroglas' failure
to perform Electroglas' obligations under this Lease or which
in the ordinary course of things would be likely to result
therefrom, including the costs and expenses (including
Attorneys' Fees, advertising costs and brokers' commissions)
of recovering possession of the Property, removing persons or
property therefrom, placing the Property in good order,
condition, and repair, preparing and altering the Property for
reletting, all other costs and expenses of reletting.
(iv) BNPLC shall have the remedy described in
California Civil Code Section 1951.4 (lessor may continue lease in
force even after lessee's breach and abandonment and recover rent as
it becomes due, if lessee has right to sublet or assign, subject only
to reasonable limitations). Accordingly, even though Electroglas has
breached this Lease and abandoned the Property, this Lease shall
continue in effect for so long as BNPLC does not terminate
Electroglas' right to possession, and BNPLC may enforce all of BNPLC's
rights and remedies under this Lease, including the right to recover
the Rent as it becomes due under this Lease. Electroglas' right to
possession shall not be deemed to have been terminated by BNPLC except
pursuant to subparagraph 0 hereof. The following shall not constitute
a termination of Electroglas' right to possession:
a) Acts of maintenance or preservation
or efforts to relet the Property;
b) The appointment of a receiver upon
the initiative of BNPLC to protect BNPLC's interest under this
Lease; or
c) Reasonable withholding of consent to
an assignment or subletting, or terminating a subletting or
assignment by Electroglas.
(b) Collections Under the Purchase Agreement. For the
limited purpose of computing
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<PAGE> 47
amounts for which Electroglas may be liable as provided in subparagraphs 0, 0
and 0, the Base Rent component of the "Rent" described in those subparagraphs
will be determined as if Stipulated Loss Value had been reduced by any payments
(net of costs of collection) actually received by BNPLC, before BNPLC is
granted an award as contemplated in subparagraph 0, from Electroglas pursuant
to Paragraph 1(a)(i) of the Purchase Agreement or as a Supplemental Payment
pursuant to Paragraph 1(a)(ii) of the Purchase Agreement. In addition,
Electroglas shall be entitled to a credit against the payment of any Base Rent
required by this Lease from time to time for periods following the Designated
Sale Date equal to the amount paid by Electroglas, if any, as interest required
by the penultimate sentence of Paragraph 1(a) of the Purchase Agreement.
(c) Enforceability. This Paragraph 0 shall be
enforceable to the maximum extent not prohibited by Applicable Law, and the
unenforceability of any provision in this Paragraph shall not render any other
provision unenforceable.
(d) Remedies Cumulative. No right or remedy herein
conferred upon or reserved to BNPLC is intended to be exclusive of any other
right or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing under Applicable Law or in equity. In addition to other remedies
provided in this Lease, BNPLC shall be entitled, to the extent permitted by
Applicable Law or in equity, to injunctive relief in case of the violation, or
attempted or threatened violation, of any of the covenants, agreements,
conditions or provisions of this Lease, or to a decree compelling performance
of any of the other covenants, agreements, conditions or provisions of this
Lease to be performed by Electroglas, or to any other remedy allowed to BNPLC
at law or in equity. Nothing contained in this Lease shall limit or prejudice
the right of BNPLC to prove for and obtain in proceedings for bankruptcy or
insolvency of Electroglas by reason of the termination of this Lease, an amount
equal to the maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater, equal to, or less than the amount
of the loss or damages referred to above. Without limiting the generality of
the foregoing, nothing contained herein shall modify, limit or impair any of
the rights and remedies of BNPLC under the Purchase Documents, and BNPLC shall
not be required to give the sixty day notice described in subparagraph 0 as a
condition to any acceleration of the Designated Sale Date or to taking any
action to enforce the Purchase Documents.
(e) Waiver by Electroglas. To the extent permitted by
law, Electroglas hereby waives and surrenders for itself and all claiming by,
through and under it, including creditors of all kinds, (i) any right and
privilege which it or any of them may have under any present or future
constitution, statute or rule of law to have a continuance of this Lease for
the term hereby demised after termination of Electroglas' right of occupancy by
order or judgment of any court or by any legal process or writ, or under the
terms of this Lease, or after the termination of this Lease as herein provided,
and (ii) the benefits of any present or future constitution, or statute or rule
of law which exempts property from liability for debt or for distress for rent,
and (iii) the provisions of law relating to notice and/or delay in levy of
execution in case of eviction of a lessee for nonpayment of rent.
19. Default by BNPLC. If BNPLC should default in the performance
of any of its obligations under this Lease, BNPLC shall have the time
reasonably required, but in no event less than thirty days, to cure such
default after receipt of notice from Electroglas specifying such default and
specifying what action Electroglas believes is necessary to cure the default.
If Electroglas prevails in any litigation brought against BNPLC because of
BNPLC's failure to cure a default within the time required by the preceding
sentence, then Electroglas shall be entitled to an award against BNPLC for the
monetary damages proximately caused to Electroglas by such default.
Notwithstanding the foregoing, BNPLC's right to cure as provided in
this Paragraph 0 will not in any event extend the time within which BNPLC must
remove Liens Removable by BNPLC as required by Paragraph 0 beyond the
Designated Sale Date.
20. Quiet Enjoyment. Provided Electroglas pays the Base Rent and
all Additional Rent payable hereunder as and when due and payable and keeps and
fulfills all of the terms, covenants, agreements and conditions to be performed
by Electroglas hereunder, BNPLC shall not during the Term disturb Electroglas'
peaceable and quiet enjoyment of the Property; however, such enjoyment shall be
subject to the terms, provisions, covenants, agreements and conditions of this
Lease, to Permitted Encumbrances, to Development Documents and to any other
claims not constituting Liens Removable by BNPLC. If any Lien Removable by
BNPLC is claimed
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<PAGE> 48
against the Property, including any judgment lien securing a Deductible
Judgment against BNPLC, BNPLC will remove the Lien Removable by BNPLC promptly.
However, BNPLC shall not be responsible for any Lien that is expressly excluded
from the definition of Liens Removable by BNPLC in the attached List of Defined
Terms. Any breach by BNPLC of this Paragraph shall render BNPLC liable to
Electroglas for any monetary damages proximately caused thereby, but as more
specifically provided in Paragraph 0 above, no such breach shall entitle
Electroglas to terminate this Lease or excuse Electroglas from its obligation
to pay Base Rent and other amounts hereunder.
21. Surrender Upon Termination. Unless Electroglas or an
Applicable Purchaser purchases BNPLC's entire interest in the Property pursuant
to the terms of the Purchase Agreement, Electroglas shall, upon the termination
of Electroglas' right to occupancy, surrender to BNPLC the Property, including
any buildings, alterations, improvements, replacements or additions constructed
by Electroglas, with all fixtures and furnishings included in the Property, but
not including movable furniture and movable personal property not covered by
this Lease, free of all Hazardous Substances (including Permitted Hazardous
Substances) and tenancies and, to the extent required by BNPLC, with all
Improvements in substantially the same condition as of the date the same were
initially completed, excepting only (i) ordinary wear and tear that occurs
between the maintenance, repairs and replacements required by other provisions
of this Lease, and (ii) alterations and additions which are expressly permitted
by the terms of this Lease and which have been completed by Electroglas in a
good and workmanlike manner in accordance with all Applicable Laws. Any
movable furniture or movable personal property belonging to Electroglas or any
party claiming under Electroglas, if not removed at the time of such
termination and if BNPLC shall so elect, shall be deemed abandoned and become
the property of BNPLC without any payment or offset therefor. If BNPLC shall
not so elect, BNPLC may remove such property from the Property and store it at
Electroglas' risk and expense. Electroglas shall bear the expense of repairing
any damage to the Property caused by such removal by BNPLC or Electroglas.
22. Holding Over by Electroglas. Should Electroglas not purchase
BNPLC's right, title and interest in the Property as provided in the Purchase
Agreement, but nonetheless continue to hold the Property after the termination
of this Lease without BNPLC's consent, whether such termination occurs by lapse
of time or otherwise, such holding over shall constitute and be construed as a
tenancy from day to day only, at a daily Base Rent equal to: (i) Stipulated
Loss Value on the day in question, times (ii) (A) the Prime Rate in effect for
such day so long as the holdover period does not extend beyond ninety days and
(B) for each such day beginning with the ninety-first day after the holdover
commences, two percent (2%) above the Prime Rate; divided by (iii) three
hundred and sixty; subject, however, to all of the terms, provisions, covenants
and agreements on the part of Electroglas hereunder. No payments of money by
Electroglas to BNPLC after the termination of this Lease shall reinstate,
continue or extend the Term of this Lease and no extension of this Lease after
the termination thereof shall be valid unless and until the same shall be
reduced to writing and signed by both BNPLC and Electroglas.
23. Independent Obligations Evidenced by Purchase Documents.
Electroglas acknowledges and agrees that nothing contained in this Lease shall
limit, modify or otherwise affect any of Electroglas' obligations under the
Purchase Documents, which obligations are intended to be separate, independent
and in addition to, and not in lieu of, the obligations set forth herein. In
the event of any inconsistency between the terms and provisions of the Purchase
Documents and the terms and provisions of this Lease, the terms and provisions
of the Purchase Documents shall control.
24. Waiver of Jury Trial. BNPLC AND ELECTROGLAS EACH HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LEASE OR ANY OTHER DOCUMENT OR DEALINGS
BETWEEN THEM RELATING TO THIS LEASE OR THE PROPERTY. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Electroglas and BNPLC each acknowledge that this waiver
is a material inducement to enter into a business relationship, that each has
already relied on the waiver in entering into this Lease and the other
documents referred to herein, and that each will continue to rely on the waiver
in their related future dealings. Electroglas and BNPLC each further warrants
and represents that it has reviewed this waiver with its legal counsel, and
that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR
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<PAGE> 49
IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS LEASE OR THE PROPERTY. In the event of litigation,
this Lease may be filed as a written consent to a trial by the court.
25. Miscellaneous.
(a) Notices. Each provision of this Lease, or of any
Applicable Laws with reference to the sending, mailing or delivery of any
notice or demand hereunder or with reference to the making of any payment
required hereunder, shall be deemed to be complied with when and if the
following steps are taken:
(i) All Rent required to be paid by Electroglas to BNPLC
hereunder shall be paid to BNPLC in immediately available funds by
wire transfer to:
Federal Reserve Bank of San Francisco
Account: Banque Nationale de Paris
ABA #: 121027234
Reference: Electroglas, Inc. (Receipts of Rent).
or at such other place and in such other manner as BNPLC may designate
in a notice to Electroglas.
(ii) All advances paid to Electroglas by BNPLC hereunder
or in connection herewith shall be paid to Electroglas in immediately
available funds by wire transfer to:
Bank of America
1850 Gateway Blvd.
Concord, Ca. 94520
Account Name: Electroglas, Inc.
Account Number: 14860-00751
ABA #: 121000358
Reference: Electroglas Lease from BNPLC.
or at such other place and in such other manner as Electroglas may
designate in a notice signed by Electroglas' Treasurer or Chief
Financial Officer to BNPLC.
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<PAGE> 50
(iii) All notices, demands, approvals, consents and other
communications to be made hereunder to or by the parties hereto must,
to be effective for purpose of this Lease, be in writing. Notices,
demands and other communications required or permitted hereunder are
to be sent to the addresses set forth below (or in the case of
communications to Participants, at the addresses set forth in Schedule
1 to the Participation Agreement) and shall be given by any of the
following means: (A) personal service; (B) electronic communication,
whether by telex, telegram or telecopying (if confirmed in writing
sent by United States first class mail, return receipt requested); or
(C) registered or certified first class mail, return receipt
requested. Such addresses may be changed by notice to the other
parties given in the same manner as provided above. Any notice or
other communication sent pursuant to clause (A) or (C) hereof shall be
deemed received (whether or not actually received) upon first
attempted delivery at the proper notice address on any Business Day
between 9:00 A.M. and 5:00 P.M., and any notice or other communication
sent pursuant to clause (B) hereof shall be deemed received upon
dispatch by electronic means.
Address of BNPLC:
BNP Leasing Corporation
717 North Harwood Street
Suite 2630
Dallas, Texas 75201
Attention: Lloyd G. Cox
Telecopy: (214) 969-0060
With a copy to:
Banque Nationale de Paris, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: William La Herran
Telecopy: (415) 296-8954
And with a copy to:
Clint Shouse
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Telecopy: (214) 969-1550
Address of Electroglas:
Electroglas, Inc.
3045 Stender Way
Santa Clara, CA. 95054
Attention: Armand Stegall
Telecopy: (408) 482-8011
With a copy to:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attention: Tom Fileti
Telecopy: (213) 892-5454
-44-
<PAGE> 51
(b) Severability. If any term or provision of this Lease
or the application thereof shall to any extent be held by a court of competent
jurisdiction to be invalid and unenforceable, the remainder of this Lease, or
the application of such term or provision other than to the extent to which it
is invalid or unenforceable, shall not be affected thereby.
(c) No Merger. There shall be no merger of this Lease or
of the leasehold estate created hereby created with any other interest in the
Property by reason of the fact that the same person may acquire or hold,
directly or indirectly, this Lease or the leasehold estate created hereby and
any other interest in the Property, unless all Persons with an interest in the
Property that would be adversely affected by any such merger specifically agree
in writing that such a merger shall occur.
(d) No Implied Waiver. The failure of BNPLC or
Electroglas to insist at any time upon the strict performance of any covenant
or agreement or to exercise any option, right, power or remedy contained in
this Lease shall not be construed as a waiver or a relinquishment thereof for
the future. The waiver of or redress for any breach of this Lease shall not
prevent a similar subsequent act from constituting a violation. Any express
waiver shall affect only the term or condition specified in such waiver and
only for the time and in the manner specifically stated therein. A receipt by
BNPLC of any Base Rent or other payment hereunder with knowledge of the breach
of any covenant or agreement contained in this Lease shall not be deemed a
waiver of such breach, and no waiver of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by the waiving
party.
(e) NO IMPLIED REPRESENTATIONS BY BNPLC. BNPLC AND
BNPLC'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE
PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE PURCHASE DOCUMENTS,
AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY ELECTROGLAS BY IMPLICATION
OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE AND THE PURCHASE
DOCUMENTS.
(f) Entire Agreement. This Lease, the Purchase Documents
and the other documents dated as of the Effective Date which are being executed
by Electroglas and executed or accepted by BNPLC contemporaneously with the
execution of this Lease supersede any prior negotiations and agreements between
BNPLC and Electroglas concerning the Property, and no amendment or modification
of this Lease (including any Construction Funding Agreement) shall be binding
or valid unless expressed in a writing executed by both parties hereto.
(g) Binding Effect. All of the covenants, agreements,
terms and conditions to be observed and performed by the parties hereto shall
be applicable to and binding upon their respective successors and, to the
extent assignment is permitted hereunder, their respective assigns.
(h) Time is of the Essence. Time is of the essence as to
all obligations of Electroglas and BNPLC and all notices required of
Electroglas and BNPLC under this Lease.
(i) Governing Law. This Lease shall be governed by and
construed in accordance with the laws of the State of California without regard
to conflict or choice of laws.
(j) Paragraph Headings. The paragraph headings contained
in this Lease are for convenience only and shall in no way enlarge or limit the
scope or meaning of the various and several paragraphs hereof.
(k) Other Terms and References. Words of any gender used
in this Lease shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural and vice
versa, unless the context otherwise requires. References herein to Paragraphs,
subparagraphs or other subdivisions shall refer to the corresponding
Paragraphs, subparagraphs or subdivisions of this Lease, unless specific
reference is made to another document or instrument. References herein to any
Schedule or Exhibit shall refer to the corresponding Schedule or Exhibit
attached hereto, which shall be made a part hereof by such reference. All
capitalized terms used in this Lease which refer to other documents shall be
deemed to refer to
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<PAGE> 52
such other documents as they may be renewed, extended, supplemented, amended or
otherwise modified from time to time, provided such documents are not renewed,
extended or modified in breach of any provision contained herein or therein or,
in the case of any other document to which BNPLC is a party or of which BNPLC
is an intended beneficiary, without the consent of BNPLC. All accounting terms
used but not specifically defined herein shall be construed in accordance with
GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and
words of similar import when used in this Lease refer to this Lease as a whole
and not to any particular subdivision unless expressly so limited. The phrases
"this Paragraph" and "this subparagraph" and similar phrases used herein refer
only to the Paragraphs or subparagraphs in which the phrase occurs. As used
herein the word "or" is not exclusive. As used herein the words "include",
"including" and similar terms shall be construed as if followed by "without
limitation to".
(l) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO
BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE
BETWEEN BNPLC AND ELECTROGLAS. NEITHER THE EXECUTION OF THIS LEASE NOR THE
ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR
ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS LEASE OR
SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF
BNPLC TO ELECTROGLAS.
26. Income Tax Reporting. BNPLC and Electroglas intend this Lease
and the Purchase Agreement to have a form for income taxes which is different
than the form of this Lease and the Purchase Agreement for other purposes, and
thus the parties acknowledge and agree as follows:
(a) For purposes of determining their respective federal,
state and local income tax obligations, BNPLC and Electroglas believe
and intend that this Lease and the Purchase Agreement constitute a
financing arrangement or conditional sale. Both BNPLC and Electroglas
agree to report this Lease and the Purchase Agreement as a financing
arrangement or conditional sale on their respective income tax returns
(the "REQUIRED REPORTING"), unless such Required Reporting is
challenged in writing by the Internal Revenue Service or another
governmental authority with jurisdiction (a "TAX CHALLENGE").
Consistent with the foregoing, BNPLC and Electroglas expect that
Electroglas (and not BNPLC) shall be treated as the true owner of the
Property for income tax purposes, thereby entitling Electroglas (and
not BNPLC) to take depreciation deductions, state and federal tax
credits and other tax benefits available to the owner. Electroglas
shall also report all interest earned on Escrowed Proceeds or any
collateral pledged pursuant to the Purchase Documents as Electroglas'
income for federal, state and local income tax purposes. REFERENCES
IN THIS LEASE OR IN THE PURCHASE AGREEMENT TO A "LEASE" ARE NOT
INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR
ELECTROGLAS AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE
PROPER CHARACTERIZATION OF, THIS LEASE AND THE PURCHASE AGREEMENT.
(b) FOR ALL OTHER PURPOSES, INCLUDING THE DETERMINATION
OF THE APPROPRIATE FINANCIAL ACCOUNTING FOR THIS LEASE AND THE
DETERMINATION OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER STATE LAW,
BNPLC and Electroglas believe and intend that (i) this
Lease constitutes a true Lease, not a mere financing arrangement,
enforceable in accordance with its express terms (and neither this
Paragraph 0 nor the provisions referencing this Paragraph on the title
page of this Lease nor the corresponding provisions in the Purchase
Agreement are intended to affect the enforcement of any other
provisions of this Lease or the Purchase Agreement) and (ii) the
Purchase Agreement shall constitute a separate and independent
contract, enforceable in accordance with the express terms and
conditions set forth therein. In this regard, Electroglas
acknowledges that Electroglas asked BNPLC to participate in the
transactions evidenced by this Lease and the Purchase Agreement as a
landlord and owner of the Property, not as a lender. Although other
transactions might have been used to accomplish similar results,
Electroglas expects to receive certain material accounting and other
advantages through the use of a lease transaction. Accordingly, and
notwithstanding the Required Reporting for income tax purposes, as
between BNPLC and Electroglas, Electroglas cannot equitably deny that
this Lease and the Purchase Agreement should be construed and enforced
in accordance with their respective terms, rather than as a mortgage
or other
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<PAGE> 53
security device, in any action brought by BNPLC to enforce this Lease
or the Purchase Agreement.
In the event of a Tax Challenge, BNPLC and Electroglas shall each provide to
the other copies of all notices from the Internal Revenue Service or any other
governmental authority presenting the Tax Challenge. Further, before changing
from the Required Reporting because of a Tax Challenge, BNPLC and Electroglas
shall each consider in good faith any reasonable suggestions received from the
other party to this Lease about an appropriate response to the Tax Challenge;
provided, however, that the suggestions are set forth in a notice delivered no
later than thirty days after the suggesting party is first notified of the Tax
Challenge; and, provided further, that when presented with a Tax Challenge,
BNPLC shall have the right to change from the Required Reporting rather than
participate in any litigation or other legal proceeding against the Internal
Revenue Service or another governmental authority. In any event, Electroglas
shall indemnify BNPLC and defend and hold BNPLC harmless from and against all
Losses imposed on or asserted against or incurred by BNPLC by reason of, in
connection with or arising out of any such challenge or any resulting
recharacterization of this Lease or the Purchase Agreement required by the
Internal Revenue Service or another governmental authority, including any
additional taxes that may become due upon any sale under the Purchase
Agreement, to the extent (if any) that such Losses are not offset by tax
savings to BNPLC resulting from additional depreciation deductions or other tax
benefits of the recharacterization.
27. Proprietary Information and Confidentiality. Electroglas
shall have no obligation to provide proprietary information (as defined in the
next sentence) to BNPLC, except and to the extent that (1) BNPLC reasonably
determines that BNPLC cannot accomplish the purposes of BNPLC's inspection of
the Property pursuant to the various provisions hereof without evaluating such
information, and (2) before conducting any inspections of the Property
permitted hereunder BNPLC shall, if requested by Electroglas, confirm and
ratify the confidentiality agreements covering such proprietary information set
forth in subparagraph 0. For purposes of this Lease "PROPRIETARY INFORMATION"
means Electroglas' intellectual property, trade secrets and other confidential
information of value to Electroglas about, among other things, Electroglas'
manufacturing processes, products, marketing and corporate strategies, but in
no event will "proprietary information" include any disclosure of substances
and materials (and their chemical composition) which are or previously have
been present in, on or under the Property at the time of any inspections by
BNPLC, nor will "proprietary information" include any additional disclosures
reasonably required to permit BNPLC to determine whether the presence of such
substances and materials has constituted a violation of Environmental Laws or
this Lease. In addition, under no circumstances shall Electroglas have any
obligation to disclose to BNPLC or any other party any proprietary information
of Electroglas (including, without limitation, any pending applications for
patents or trademarks, any research and design and any trade secrets) except if
and to the limited extent reasonably necessary to comply with the express
provisions of this Lease.
[The signature pages follow.]
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<PAGE> 54
IN WITNESS WHEREOF, Electroglas and BNPLC have caused this Lease
Agreement to be executed as of March 31, 1997.
"ELECTROGLAS"
ELECTROGLAS, INC.
By: /s/ Armand Stegall
-------------------------------------------
Armand Stegall, Chief Financial Officer and
Vice President of Finance
<PAGE> 55
[Continuation of signature pages to Lease Agreement dated to be effective March
31, 1997]
"BNPLC"
BNP LEASING CORPORATION
By: /s/ Lloyd G. Cox
-------------------------------
Lloyd G. Cox, Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME, THE CONSOLIDATED BALANCE SHEETS AND THE
ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 34,785
<SECURITIES> 92,263
<RECEIVABLES> 19,344
<ALLOWANCES> 208
<INVENTORY> 23,593
<CURRENT-ASSETS> 180,457
<PP&E> 28,790
<DEPRECIATION> 16,742
<TOTAL-ASSETS> 196,364
<CURRENT-LIABILITIES> 22,581
<BONDS> 0
0
0
<COMMON> 183
<OTHER-SE> 173,600
<TOTAL-LIABILITY-AND-EQUITY> 196,364
<SALES> 25,551
<TOTAL-REVENUES> 25,551
<CGS> 15,667
<TOTAL-COSTS> 15,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 40
<INCOME-TAX> 14
<INCOME-CONTINUING> 26
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
