<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _________to__________
Commission file number 0-24156
FORE SYSTEMS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 25-1628117
-------- ----------
(State or Other Jurisdiction of (I.R.S Employer
Incorporation or Organization) Identification No.)
1000 FORE Drive, Warrendale, Pennsylvania 15086-7502
----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (724) 742-4444
--------------
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 1, 1999
- ---------------------------- -------------------------------
Common Stock, $.01 par value 111,239,447 Shares
<PAGE> 2
FORM 10-Q
FORE SYSTEMS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FORE Systems, Inc. Consolidated Balance
Sheet as of December 31, 1998 and
March 31, 1998 3
FORE Systems, Inc. Consolidated Statement
of Operations for the three months and
nine months ended December 31, 1998 and 1997 4
FORE Systems, Inc. Consolidated Statement
of Cash Flows for the three months and
nine months ended December 31, 1998 and 1997 5
Notes to Unaudited Consolidated Financial
Statements 6-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-20
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21-22
Signature 23
Exhibit Index 24
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FORE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, MARCH 31,
1998 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $189,432 $ 127,231
Short-term investments 172,048 186,999
Accounts receivable, net of allowance for doubtful
accounts of $6,521 at December 31, 1998 and
$7,194 at March 31, 1998 124,163 111,347
Inventories 87,053 70,388
Deferred income taxes 36,533 36,620
Prepaid expenses and other current assets 18,101 12,127
--------------- ---------------
Total current assets 627,330 544,712
Fixed assets, net 70,848 71,495
Other non-current assets 6,642 5,000
--------------- ---------------
Total assets $704,820 $ 621,207
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,811 $ 37,240
Accrued payroll and related costs 18,350 18,560
Income taxes payable 12,695 13,789
Deferred revenue 46,194 28,719
Other current liabilities 21,999 15,881
--------------- ---------------
Total current liabilities 148,049 114,189
--------------- ---------------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share; 300,000,000
shares authorized; shares issued:
111,158,727 at December 31, 1998 and 100,302,143
at March 31, 1998 640,871 423,782
Retained earnings (accumulated deficit) (79,720) 88,285
Treasury stock, at cost:
165,714 shares at December 31, 1998 and 137,310
shares at March 31, 1998 (3,253) (3,252)
Cumulative translation adjustment (590) (101)
Valuation allowance for short-term investments (537) (1,696)
--------------- ---------------
Total stockholders' equity 556,771 507,018
--------------- ---------------
Total liabilities and stockholders' equity $704,820 $ 621,207
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
FORE SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ---------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $ 158,724 $ 122,083 $ 444,208 $ 327,161
Cost of sales 74,013 53,944 201,185 144,322
--------- --------- --------- ---------
Gross profit 84,711 68,139 243,023 182,839
--------- --------- --------- ---------
Operating expenses:
Research and development 20,760 17,765 58,372 50,802
Sales and marketing 44,929 32,577 125,064 92,016
General and administrative 7,901 6,182 22,162 16,686
Purchased research and development -- -- 199,316 --
Restructuring charges -- -- 5,100 --
--------- --------- --------- ---------
Total operating expenses 73,590 56,524 410,014 159,504
--------- --------- --------- ---------
Income (loss) from operations 11,121 11,615 (166,991) 23,335
Interest income, net 3,869 3,413 10,930 9,706
Other income (expense) 491 199 233 296
--------- --------- --------- ---------
Income (loss) before provision for income taxes 15,481 15,227 (155,828) 33,337
Provision for income taxes 4,335 5,177 12,177 11,335
--------- --------- --------- ---------
Net income (loss) $ 11,146 $ 10,050 $(168,005) $ 22,002
========= ========= ========= =========
Net income (loss) per share - basic $ 0.10 $ 0.10 $ (1.61) $ 0.22
========= ========= ========= =========
Net income (loss) per share - diluted $ 0.10 $ 0.10 $ (1.61) $ 0.22
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
FORE SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- -------------------------
1998 1997 1998 1997
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 11,146 $ 10,050 $(168,005) $ 22,002
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 9,641 6,915 26,796 18,570
Deferred income tax benefit 4,441 (739) 5,442 (1,710)
Purchased research and development -- -- 199,316 --
Income tax benefit related to stock options 456 -- 5,112 1,376
Cumulative translation adjustment (242) (423) (489) (268)
Change in operating assets and liabilities:
Accounts receivable (11,792) 4,108 (12,814) (12,616)
Inventories (13,584) (1,694) (16,286) (12,151)
Prepaid expenses and other current assets (6) 935 (10,286) (5,434)
Accounts payable 12,455 (10,523) (20) (1,821)
Accrued liabilities 3,246 1,094 510 6,245
Prepaid income taxes and income taxes payable (1,590) 5,504 (1,094) 10,512
Deferred revenue 9,280 3,860 17,463 6,862
--------- --------- --------- ---------
Net cash provided by operating activities 23,451 19,087 45,645 31,567
--------- --------- --------- ---------
Cash flows from investing activities:
Purchases of short-term investments (64,076) (53,775) (139,744) (152,710)
Redemption and sale of short-term investments 68,983 21,133 155,854 146,296
Investment in other non-current assets 145 -- (1,642) --
Capitalization of software development costs (413) (527) (2,055) (1,112)
Acquisition of businesses, net of cash acquired -- -- 844 --
Purchases of fixed assets (6,890) (13,954) (22,479) (37,101)
--------- --------- --------- ---------
Net cash used in investing activities (2,251) (47,123) (9,222) (44,627)
--------- --------- --------- ---------
Cash flows from financing activities:
Principal payments on notes payable and capital lease
obligations -- -- -- (21)
Purchase of treasury stock -- -- (1) --
Proceeds from issuance of Common stock 4,338 3,484 25,779 12,814
--------- --------- --------- ---------
Net cash provided by financing activities 4,338 3,484 25,778 12,793
--------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents 25,538 (24,552) 62,201 (267)
Cash and cash equivalents at beginning of period 163,894 153,709 127,231 129,424
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 189,432 $ 129,157 $ 189,432 $ 129,157
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE 1. Interim Financial Statements
The accompanying unaudited interim consolidated financial statements of
FORE Systems, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, these statements include all adjustments,
consisting of normal and recurring adjustments, considered necessary for a fair
presentation of the results for such periods. The results of operations for the
three and nine month periods ending December 31, 1998 are not necessarily
indicative of results which may be achieved for the entire fiscal year ending
March 31, 1999. The unaudited consolidated interim financial statements should
be read in conjunction with the financial statements and notes thereto contained
in the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1998 as filed with the Securities and Exchange Commission.
NOTE 2. Inventories (in thousands)
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method, and include raw material
components, processing costs and manufacturing overhead costs.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1998
----------------- --------------
<S> <C> <C>
Raw Materials $ 22,956 $15,120
Work in Process 12,358 11,512
Finished Goods 51,739 43,756
-------- -------
Total Inventories $ 87,053 $70,388
======== =======
</TABLE>
NOTE 3. Lease Commitments
In December 1998, the Company entered into agreements to construct and
lease manufacturing and operating facilities on land adjacent to the Company's
headquarters, which was purchased by the Company. The lessor has committed to
fund a maximum of $20.5 million for the construction of the building. Upon
completion of construction, the Company will lease the facilities under an
eight-year operating lease and has options to renew the lease for two additional
five-year terms (subject to certain conditions). Future annual minimum rental
payments under the lease are approximately $1.5 million and are expected to
commence in fiscal year 2000. During the construction period, the Company
guaranties the repayment of 90% of certain project costs expended or financed by
the lessor, which amount is estimated not to exceed $18 million, and under
certain circumstances guaranties the repayment of 100% of all project costs
expended or financed by the lessor. During the lease period, the Company
guaranties all of its obligations under the lease.
The Company may, at its option, purchase the facilities during or at
the expiration of the term of the lease at an amount equal to the remaining
balance of any debt of the lessor related to the construction of the facilities
plus any applicable prepayment penalties. The Company has the right to obtain a
purchaser for the facility upon the termination of the lease. If the Company
exercises this remarketing option and obtains a buyer for the facility, the
Company guaranties to the lessor a residual value for the facility of
approximately $14 million, an amount that was determined at the lease inception
date. Should the Company not exercise the remarketing option, the Company will
be required to purchase the facility at the termination of the lease for
approximately $19 million.
As part of the above lease transaction, the Company will pledge
approximately $19.5 million of marketable securities (valued as of completion of
construction) as collateral for specified obligations of the lessor. The Company
under its investment policy will manage these securities. In addition, under the
terms of the lease, the Company is required to comply with certain financial
covenants including the maintenance of a minimum tangible net worth. Other
restrictive covenants limit indebtedness and the payment of dividends.
The lease transaction entered into in December 1998 is tied to the
lease for the Company's existing headquarters facilities. As such, the lease
contains cross default provisions with the previous lease, and the Company must
exercise purchase options, renewal options and remarketing options with respect
to all buildings at the headquarters. Should the Company elect to purchase, or
be required to purchase, all facilities at its headquarters, the total purchase
price would approximate $43 million.
-6-
<PAGE> 7
NOTE 4. Legal Proceedings
In July and August 1997, the Company was notified that it was a party
to seven nearly identical class action lawsuits, filed in the United States
District Court for the Western District of Pennsylvania, alleging certain
violations of federal securities laws by the Company and certain of its
officers, who were named as defendants in the suits, arising from alleged
misstatements or omissions by the Company. Plaintiffs seek compensatory damages
for injuries allegedly incurred by purchasers of the Company's stock during the
period from July 19, 1996 through April 1, 1997, inclusive. Pursuant to court
order, the lawsuits were consolidated and a consolidated amended complaint was
filed by the lead plaintiffs. The Company and the individual defendants
subsequently filed their answer to the consolidated amended complaint. In
December, 1998, plaintiffs filed a second consolidated amended complaint and the
Company and the individual defendants responded by filing a motion to dismiss,
or, in the alternative, for summary judgment. The Company believes the
allegations in the consolidated amended complaint are completely without merit
and intends to defend this action vigorously. Management believes that the
ultimate outcome of these claims will not have a material adverse effect on the
results of operations or financial position of the Company.
The Company was served, in October 1998, with a complaint filed by Bell
Communications Research, Inc. in the United States District Court for the
District of Delaware. The complaint alleges that the Company infringes four
patents owned by the plaintiff and seeks compensatory and injunctive relief. The
Company subsequently filed its answer to the complaint. The Company believes the
allegations in the complaint are completely without merit and intends to defend
this action vigorously.
From time to time, the Company receives notifications alleging that it
is or may be infringing the intellectual property rights of third parties. At
the present time, the Company is in separate discussions with several such third
parties regarding the alleged infringement by the Company of certain patents
owned by such third parties.
In the opinion of management, the ultimate outcome of the complaint
filed by Bell Communications Research, Inc. or of any of the above referenced
potential intellectual property claims by third parties will not have a material
adverse effect on the results of operations or the financial position of the
Company. However, in the course of defending any of these matters, the Company
may incur substantial legal and other expenses, and certain managers of the
Company may expend substantial amounts of time and effort, diverting the
attention of such managers from other activities. In addition, because the
ultimate outcome of matters of this type can be difficult to predict with
accuracy, it is possible that an unfavorable resolution of any of these matters
could materially adversely affect the Company's results of operations or its
financial position in a particular future period or periods.
NOTE 5. Business Combination
On September 11, 1998, the Company acquired Berkeley Networks, Inc., a
California corporation ("Berkeley"), by means of a merger (the "Merger") of a
wholly-owned subsidiary of the Company, Fastwire Acquisition Corporation, a
Delaware corporation ("Fastwire"), with and into Berkeley. Berkeley, which
designs and develops multi-gigabit routing switch platforms based on Windows NT
and advanced stateful inspection switching ASICs, was a development stage
enterprise that had generated no significant revenues and had not shipped a
completed product at the time the acquisition was completed.
The Company issued a total of approximately 8.6 million shares of
Common stock to the former shareholders of Berkeley and granted to former
holders of options to purchase Berkeley Common stock a total of approximately
0.6 million substitute stock options to purchase the Company's Common stock.
Pursuant to the terms of the Merger, additional consideration of up to a total
of $30,000,000 in cash (the "Earn-Out Payments") was to be paid by the Company
based on Berkeley achieving certain technological advances and/or attaining
certain revenue goals in the period commencing on September 11, 1998 and ending
on the second anniversary thereof. Since the acquisition date, the Company has
made Earn-Out Payments of approximately $8.8 million, based on the payment
schedule established by the terms of the Merger, to the former equity holders of
Berkeley.
-7-
<PAGE> 8
The transaction was accounted for under the purchase method of
accounting and, accordingly, the acquired assets and liabilities were recorded
based upon their fair values at the date of the acquisition. The Company has
obtained an independent third-party appraisal of the value of intangible assets
and purchased research and development acquired. The results of operations of
Berkeley are included in the financial statements of the Company from the date
of the acquisition.
The purchase price paid in Company stock and options and including the
Earn-Out Payments made to date of $8.8 million totaled $196.6 million.
Additional costs incurred in connection with the closing of the transaction
($6.5 million) and restructuring charges of the acquired company for certain
assets, closing of facilities and employee termination costs ($2.0 million)
results in a total purchase price of $205.1 million. The Company may be required
to pay up to an additional $10 million based on the achievement of certain
technological advances prior to March 31, 1999 and an additional $10 million
based on the attainment of certain revenue goals prior to September 11, 2000.
Depending on the amount and nature of any additional consideration paid, the
amount of intangible assets and corresponding periodic amortization would be
increased.
The table below summarizes the purchase price allocation, excluding the
additional $20 million that may be recorded based on certain technological
advances and/or certain revenue goals being achieved over the next 2 years:
<TABLE>
<CAPTION>
Value
---------
<S> <C>
Current assets $ 1,311
Property, plant and equipment 2,168
Assembled work force 1,700
Purchased research and development 199,316
Liabilities (4,671)
Deferred tax asset 5,355
----------
Total purchase price $205,179
----------
</TABLE>
As of the acquisition date, it was determined that technological
feasibility of the in-process technology had not been established, Berkeley had
generated no significant revenue, had not shipped a
-8-
<PAGE> 9
completed product and the technology had no alternative future use. Accordingly,
no value was assigned to existing technology. Therefore, in accordance with
generally accepted accounting principles, the Company has expensed the amount of
purchase price allocated to purchased research and development of approximately
$199 million.
The value assigned to purchased research and development was determined
by identifying three research projects in areas for which technological
feasibility had not been established as of the date of the acquisition. These
projects were the E4, the E8 and the EZ Switch (collectively the "projects").
The E4 is a stackable Ethernet/Fast Ethernet/Gigabit Ethernet switch offering
"pay-as-you-go" bandwidth scalability and designed for medium size LAN
backbones. The E8 is a modular platform expected to deliver high network
performance to enterprise LAN backbones, and designed to meet the demands of the
corporate data center and to operate at a processing rate of more than 38
million packets per second. The EZ Switch is a workgroup edge switch which will
be targeted toward the low-cost stackable market and will allow for low-cost
forwarding devices to employ higher-end processing and memory architectures
toward the route calculation and distribution functions.
The value assigned to purchased research and development was determined
by estimating the costs to develop the purchased research and development into
commercially viable products; estimating the resulting net cash flows from such
projects; and discounting the net cash flows back to their present value. The
discount rate includes a factor that takes into account the uncertainty
surrounding the successful development of the purchased research and
development. At the acquisition date, the efforts remaining to develop the
purchased research and development into commercially viable products principally
related to the completion of all planning, designing, prototyping, high-volume
manufacturing, verification and testing activities that are necessary to
establish that the products can be produced to meet their design specifications
including functions, features and technical performance requirements.
The projects identified made up 100% of the total charge for purchased
research and development. Commercial versions of the E4 and the E8 were first
shipped to customers late in the quarter ended December 31, 1998. Development of
the EZ Switch is not yet complete. Management expects that development of the EZ
Switch will be completed prior to March 31, 2000. If such development is
completed on schedule, management expects that sales of the product will
commence prior to March 31, 2000. Research and development costs related to the
E4, the E8 and the EZ switch projects incurred through the acquisition date and
the quarter ended December 31, 1998 were $12.6 million and $15.4 million,
respectively. Estimated costs to complete these projects are $2.3 million.
Estimated revenues for the purchased in-process products commence in
fiscal year 1999 and increase through fiscal year 2002, at which time they are
assumed to decrease through fiscal year 2004, as newer products are released.
These assumptions are based on management's estimates of market size and growth
(which are supported by independent market data), expected trends in technology
and the nature and expected timing of new product introductions by the Company
and its competitors. The estimated gross margins as a percentage of revenues are
expected to be higher on a stand alone basis as compared to historical gross
margin percentages due to the product features and selling into a less price
sensitive market. The estimated selling, general and administration costs were
assumed to be lower as a percentage of revenue on a stand alone basis as
compared to historical percentages due to the type of markets and purchasing
patterns of the customers. Research and development costs were based on costs
estimated to complete the projects and maintenance costs after the products are
completed. The assumed income tax rate was 28%. The discount rate used in
discounting the net cash flows from purchased research and development averaged
30%.
In connection with this acquisition, the Company allocated the fair
values of the net assets acquired, including purchased research and development,
based upon an independent third party appraisal. Significant assumptions used to
determine the value of the purchased research and development included
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<PAGE> 10
financial projections for revenues, gross margin, selling and administrative
costs and research and development costs and an applicable income tax rate. The
company believes that the assumptions used in the forecasts were reasonable at
the time of the business combination. No assurance can be given, however, that
the underlying assumptions used to estimate expected project revenues,
development costs or profitability, or the events associated with such projects,
will transpire as estimated. For these reasons, actual results may vary
materially from the projected results.
Since the acquisition date the E4, E8 and EZ Switch have progressed
generally as expected under the assumptions used in the valuation. Revenues and
costs from these projects have not differed materially from the original
projections and estimates used in the assumptions.
In addition, the Company incurred restructuring charges during the
quarter ended September 30, 1998 of $5.1 million related primarily to the
closing of the Company's facilities and certain employee termination costs. The
decision to close such facilities and to terminate such employees was made in
connection with the acquisition of Berkeley in order to rationalize and better
align the Company's resources following the acquisition. Cost savings are
expected to result from the changes related to the restructuring activities.
The Company has received a letter from the Securities and Exchange
Commission (the "Commission") requesting additional information with respect to
the calculation and treatment of such purchased research and development, as
well as information concerning a restructuring charge of $5.1 million which the
Company recorded in connection with the acquisition of Berkeley. The Company
believes that it has appropriately assigned fair values in connection with the
acquisition of Berkeley, including purchased research and development, and that
it has appropriately recorded restructuring charges in accordance with generally
accepted accounting principles. However, the Commission, in recent public
statements and in communications with other companies in the computer networking
and other technology industries, has challenged the valuation methodologies used
in valuing purchased research and development. The Company, as a result of
discussions with the Commission, may be required to restate its financial
statements for the periods ended September 30, 1998 and December 31, 1998 with
respect to the treatment of the in process research and development acquired
from Berkeley and/or in connection with the restructuring charges related to
such acquisition. Any such restatement would increase goodwill and intangibles
and result in charges against the Company's earnings in future periods, and may
have a material adverse effect on the Company's results of operations in such
future periods.
The following unaudited pro forma information has been prepared
assuming that the acquisition of Berkeley had taken place at the beginning of
the respective periods presented. The amount of the aggregate purchase price
allocated to purchased research and development and the restructuring charges
has been excluded from the pro forma information as they are non-recurring
items. The pro forma financial information is not necessarily indicative of the
combined results that would have occurred had the acquisition taken place at the
beginning of the period, nor is it necessarily indicative of the results that
may occur in the future.
<TABLE>
<CAPTION>
Pro Forma of the Nine Months
Ended December 31,
1998 1997
<S> <C> <C>
Revenue $444,313 $327,161
Income from operations 29,432 18,876
Net income 27,047 17,669
Earnings per share - basic $ .25 $ .18
Earnings per share - diluted $ .24 $ .17
</TABLE>
NOTE 6. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
and Similar Financial Instruments and for Hedging Activities" ("SFAS 133"). This
new standard requires recognition of all derivatives as either assets or
liabilities at fair value. Based upon the hedging strategies currently used and
the level of activity related to derivative instruments, the Company does not
anticipate the effect of adoption to have a material impact on either financial
position or results of operations. The Company will implement SFAS 133 in fiscal
year 2001, as required.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130") and Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). The Company is currently
evaluating the impact of SFAS 131. During the first quarter of fiscal year 1999,
the company adopted SFAS 130. This statement establishes standards for reporting
and the display of comprehensive income and its components in a primary
financial statement. At December 31, 1998 and December 31, 1997, the components
of comprehensive income were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1998 1997
<S> <C> <C>
Net Income $ 11,146 $ 10,050
Change in currency translation
adjustment $ (242) $ (423)
Change in unrealized gain (loss)
on available-for-sale investments $ 343 $ (306)
---------- --------
Comprehensive income $ 11,247 $ 9,321
========== ========
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1998 1997
<S> <C> <C>
Net Income (loss) $ (168,005) $ 22,002
Change in currency translation
adjustment $ (489) $ (268)
Change in unrealized gain (loss)
on available-for-sale investments $ 1,159 $ (56)
---------- --------
Comprehensive income (loss) $ (167,335) $ 21,678
========== ========
</TABLE>
NOTE 7. Earnings Per Share (in thousands except per-share data)
In February 1997, Statement of Financial Accounting Standards No. 128
"Earnings per share"("SFAS 128") was issued by the FASB. Under SFAS 128, "basic
earnings per share" is calculated based upon the weighted average number of
common shares actually outstanding and "diluted earnings per share" is
calculated based upon the weighted average number of common shares outstanding
and other potential common shares if they are dilutive. Since the Company had a
net loss for the nine month period ended December 31, 1998, the dilutive effect
of other potential common shares has been excluded from the calculation. Common
share equivalents consisting of common shares issuable on exercise of
outstanding options are computed using the treasury method.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1998 1997
<S> <C> <C>
Net income available to common stockholders $ 11,146 $ 10,050
-------- --------
Shares used for basic per share computation
weighted average shares outstanding 109,791 99,564
Effect of dilutive securities:
Stock options 5,399 2,969
-------- --------
Shares used for diluted per share computation 115,190 102,533
======== ========
Net income per share:
Basic $ .10 $ .10
======== ========
Diluted $ .10 $ .10
======== ========
</TABLE>
-11-
<PAGE> 12
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1998 1997
<S> <C> <C>
Net income (loss) available to common stockholders $(168,005) $ 22,002
--------- ---------
Shares used for basic per share computation
weighted average shares outstanding 104,572 99,000
Effect of dilutive securities:
Stock options -- 2,850
--------- ---------
Shares used for diluted per share computation 104,572 101,850
========= =========
Net income (loss) per share:
Basic $ (1.61) $ .22
========= =========
Diluted $ (1.61) $ .22
========= =========
</TABLE>
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
GENERAL
Certain statements made herein, including, without limitation, statements
regarding increased market acceptance of ATM and LAN switching products,
statements regarding the Company's pricing strategies and resulting effects on
revenue and gross margins and statements regarding the Company's sales and
marketing strategies, may be deemed to be forward-looking statements that
involve risks and uncertainties. In addition, statements containing the words
"believes", "estimates", "expects" and words of similar import may be deemed to
be forward-looking statements. Such forward-looking statements should be read in
conjunction with certain cautionary statements set forth herein and the list of
risk factors set forth in the Company's Annual Report on Form 10-K for the year
ended March 31, 1998 (the "Form 10-K") and the Company's Current Report on Form
8-K dated September 11, 1998 in connection with the acquisition of Berkeley
Networks, Inc. ("Berkeley"). Such factors could cause actual results to differ
materially from those expressed in any forward-looking statements contained
herein.
On September 11, 1998, the Company acquired Berkeley by means of a merger
(the "Merger") of Fastwire Acquisition Corporation, a wholly-owned subsidiary of
the Company ("Fastwire"), with and into Berkeley pursuant to an Agreement and
Plan of Reorganization, dated as of August 25, 1998, by and among the Company,
Berkeley and Fastwire (the "Reorganization Agreement"). Based in Milipitas,
California, Berkeley designs and develops multi-gigabit routing switch platforms
based on Windows NT and advanced stateful inspection switching ASICs.
The Company issued a total of approximately 8.6 million shares of Common
stock to the former shareholders of Berkeley and granted to former holders of
options to purchase Berkeley Common stock a total of approximately 0.6 million
substitute stock options to purchase the Company's Common stock. Pursuant to the
Reorganization Agreement, additional consideration of up to a total of
$30,000,000 in cash (the "Earn-Out Payments") was to be paid by the Company
based on Berkeley achieving certain technological advances and/or attaining
certain revenue goals in the period commencing on September 11, 1998 and ending
on the second anniversary thereof. Since the closing date, the Company has made
Earn-Out Payments of approximately $8.8 million, based on the payment schedule
established by the Reorganization Agreement, to the former equity holders of
Berkeley. The Company accounted for the acquisition under the purchase method of
accounting.
QUARTER AND NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH QUARTER AND NINE
MONTHS ENDED DECEMBER 31, 1997
REVENUE. Revenue increased by 30% to $158.7 million in the quarter ended
December 31, 1998, from $122.1 million in the quarter ended December 31, 1997.
The distribution of revenue from sales to domestic and foreign customers was 73%
and 27%, respectively, in the quarter ended December 31, 1998. This compares
with 68% and 32%, respectively, in the corresponding quarter in 1997. In the
quarter ended December 31, 1998, the distribution of revenue from sales to
foreign customers by geographic region was 19%, 4% and 4% for Europe (which
includes Middle East and Africa), Pacific Rim and other, respectively.
Geographic mix for the corresponding quarter in 1997 was 20%, 9% and 3%,
respectively. Revenue increased by 36% to $444.2 million for the nine month
period ended December 31, 1998, as compared to $327.2 million in the
corresponding nine month period in 1997. The distribution of revenue from sales
to domestic and foreign customers was 72% and 28%, respectively, in the nine
month period ended December 31, 1998. This compares with 70% and 30%,
respectively, in the corresponding period in 1997. The distribution of revenue
from sales to foreign customers by geographic region for the nine month period
ended December 31, 1998 was 19%, 5% and
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4% for Europe (which includes Middle East and Africa), Pacific Rim and other,
respectively. Geographic mix for the corresponding nine month period in 1997 was
18%, 7% and 5%, respectively. The increase in revenue dollars was attributable
to the increased market acceptance of ATM and, to a lesser extent, LAN switching
products.
The Company measures overall unit volume for its switching products based
on the number of ATM ports or network connections shipped. The total number of
ATM ports shipped in the quarter ended December 31, 1998 was 53,500 (48,000
enterprise ports, 5,500 service provider ports), as compared with 45,000 (40,000
enterprise ports, 5,000 service provider ports) in the previous year's
corresponding period. The total installed base of ATM ports as of December 31,
1998 was 465,000, as compared with 263,000 at December 31, 1997. The total
number of LAN switching ports shipped in the quarter ended December 31, 1998 was
159,500, as compared with 135,000 in the previous year's corresponding period.
The total number of adapter cards shipped in the quarter ended December 31, 1998
was 21,400, as compared with 12,700 in the previous year's corresponding period.
The total installed base of adapter cards as of December 31, 1998 was 168,500 as
compared with 93,000 at December 31, 1997. In the quarter ended December 31,
1998, revenue mix, as a percentage of revenue, among ATM switching products, LAN
switching products, adapter cards and other revenue (principally service support
and development contracts) was 63%, 24%, 4% and 9%, respectively. Revenue mix
for the corresponding quarter in 1997 was 59%, 28%, 4% and 9%, respectively.
Average selling price per ATM port during the quarter ended December 31, 1998
was $1,900, as compared to $1,600 in the corresponding quarter in 1997. Average
selling price per LAN switching port was $235 in the quarter ended December 31,
1998 as compared to $300 in the corresponding quarter in 1997. Average selling
price for adapter cards shipped during the quarter ended December 31, 1998 was
$300, as compared to $400 in the previous year's quarter ended December 31,
1997. In January of 1998, the Company reduced the price of certain of its ATM
workgroup products by up to 40%.
GROSS PROFIT. Gross profit increased to $84.7 million or 53.4% as a
percentage of revenue in the quarter ended December 31, 1998, as compared to
gross profit of $68.1 million or 55.8% as a percentage of revenue in the
corresponding quarter in 1997. Gross profit of $243.0 million or 54.7% as a
percentage of revenue for the nine month period ended December 31, 1998,
compares to gross profit of $182.8 million or 55.9% as a percentage of revenue
during the same period in the previous year. The dollar increase in gross profit
was largely attributable to the increase in revenue. The gross margin percentage
decline in the three month and nine month periods ended December 31, 1998 was
directly attributable to a single government contract. Gross margin percentage
for the quarter ended December 31, 1998 excluding this government contract would
have been 55.5%. This seven-year government contract commenced in August 1998
and the impact on future gross margin cannot be determined because the contract
includes fixed prices for certain products but does not include any volume
commitment. The Company intends to price its products competitively. There can
be no assurance that the gross profit percentage can be maintained at the
current level.
RESEARCH AND DEVELOPMENT. Research and development expense was $20.8
million or 13.1% of revenue in the quarter ended December 31, 1998, as compared
to $17.8 million or 14.5% of revenue in the corresponding quarter in 1997.
Research and development expense for the nine month period ended December 31,
1998 was $58.4 million or 13.1% of revenue, as compared to $50.8 million or
15.6% of revenue in the year ago nine month period. The increase in research and
development expense in dollars was largely attributable to increased purchases
of research and development materials, increased hiring of engineering employees
and increases in depreciation. The decrease in research and development expense
as a percentage of revenue was primarily attributable to increased revenue
absorbing a greater portion of the Company's expenses. The number of employees
of the Company engaged in research and development increased to 451 at December
31, 1998, from 415 at December 31, 1997. The Company plans to make appropriate
expenditures for research and development, but does not expect the overall
expenditures to increase materially as a percentage of revenue.
SALES AND MARKETING. Sales and marketing expense was $44.9 million or 28.3%
of revenue for the quarter ended December 31, 1998, as compared to $32.6 million
or 26.7% of revenue in the
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corresponding quarter in 1997. Sales and marketing expense for the nine month
period ended December 30, 1998 was $125.1 million or 28.2% of revenue, as
compared to $92.0 million or 28.1% of revenue in the year ago nine month period.
Comparing the quarter ended December 31, 1998 versus the corresponding quarter
in 1997, the increase in sales and marketing expense in dollars and as a
percentage of revenue for the quarter ended December 31, 1998 was largely the
result of hiring additional sales, marketing and support personnel (including
training and documentation), increased marketing promotion costs and increases
in depreciation. The number of employees of the Company engaged in sales and
marketing activities increased to 924 at December 31, 1998, from 725 at December
31, 1997. The Company has and expects to continue to increase sales and
marketing expenses in dollars, but not as a percentage of revenue, both
domestically and internationally as a part of its continuing effort to expand
its markets, introduce new products, build marketing staff and programs and
expand its international presence.
GENERAL AND ADMINISTRATIVE. General and administrative expense was $7.9
million or 5.0% of revenue in the quarter ended December 31, 1998, as compared
to $6.2 million or 5.1% of revenue in the corresponding quarter in 1997. General
and administrative expense for the nine month period ended December 31, 1998 was
$22.2 million or 5.0% of revenue, as compared to $16.7 million or 5.1% of
revenue in the year ago nine month period. The dollar increase in general and
administrative expense was largely due to increased salary costs, increased
hiring of administrative staff, including those engaged in systems
administration, accounting and human resources and increased costs for
professional services and depreciation. The number of employees of the Company
engaged in general and administrative activities increased to 219 at December
31, 1998, from 167 at December 31, 1997. The Company plans to make appropriate
expenditures in the general and administrative organization as necessary, but
does not expect the overall expenditures to increase materially as a percentage
of revenue.
PURCHASED RESEARCH AND DEVELOPMENT. In connection with the acquisition of
Berkeley, the Company allocated $199.3 million of the purchase price to
purchased research and development that had not reached technological
feasibility as of September 11, 1998. The Company expensed such amount as a
non-recurring charge in the fiscal quarter ended September 30, 1998.
RESTRUCTURING CHARGES. In connection with the acquisition of Berkeley, the
Company recorded a restructuring charge of $5.1 million related primarily to the
closing of duplicate facilities and certain employee termination costs. The
Company expensed such amount as a non-recurring charge in the fiscal quarter
ended September 30, 1998.
INTEREST INCOME. Interest income, net of interest expense, was $3.9 million
and $10.9 million, respectively, in the quarter and nine months ended December
31, 1998, as compared to $3.4 million and $9.7 million in the corresponding
quarter and nine month period in 1997.
INCOME TAXES. In the quarter ended December 31, 1998, the provision for
income taxes was $4.3 million, or an effective rate of 28%, as compared to $5.2
million, or an effective rate of 34%, in the previous year's quarter ended
December 31, 1997. The provision for income taxes recorded in the nine month
period ended December 31, 1998 was $12.2 million, or an effective rate of 28%,
exclusive of the effect of one-time non-deductible purchased research and
development expense, as compared to $11.3 million, or an effective rate of 34%,
in the corresponding nine month period in 1997. The decrease in the effective
tax rate is primarily the result of certain tax advantages associated with the
operation of the Dublin, Ireland manufacturing facility.
NET INCOME (LOSS). Net income for the three month period ended December 31,
1998 was $11.1 million or $.10 per diluted share compared to net income of $10.1
million or $0.10 per diluted share for the corresponding period in the previous
fiscal year. Net loss for the nine month period ended December 31, 1998 was
$168.0 million or $1.61 per diluted share compared to net income of $22.0
million or $0.22 per diluted
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share for the corresponding period in 1997. Net loss for the nine month periods
ended December 31, 1998 included purchased research and development expenses of
$199.3 million and restructuring charges of $5.1 million. Excluding these
charges and any tax effect, the net income for the nine month period ended
December 31, 1998 was $35.0 million or $.32 per diluted share.
YEAR 2000
The Company continues to evaluate the possible impact of Year 2000 on its
products, internal information technology systems and non-information technology
systems and third party suppliers. The Company believes that all of its current
products are Year 2000 compliant, in that they will be able to distinguish
accurately between 20th century and 21st century dates. However, certain
products previously sold by the Company are not Year 2000 compliant, and the
Company has instituted an upgrade program for such non-compliant products. The
Company believes that the costs associated with such program will not have a
material adverse effect on its financial position or results of operations. The
failure of any of the Company's products to be Year 2000 compliant could result
in increased warranty claims and other liabilities.
The Company believes that most of its internal information technology
systems are Year 2000 compliant. However, the Company continues to evaluate its
internal information technology systems and is in the process of implementing
upgrades to certain systems. In addition, the Company is also assessing other
non-information technology equipment and systems and related business processes
used in its operations. The Company plans to have a full assessment of such
equipment, systems and processes completed in the first quarter of calendar year
1999 and test and deploy solutions during the first and second quarters of
calendar year 1999. The Company expects that all of its equipment, systems and
processes will be Year 2000 compliant early in the third quarter of calendar
year 1999. The Company believes that the costs of converting or replacing
equipment, systems and related business processes that are not Year 2000
compliant will not have a material adverse effect on the Company's financial
position or results of operations.
The Company is also assessing the possible effect on its operations of the
Year 2000 readiness of its suppliers of products and services, as well as its
customers. The Company has submitted questionnaires to its suppliers in order to
solicit information concerning the Year 2000 readiness of such suppliers. The
Company has material relationships with certain third party manufacturers and a
Year 2000 problem which results in any such manufacturer being unable to deliver
products to the Company could materially adversely affect the Company. There can
be no assurance that the information systems and other business processes of the
Company's suppliers and customers will be Year 2000 compliant, and it is
possible that various business functions which require the interaction of the
Company's systems with those of suppliers or customers will fail or malfunction
in the Year 2000. Such failure or malfunction could materially adversely affect
the Company's financial position or results of operation.
In addition, it is possible that the Company's revenue may be adversely
affected if current and prospective customers divert their spending resources
away from networking equipment over the next two years in order to correct or
replace information systems which are not Year 2000 compliant.
The Company expects to finalize a preliminary estimate of Year 2000 project
costs related to the Company's products and internal information and
non-information technology equipment and systems during the first quarter of
calendar year 1999. Year 2000 related project costs incurred to date are
immaterial to the Company's financial position and results of operation.
Although the Company expects its products and systems to be Year 2000 compliant
on or before December 31, 1999, it cannot predict with complete accuracy the
outcome of its Year 2000 program. If its Year 2000 program is not successful or
if the systems of suppliers and customers material to the Company fail or
malfunction in the Year 2000, the Company's financial position or
results of operations may be materially adversely affected. The Company is
currently preparing a contingency plan to address possible risks to
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its internal systems and the consequences of Year 2000 issues among its
suppliers and expects such plan to be completed during calendar year 1999. The
Company has not yet estimated the costs of implementing the contingency plan,
and it is possible that such costs may have a material adverse effect on the
Company's financial position or results of operations.
FUTURE GROWTH SUBJECT TO RISKS
The Company's quarterly and annual operating results are affected by a wide
variety of risks and uncertainties as discussed in the Company's 1998 Annual
Report on Form 10-K and the Company's Current Report on Form 8-K dated September
11, 1998. This Quarterly Report on Form 10-Q should be read in conjunction with
the 1998 Form 10-K, particularly the section entitled "Certain Risk Factors,"
and such Current Report on Form 8-K.
The networking industry is highly competitive and is characterized by
rapidly changing technology, evolving industry standards and frequent new
product introductions which could render the Company's products noncompetitive
or obsolete. Because the Company's business strategy is based upon the belief
that ATM will be the technology of choice for the information technology
infrastructure, the Company's business, financial position and results of
operations would be materially adversely affected if ATM fails to gain broad
commercial acceptance or if other networking technologies gain competitive
advantages over ATM. Even if ATM achieves broad commercial acceptance, there can
be no assurance that the Company can continue to successfully develop and
introduce new products and enhancements given the fact that many of the
Company's competitors have significantly greater financial, technological and
personnel resources than does the Company.
The networking industry has experienced consolidation as industry
participants have sought to expand into new technologies and markets. Several
recent transactions, such as the acquisition by Northern Telecom Limited of Bay
Networks, Inc. and the pending acquisition by Lucent Technologies Inc. of Ascend
Communications, Inc. have intensified this trend. Such consolidations may result
in the creation of stronger, more powerful competitors, which could increase the
competitive risks faced by the Company.
The Company has in the past and may in the future make acquisitions of
companies and technologies in order to compete more effectively. The Company
completed the acquisition of Berkeley in September 1998 and in connection
therewith, recorded $199.3 million as purchased research and development
expense. The Company has received a letter from the Commission requesting
additional information with respect to the calculation and treatment of such
purchased research and development, as well as information concerning a
restructuring charge of $5.1 million which the Company recorded in connection
with the acquisition of Berkeley. The Company believes that it has appropriately
assigned fair values in connection with the acquisition of Berkeley, including
purchased research and development, and that it has appropriately recorded
restructuring charges in accordance with generally accepted accounting
principles. However, the Commission , in recent public statements and in
communications with other companies in the computer networking and other
technology industries, has challenged the methodologies used in valuing
purchased research and development and in accounting for acquisition-related
restructuring charges. The Company, as a result of discussions with the
Commission, may be required to restate its financial statements for the periods
ended September 30, 1998 and December 31, 1998 with respect to the treatment of
the in process research and development acquired from Berkeley and/or in
connection with the restructuring charges related to such acquisition. Any such
restatement would result in charges against the Company's earnings in future
periods, and may have a material adverse effect on the Company's results of
operations in such future periods.
Acquisitions are subject to numerous risks, including the risk that
research and development and other expenses will materially increase without
necessarily leading to the successful introduction of new products or
enhancements. The introduction of a new line of products based on multi-service
WAN adaptation and concentration technology for the service provider market,
previously announced by the
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Company in connection with an acquisition, has been delayed, and there can be no
assurance that this product will be introduced or, if it is introduced, that it
will be successful in the marketplace. There can be no assurance that the
Company can successfully introduce and market new products resulting from the
acquisition of Berkeley or identify other acquisition opportunities or that any
acquisitions that are completed will be successfully integrated with the
Company's operations.
Although the Company has historically experienced increasing sales on an
annual basis, the Company's rate of revenue growth may be slower than that of
certain other networking industry participants. The Company's rate of revenue
growth may continue to decline, and there can be no assurance that the Company
will experience revenue growth in the future at historic rates or at all.
The Company has experienced fluctuating operating results on a quarterly
and annual basis and may continue to do so. These fluctuations are caused by
many factors, including a disproportionate share of sales occurring late in a
given quarter, manufacturing lead times and the need to match resources with
anticipated demand for newly introduced products, the introduction of new
products and technologies by competitors, the pattern and seasonality of
customer purchasing cycles, variations in the mix of products sold and sales
channels, price competition, manufacturing lead times and changes in economic
conditions. These factors make it difficult to predict operating results for any
given period, and have led to, and are likely to continue to lead to, volatility
in the market price of the Company's Common stock.
The Company competes in international markets and is, accordingly, subject
to numerous risks. Sales to foreign customers in fiscal 1998 decreased in
dollars and as a percentage of revenue in comparison with fiscal 1997 and have
continued to decline as a percentage of revenue in the first three quarters of
fiscal 1999. There can be no assurance that such sales will not decline. In
addition, the Company's international business may be adversely affected by
foreign regulatory requirements, changes in demand resulting from fluctuations
in currency exchange rates and local purchasing practices, difficulties in
distribution, slower payment of invoices, increases in duty rates, foreign
political and economic conditions and constraints upon international trade.
The Company's gross margins in the three months and the nine months ended
December 31, 1998 were adversely affected by a government contract. This
government contract has a duration of seven years, and if the government were to
purchase significant quantities of products thereunder, the Company's gross
margins will continue to be adversely affected in future periods. In addition,
gross margins have been adversely affected and may continue to be adversely
affected by competitive pricing pressures and a change in the mix of products
sold toward lower-margin workgroup and desktop products for both ATM and
Ethernet. In addition, the Company's operating margins may be adversely affected
by the need to hire additional sales, marketing and other personnel. The Company
plans its operating expense levels based primarily on forecasted revenue, and a
shortfall in revenue would be likely to lead to operating results being lower
than expected. Any such failure to meet expectations could result in a decrease
in the market price of the Company's Common stock.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed most of its working capital and capital
expenditure requirements to date primarily through cash proceeds from public
offerings and cash generated from operations.
Net cash provided by operations was $45.6 million for the nine month period
ended December 31, 1998. Net cash provided by operations was the result of net
income (net of purchased research and development expenses) and an increase to
deferred revenue offset somewhat by increases to inventories, accounts
receivable and prepaid expenses and other current assets. Net cash provided by
operations was $31.6 million for the nine month period ended December 31, 1997.
Net cash provided by operations was the result of net income and increases to
prepaid income taxes and income taxes payable, accrued liabilities and deferred
revenue offset somewhat by increases to accounts receivable and inventories. The
increase in accounts receivable and inventories was due to increased revenue.
The Company's investing activities to date have been primarily for the purchase
of fixed assets to support the Company's growth.
At December 31, 1998, the Company had cash and cash equivalents of
approximately $189.4 million, short-term investments of $172.0 million and an
unused line of credit of $20 million.
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In December 1998, the Company entered into agreements to construct and
lease manufacturing and operating facilities on land adjacent to the Company's
headquarters, which was purchased by the Company. The lessor has committed to
fund a maximum of $20.5 million for the construction of the building. Upon
completion of construction, the Company will lease the facilities under an
eight-year operating lease and has options to renew the lease for two additional
five-year terms (subject to certain conditions). Future annual minimum rental
payments under the lease are approximately $1.5 million and are expected to
commence in fiscal year 2000. During the construction period, the Company
guaranties the repayment of 90% of certain project costs expended or financed by
the lessor, which amount is estimated not to exceed $18 million, and under
certain circumstances guaranties the repayment of 100% of all project costs
expended or financed by the lessor. During the lease period, the Company
guaranties all of its obligations under the lease.
The Company may, at its option, purchase the facilities during or at the
expiration of the term of the lease at an amount equal to the remaining balance
of any debt of the lessor related to the construction of the facilities plus any
applicable prepayment penalties. The Company has the right to obtain a purchaser
for the facility upon the termination of the lease. If the Company exercises
this remarketing option and obtains a buyer for the facility, the Company
guaranties to the lessor a residual value for the facility of approximately $14
million, an amount that was determined at the lease inception date. Should the
Company not exercise the remarketing option, the Company will be required to
purchase the facility at the termination of the lease for approximately $19
million.
As part of the above lease transaction, the Company will pledge
approximately $19.5 million of marketable securities (valued as of completion of
construction) as collateral for specified obligations of the lessor. The Company
under its investment policy will manage these securities. In addition, under the
terms of the lease, the Company is required to comply with certain financial
covenants including the maintenance of a minimum tangible net worth. Other
restrictive covenants limit indebtedness and the payment of dividends.
The lease transaction entered into in December 1998 is tied to the lease
for the Company's existing headquarters facilities. As such, the lease contains
cross default provisions with the previous lease, and the Company must exercise
purchase options, renewal options and remarketing options with respect to all
buildings at the headquarters. Should the Company elect to purchase, or be
required to purchase, all facilities at its headquarters, the total purchase
price would approximate $43 million.
The Company may be required to pay up to $21.2 million based on the
achievement of certain technological advances and/or the attainment of certain
revenue goals over the next 2 years. Since the acquisition date, the Company has
paid approximately $8.8 million to former equity holders of Berkeley.
The Company believes that the proceeds from its public offerings, together
with its existing sources of liquidity and internally generated cash, will
satisfy the Company's projected cash needs through at least the next twelve
months. The Company may require additional sources of liquidity to fund future
growth, including additional equity offerings or debt financing.
In July and August 1997, the Company was notified that it was a party to
seven nearly identical class action lawsuits, filed in the United States
District Court for the Western District of Pennsylvania, alleging certain
violations of federal securities laws by the Company and certain of its
officers, who were named as defendants in the suits, arising from alleged
misstatements or omissions by the Company. Plaintiffs seek compensatory damages
for injuries allegedly incurred by purchasers of the Company's stock during the
period from July 19, 1996 through April 1, 1997, inclusive. Pursuant to court
order, the lawsuits were consolidated and a consolidated amended complaint was
filed by the lead plaintiffs. The Company and the individual defendants
subsequently filed their answer to the consolidated amended complaint. In
December, 1998, plaintiffs filed a second consolidated amended complaint and the
Company and the individual defendants responded by filing a motion to dismiss,
or, in the alternative, for summary judgement. The Company believes the
allegations in the consolidated amended complaint are completely without merit
and intends to defend this action vigorously. Management believes that the
ultimate outcome of these claims will not have a material adverse effect on the
results of operations or financial position of the Company.
To date, inflation has not had a material impact on the Company's financial
results.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
and Similar Financial Instruments and for Hedging Activities" ("SFAS 133"). This
new standard requires recognition of all derivatives as either
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assets or liabilities at fair value. Based upon the hedging strategies currently
used and the level of activity related to derivative instruments, the Company
does not anticipate the effect of adoption to have a material impact on either
financial position or results of operations. The Company will implement SFAS 133
in fiscal year 2001, as required.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). The Company is currently evaluating the
impact of SFAS 131. During the first quarter of fiscal year 1999, the company
adopted SFAS 130. This statement establishes standards for reporting and the
display of comprehensive income and its components in a primary financial
statement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In July and August 1997, the Company was notified that it was a party
to seven nearly identical class action lawsuits, filed in the United States
District Court for the Western District of Pennsylvania, alleging certain
violations of federal securities laws by the Company and certain of its
officers, who were named as defendants in the suits, arising from alleged
misstatements or omissions by the Company. Plaintiffs seek compensatory damages
for injuries allegedly incurred by purchasers of the Company's stock during the
period from July 19, 1996 through April 1, 1997, inclusive. Pursuant to court
order, the lawsuits were consolidated and a consolidated amended complaint was
filed by the lead plaintiffs. The Company and the individual defendants
subsequently filed their answer to the consolidated amended complaint. In
December, 1998, plaintiffs filed a second consolidated amended complaint and the
Company and the individual defendants responded by filing a motion to dismiss,
or, in the alternative, for summary judgement. The Company believes the
allegations in the consolidated amended complaint are completely without merit
and intends to defend this action vigorously. Management believes that the
ultimate outcome of these claims will not have a material adverse effect on the
results of operations or financial position of the Company.
The Company was served, in October 1998, with a complaint filed by Bell
Communications Research, Inc. in the United States District Court for the
District of Delaware. The complaint alleges that the Company infringes four
patents owned by the plaintiff and seeks compensatory and injunctive relief. The
Company subsequently filed its answer to the complaint. The Company believes the
allegations in the complaint are completely without merit and intends to defend
this action vigorously.
Although management believes that the ultimate outcome of pending legal
proceedings will not have a material adverse effect on the Company's financial
position or results of operations, litigation is subject to inherent
uncertainties, and an unfavorable outcome may have a material adverse effect on
the results of operations in a particular future period or periods.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
The exhibits listed below are filed or incorporated by
reference as part of this quarterly report on Form 10-Q:
3.1 Amended and Restated Certificate of Incorporation of FORE
Systems, Inc. (as amended by Certificate of Amendment dated
May 6, 1996) (incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996).
3.2 Second Amended and Restated Bylaws of FORE Systems, Inc.
(as amended through March 5, 1997) (incorporated by reference
to Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1997).
10.1 Participation Agreement, dated as of December 14, 1998,
by and among FORE Systems, Inc., Wilmington Trust Company,
Mellon Financial Services Corporation #4 and Mellon Bank, N.A.
10.2 Lease and Open End Mortgage, dated as of December 14,
1998, by and between FORE Systems, Inc. and Wilmington Trust
Company.
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<PAGE> 22
10.3 Guaranty, dated as of December 14, 1998, by and among
FORE Sytems, Inc., Mellon Bank, N.A. and Mellon Financial
Services Corporation #4.
10.4 Guaranty Agreement, dated as of December 14, 1998, by and
among FORE Systems Holding Corporation, Mellon Bank, N.A. and
Mellon Financial Services Corporation #4.
10.5 Pledge and Security Agreement, dated as of December 14,
1998, by and among FORE Systems Holding Corporation, Mellon
Bank, N.A., Mellon Financial Services Corporation #4 and
Mellon Bank, N.A., as custodian.
27.1 Financial Data Schedule.
b) Reports on Form 8-K.
On October 1, 1998, the Company filed a Current Report on Form
8-K in connection with the issuance of a press release
announcing preliminary financial results for its second fiscal
quarter ended September 30, 1998.
-22-
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORE SYSTEMS, INC.
(Registrant)
Date: February 16, 1999 /s/ Bruce E. Haney
------------------
Bruce E. Haney
Senior Vice President and Chief
Financial Officer
(Authorized Officer and Principal
Financial Officer)
-23-
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Participation Agreement, dated as of December 14,
1998, by and among FORE Systems, Inc., Wilmington
Trust Company, Mellon Financial Services Corporation
#4 and Mellon Bank, N.A.
10.2 Lease and Open End Mortgage, dated as of December 14,
1998, by and between FORE Systems, Inc. and
Wilmington Trust Company.
10.3 Guaranty, dated as of December 14, 1998, by and among
FORE Systems, Inc., Mellon Bank, N.A. and Mellon
Financial Services Corporation #4.
10.4 Guaranty Agreement, dated as of December 14, 1998, by
and among FORE Systems Holding Corporation, Mellon
Bank, N.A. and Mellon Financial Services Corporation
#4.
10.5 Pledge and Security Agreement, dated as of December
14, 1998, by and among FORE Systems Holding
Corporation, Mellon Bank, N.A., Mellon Financial
Services Corporation #4 and Mellon Bank, N.A., as
custodian.
27.1 Financial Data Schedule
</TABLE>
-24-
<PAGE> 1
Exhibit 10.1
================================================================================
PARTICIPATION AGREEMENT
dated as of December 14, 1998
among
FORE SYSTEMS, INC.,
as Lessee, Guarantor and Construction Agent,
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
trustee of BRUSH CREEK BUSINESS TRUST II,
as Lessor and Certificate Trustee,
MELLON FINANCIAL SERVICES CORPORATION #4,
as Certificate Purchaser,
and
MELLON BANK, N.A.,
as Construction Lender
---------------------------------------------
Construction Program For a
Manufacturing/Office Facility
in Allegheny County, Pennsylvania
================================================================================
Participation Agreement
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. DEFINITIONS; INTERPRETATION
ARTICLE II. DOCUMENTATION DATE; INITIAL ADVANCE DATE
SECTION 2.1. DOCUMENTATION DATE............................................................................. 3
SECTION 2.2. INITIAL ADVANCE DATE........................................................................... 4
ARTICLE III. FUNDING OF ADVANCES
SECTION 3.1. CERTIFICATE TRUSTEE COMMITMENT................................................................. 4
SECTION 3.2. CERTIFICATE PURCHASER'S COMMITMENT............................................................. 5
SECTION 3.3. CONSTRUCTION LENDER'S COMMITMENT............................................................... 5
SECTION 3.4. PROCEDURES FOR ADVANCES........................................................................ 5
SECTION 3.5. USE OF ADVANCES................................................................................ 6
SECTION 3.6. COLLATERALIZATION.............................................................................. 6
SECTION 3.7. REFINANCING.................................................................................... 6
SECTION 3.8. RESIZING OF TRANCHE A, TRANCHE B AND CERTIFICATE............................................... 9
ARTICLE IV. CERTIFICATE PAYMENTS; CONSTRUCTION LOAN PAYMENTS
SECTION 4.1. CERTIFICATE PAYMENTS........................................................................... 9
SECTION 4.2. CONSTRUCTION LOAN PAYMENTS..................................................................... 10
SECTION 4.3. RENT PAYMENTS.................................................................................. 10
SECTION 4.4. OVERDUE PAYMENTS............................................................................... 11
ARTICLE V. CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1. NATURE OF TRANSACTION.......................................................................... 11
SECTION 5.2. AMOUNTS DUE UNDER LEASE........................................................................ 12
ARTICLE VI. CONDITIONS PRECEDENT TO INITIAL ADVANCE DATE AND ADVANCES
SECTION 6.1. INITIAL ADVANCE DATE CONDITIONS................................................................ 12
SECTION 6.2. CONDITIONS PRECEDENT TO EACH ADVANCE........................................................... 17
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE VII. CONDITIONS TO SUBSTANTIAL COMPLETION
SECTION 7.1. CONDITIONS TO SUBSTANTIAL COMPLETION OF THE PROPERTY.......................................... 20
VIII. ARTICLE REPRESENTATIONS
SECTION 8.1. REPRESENTATIONS OF THE PARTICIPANTS........................................................... 20
SECTION 8.2. REPRESENTATIONS OF THE CERTIFICATE TRUSTEE AND THE TRUST COMPANY.............................. 21
SECTION 8.3. REPRESENTATIONS OF LESSEE..................................................................... 23
SECTION 8.4. REPRESENTATIONS OF LESSEE WITH RESPECT TO EACH ADVANCE........................................ 29
ARTICLE IX. PAYMENT OF CERTAIN EXPENSES
SECTION 9.1. TRANSACTION EXPENSES.......................................................................... 30
SECTION 9.2. BROKERS' FEES AND STAMP TAXES................................................................. 31
SECTION 9.3. LIMITATIONS DURING INTERIM TERM............................................................... 31
ARTICLE X. OTHER COVENANTS AND AGREEMENTS
SECTION 10.1. COVENANTS OF LESSEE........................................................................... 31
SECTION 10.2. RESERVED...................................................................................... 35
SECTION 10.3. FINANCIAL COVENANTS........................................................................... 35
SECTION 10.4. WAIVER OF COVENANTS........................................................................... 35
SECTION 10.5. COVENANT OF THE CERTIFICATE TRUSTEE AND THE PARTICIPANTS...................................... 35
SECTION 10.6. OTHER COVENANTS OF THE CERTIFICATE TRUSTEE AND THE TRUST COMPANY.............................. 35
SECTION 10.7. COVENANT OF CERTIFICATE PURCHASER............................................................. 37
ARTICLE XI. [RESERVED]
ARTICLE XII. TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION 12.1. ASSIGNMENTS................................................................................... 37
SECTION 12.2. PARTICIPATIONS................................................................................ 39
SECTION 12.3. WITHHOLDING TAXES; DISCLOSURE OF INFORMATION; PLEDGE UNDER REGULATION A........................39
ARTICLE XIII. INDEMNIFICATION
SECTION 13.1. GENERAL INDEMNIFICATION....................................................................... 40
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 13.2. END OF TERM INDEMNITY......................................................................... 48
SECTION 13.3. ENVIRONMENTAL INDEMNITY....................................................................... 49
SECTION 13.4. PROCEEDINGS IN RESPECT OF CLAIMS.............................................................. 50
SECTION 13.5. GENERAL TAX INDEMNITY......................................................................... 52
SECTION 13.6. FUNDING LOSSES................................................................................ 56
SECTION 13.7. REGULATION D COMPENSATION..................................................................... 56
SECTION 13.8. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR...................................... 57
SECTION 13.9. ILLEGALITY.................................................................................... 57
SECTION 13.10. INCREASED COST AND REDUCED RETURN............................................................. 58
SECTION 13.11. INDEMNITY PAYMENTS IN ADDITION TO LEASE OBLIGATIONS........................................... 59
ARTICLE XIV. MISCELLANEOUS
SECTION 14.1. SURVIVAL OF AGREEMENTS........................................................................ 60
SECTION 14.2. NO BROKER, ETC................................................................................ 60
SECTION 14.3. NOTICES....................................................................................... 60
SECTION 14.4. COUNTERPARTS.................................................................................. 60
SECTION 14.5. AMENDMENTS.................................................................................... 61
SECTION 14.6. HEADINGS, ETC................................................................................. 61
SECTION 14.7. PARTIES IN INTEREST........................................................................... 61
SECTION 14.8. GOVERNING LAW................................................................................. 61
SECTION 14.9. SEVERABILITY.................................................................................. 61
SECTION 14.10. LIABILITY LIMITED............................................................................. 62
SECTION 14.11. FURTHER ASSURANCES............................................................................ 62
SECTION 14.12. SUBMISSION TO JURISDICTION.................................................................... 63
SECTION 14.13. CONFIDENTIALITY............................................................................... 63
SECTION 14.14. NO BAR........................................................................................ 64
SECTION 14.15. WAIVER OF JURY TRIAL.......................................................................... 64
SECTION 14.16. CONSTRUCTION CONSULTANT....................................................................... 64
SECTION 14.17. COOPERATION IN CONNECTION WITH SUBDIVISIONS................................................... 64
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
APPENDICES
<S> <C>
APPENDIX 1 Definitions and Interpretation
SCHEDULES
SCHEDULE I ADDITIONAL DEBT
SCHEDULE II CHANGE IN NAME OR ENTITY
SCHEDULE III INFORMATION FOR NOTICES
SCHEDULE IV COMMITMENT PERCENTAGES
EXHIBITS
EXHIBIT A Funding Request
EXHIBIT B Form of Lease
EXHIBIT C Form of Certificate
EXHIBIT D Form of Construction Loan Agreement
EXHIBIT E Form of Note
EXHIBIT F Form of Guaranty
EXHIBIT G Form of Pledge and Security Agreement
EXHIBIT H Form of Assignment of Leases and Rents
EXHIBIT I Form of Deed
EXHIBIT J Form of Mortgage
EXHIBIT K Form of Construction Agency Agreement
EXHIBIT L Form of Assignment of Construction Agency Agreement
EXHIBIT M Form of Construction Documents Assignment
EXHIBIT N Responsible Employee's Certificates
EXHIBIT O Construction Certificate
EXHIBIT P Form of Assignment Agreement
EXHIBIT Q Form of Guaranty Agreement
</TABLE>
<PAGE> 6
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of December 14, 1998, is entered
into by and among FORE SYSTEMS, INC., a Delaware corporation, as Lessee,
Guarantor and Construction Agent; WILMINGTON TRUST COMPANY, not in its
individual capacity, except as expressly stated herein, but solely as trustee of
BRUSH CREEK BUSINESS TRUST II, a Delaware business trust, as Lessor and
Certificate Trustee; MELLON FINANCIAL SERVICES CORPORATION #4, a Pennsylvania
corporation, as the Certificate Purchaser; and MELLON BANK, N.A., a national
banking association ("Mellon"), as Construction Lender,
W I T N E S S E T H:
--------------------
WHEREAS, the Lessee is the owner of the fee simple interest in the
Land;
WHEREAS, pursuant to the terms of the Ground Lease, the Lessee has
leased to the Lessor, and the Lessor has leased from the Lessee, the Land;
WHEREAS, pursuant to the terms of the Lease, the Lessor has subleased
to the Lessee, and the Lessee has subleased from the Lessor, the Land;
WHEREAS, the Lessor wishes to finance the development of certain
Improvements on the Land to be used by the Lessee and certain Soft Costs in
connection therewith;
WHEREAS, the Trust under the Trust Agreement has been created for the
purpose of providing financing for the construction of the Improvements on the
Land and certain Soft Costs in connection therewith;
WHEREAS, using Advances from the Lessor, the Lessee, as Construction
Agent, will construct certain Improvements which will be the property of the
Lessor and will become part of the Property subject to the terms of the Lease;
WHEREAS, the Certificate Purchaser is willing to provide as equity a
portion of the funding of the costs of the construction of the Improvements on
the Land and certain Soft Costs in connection therewith up to $1,286,500.00.
WHEREAS, the Construction Lender is willing to provide financing for a
portion of the costs of the construction of the Improvements on the Land and
certain Soft Costs in connection therewith up to $19,213,500.00.
-2-
Participation Agreement
<PAGE> 7
WHEREAS, to secure such financing, (i) the Lessor, pursuant to the
Lease and subject to the Construction Loan Agreement, will have the benefit of a
lien from the Lessee on all of the Lessee's right, title and interest in and to
the Property, and (ii) the Construction Lender and the Certificate Purchaser
will have the benefit of a Lien (a) from the Lessor on all of the Lessor's
right, title and interest in and to the Property and on all of the Lessor's
rights against the Lessee under the Lease and the Ground Lease, against the
Construction Agent under the Construction Agency Agreement, and against the
Lessee under the Guaranty which liens are more fully described in the Lease and
Mortgage and (b) from the Lessee on all of the Lessee's right, title and
interest in and to the Land and the Lessee's leasehold interest in and to the
Lease;
WHEREAS, the Lessee's obligations under the Operative Documents will be
guaranteed pursuant to the terms of the Guaranty and Guaranty Agreement, which
Guaranty and Guaranty Agreement may be for amounts less than the Lease Balance;
and
WHEREAS, to secure the Lessee's obligations under the Guaranty and the
obligations of Fore Systems Holdings Corp. under the Guaranty Agreement, the
Construction Lender and the Lessor will have a perfected security interest in
the Property and the Collateral Account.
NOW, THEREFORE, in consideration of the mutual agreements contained in
this Participation Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in Appendix 1 hereto
for all purposes hereof; and the rules of interpretation set forth in Appendix 1
hereto shall apply to this Participation Agreement.
ARTICLE II.
DOCUMENTATION DATE; INITIAL ADVANCE DATE
SECTION 2.1. Documentation Date. The documentation date (the
"Documentation Date") shall occur on the earliest date on which all of the
following conditions precedent shall have been satisfied:
(a) Participation Agreement. This Participation Agreement
shall have been duly authorized, executed and delivered by the parties
hereto and shall be in full force and effect.
(b) Certain Transaction Expenses. Counsel for each of the
Lessor, the Lessee, the Certificate Purchaser and the Construction
Lender shall have received, to the extent
-3-
Participation Agreement
<PAGE> 8
then invoiced, payment in full in cash of all Transaction Expenses
pursuant to Section 3.4 payable to such counsel pursuant to Section
9.1.
(c) Mellon Bank's Facility Fee. The Lessee shall pay to Mellon
Bank a non-refundable, fully-earned facility structuring fee in the
amount of (A) $150,000 plus (B) the greater of (i) $100,000 and (ii)
0.50% of the maximum amount of the Commitment of the Construction
Lender under the Construction Loan Agreement, which will be payable
from the initial Advance pursuant to Section 3.4.
(d) Mellon Leasing Corporation's Fees. The Lessee shall pay to
Mellon Leasing Corporation a fully-earned, non-refundable arranging and
structuring fee in the amount of $350,000, which will be payable from
the initial Advance pursuant to Section 3.4.
SECTION 2.2. Initial Advance Date. The Initial Advance Date (the
"Initial Advance Date") shall occur on the earliest date on or before January
10, 1999 on which all the conditions precedent thereto set forth in Section 6.1
shall have been satisfied or waived by the applicable parties as set forth
therein; provided, however, that if the Initial Advance Date does not occur
prior to January 10, 1999, then this Participation Agreement shall automatically
terminate (except as provided in Section 14.1), the Lessee shall pay in full all
Transaction Expenses not theretofore paid, and each other Operative Document
then executed shall terminate. The Lessee, the Lessor, the Certificate Purchaser
and the Construction Lender shall confirm in writing the occurrence of the
Initial Advance Date.
ARTICLE III.
FUNDING OF ADVANCES
SECTION 3.1. Certificate Trustee Commitment. Subject to the conditions
and terms hereof, the Certificate Trustee shall take the following actions at
the written request of the Lessee from time to time during the Commitment
Period:
(a) the making of Advances (out of funds provided by the
Certificate Purchaser and the Construction Lender) for the purpose of
financing of Soft Costs and the construction of the Improvements on the
Land; and
(b) the subleasing of the Land and the leasing of the
Improvements by the Certificate Trustee as Lessor to the Lessee under
the Lease.
Notwithstanding any other provision hereof, the Certificate Trustee shall not be
obligated to make any Advance if, after giving effect thereto, the aggregate
original amounts of the Loans and the Certificate Amounts would exceed the
Commitments of the Construction Lender and the Certificate Purchaser.
SECTION 3.2. Certificate Purchaser's Commitment. Subject to the
conditions and terms
-4-
Participation Agreement
<PAGE> 9
hereof, the Certificate Purchaser shall make available to the Lessor at the
request of the Lessee from time to time during the Commitment Period on any
Funding Date an amount (each, a "Certificate Amount") in immediately available
funds equal to three percent (3%) of the amount of the Advance being funded on
such Funding Date; provided, that on the Documentation Date the Certificate
Purchaser shall fund all funds payable to Mellon Bank and Mellon Leasing
Corporation under Section 2.1. Notwithstanding any other provision hereof, the
Certificate Purchaser shall not be obligated to make available any Certificate
Amount to the extent that, after giving effect to the proposed Certificate
Amount, the outstanding aggregate amount of Certificate Amounts would exceed the
Certificate Purchaser's Commitment. No amounts repaid with respect to
Certificate Amounts may be readvanced.
SECTION 3.3. Construction Lender's Commitment. Subject to the
conditions and terms hereof, the Construction Lender shall make Construction
Loans to the Lessor at the request of the Lessee from time to time during the
Commitment Period on any Funding Date (except for the fees to Mellon Bank, N.A.
and Mellon Leasing Corporation, which are included in the initial Advance
pursuant to Section 3.4) in an amount in immediately available funds equal to
ninety-seven percent (97%) of the amount of the Advance being funded on such
Funding Date. Notwithstanding any other provision hereof, the Construction
Lender shall not be obligated to make any Construction Loan to the extent that,
after giving effect to the proposed Construction Loan, the outstanding aggregate
amount of the Construction Loans would exceed the Construction Lender's
Commitment. No amounts repaid with respect to the Construction Loans may be
readvanced.
SECTION 3.4. Procedures for Advances.
(a) With respect to each funding of an Advance, the Lessee
shall give the Certificate Trustee, the Certificate Purchaser and the
Construction Lender prior written notice not later than 10:00 a.m.,
Pittsburgh, Pennsylvania time, three Business Days prior to the
proposed Funding Date, pursuant to a Funding Request substantially in
the form of Exhibit A (a "Funding Request"), specifying the proposed
Funding Date and the amount of Advance requested. Except as the parties
may otherwise agree in writing, Advances shall be made solely to
provide the Construction Agent with funds with which to pay or
reimburse itself for Property Improvements Costs, except that the
Participants shall make Certificate Yield Payment Advances, and
Interest Payment Loans, in accordance with the provisions of Section
4.1 hereof and Section 2.2 of the Construction Loan Agreement, up to
the maximum amounts set forth in such provisions. On the Documentation
Date, the Lessee shall submit an irrevocable Funding Request for the
payment of fees to Mellon Bank and Mellon Leasing Corporation and
Transaction Expenses under Section 2.1.
(b) All remittances made by the Certificate Purchaser and the
Construction Lender for the funding of any Advance shall be made on the
applicable Funding Date in immediately available federal funds by wire
transfer to the account of the Construction Agent specified on the
Construction Agent's signature page hereto, except that a portion of
the initial Advance shall be made (in accordance with instructions to
be included in the
-5-
Participation Agreement
<PAGE> 10
initial Funding Request) by wire transfer to the Lessee to reimburse
the Lessee for Transaction Expenses as provided in Section 3.4(a).
SECTION 3.5. Use of Advances. Notwithstanding any provision to the
contrary contained in any Operative Document, Advances may be used to fund the
following items to the extent they are included in the Approved Construction
Budget: (i) Project Improvement Costs (including all Soft Costs and costs
related to Site Work), (ii) Transaction Expenses and (iii) fees payable pursuant
to Sections 4.5 and 4.6 of this Participation Agreement, provided, that in no
event may the Advances be used to fund any of the foregoing matters in clauses
(i) and (ii) to the extent any such funding would conflict with any provision of
any Operative Document. Advances may be applied to any of the foregoing,
regardless of whether such costs, fees or expenses were incurred prior to, as of
or after the Documentation Date. Prior to the Base Date, Certificate Yield shall
accrue for the benefit of the Certificate Trustee in accordance with Section
4.1(d) of this Participation Agreement but shall not be paid to the Certificate
Trustee during the Interim Term. Accrued interest under the Construction Loan
shall be paid to the Construction Lender in accordance with Section 2.2 of the
Construction Loan Agreement.
SECTION 3.6. Collateralization. The Lessee shall satisfy the Collateral
Requirement as a condition precedent to each Advance, and shall satisfy the
Collateral Requirement throughout the Lease Term.
SECTION 3.7. Refinancing. So long as (i) no Event of Default shall have
occurred and be continuing, and (ii) the Refinancing Loan Documents shall have
been accepted and delivered by all parties thereto in form and substance
satisfactory to Mellon Bank and Mellon Financial Service Corporation #4 in their
sole discretion,
(a) The Construction Lender covenants and agrees to purchase
the Tranche A Loans, which Tranche A Loans shall bear interest at a
rate per annum equal to the Eurodollar Rate plus 1/2 of 1%, and the
Certificate Purchaser covenants and agrees to purchase the Tranche B
Loans, which Tranche B Loans shall bear interest at a rate per annum
equal to the Treasury Rate plus 2.25%.
(b) The Certificate Purchaser further covenants and agrees
that so long as no Event of Default shall have occurred and be
continuing, the Certificate Purchaser shall purchase a new Certificate,
which Certificate shall be in the original principal amount of no less
than 3% of the aggregate amount of all Advances made to or for the
benefit of the Construction Agent during the Interim Term and shall
bear interest at a rate per annum equal to the Treasury Rate plus
4.00%, so long as all of the following conditions shall have been
satisfied:
(i) the Tranche A Loans shall have been purchased by
Mellon Bank, and the Tranche B Loans shall have been purchased
by the Certificate Purchaser;
(ii) the conditions set forth in Section 6.1(a), (b),
(d), (f), (g), (h), (m), and 6.2(c), (d), (e), (f) and (j)
(and each Lender shall receive an appropriate
-6-
Participation Agreement
<PAGE> 11
endorsement under clause (j)) shall have been satisfied in
connection with the Refinancing, provided, that all references
in such provisions in Sections 6.1 and 6.2 to the
"Construction Lender" shall be deemed to refer to the
"Lenders" and all references to the "Operative Documents"
shall be deemed to include all documents, agreements and
instruments to be executed in connection with the Refinancing;
(iii) all documents, agreements and instruments to be
executed in connection with the Refinancing shall be legal,
valid and binding in accordance with their terms, and the
Lenders and Certificate Purchaser shall have received a legal
opinion, in form and substance satisfactory to them, to such
effect;
(iv) all documents to be recorded and/or filed in
connection with the Refinancing shall have been properly
recorded or filed;
(v) after giving effect to the Refinancing, no
Default shall exist under any Operative Document; and
(vi) the Lessee, Mellon Bank and Mellon Financial
Services Corporation #4 shall each have approved the proposed
terms of the Refinancing and the Refinancing Loan Documents.
Upon the consummation of the Refinancing, the Tranche A Lenders and the
Tranche B Lender shall succeed to all rights and benefits of the Construction
Lender under the Operative Documents.
(c) Unless a Default or Event of Default shall exist, at the
request and expense of Lessee and subject to the provisions of the Loan
Agreement, Lessor (upon receipt of written instructions from Lessee and
upon compliance with the conditions hereof) shall refinance the Tranche
A Loans by either:
(i) issuing and selling during the Term refunding
notes pursuant to and subject to the restrictions in the
Refinancing Loan Documents with such terms and conditions as
Lessee and the new Tranche A Lender or Lenders may agree upon
and, in connection therewith, use the proceeds of such
issuance and sale to prepay, pursuant to the Refinancing Loan
Documents, all of the Tranche A Loans then outstanding, in
whole but not in part, or
(ii) causing the Tranche A Lender to assign the
Tranche A Loans to a commercial bank, savings and loan
association, savings bank, pension plan, depository
institution, insurance company, branches or agents of foreign
banks, a real estate investment trust or other similar
institution as the Lessee identifies and as a result of such
assignment the Tranche A Lender receives par plus all accrued
interest through the date of such assignment, plus all other
amounts then due and payable to the selling Tranche A Lender,
provided, however, that no refinancing
-7-
Participation Agreement
<PAGE> 12
pursuant to this Section 3.7(c) shall occur unless and until
all of the following conditions have been satisfied: (a) no
Default or Event of Default shall have occurred and be
continuing; (b) no such refinancing shall increase or decrease
the amount, or shorten or lengthen the maturity, of any
scheduled payment of any outstanding principal amount thereof;
(c) no such refinancing shall increase the principal amount of
indebtedness then outstanding under the Tranche A Loans,
provided that the interest rate charged by the lenders in
connection with any such refinancing may be different from the
interest rate under the Tranche A Loans; (d) no such
refinancing shall contain any covenants or restrictions upon
the Lessee or Lessor or any of their Affiliates which are
materially more burdensome to the Lessee or Lessor or any of
their Affiliates than the undertakings and restrictions
contained in the Operative Documents; (e) no such refinancing
shall create any Liens on any property of the Lessee or any of
its Affiliates except for those Liens created pursuant to the
Security Documents in accordance with the terms of the
Security Documents; provided, however, Lessee or its
Affiliates may pledge additional collateral up to a value of
$5,000,000 to such new lender so long as the pledge of such
additional collateral does not violate the covenants set forth
in Section 10.3; (f) the lenders under such refinancing shall
each execute an agreement, in form and substance satisfactory
to the Lenders, pursuant to which such refinancing lenders
shall agree to be bound by all of the obligations, terms and
conditions of the Construction Loan Agreement to which the
Tranche A Lender is bound and to assume all of the
responsibilities, covenants and agreements of the Tranche A
Lender under the Construction Loan Agreement; (g) no such
refinancing shall impair the Liens, rights or benefits of the
Lenders under the Refinancing Loan Documents, or any documents
or agreements executed in connection therewith (provided, that
this subsection shall not be construed to prohibit such new
Tranche A Lender from taking a first priority mortgage
position as contemplated in the Construction Loan Agreement);
(h) after giving effect to any such refinancing, no Default or
Event of Default shall exist; and (i) Lessee shall cause the
Pledgor under the Pledge and Security Agreement to make an
additional transfer to the Collateral Account (as defined in
the Pledge and Security Agreement) in the amount required
thereunder as a result of the refinancing or refunding. The
parties hereto shall cooperate in the preparation and
execution of any amendments, supplements and other writings
reasonably requested to accomplish such refinancing, including
assignments and/or release instruments, as appropriate. Lessee
shall reimburse Lessor, the Tranche A Lender and Tranche B
Lender for all reasonable costs and expenses (including all
reasonable internal and external costs and fees of the Tranche
A Lender and Tranche B Lender) incurred in connection with any
refinancing of the Tranche A Loans which is consummated
pursuant to this Section 3.7(c).
SECTION 3.8. Resizing of Tranche A, Tranche B and Certificate. The
parties have determined the amounts of Tranche A, Tranche B and the Certificate
based on certain assumptions determined to be reasonable by the parties as of
the Documentation Date. Should
-8-
Participation Agreement
<PAGE> 13
there be a material change in the Lease Balance (it being agreed that any such
change shall be made only with the consent of the Certificate Purchaser and the
Lenders in each case in their respective sole and absolute discretion) or the
assumptions utilized by the parties as of the Documentation Date that, because
of GAAP, requires a new calculation of Tranche A, Tranche B and the Certificate
to meet the intention of the parties as stated in Section 5.1 and to provide
operating lease treatment for the Lessee in accordance with GAAP, the parties
agree to negotiate in good faith to recalculate the principal amount of Tranche
A, Tranche B and the Certificate such that the Lease may continue to be treated
by the Lessee for financial accounting purposes as an operating lease in
accordance with GAAP so long as any such recalculation does not impose any
additional burdens or risks of any nature on the Lenders, the Certificate
Trustee or the Certificate Purchaser.
ARTICLE IV.
CERTIFICATE PAYMENTS; CONSTRUCTION LOAN PAYMENTS
SECTION 4.1. Certificate Payments.
(a) The amount of the Certificate Amounts outstanding from
time to time shall accrue yield ("Certificate Yield") at the
Certificate Yield Rate, calculated during the Interim Term using the
actual number of days elapsed in a 360 day year, and during the Base
Term using 30 days for each month in a 360 day year. If all or any
portion of the Certificate Amounts, any Certificate Yield payable
thereon or any other amount payable hereunder shall not be paid when
due (whether at stated maturity, acceleration thereof or otherwise),
such overdue amount shall bear interest at a rate per annum which is
equal to the Overdue Rate.
(b) Subject to the provisions of the Operative Documents,
Certificate Amounts shall be repaid on the Expiration Date.
(c) The Certificate Trustee shall, pursuant to the Assignment
of Leases and Rents, direct the Lessee to pay to the Certificate
Trustee for the account of the Certificate Purchaser Basic Rent
(determined on the basis of amounts due in accordance with clauses (a)
and (b) above) and all other amounts due with respect to the
Certificate Amounts payable by the Lessee under the Lease from time to
time, and the Certificate Trustee shall distribute such amounts to the
Certificate Purchaser in accordance with Section 5 of the Construction
Loan Agreement.
(d) On each Scheduled Payment Date prior to the Base Date, the
Certificate Trustee shall be deemed to have requested a payment with
respect to accrued Certificate Yield on outstanding Certificate Amounts
pursuant to Section 3.2 (a "Certificate Yield Payment Advance") in an
amount equal to the lesser of (x) the aggregate amount of Certificate
Yield which has accrued to and including such date and (y) the
Available Certificate Purchaser Commitment. The Funding Date with
respect to any such Certificate
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Yield Payment Advance shall be the relevant Scheduled Payment Date
(provided that the making of a Certificate Amount pursuant to such
payment shall be subject to satisfaction of the applicable conditions
precedent set forth in Section 6.2) and the proceeds of such payment
shall be applied to such accrued Certificate Yield but shall not be
paid to the Certificate Trustee during the Interim Term, and instead
shall be added to the Certificate Amount. On each such Funding Date,
the Certificate Amounts and the Property Improvements Costs shall be
increased by an amount equal to the Certificate Yield Payment Advance
paid on such date with the proceeds of such payment.
SECTION 4.2. Construction Loan Payments.
(a) Each Construction Loan shall accrue interest computed and
payable in accordance with the terms of the Construction Loan
Agreement.
(b) The principal of the Construction Loan shall be repaid in
full on the Construction Loan Expiration Date.
(c) The Certificate Trustee shall, pursuant to the Assignment
of Leases and Rents, direct the Lessee to pay to the Certificate
Trustee the Lender Basic Rent (determined on the basis of amounts due
in accordance with clauses (a) and (b) above) and all other amounts due
with respect to the Construction Loans payable by the Lessee under the
Lease from time to time, and the Certificate Trustee shall distribute
such amounts in accordance with Section 5 of the Construction Loan
Agreement.
SECTION 4.3. Rent Payments. The Lessee may, at any time and from time
to time, designate one or more (but in no event more than three) separate
accounts or credit facilities (including the Mellon Revolver) in one or more
financial institutions to be debited directly by the Certificate Trustee on each
Scheduled Payment Date for the payment of Basic Rent under the Lease. Lessee may
designate the priority from time to time of debiting of such accounts or credit
facilities by written notice to the Certificate Trustee no later than fifteen
(15) Business Days prior to any Scheduled Payment Date. Nothing contained herein
shall limit Lessee's obligation to pay Basic Rent under the Lease. The
Certificate Trustee, the Construction Lender and the Certificate Purchaser
acknowledge that the Lessee has the right to prepay Rent in minimum amounts of
$100,000 and integrals of $10,000 at any time, upon thirty days prior written
notice, together with a Make-Whole Premium. The Lessee acknowledges and agrees
that a Make-Whole Premium shall be payable in connection with each and every
prepayment of the principal component of Rent prior to the Expiration Date
except for a prepayment to the extent arising solely from a Significant Casualty
or a Significant Condemnation, and that such prepayment shall be applied as
provided in Section 5.1(b) of the Construction Loan Agreement or the Refinancing
Loan Documents, as applicable.
SECTION 4.4. Overdue Payments. The Certificate Trustee, the
Construction Lender and the Certificate Purchaser acknowledge that the Lessee
shall have no liability with respect to overdue payments of Loans and
Certificate Amounts so long as the Lessee has timely paid Rent in
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accordance with Article III of the Lease, or such amounts are otherwise
accounted for pursuant to Section 4.1(d).
ARTICLE V.
CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1. Nature of Transaction.
(a) The parties hereto intend that (i) for financial
accounting purposes with respect to the Lessee, the Lessor will be
treated as the sublessor of the Land under the Lease and the owner and
the lessor of the Improvements and the Lessee will be treated as the
sublessee of the Land under the Lease and the lessee of the
Improvements and (ii) for all other purposes, including federal and all
state and local income tax purposes, state real estate and commercial
law and bankruptcy purposes, (A) the Lease will be treated as a
financing arrangement, (B) the Lessor, the Certificate Purchaser and
the Lenders will be deemed lenders making loans to the Lessee in an
amount equal to the sum of the Certificate Amounts and the outstanding
principal amount of the Loans, which loans are secured by the Property
and (C) the Lessee will be treated as the owner of the Property and
will be entitled to all tax benefits ordinarily available to an owner
of property like the Property for such tax purposes. Nevertheless, the
Lessee acknowledges and agrees that neither the Certificate Trustee,
the Certificate Purchaser nor any Lender have made any representations
or warranties to the Lessee concerning the tax, accounting or legal
characteristics of the Operative Documents and that the Lessee has
obtained and relied upon such tax, accounting and legal advice
concerning the Operative Documents as it deems appropriate.
(b) Specifically, without limiting the generality of
subsection (a) of this Section 5.1, the parties hereto intend and agree
that in the event of any insolvency or receivership proceedings or a
petition under the United States bankruptcy laws or any other
applicable insolvency laws or statute of the United States of America
or any State or Commonwealth thereof affecting the Lessee, the Lessor,
the Certificate Purchaser or the Lenders or any collection actions, the
transactions evidenced by the Operative Documents shall be regarded as
loans made by the Certificate Trustee, the Certificate Purchaser and
the Lenders as unrelated third party lenders of the Lessee.
SECTION 5.2. Amounts Due Under Lease. Anything else herein or elsewhere
to the contrary notwithstanding, it is the intention of the Lessee, the
Certificate Trustee, the Certificate Purchaser and the Lenders that: (i) the
amount and timing of installments of Basic Rent due and payable from time to
time from the Lessee under the Lease shall be equal to the aggregate payments
due and payable with respect to amortization of principal of, and interest on,
the Loans, and with respect to Certificate Yield on the Certificate Amounts on
each Payment Date (to the extent such interest is not funded by additional
Interest Payment Loans); (ii) if the Lessee elects the Purchase Option or
becomes obligated to purchase the Property (which is subject to the
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Lease) under the Lease (whether upon the occurrence of a Lease Event of Default
or otherwise), the Loans, the Certificate Amounts, the Make-Whole Premium, all
interest and Certificate Yield thereon and all other obligations of the Lessee
owing to the Certificate Trustee, the Certificate Purchaser and the Lenders
shall be paid in full by the Lessee; and (iii) if the Lessee properly elects the
Remarketing Option, the Lessee shall only be required to pay to the Certificate
Trustee the Gross Proceeds from Improvements, the Termination Rental Amount and
any amounts due pursuant to Section 9.1 and Article XIII of this Participation
Agreement and Sections 20.1 and 20.2 of the Lease (which aggregate amounts may
be less than the Lease Balance).
ARTICLE VI.
CONDITIONS PRECEDENT TO INITIAL ADVANCE DATE AND ADVANCES
SECTION 6.1. Initial Advance Date Conditions. The occurrence of the
Initial Advance Date is subject to the occurrence of the Documentation Date and
the satisfaction of the following conditions precedent:
(a) Trust Agreement; Redemption of Certificate; Operative
Documents; No Default. The Trust Agreement shall have been duly
authorized, executed and delivered by the parties thereto, shall be
in form and substance satisfactory to the Certificate Purchaser, and
shall be in full force and effect, and the Certificate shall have been
validly issued to the Certificate Purchaser pursuant to the Trust
Agreement. Each of the Operative Documents shall have been duly
authorized, executed and delivered by the parties thereto in
substantially the forms attached hereto as Exhibits B through M,
P and Q, respectively, and, if not so attached, in form and substance
satisfactory to the parties hereto, and shall be in full force and
effect. No Default or Event of Default shall exist under any of the
Operative Documents to which the Lessee is a party (either before or
after giving effect to the transactions contemplated by the Operative
Documents), no "Default" or "Event of Default" as such terms are
defined in the Lease shall exist, and the Certificate Trustee, the
Construction Lender and the Certificate Purchaser shall each have
received a fully executed copy of each of the Operative Documents
(other than (A) the Note and the Lease, of which the Construction
Lender shall receive the originals and the Lessor and the Certificate
Purchaser shall receive specimens, and (B) the Certificate, of which
the Certificate Purchaser shall receive the original and the
Certificate Trustee, Lessee and the Construction Lender shall receive
specimens). The Operative Documents (or memoranda thereof), any
supplements thereto and any financing statements in connection
therewith required under the Uniform Commercial Code shall have been
recorded, registered and filed, if necessary, in such manner as to
enable the title insurance company to issue the title insurance
policies referred to in clause (k) below.
(b) Taxes. All taxes, fees and other charges in connection
with the execution, delivery, recording, filing and registration of the
Operative Documents shall have been paid or provisions for such payment
shall have been made to the satisfaction of the Certificate Trustee,
the Certificate Purchaser and the Construction Lender.
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(c) Opinions of Counsel. Each of (i) Kirkpatrick & Lockhart
LLP, special counsel to the Lessee, and (ii) Richards, Layton & Finger
shall have issued to the Certificate Trustee, the Certificate Purchaser
and the Construction Lender his/her opinion in form and scope mutually
satisfactory to the Certificate Trustee, the Certificate Purchaser and
the Construction Lender.
(d) Governmental Approvals. All necessary (or, in the
reasonable opinion of the Certificate Trustee, the Certificate
Purchaser, the Construction Lender or any of their respective counsel,
advisable) Governmental Actions, in each case required by any
Requirement of Law, shall have been obtained or made and be in full
force and effect.
(e) Litigation. No action or proceeding shall have been
instituted, nor shall any action or proceeding be threatened, before
any Governmental Authority, nor shall any order, judgment or decree
have been issued or proposed to be issued by any Governmental Authority
(i) to set aside, restrain, enjoin or prevent the full performance of
this Participation Agreement, any other Operative Document or any
transaction contemplated hereby or thereby or (ii) which is reasonably
likely to materially and adversely affect the Lessee.
(f) Requirements of Law. In the reasonable opinion of the
Certificate Trustee, the Certificate Purchaser, the Construction Lender
and their respective counsel, the transactions contemplated by the
Operative Documents do not and will not violate in any respect any
Requirement of Law and do not and will not subject the Certificate
Trustee, the Certificate Purchaser or the Construction Lender to any
material adverse regulatory prohibitions or constraints.
(g) Responsible Employee's Certificates. The Certificate
Trustee, the Certificate Purchaser and the Construction Lender shall
each have received a Responsible Employee's Certificate of the Lessee
(as Lessee, Guarantor and Construction Agent) in substantially the form
of Exhibit N attached hereto, dated as of the Initial Advance Date,
stating that (i) each and every representation and warranty of such
Person contained in each Operative Document to which it is a party is
true and correct in all material respects on and as of the Initial
Advance Date; (ii) no Default or Event of Default has occurred and is
continuing under any Operative Document to which it is a party with
respect to such Person; (iii) each Operative Document to which such
Person is a party is in full force and effect with respect to it; and
(iv) such Person has duly performed and complied with all covenants,
agreements and conditions contained herein or in any Operative Document
required to be performed or complied with by it on or prior to the
Initial Advance Date.
(h) Resolutions and Incumbency Certificate, etc. The Lessee
shall have delivered to the Certificate Trustee, the Certificate
Purchaser and the Construction Lender (i) a certificate of its
Secretary or an Assistant Secretary attaching and certifying as to (A)
the resolutions of the Board of Directors duly authorizing the
execution, delivery and performance by it of each Operative Document to
which it is or will be a party, (B) its
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certificate of incorporation and by-laws, and (C) the incumbency and
signature of persons authorized to execute and deliver on its behalf
the Operative Documents to which it is a party and (ii) a certificate
of good standing with respect to it issued by the Secretary of State of
its State of incorporation.
(i) Environmental Audit. The Certificate Trustee, the
Certificate Purchaser and the Construction Lender shall have received
an Environmental Audit for the Property in form and substance
acceptable to each of them, and shall have received a report from
Killam & Associates describing the corrective actions required to be
taken by the Lessee to remediate any Hazardous Substances and any
violations, or potential violations, of Environmental Law identified in
the Phase I environmental report previously prepared for the Land and
delivered to the Construction Lender, which report shall be in form and
substance satisfactory to the Construction Lender.
(j) Appraisal. The Certificate Trustee, the Certificate
Purchaser and the Construction Lender shall have received an Appraisal
of the Property, which Appraisal shall (i) show that as of the Base
Date the value of the Lessor's interest in the Improvements to be
constructed thereon in accordance with the Plans and Specifications
shall not be less than 100% of the aggregate Commitments of the
Certificate Purchaser and the Construction Lender and (ii) show the
Fair Market Sales Value as of the end of the Base Term of the Lessor's
interest in the Improvements to be constructed thereon in accordance
with the Plans and Specifications shall be no less than [$14,500,000.]
(k) Survey and Title Insurance. The Lessee shall have
delivered to the Certificate Trustee, the Certificate Purchaser and the
Construction Lender an ALTA/1992 (Urban) Survey of the Property
prepared by a licensed surveyor and meeting the Minimum Standard Detail
Requirements for ALTA/ASCM Land Title Surveys as adopted by the
American Land Title Association/American Society and American Congress
on Surveying and Mapping in 1992 certified to the Certificate Trustee,
the Construction Lender and the title company and otherwise in form
reasonably acceptable to the Construction Lender, and an ALTA owner's
and lender's title commitment for an insurance (together with a title
insurance policy issued pursuant to such commitment, and containing no
additional exclusions or exceptions from the commitment, which shall be
delivered promptly after the Initial Advance Date) policy covering the
Property in favor of the Certificate Trustee, the Lessee and the
Construction Lender, and a leasehold policy in favor of the Lessee,
each such policy to be dated as of the Initial Advance Date and in an
amount not less than the aggregate Commitments of the Construction
Lender and Certificate Purchaser and to be reasonably satisfactory to
the Participants with comprehensive, survey, variable rate, access and
such other endorsements requested by the Participants to the extent
available in the Commonwealth of Pennsylvania.
(l) Recordation. Each of the Construction Lender and the
Certificate Purchaser shall have received evidence reasonably
satisfactory to it that each of the Deed, the Ground Lease or a
memorandum thereof, the Lease or a memorandum thereof, the
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Mortgage and the Assignment of Leases and Rents shall have been or are
being recorded with the appropriate Governmental Authorities in the
order in which such documents are listed in this clause (and the
issuance of the title insurance policies in clause (k) above shall be
satisfactory evidence of the foregoing), and the UCC Financing
Statements with respect to the Property shall have been or are being
filed with the appropriate Governmental Authorities.
(m) Evidence of Property Insurance. The Certificate Trustee,
the Construction Lender and the Certificate Purchaser shall have
received evidence of insurance with respect to the Property required to
be maintained pursuant to the Lease, setting forth the respective
coverages, limits of liability, carrier, policy number and period of
coverage.
(n) Initial Advance Date. The Initial Advance Date shall occur
on or prior to January 10, 1999.
(o) [Reserved]
(p) Certificate Trustee's Resolutions and Incumbency
Certificate, etc. The Lessee, the Construction Lender and the
Certificate Purchaser shall have received a certificate of the
Secretary or an Assistant Secretary of the Certificate Trustee
attaching and certifying as to (i) the resolutions of the Board of
Directors duly authorizing the execution, delivery and performance by
the Certificate Trustee of each Operative Document to which it is or
will be a party, (ii) its articles of association, certified as of a
recent date by an appropriate officer of Trust Company, (iii) its
by-laws and (iv) the incumbency and signature of persons authorized to
execute and deliver on its behalf the Operative Documents to which it
is a party.
(q) Architect's Statement of Professional Opinion. The
Certificate Trustee, the Construction Lender and the Certificate
Purchaser shall have received a statement of professional opinion from
the Architect, in form and scope satisfactory to the Certificate
Trustee, the Construction Lender and the Certificate Purchaser,
certifying that (i) the Property as improved in accordance with the
Plans and Specifications and the contemplated use thereof by the Lessee
will comply with Requirements of Law (including zoning and land use
laws and Environmental Laws) and (ii) the Plans and Specifications have
been prepared in accordance with applicable Requirements of Law
(including applicable Environmental Laws and building, planning, zoning
and fire codes) and upon completion of the Improvements in accordance
with the Plans and Specifications, such Improvements on the Property
will not encroach in any manner onto any adjoining land to the best of
the Architect's knowledge based on information received (except as
permitted by express written easements or as insured by appropriate
title insurance). The Plans and Specifications, the contracts with the
Prime Contractor and a complete and detailed breakdown, on a line item
basis, of the costs (prepared by others) of constructing the
Improvements in accordance with the Plans and Specifications, together
with evidence of all matters described in the Architect's statement of
professional opinion described in this
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paragraph, shall have been reviewed and approved by the Construction
Lender.
(r) Custody Agreement. The Lessee shall have executed and
delivered the Custody Agreement to the Construction Lender.
(s) Recognition of Assignment. The Architect and the Prime
Contractor shall have each executed written instruments reasonably
satisfactory to the Certificate Trustee, the Certificate Purchaser and
the Construction Lender pursuant to which each of the Architect and the
Prime Contractor shall have agreed to perform its obligations under the
Construction Documents to which it is a party for the benefit of the
Certificate Trustee or the Construction Lender, when and if the
Certificate Trustee or the Construction Lender shall exercise their
rights under the Construction Documents Assignment.
(t) Approval of Prime Contractor. The Construction Lender
shall have reviewed and approved a credit report issued by the bonding
company for the Construction with respect to the Prime Contractor,
which report shall be satisfactory to the Construction Lender in all
respects.
(u) Fees. The Certificate Trustee and the Participants shall
have received all fees payable on the Documentation Date and the
Initial Advance Date pursuant to this Participation Agreement (which
fees shall be included in the initial Advance).
All documents and instruments required to be delivered on the Initial Advance
Date shall be delivered at the offices of Mellon Bank, One Mellon Bank Center,
Pittsburgh, Pennsylvania, or at such other location as may be determined by the
Certificate Trustee, the Certificate Purchaser, the Construction Lender and the
Lessee.
SECTION 6.2. Conditions Precedent to each Advance. The obligations of
the Certificate Trustee to make an Advance on a Funding Date (including the
Initial Advance), the obligation of the Certificate Purchaser to make any
related Certificate Amount available on such Funding Date and the obligation of
the Construction Lender to make any related Construction Loans on such Funding
Date, are subject to satisfaction or waiver of the following conditions
precedent:
(a) Funding Request. The Construction Lender, the Certificate
Purchaser and the Certificate Trustee shall have received a fully
executed counterpart of the applicable Funding Request, executed by the
Lessee, in accordance with Section 3.4.
(b) Construction Certificate. With respect to any Property
Improvements Costs to be paid or reimbursed using the proceeds of such
Advance, (i) the Construction Lender shall have received, at least ten
(10) days prior to the applicable Funding Date, a Construction
Certificate in the form of Exhibit O hereto, together with all
attachments thereto, and (ii) the property inspectors and consultants
employed by the Construction Lender to inspect the Improvements shall
have inspected and approved all of the work performed to such date in
connection with the Property and the Improvements, and
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arrangements shall have been made to reimburse the Construction Lender
for the reasonable costs and expenses incurred in connection with such
inspection and approval, including the internal costs and expenses of
the Construction Lender, its employees and consultants.
(c) Accuracy of Representations and Warranties. On the
applicable Funding Date the representations and warranties of the
Lessee contained herein and in each of the other Operative Documents
shall be true and correct in all material respects as though made on
and as of such date, except to the extent such representations or
warranties relate solely to an earlier date, in which case such
representations and warranties shall have been true and correct in all
material respects on and as of such earlier date.
(d) Performance of Agreements. The Lessee shall have performed
its agreements contained herein and in the other Operative Documents to
be performed by it on or prior to such date.
(e) No Default. There shall not have occurred and be
continuing any Event of Default under the Lease and no Default or Event
of Default under the Lease will have occurred after giving effect to
the making of the Advance requested by such Funding Request.
(f) Commitment Amount. After giving effect to the applicable
Advance, the aggregate amount of all Advances shall not exceed the
aggregate of the Commitments with respect to any party which has been
requested to make an Advance.
(g) Cost of Completion. The Certificate Purchaser and the
Construction Lender shall have received a Certificate from the Prime
Contractor, in form and scope satisfactory to each of them, certifying
that after giving effect to the applicable Advance (or if the
Certificate is given pursuant to Section 3.3.1 hereof, then after
giving effect to the reduction of the Commitments), the estimated as
yet unpaid cost to the Construction Agent of completing the
Construction pursuant to the Construction Documents will not exceed the
Available Commitments net of any portion of the Available Commitments
that shall be allocated for Interest Payment Loans and Certificate
Yield Payment Advances, and all such Construction is capable of
attaining Substantial Completion by the Outside Completion Date and is
proceeding in accordance with the schedule for Construction approved by
the Participants prior to the Initial Advance Date, which schedule is
attached as Schedule 3 to the Construction Agency Agreement.
(h) Building Permits. All building permits required by any
Governmental Authority in connection with the Construction for which
the applicable Advance is being made shall have been obtained.
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(i) Architect's Statement of Professional Opinion. The
Certificate Trustee, the Construction Lender and the Certificate
Purchaser shall have received a statement of professional opinion from
the Architect, in form and scope satisfactory to the Certificate
Trustee, the Construction Lender and the Certificate Purchaser, stating
that (i) the Property is being improved in a good and workmanlike
manner and in accordance with the Plans and Specifications, and the
contemplated use thereof by the Lessee will comply with Requirements of
Law (including all zoning and land use laws and Environmental Laws),
(ii) the progress of the construction is such that Substantial
Completion of the Improvements can occur on or prior to the Outside
Completion Date (and specifying the stage and percentage of completion
which has been achieved by each of the various trades engaged in the
construction of the Improvements), and the Construction is proceeding
in accordance with the schedule for construction approved by the
Participants prior to the Initial Advance Date, and (iii) the amount of
the Advance is not greater than the actual value of the materials
incorporated into the Improvements and the work and labor performed in
connection therewith.
(j) Title Policy Endorsement. The Construction Lender and the
Certificate Trustee shall have received on the date of such Advance an
endorsement to the title policy delivered pursuant to the Lease (i)
indicating that since the date of the preceding Advance there has been
no change in the state of title (except changes approved by the
Construction Lender), (ii) updating the title policy to the date of
such Advance, and (iii) increasing the coverage of the title policy by
an amount equal to such Advance if the title policy does not by its own
terms provide for such an increase.
(k) Contractor Receipts. On or prior to the date of each
Advance the Lessor shall have received (i) receipts with respect to any
invoice which is the subject of such Advance and which is in excess of
Fifty Thousand Dollars ($50,000) from the Prime Contractor and all
subcontractors engaged in the construction of the Improvements
evidencing that all sums previously advanced for Property Improvement
Costs have been expended for such Property Improvement Costs and that
no further amounts are owing with respect to such previously invoiced
Property Improvement Costs and (ii) copies of all documents required to
be submitted by the Lessee as of such date pursuant to the terms of the
contracts with the Prime Contractor.
(l) Maintenance of Collateral. The Lessee shall on the date of
such Advance have satisfied the Collateral Requirement.
(m) Commitment Period. No Advance shall be made after the
termination of the Commitment Period.
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ARTICLE VII.
CONDITIONS TO SUBSTANTIAL COMPLETION
SECTION 7.1. Conditions to Substantial Completion of the Property.
Substantial Completion shall be deemed to have occurred for purposes of the
Operative Documents at such time as the Construction, including Tenant
Improvement Work, shall have been substantially completed in accordance with the
Plans and Specifications and all Applicable Law, and the Property shall be ready
for occupancy and operation, as evidenced by certificates of the Architect, the
Prime Contractor and the Construction Agent and the issuance by the appropriate
Governmental Authority of certificates of occupancy for the Facility
contemplated by the Plans and Specifications, all in form and substance
reasonably satisfactory to the Lessor.
VIII. ARTICLE
REPRESENTATIONS
SECTION 8.1. Representations of the Participants. As of the Initial
Advance Date, each Participant represents and warrants to the Lessor, the other
Participants, and the Lessee that:
(a) ERISA. Such Participant is not and will not be making its
Construction Loans or funding its Certificate Amounts hereunder, and is
not performing its obligations under the Operative Documents, with the
assets of an "employee benefit plan" (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA, or "plan" (as defined in
Section 4975(e)(1) of the Code).
(b) Status. Such Participant is a commercial bank, savings and
loan association, savings bank, pension plan, depository institution,
insurance company, branch or agency of a foreign bank or other similar
financial institution, or an Affiliate thereof.
(c) Power and Authority. Such Participant has the requisite
power and authority to enter into and perform under the Operative
Documents to which it is a party.
(d) Corporate Status. Such Participant (i) is a duly organized
and validly existing corporation in good standing under the laws of its
state of incorporation and (ii) has duly qualified and is authorized to
do business and is in good standing in all jurisdictions where the
failure to do so might have a material adverse effect on it or its
properties.
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(e) Corporate Power and Authority. Such Participant has the
corporate power and authority to execute, deliver and carry out the
terms and provisions of the Operative Documents to which it is or will
be a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Operative Documents to
which it is a party and has duly executed and delivered each Operative
Document required to be executed and delivered by it and, assuming the
due authorization, execution and delivery thereof on the part of each
other party thereto, each such Operative Document constitutes a legal,
valid and binding obligation enforceable against it in accordance with
its terms, except as the same may be limited by insolvency, bankruptcy,
reorganization or other laws relating to or affecting the enforcement
of creditors' rights or by general equitable principles.
(f) Lessor Liens. The Property is free and clear of all Lessor
Liens attributable to it.
SECTION 8.2. Representations of the Certificate Trustee and the Trust
Company. The Certificate Trustee and the Trust Company (solely as to Paragraphs
(a)(i), (b) and (c) only as to the agreements to which the Trust Company is a
party, (d), (e), (f) and (g), and only as to the Trust Company) represent and
warrant to the Lessee and the Participants that:
(a) Corporate Status. The Trust Company (i) is a duly
organized and validly existing banking corporation in good standing
under the laws of the State of Delaware and (ii) the Certificate
Trustee has duly qualified and is authorized to do business and is in
good standing in all jurisdictions where the failure to do so might
have a material adverse effect on it or its properties.
(b) Corporate Power and Authority. The Certificate Trustee and
the Trust Company each has the corporate power and authority to
execute, deliver and carry out the terms and provisions of the
Operative Documents to which it is or will be a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Operative Documents to which it is a party and has
duly executed and delivered each Operative Document required to be
executed and delivered by it and, assuming the due authorization,
execution and delivery thereof on the part of each other party thereto,
each such Operative Document constitutes a legal, valid and binding
obligation enforceable against it in accordance with its terms, except
as the same may be limited by insolvency, bankruptcy, reorganization or
other laws relating to or affecting the enforcement of creditors'
rights or by general equitable principles.
(c) No Violation. Neither the execution, delivery and
performance by the Certificate Trustee or the Trust Company of the
Operative Documents to which it is or will be a party nor compliance
with the terms and provisions thereof, nor the consummation by the
Certificate Trustee or the Trust Company of the transactions
contemplated therein (i) will result in a violation by the Certificate
Trustee or the Trust Company respectively of any applicable provision
of any law, statute, rule, regulation,
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order, writ, injunction or decree of any court or governmental
instrumentality having jurisdiction over the Certificate Trustee, the
Trust Company or the Property that would adversely affect (x) the
validity or enforceability of the Operative Documents to which the
Certificate Trustee or the Trust Company is a party, or the title to,
or value or condition of, the Property, or (y) the consolidated
financial position, business, prospects or consolidated results of
operations of the Certificate Trustee or the Trust Company or the
ability of the Certificate Trustee or the Trust Company to perform its
obligations under the Operative Documents, (ii) violate or result in
any breach which would constitute a default under, or (other than
pursuant to the Operative Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any
of the property or assets of the Certificate Trustee or the Trust
Company pursuant to the terms of any indenture, loan agreement or other
agreement for borrowed money to which the Certificate Trustee or the
Trust Company is a party or by which it or any of its property or
assets is bound or to which it may be subject (other than Permitted
Liens), or (iii) will violate any provision of the certificate of
incorporation or by-laws of the Certificate Trustee.
(d) No Approvals, etc. Neither the execution and delivery by
Trust Company or (assuming the due authorization, execution and
delivery of the Trust Agreement by the Certificate Purchaser)
Certificate Trustee, as the case may be, of any of the Operative
Documents to which it is a party requires the consent or approval of,
or the giving of notice to or registration with, or the taking of any
other action in respect of, any Governmental Authority or other body
governing its banking practices.
(e) Litigation. There is no action, proceeding or
investigation pending or threatened against Trust Company or
Certificate Trustee which questions the validity of the Operative
Documents, and there is no action, proceeding or investigation pending
or threatened which is likely to result, either in any case or in the
aggregate, in any material adverse change in the ability of Trust
Company or Certificate Trustee to perform its obligations under the
Operative Documents to which it is a party.
(f) Lessor Liens. The Property is free and clear of all Lessor
Liens attributable to it.
(g) Securities Act. Neither Trust Company nor Certificate
Trustee nor anyone authorized to act on its behalf has, directly or
indirectly, in violation of Section 5 of the Securities Act or any
state securities laws, offered or sold any interest in the Note, the
Certificate, the Property or the Lease, or in any security or lease the
offering of which, for purposes of the Securities Act or any state
securities laws, would be deemed to be part of the same offering as the
offering of the aforementioned securities or leases, or solicited any
offer to acquire any of the aforementioned securities or leases.
SECTION 8.3. Representations of Lessee. The Lessee represents and
warrants to the Lessor, the Certificate Purchaser and the Construction Lender
that the representations and
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warranties of the Lessee under the "Operative Documents" as such term is defined
in the Existing Lease are true and correct in all material respects, and:
(a) Corporate Status. The Lessee (i) is a duly organized and
validly existing corporation in good standing under the laws of the
State of Delaware and (ii) has duly qualified and is authorized to do
business and is in good standing in all jurisdictions where the failure
to do so might have a material adverse effect on it or its properties.
(b) Corporate Power and Authority. The Lessee has the
corporate power and authority to execute, deliver and carry out the
terms and provisions of the Operative Documents to which it is or will
be a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Operative Documents to
which it is a party and has duly executed and delivered each Operative
Document required to be executed and delivered by it and, assuming the
due authorization, execution and delivery thereof on the part of each
other party thereto, each such Operative Document constitutes a legal,
valid and binding obligation enforceable against it in accordance with
its terms, except as the same may be limited by insolvency, bankruptcy,
reorganization or other laws relating to or affecting the enforcement
of creditors' rights or by general equitable principles.
(c) No Violation. Neither the execution, delivery and
performance by the Lessee of the Operative Documents to which it is or
will be a party nor compliance with the terms and provisions thereof,
nor the consummation by the Lessee of the transactions contemplated
therein (i) result or will result in a violation by the Lessee of any
Applicable Law applicable to it or the Property, (ii) violate or result
in any breach which would constitute a default under, or (other than
pursuant to the Operative Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any
of the property or assets of the Lessee pursuant to the terms of any
indenture, loan agreement or other agreement for borrowed money to
which the Lessee is a party or by which it or any of its property or
assets is bound or to which it may be subject (other than Permitted
Liens), or (iii) will violate any provision of the certificate of
incorporation or by-laws of the Lessee.
(d) Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Lessee, threatened (i) that are
reasonably likely to have a material adverse effect on the Property or
on the businesses, prospects, operations, financial condition or assets
of the Lessee or (ii) that question the validity of the Operative
Documents or the rights or remedies of the Lessor, the Certificate
Purchaser or the Construction Lender with respect to the Lessee or the
Property under the Operative Documents.
(e) Governmental Approvals. No Governmental Action by any
Governmental Authority having jurisdiction over the Lessee or the
Property is required to authorize or is required in connection with (i)
the execution, delivery and performance by the Lessee of
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any Operative Document to which it is a party, (ii) the Construction
(other than certain permits which shall be obtained prior to any
Construction which relates to or requires such permits) or (iii) the
legality, validity, binding effect or enforceability against the Lessee
of any Operative Document to which it is a party.
(f) Investment Company Act. The Lessee is not an "investment
company" or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act.
(g) Public Utility Holding Company Act. The Lessee is not a
"holding company" or a "subsidiary company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Company Act of 1935, as
amended.
(h) Provided Information. The information and materials which
have been provided by the Lessee or any of its Affiliates (or any
Person authorized or employed by any such Person as agent or otherwise)
to the Lessor, the Certificate Purchaser and/or the Construction Lender
in writing prior to the Initial Advance Date, are true and accurate in
all material respects, do not contain an untrue statement of a material
fact, and are not incomplete by omitting to state any fact necessary to
make the statements herein or therein (taken as a whole) not misleading
in light of the circumstances under which such information was
provided.
(i) Taxes. All United States Federal income tax returns and
all other tax returns which are required to have been filed have been
or will be filed by or on behalf of the Lessee by the respective due
dates, including extensions, and all taxes due with respect to the
Lessee pursuant to such returns or pursuant to any assessment received
by the Lessee have been or will be paid. The charges, accruals and
reserves on the books of the Lessee in respect of such taxes or other
governmental charges are, in the opinion of the Lessee, adequate.
(j) Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA
and the Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and
the Code with respect to the Plan. No member of the ERISA Group has (i)
sought a waiver of the minimum funding standard under Section 412 of
the Code in respect of any Plan, (ii) failed to make any contribution
or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code
or (iii) incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA. No Plan
Termination Event has occurred with respect to any Plan or Multiple
Employer Plan. No member of the ERISA Group has any knowledge of any
event that could result in a liability of any such member to the PBGC,
whether
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under a Plan, a Multiemployer Plan, a Multiple Employer Plan, or
otherwise. There have not been any nor are there now existing any
events or conditions that would permit any Plan to be terminated under
circumstances that would cause the lien provided under Section 4068 of
ERISA to attach to the material assets of the Lessee or its ERISA
Affiliates. The value of the Plans' benefits guaranteed under Title IV
of ERISA on the date hereof does not exceed the value of such Plans'
assets allocable to such benefits as of the date of this Participation
Agreement. No "Prohibited Transaction" within the meaning of Section
406 of ERISA exists or will exist upon the execution and delivery of
this Lease or any Operative Document.
(k) Environmental Laws. The Lessee is in compliance with all
Environmental Laws relating to pollution and environmental control in
all jurisdictions in which all real property of the Lessee, including
the Land, are located, other than those the non-compliance with which
would not have a material adverse effect on such real property,
including the Land, or the consolidated results of operations,
business, prospects or consolidated financial position of the Lessee.
(l) Offer of Securities, etc. Neither the Lessee nor any
Person authorized to act on the Lessee's behalf has, directly or
indirectly, offered any interest in the Property or any other interest
similar thereto (the sale or offer of which would be integrated with
the sale or offer of such interest in the Property), for sale to, or
solicited any offer to acquire any of the same from, any Person other
than the Lessor and other "accredited investors" (as defined in
Regulation D of the Securities and Exchange Commission).
(m) Financial Statements.
(i) The Submitted Financial Statements, copies of
which have been delivered to the Lessor, the Certificate
Purchaser and the Construction Lender present fairly in all
material respects, in conformity with generally accepted
accounting principles, the financial position of the Lessee as
of such date and its results of operations and cash flows for
such fiscal year.
(ii) The unaudited consolidated statement of
financial position of the Lessee as of September 30, 1998 and
the related unaudited consolidated statements of income, and
cash flows for the year to date, copies of which have been
delivered to Lessor and the Construction Lender, present
fairly in all material respects, in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with the financial statements
referred to in clause (i) of this subsection (m), the
consolidated financial position of the Lessee as of such date
and its consolidated results of operations and cash flows for
such year-to-date period (subject to normal year-end
adjustments), and as of the Documentation Date there have been
no material adverse changes in the consolidated assets,
liabilities, results of operations or financial condition of
the Lessee from that set forth in such statements.
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(n) Property. The Property as improved in accordance with the
Plans and Specifications and the contemplated use thereof by the Lessee
and its agents, assignees, employees, lessees, licensees and tenants
will comply in all material respects with all Requirements of Law
(including all zoning and land use laws and Environmental Laws) and
Insurance Requirements.
(o) Plans and Specifications. Upon Substantial Completion of
the Construction all water, sewer, electric, gas, telephone and
drainage facilities and all other utilities required to adequately
service the Improvements for their intended use will be available
pursuant to adequate permits (including any that may be required under
applicable Environmental Laws). There is on the Documentation Date no
action, suit or proceeding (including any proceeding in condemnation or
eminent domain or under any Environmental Law) pending or, to the
Lessee's knowledge, threatened with respect to the Lessee, its
Affiliates or the Property which adversely affects the title to, or the
use, operation or value of, the Property, and following the
Documentation Date there will be no action, suit or proceeding
(including any proceeding in condemnation or eminent domain or under
any Environmental Law) pending or, to the Lessee's knowledge,
threatened with respect to the Lessee, its Affiliates or the Property
which materially adversely affects the title to, or the use, operation
or value of, the Property . No fire or other casualty with respect to
the Property has occurred which fire or other casualty has had a
material adverse effect on the Property. Upon Substantial Completion of
the Construction the Property will have available all material services
of public facilities and other utilities necessary for use and
operation of the Property and the other Improvements for their primary
intended purposes including adequate water, gas and electrical supply,
storm and sanitary sewerage facilities, telephone, other required
public utilities and means of access between such Improvements and
public highways for motor vehicles. All utilities serving the Property,
or proposed to serve the Property in accordance with the related Plans
and Specifications, are located in, and vehicular access to the
Improvements on the Property is provided by, either public
rights-of-way abutting the Property or Appurtenant Rights. All
Requirements of Law, easements and rights-of-way, including proof and
dedication, required for (x) the use, treatment, storage, transport,
disposal or disposition of any Hazardous Substance on, at, under or
from the Property during the construction of the Improvements thereon,
and (y) construction of the Improvements in accordance with the Plans
and Specifications and the Construction Agency Agreement have either
been irrevocably obtained from the appropriate Governmental Authorities
having jurisdiction or from private parties, as the case may be, or
will be irrevocably obtained from the appropriate Governmental
Authorities having jurisdiction or from private parties, as the case
may be, prior to commencing any such construction or use and operation,
as applicable.
(p) Title. The Deed is in form and substance sufficient to
convey good and marketable title to the Land in fee simple to the
Lessee, subject only to Permitted Liens. The Ground Lease is in form
and substance sufficient to convey a valid leasehold estate to the
Lessor, subject only to Permitted Liens. The Lessor will at all times
during the Term
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have a valid leasehold estate in the Land and good and marketable title
in fee simple to all Improvements located on the Land, subject only to
Permitted Liens. The Lessee will at all times during the Term have
marketable title in fee simple to the Land subject only to Permitted
Liens.
(q) Insurance. The Lessee has obtained or caused to be
obtained insurance coverage covering the Property which meets in all
respects the requirements of the Lease, and such coverage is in full
force and effect. The Lessee carries insurance with reputable insurers,
or self-insures, in respect of its material assets, in such manner, in
such amounts and against such risks as is customarily maintained by
other Persons of similar size engaged in similar business.
(r) Flood Hazard Areas. Except as otherwise identified on the
survey delivered pursuant to Section 6.1(k), no portion of the Property
is located in an area identified as a special flood hazard area by the
Federal Emergency Management Agency or other applicable agency. If the
Property is located in an area identified as a special flood hazard
area by the Federal Emergency Management Agency or other applicable
agency, then flood insurance has been obtained for the Property in
accordance with the Lease and in accordance with the National Flood
Insurance Act of 1968, as amended.
(s) Lease. Upon the execution and delivery of the Lease, (i)
the Lessee will have unconditionally accepted the Property demised
thereunder (provided that nothing contained herein shall be deemed a
waiver by the Lessee of any right of action against Persons with
respect to title to and condition of the Property on the Initial
Advance Date other than the Lessor, the Certificate Purchaser and the
Construction Lender) and will have good and marketable title to a valid
and subsisting subleasehold interest in the Land and leasehold interest
in the Improvements, subject only to Permitted Liens, (ii) no right of
offset will exist with respect to any Rent or other sums payable under
the Lease and (iii) no Rent under the Lease will have been prepaid.
(t) Outstanding Debt. Except as set forth on Schedule I, as of
the date hereof, the Lessee has no outstanding Debt for money borrowed,
other than (i) Debt arising or permitted hereunder or under the
Operative Documents, and (ii) Debt reflected on the balance sheets in
the Submitted Financial Statements.
(u) Title to Properties. The Lessee has good and marketable
title to all of its material assets reflected on the balance sheets in
the Submitted Financial Statements, except for such material assets as
have been disposed of in the ordinary course of business, and all such
material assets are free and clear of any Lien, except as reflected in
the Submitted Financial Statements and/or notes thereto or as otherwise
permitted by the provisions hereof or under the Operative Documents,
and except for Permitted Liens. The Lessee has such trademarks,
trademark rights, trade names, trade name rights, franchises,
copyrights, patents, patent rights and licenses as to allow it to
conduct its business as now operated in all material respects, without
known conflict with the rights of others.
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(v) Defaults. The Lessee is not in default under any
instrument evidencing any Debt individually, or in the aggregate, in an
amount in excess of $500,000, or under any material agreement relating
thereto or any indenture, mortgage, deed of trust, security agreement,
lease, franchise or other agreement or other instrument to which any
such Person is a party or by which any such Person or any of its
material assets is subject to or bound including the Mellon Revolver
Facility.
(w) Use of Advances. No part of any Advance will be used
directly or indirectly for the purpose of purchasing or carrying, or
for payment in full or in part of Debt that was incurred for the
purposes of purchasing or carrying, any margin security or margin stock
as such terms are defined in Regulation G, T, V or X of the Board of
Governors of the Federal Reserve System.
(x) Solvency. The Lessee is Solvent.
(y) Leases and Contracts. All material leases to which the
Lessee is a party that relate to the material assets of the Lessee or
the Collateral and all material contracts relating to the ownership by
any such Person of rights or interests in the material assets of any
such Person and the Collateral are in full force and effect, and no
material default has occurred with regard to any such lease or
contract. All rentals and other payments due under any such lease or
contract have been timely paid to the Person entitled to receive such
payment.
(z) [Reserved]
(aa) Condition of Property. The material properties used or to
be used in the continuing operations of the Lessee comply with all
Requirements of Law and with any Appurtenant Rights pertaining to such
properties.
(bb) No Change in Name or Entity. Except as provided in
Schedule II hereto or in the case of a transaction permitted by the
Pledge and Security Agreement which occurs subsequent to the date
hereof, the Lessee has not prior to the date of this Participation
Agreement, changed its name.
(cc) Rights in Respect of the Property. The Lessee is not a
party to any contract or agreement to sell any interest in the Property
or any part thereof other than pursuant to or in accordance with this
Participation Agreement and the Lease.
(dd) Chief Executive Office of Lessee. The principal place of
business and chief executive office, as such terms are used in Section
9-103(3) of the UCC, of the Lessee are each located at 1000 Fore Drive,
Warrendale, Pennsylvania 15086-7535.
(ee) Zoning. The Property complies in all material respects
with all applicable zoning and subdivision laws, ordinances,
regulations and restrictive covenants, and all requirements thereof
necessary for the use, occupancy and operation of the Property have
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been, or upon the completion of the Facility thereon will be, satisfied
in all material respects, and the current use and intended use under
the Lease of the Property is a conforming use.
(ff) Appraisal Data. The information provided by the Lessee
and its Affiliates to the Appraiser and forming the basis for the
conclusions set forth in each Appraisal, taken as a whole, was true and
correct in all material respects and did not omit any information known
and available to the Lessee necessary to make the information provided
not materially misleading.
SECTION 8.4. Representations of Lessee with Respect to Each Advance.
The Lessee represents and warrants to the Lessor, the Certificate Purchaser and
the Construction Lender as of each Funding Date on which an Advance is made as
follows:
(a) Representations. The representations and warranties of the
Lessee set forth in the Operative Documents (including the
representations and warranties set forth in Section 8.3) and the
"Operative Documents" as such term is defined in the Exiting Lease are
true and correct in all material respects on and as of such Funding
Date, except to the extent such representations or warranties relate
solely to an earlier date, in which case such representations and
warranties shall have been true and correct on and as of such earlier
date. The Lessee is in material compliance with its obligations under
the Operative Documents and there exists no Default or Event of Default
under the Lease, the Guaranty, the Guaranty Agreement, the Construction
Agency Agreement or the Pledge and Security Agreement or any other
Operative Document or the "Operative Documents" as such term is defined
in the Existing Lease to which the Lessee is a party. No Default or
Event of Default by Lessee under the Lease, the Guaranty, the Guaranty
Agreement, the Construction Agency Agreement or the Pledge and Security
Agreement or any other Operative Document to which the Lessee is a
party will occur as a result of, or after giving effect to, the Advance
requested by the Funding Request on such date and in accordance with
the schedule for construction approved by the Participants prior to the
Initial Advance Date.
(b) Improvements. The Construction of the Improvements to date
has been performed in a good and workmanlike manner, substantially in
accordance with the Plans and Specifications and in compliance with all
Insurance Requirements and Requirements of Law, and will be completed
prior to the occurrence of the Outside Completion Date.
(c) Lender's Liens. The Lessee has not permitted Liens to be
placed against the Property or against Lessee's fee ownership interest
in the Land since the recordation of the Mortgage other than Permitted
Liens.
(d) Advance. The amount of the Advance requested represents
interest on Construction Loans and Certificate Yield, Financed
Transaction Costs, and amounts owed by the Lessee or Construction Agent
to third parties in respect of Property Improvements
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Costs incurred prior to the date of such Advance and for which the
Lessee has not previously been reimbursed by an Advance. The conditions
precedent to such Advance and the related Certificate Amount and Loans
set forth in Article VI have been satisfied.
ARTICLE IX.
PAYMENT OF CERTAIN EXPENSES
The Lessee agrees, for the benefit of the Certificate Trustee, the
Certificate Purchaser, Trust Company and the Construction Lender, that:
SECTION 9.1. Transaction Expenses.
(a) The Lessee shall pay, or cause to be paid, from time to
time all Transaction Expenses in respect of the transactions on the
Documentation Date, the Initial Advance Date and each Funding Date on
such date; provided, however, that, if the Lessee has not received
written invoices therefor prior to such date, such Transaction Expenses
shall be paid within ten Business Days after the Lessee has received
written invoices therefor.
(b) The Lessee shall pay or cause to be paid (i) the fee of
Mellon Leasing Corporation as provided in Section 2.1 and all fees and
expenses (other than expenses directly relating to an assignment of any
interest of a Participant pursuant to Section 12.1) of the Certificate
Trustee, the Custodian and any necessary co-trustees (including
reasonable counsel fees and expenses) or any successor Certificate
Trustee or successor Custodian, for acting as Certificate Trustee under
the Trust Agreement and Custodian under the Pledge and Security
Agreement, (ii) all Transaction Expenses incurred by the Certificate
Trustee, the Lenders or the Certificate Purchaser in entering into any
future amendments or supplements with respect to any of the Operative
Documents, whether or not such amendments or supplements are ultimately
entered into, or giving or withholding of waivers of consents hereto or
thereto, in each case which have been requested by or approved by the
Lessee, (iii) all Transaction Expenses incurred by the Certificate
Trustee, the Lessee, the Certificate Purchaser or the Lenders in
connection with any purchase of the Property by the Lessee or other
Person pursuant to Articles XV, XVI, XVIII and XX of the Lease and (iv)
all Transaction Expenses incurred by any of the other parties hereto in
respect of enforcement of any of their rights or remedies against the
Lessee or any Affiliate of the Lessee in respect of the Operative
Documents. Subject to the provisions of Section 9.3, all fees and
expenses referenced in Sections 9.1(a) and (b) payable or incurred
before or during the Interim Term shall be paid through Advances to the
extent they are included in the Approved Construction Budget.
SECTION 9.2. Brokers' Fees and Stamp Taxes. The Lessee shall pay or
cause to be paid any brokers' fees and any and all Impositions, if any,
including any interest and penalties, which are payable in connection with the
transactions contemplated by this Participation Agreement and the other
Operative Documents. During the Interim Term, such fees and Impositions shall be
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payable through Advances to the extent they are specifically included in the
Approved Construction Budget.
SECTION 9.3. Limitations During Interim Term. If at any time there
shall be fees, expenses, Impositions or other amounts which are required to be
paid prior to or during the Interim Term through Advances under this Article IX
or Sections 13.5, 13.7, 13.10 or 14.11 or under any Operative Document, and (i)
such amounts are not included in the Approved Construction Budget or (ii) there
are not sufficient Available Commitments remaining to complete the construction
of the Improvements pursuant to the Construction Documents (net of all
Certificate Yield Payment Advances and Interest Payment Loans), then at such
time an Event of Default shall be deemed to have occurred under the Construction
Agency Agreement. All references to the Approved Construction Budget in the
Operative Documents shall be deemed to include all contingencies therein;
provided that at no time shall any contingency (on a percentage basis of all
contingency amounts) be funded in excess of the percentage of the commitments
funded to such date, and any usage or reallocation of the contingency shall be
subject to the approval of the Construction Lender in its sole and absolute
discretion.
ARTICLE X.
OTHER COVENANTS AND AGREEMENTS
SECTION 10.1. Covenants of Lessee. The Lessee hereby agrees as follows:
(a) Information. The Lessee will deliver, or cause to be
delivered, to each of the Certificate Purchaser and the Construction
Lender:
(i) as soon as available and in any event within 120
days after the end of each fiscal year of the Lessee,
consolidated statements of financial position of the Lessee
and its consolidated subsidiaries as of the end of such fiscal
year and the related consolidated statements of income, and
cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year,
with such consolidated financial statements audited by
PriceWaterhouseCoopers or other "Big Six" accounting firm, or
other independent public accountants of nationally recognized
standing reasonably acceptable to the Construction Lender and
the Certificate Purchaser, without qualification as to going
concern or limitation on the scope of the audit, which
financial statements shall be accompanied by a certificate of
a Vice President or the President of the Lessee certifying
that, as of such date, no Default or Event of Default exists
under any Operative Document to which the Lessee is a party,
and that the Lessee is in compliance with all of its
obligations under the Operative Documents;
(ii) as soon as available and in any event within 60
days after the end of each of the first three quarters of each
fiscal year of the Lessee, a consolidated statement of
financial position of the Lessee as of the end of such quarter
and the
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related consolidated statements of income and cash flows for
such quarter and for the portion of the Lessee's fiscal year
ended at the end of such quarter, which financial statements
shall be accompanied by a certificate of a Vice President or
the President of the Lessee certifying that, as of such date,
no Default or Event of Default exists under any Operative
Document to which the Lessee is a party, and that the Lessee
is in compliance with all of its obligations under the
Operative Documents;
(iii) if and when any member of the ERISA Group (1)
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV or ERISA, or knows
that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy
of the notice of such reportable event given or required to be
given to the PBGC; (2) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (3) receives
notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (4) applies for a
waiver of the minimum funding standard under Section 412 of
the Code, a copy of such application; (5) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a
copy of such notice and other information filed with the PBGC;
(6) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (7) fails to
make any payment or contribution to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the
posting of a bond or other security, a certificate of the
chief financial officer or the chief accounting officer of the
Lessee setting forth details as to such occurrence and action,
if any, which the Lessee or applicable member of the ERISA
Group is required or proposes to take;
(iv) as soon as possible and in any event within
three Business Days after the occurrence of each Default or
Event of Default under any Operative Document a statement of
an officer of the Lessee setting forth details of such Default
or Event of Default and the action that the Lessee proposes to
take with respect thereto;
(v) promptly upon any change of the Lessee's
independent public accountants, notification thereof and such
further information as the Construction Lender, the
Certificate Purchaser and the Certificate Trustee may
reasonably request concerning the resignation, refusal to
stand for reappointment after completion of the current audit
or dismissal of such accountants;
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(vi) promptly upon becoming aware thereof, written
notice of the commencement or existence of any proceeding
against the Lessee or any Affiliate of the Lessee by or before
any Governmental Authority with respect to the Property;
(vii) as soon as possible and in any event within ten
days after the occurrence of any violation or alleged
violation of an Environmental Law, a statement of an
authorized officer setting forth the details of such violation
and the action which the Lessee proposes to take with respect
thereto; and
(viii) from time to time such additional information
regarding the business, prospects, properties, condition or
operations, financial or otherwise, of the Lessee, or
regarding the Property or the status of any construction
thereon, as the Certificate Purchaser or the Construction
Lender may reasonably request.
(b) Compliance with Laws. Lessee shall comply in all material
respects with all Applicable Laws with respect to the Property.
(c) Required Transfers. The Lessee will maintain, or cause to
be maintained, Qualified Assets in the amounts, and transfer (or cause
to be transferred) Qualified Assets at the times and to the accounts,
all as provided in the Pledge and Security Agreement.
(d) Payment of Taxes, etc. The Lessee shall pay and discharge
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges or levies imposed upon it or upon its property,
and (ii) all lawful claims that, if unpaid, might by law become a Lien
upon its property, other than those arising from Permitted Liens;
(e) Visitation Rights. Subject to the provisions of Section
14.13 of this Participation Agreement, the Lessee shall permit the
Construction Lender, the Certificate Purchaser and the Certificate
Trustee or any agents or representatives thereof annually (or upon
demand during an Event of Default) to (upon reasonable notice) examine
and make copies of and abstracts from the records and books of account
of, the Lessee (except for any proprietary information which involves
trade secrets of the Lessee) and to discuss the affairs, finances and
accounts of the Lessee with any of its officers. Subject to the
provisions of Section 14.13 of this Participation Agreement, during the
Term, the Lessee shall upon reasonable notice from the Lessor (except
that no notice shall be required if an Event of Default has occurred
and is continuing) permit the Lenders, the Certificate Purchaser and
their respective authorized representatives to inspect the Property
during normal business hours, provided that such inspections shall not
unreasonably interfere with the Lessee's business operations at the
Property.
(f) Keeping of Books. The Lessee shall keep proper books of
record and account, in which full and correct entries shall be made of
all financial transactions and the assets and business of the material
assets of the Lessee.
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(g) Maintenance of Property, etc. The Lessee shall maintain
and preserve all material assets used or useful in the conduct of its
business in good working order and condition.
(h) Maintenance of Insurance. The Lessee shall maintain
insurance coverage covering the Property which meets in all respects
the requirements of Article XIII of the Lease, and such coverage shall
remain in full force and effect. The Lessee shall carry insurance with
reputable insurers, or self-insure, in respect of its material assets,
in such manner, in such amounts and against such risks as is
customarily maintained by other Persons of similar size engaged in
similar business.
(i) Environmental Audit. The Lease shall deliver to the
Certificate Purchaser and the Construction Lender upon the request of
any Participant, on or before January 1 of each calendar year, an
Environmental Audit for the Property, prepared during the last quarter
of the previous calendar year, in form and substance acceptable to each
of them, provided that such Environmental Audit may be an update of the
Environmental Audit delivered during the previous calendar year
pursuant to the terms of this Participation Agreement. During the
continuance of any Lease Event of Default, the Lessee shall deliver to
the Certificate Purchaser and the Construction Lender an Environmental
Audit for the Property within twenty days of demand therefor.
(j) Appraisal. Within sixty days of the three year anniversary
of the Initial Advance Date, and at thirty-six month intervals
thereafter (or upon demand from the Certificate Purchaser or the
Construction Lender during the continuance of an Lease Event of
Default), the Lessee shall deliver to the Certificate Purchaser and the
Construction Lender an Appraisal of the Property, prepared by an
appraiser satisfactory to the Certificate Purchaser and the
Construction Lender and in form and substance reasonably satisfactory
to each of them, showing the Fair Market Sales Value of the fee
interest in the Land and the Lessor's interest in the Improvements,
dated within thirty days of the delivery of such Appraisal.
SECTION 10.2. Reserved.
SECTION 10.3. Financial Covenants.
(a) Fixed Charge Coverage. The Lessee and its Subsidiaries
shall as of the end of each fiscal quarter of the Lessee, for the
period of four (4) consecutive fiscal quarters then ended, maintain a
ratio of Consolidated Available Earnings to Consolidated Fixed Charges
of 1.5 to 1, provided, that during the Interim Term the Lessee shall be
deemed to be in default of the covenants under this Section 10.3 only
if the failure to comply with such covenants shall arise from, be
caused by or relate to, any act or omission of the Lessee, anything
within the reasonable control of the Lessee or anything that could have
been avoided through the use of best efforts by the Lessee. The Lessee
covenants and agrees that it shall use best efforts during the Term to
comply with the covenants in this
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Section 10.3.
(b) Tangible Net Worth. The Tangible Net Worth of the Lessee
shall not at any time be less than $225,000,000.
(c) Limitations on Indebtedness.
(i) The Consolidated Indebtedness of the Lessee and
its Subsidiaries shall not at any time exceed 50% of the Total
Capitalization of the Lessee.
SECTION 10.4. Waiver of Covenants. The covenants of the Lessee
contained in Section 10.3 above may, following the consummation of the
Refinancing, be waived only by a written instrument executed by the Construction
Lender, the Certificate Purchaser and the holders of at least 50% of the then
outstanding principal amount of the Tranche A Loans and the Tranche B Lender (or
its successor), in each case of the foregoing in their respective sole and
absolute discretion.
SECTION 10.5. Covenant of the Certificate Trustee and the Participants.
In the event that the Certificate Trustee or any Participant receives (x)
written notice of any material pending or threatened claim, action or proceeding
involving any Environmental Law or any Release on or in connection with the
Property or (y) written notice from any Governmental Authority relating to the
Property, the Certificate Trustee or such Participant, as the case may be, shall
promptly give notice thereof to the Lessee.
SECTION 10.6. Other Covenants of the Certificate Trustee and the Trust
Company.
(a) Other Activities. The Certificate Trustee (in its capacity
as such) shall not conduct, transact or otherwise engage in, or commit
to transact, conduct or otherwise engage in, any business or operations
other than the entry into, and exercise of rights and performance of
obligations in respect of, the Operative Documents, the Refinancing
Credit Facility Agreements and other activities incidental or related
to the foregoing.
(b) Ownership of Properties; Indebtedness. The Certificate
Trustee (in its capacity as such) shall not own, lease, manage or
otherwise operate any properties or assets other than in connection
with the activities described in clause (a) above, or incur, create,
assume or suffer to exist any indebtedness or other consensual
liabilities or financial obligations other than as may be incurred,
created or assumed or as may exist in connection with the activities
described in clause (a) above (including the Construction Loans, the
Refinancing Credit Facility Agreements and other obligations incurred
by the Certificate Trustee hereunder).
(c) Disposition of Assets. The Certificate Trustee (in its
capacity as such) shall not convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets, whether
now owned or hereafter acquired, except to the extent expressly
contemplated by the Operative Documents, the Refinancing Credit
Facility
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Agreements or as otherwise directed in writing by the Participants.
(d) Compliance with the Operative Documents. The Certificate
Trustee and the Trust Company shall at all times observe and perform
all of the covenants, conditions and obligations required to be
performed by them respectively (whether in its capacity as Certificate
Trustee, in its individual capacity or otherwise) under each Operative
Document to which either of them is a party.
(e) Further Assurances. At any time and from time to time,
upon the written request of the Construction Lender, and at the sole
expense of the Lessee, the Certificate Trustee and the Trust Company
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the Construction Lender may
reasonably deem necessary for the purpose of obtaining or preserving
the full benefits of this Participation Agreement and the other
Operative Documents and of the rights and powers herein or therein
granted.
(f) Notices. If on any date the Certificate Trustee shall
obtain actual knowledge of the occurrence of a Default or Event of
Default, the Certificate Trustee will give written notice thereof to
the Construction Lender or Tranche A Lenders and Tranche B Lender
within two Business Days after such date.
(g) Discharge of Liens. The Trust Company will not create or
permit to exist at any time, and the Trust Company will, at its own
expense, promptly take such action as may be necessary to duly
discharge, or cause to be discharged, all Lessor Liens attributable to
it and not resulting from the Operative Documents.
(h) Trust Agreement. Without prejudice to any right under the
Trust Agreement of the Certificate Trustee to resign, each of the
Certificate Trustee and the Trust Company (a) agrees not to terminate
or revoke the trust created by the Trust Agreement except as permitted
by Article VI of the Trust Agreement, (b) agrees not to amend,
supplement, terminate, revoke or otherwise modify any provision of the
Trust Agreement in any manner which could reasonably be expected to
have an adverse effect on the rights or interests of the Construction
Lender or Lessee hereunder or under the other Operative Documents and
(c) agrees to comply with all of the terms of the Trust Agreement.
(i) No Transfers. Notwithstanding anything to the contrary
contained in the Operative Documents, the Certificate Trustee shall not
pledge, hypothecate, convey, assign, encumber or otherwise transfer (by
operation of law or otherwise) any interest of the Certificate Trustee
in and to the Property, the Ground Lease or the Lease (including any
right to receive Rent or other sums from the Lessee), except as
expressly contemplated by the Operative Documents and the Refinancing
Credit Facility Agreement, and any such pledge, hypothecation,
conveyance, assignment, encumbrance or other transfer not expressly
authorized in accordance with the Operative Documents shall be
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void ab initio and of no force and effect.
SECTION 10.7. Covenant of Certificate Purchaser. So long as no Event of
Default shall have occurred and be continuing, (i) the Certificate Purchaser
shall not direct the Trustee to terminate the Trust, pursuant to Article VI of
the Trust Agreement, unless such action does not adversely affect the Lessee or
its rights under the Operative Documents and (ii) until the expiration or sooner
termination of the Term, the Certificate Purchaser shall accept no distributions
from the Trust, other than (A) distributions of Certificate Yield during the
Base Term and any Renewal Term and (B) distributions otherwise expressly
permitted under Article V of the Construction Loan Agreement.
ARTICLE XI.
[RESERVED]
ARTICLE XII.
TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION 12.1. Assignments. All or any part of the interest of any
Participant in, to or under this Participation Agreement, the other Operative
Documents, the Property, the Notes or the Certificate may be assigned or
transferred by such Participant at any time; provided, however, that (i) no
assignment or transfer shall be made during the Interim Term so long as Lessee
is not in Default under the terms of any Operative Document (unless a
Participant's institution is no longer participating in the types of financings
evidenced by the Operative Documents), (ii) each assignment or transfer shall
comply with all applicable securities laws, and (iii) any assignee or transferee
(A) acknowledges that the obligations to be performed from and after the date of
such transfer or assignment under this Participation Agreement and all other
Operative Documents are its obligations, including the obligations imposed by
this Section 12.1 (and the transferor and transferee Participant shall deliver
to the Lessee and the Certificate Trustee an Assignment Agreement, in
substantially the form of Exhibit P hereto, executed by the assignee or
transferee), and (B) further represents and warrants to the Certificate Trustee,
each Participant and the Lessee that:
(i) it will not be acquiring any Note or Certificate,
as the case may be, with the assets of an employee pension
benefit plan (or its related trust) as defined in Section 3(2)
of ERISA, or with the assets of a Plan (or its related trust)
as defined in Section 4975(e)(l) of the Code or with any
assets which are "plan assets" within the meaning of
Department of Labor Regulation Section 2510.3-101, unless the
acquisition qualifies for an exemption from the prohibited
transaction rules under Section 406 of ERISA and Section 4975
of the Code, other than assets allocated to an insurance
company pooled separate account as defined in ERISA Section
3(17) maintained by a lessor which satisfies the requirements
of U.S. Department of Labor Prohibited Transaction Class
Exemption 90-1 with
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<PAGE> 41
respect to the transactions contemplated by the Lease in order
for such transactions to be exempt from the prohibitions of
Section 406 of ERISA and Section 4975 of the Code;
(ii) it is a commercial bank, savings and loan
association, savings bank, pension plan, depository
institution, insurance company, branch or agency of a foreign
bank, mutual fund or other similar financial institution, in
each case, having a minimum capital and surplus of
$100,000,000;
(iii) it will not transfer any Note or Certificate,
as the case may be, unless the proposed transferee makes the
foregoing representations and covenants;
(iv) it will not take any action with respect to such
Note or Certificate that would violate any applicable
securities laws;
(v) it will not assign or transfer any interest in
the Note or the Certificate except in compliance with this
Section 12.1; and
(vi) funds used to acquire such interest will not be
derived from the proceeds of non-recourse financing, and the
assignee will not otherwise limit its at-risk equity
investment as a result of hedging arrangements, to the extent
the interest being assigned is an interest in the Certificate.
Notwithstanding anything to the contrary contained in any Operative
Document, the holder of the Note or the Certificate which is assigned or
transferred pursuant to this Section shall pay any municipal, county or state
real estate transfer tax payable in the Commonwealth of Pennsylvania arising
solely as the result of the assignment or transfer of such Certificate.
SECTION 12.2. Participations. Any Participant may without the consent
of the Lessee sell participations to one or more commercial banks, savings and
loan associations, savings banks, pension plans, depository institutions,
insurance companies, branches or agencies of foreign banks, mutual funds or
other similar institutions, in each case, having a minimum capital and surplus
of $100,000,000 (such institutions are hereinafter referred to, collectively, as
"Sub-Participants") in all or a portion of its rights and obligations under this
Participation Agreement, the other Operative Documents or its Note or
Certificate; provided, however, that (i) such Participant's obligations under
this Participation Agreement and the other Operative Documents to which it is a
party shall remain unchanged, (ii) such Participant shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the Sub-Participants shall be entitled to the cost protection and tax
indemnification provisions contained in this Participation Agreement (provided
that no Sub-Participant shall be entitled to receive any greater amount pursuant
to such provisions than the Participant would have been entitled to receive in
respect of the amount of the participation transferred by such transferor
Participant to such Sub-Participant had not such transfer occurred and,
provided, further, that such Sub-Participant shall have fully complied with the
provisions of Section 12.3), (iv) the Lessee, the Certificate Trustee and the
Participants shall continue to deal solely and directly with such Participant
in connection with such
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Participant's rights and obligations under this Participation Agreement and the
other Operative Documents to which it is a party and in connection with the cost
protection and tax indemnification provisions of this Participation Agreement
and the other applicable Operative Documents to which any Sub-Participant is
entitled pursuant to this Section 12.2, (v) such Participant shall retain the
sole right and responsibility to enforce the obligations of the Lessee relating
to this Participation Agreement, the Lease and the other Operative Documents,
(vi) each such sale shall be made in the ordinary course of such Participant's
commercial banking business and in compliance with all applicable Laws, (vii)
each Sub-Participant shall comply with the provisions of Section 12.1(vi), and
(viii) such Participant shall retain the sole right to approve any amendment,
modification or waiver of any provision of this Participation Agreement or any
other Operative Document (other than amendments, modifications or waivers
decreasing any Transaction Expenses or other fees payable hereunder or the
amount of principal of or the rate at which interest is payable on the
Construction Loans, or the rate at which Certificate Yield is payable on the
Certificate, extending the Term or increasing any Commitment, in each case in
respect of an obligation in which the relevant participating bank or entity is
participating, or releasing all or substantially all of the Collateral, or the
Lessee from its obligations under the Guaranty).
SECTION 12.3. Withholding Taxes; Disclosure of Information; Pledge
Under Regulation A.
(a) If any Participant (or the assignee of or Sub-Participant
in any Note or Certificate of a Participant, each a "Transferee") is
organized under the laws of any jurisdiction other than the United
States or any State thereof, then such Participant or the Transferee of
such Participant, as applicable, shall (as a condition precedent to
acquiring or participating in such Construction Loan or Certificate and
as a continuing obligation to the Certificate Trustee and the Lessee)
(i) furnish to the Certificate Trustee and the Lessee in duplicate, for
each taxable year of such Participant or Transferee during the term of
the Lease, a properly completed and executed copy of either Internal
Revenue Service Form 4224 or Internal Revenue Service Form 1001 and
Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9
and any additional form (or such other form) as is necessary to claim
complete exemption from United States withholding taxes (wherein such
Transferee claims entitlement to complete exemption from United States
withholding taxes on all payments hereunder), and (ii) provide to the
Certificate Trustee and the Lessee a new Internal Revenue Service Form
4224 or Internal Revenue Service Form 1001 and Internal Revenue Service
Form W-8 or Internal Revenue Service Form W-9 and any such additional
form (or any successor form or forms) upon the expiration or
obsolescence of any previously delivered form and comparable statements
in accordance with applicable United States laws and regulations and
amendments duly executed and completed by such Participant or
Transferee, and to comply from time to time with all applicable United
States laws and regulations with regard to such withholding tax
exemption. By its acceptance of a participation or assignment of a
Participant's Note or Certificate, each Transferee shall be deemed
bound by the provisions set forth in this Article XII.
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(b) Subject to Section 14.13, any Participant may, in
connection with any assignment or participation or proposed assignment
or participation pursuant to this Article XII, disclose to the assignee
or participant or proposed assignee or participant, any information
relating to the Lessee.
(c) Anything in this Article XII to the contrary
notwithstanding, any Participant may without the consent of the Lessee
assign and pledge all or any portion of the Note or Certificate held by
it to any Federal Reserve Bank, the United States Treasury or to any
other financial institution as collateral security pursuant to
Regulation A of the Federal Reserve Board and any operating circular
issued by the Federal Reserve System and/or the Federal Reserve Bank or
otherwise.
ARTICLE XIII.
INDEMNIFICATION
SECTION 13.1. A. General Indemnification. The Lessee agrees, commencing
upon the Completion Date and without limitation on the rights of any indemnitee
under Section 13.1B. or 13.1C., whether or not any of the transactions
contemplated hereby shall be consummated, to indemnify, protect, defend, save
and keep harmless each Indemnitee from and against any and all Claims that may
be imposed on, incurred by or asserted against such Indemnitee, whether or not
such Indemnitee shall also be indemnified as to any such Claim by any other
Person, whether or not such Claim is covered by the indemnification under
Section 13.B. or 13.1C. and whether or not such Claim arises or accrues prior to
the Documentation Date, the Initial Advance Date or the Completion Date, and to
assume liability for, and to indemnify, protect, defend, save and keep harmless
each Indemnitee, on an After Tax Basis, from and against, any and all Claims
(including matters based upon or arising from the negligence of the Indemnitee)
that may be imposed on, incurred by or asserted against such Indemnitee (whether
because of action or omission by such Indemnitee or otherwise), whether or not
such Indemnitee shall also be indemnified as to any such Claim by any other
Person and whether or not such Claim arises or accrues prior to the Initial
Advance Date or after the Expiration Date, in any way relating to or arising out
of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in
respect thereof;
(b) the Property or any part thereof or interest therein;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental, lease,
sublease, repossession, maintenance, repair, alteration, modification,
addition or substitution, storage, transfer of title, redelivery, use,
financing, refinancing, disposition, operation, condition, sale
(including any sale pursuant to Section 15.1, 16.2(c), 16.2(e) or 18.3
of the Lease or any sale pursuant to Articles XVIII or XX of the
Lease), return or other disposition of all or any part or any interest
in the Property
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or the imposition of any Lien (or incurring of any liability to refund
or pay over any amount as a result of any Lien) thereon, including: (1)
Claims or penalties arising from any violation of law or in tort
(strict liability or otherwise), (2) latent or other defects, whether
or not discoverable, (3) any Claim based upon a violation or alleged
violation of the terms of any restriction, easement, condition or
covenant or other matter affecting title to the Property, (4) the
making of any Modifications in violation of any standards imposed by
any insurance policies required to be maintained by Lessee pursuant to
the Lease which are in effect at any time with respect to the Property
or any part thereof, (5) any Claim for patent, trademark or copyright
infringement, and (6) Claims arising from any public improvements with
respect to the Property resulting in any change or special assessments
being levied against the Property or any plans to widen, modify or
realign any street or highway adjacent to the Property, or any Claim
for utility "tap-in" fees;
(d) the breach by the Lessee of any covenant, representation
or warranty made by it or deemed made by it in any Operative Document
or any certificate required to be delivered by any Operative Document;
(e) the retaining or employment of any broker, finder or
financial advisor by the Lessee to act on its behalf in connection with
this Participation Agreement;
(f) the existence of any Lien on or with respect to the
Property, the Improvements, any Basic Rent or Supplemental Rent, title
thereto, or any interest therein including any Liens which arise out of
the possession, use, occupancy, construction, repair or rebuilding of
the Property or by reason of labor or materials furnished or claimed to
have been furnished to the Lessee, or any of its contractors or agents
or by reason of the financing of any personalty or equipment purchased
or leased by the Lessee or Modifications constructed by the Lessee,
except Lessor Liens and Liens in favor of the Construction Lender or
the Lessor; or
(g) subject to the accuracy of any Participant's
representation set forth in Section 8.1(a), as to such Participant, the
transactions contemplated by the Lease or by any other Operative
Document, in respect of the application of Parts 4 and 5 of Subtitle B
of Title I of ERISA and any prohibited transaction described in Section
4975(c) of the Code;
provided, however, the Lessee shall not be required to indemnify any Indemnitee
under this Section 13.1 for any of the following: (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnitee (or
any Affiliate of such Indemnitee) (it being understood that the Lessee shall be
required to indemnify an Indemnitee even if the ordinary (but not gross)
negligence of such Indemnitee caused or contributed to such Claim) or the breach
of any representation, warranty or covenant of such Indemnitee (or any Affiliate
of such Indemnitee) set forth in any Operative Document, (2) any Claim resulting
from Lessor Liens which the Indemnitee is responsible for discharging under the
Operative Documents, (3) any Claim to the extent attributable to acts or events
occurring after the expiration of the Term or the return or
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remarketing of the Property so long as the Certificate Trustee, the Construction
Lender and the Certificate Purchaser are not exercising remedies against the
Lessee in respect of the Operative Documents, (4) any claim for the payment of
state, county or municipal real estate transfer tax for which Lessee is not
responsible pursuant to Section 12.1 of the Participation Agreement and (5) any
Claim to the extent arising from a breach of representations, warranties or
covenants of an Indemnitee. It is expressly understood and agreed that the
indemnity provided for herein shall survive the expiration or termination of and
shall be separate and independent from any remedy under the Lease or any other
Operative Document. Without limiting the express rights of any Indemnitee under
this Section 13.1, this Section 13.1 shall be construed as an indemnity only and
not a guaranty of residual value of the Property or as a guaranty of the Notes
or the Certificate.
B. (1) General Indemnification by Construction Agent for the
Construction Period. The Construction Agent agrees, without limitation on the
rights of any indemnitee under Section 13.1A. or 13.1C., whether or not any of
the transactions contemplated hereby shall be consummated, to indemnify,
protect, defend, save and keep harmless the Lessor and its successors, assigns,
directors, shareholders, partners, officers, employees and agents (hereinafter
collectively referred to in this Section 13.1B. as the "Indemnitee") from and
against any and all Claims that may be imposed on, incurred by or asserted
against such Indemnitee, whether or not such Indemnitee shall also be
indemnified as to any such Claim by any other Person, whether or not such Claim
is covered by the indemnification under Section 13.A. or 13.1C. and whether or
not such Claim arises or accrues prior to the Documentation Date or the Initial
Advance Date, or after the Completion Date, and to assume liability for, and to
indemnify, protect, defend, save and keep harmless each Indemnitee, on an After
Tax Basis, from and against, any and all Claims (including matters based upon or
arising from the negligence of the Indemnitee) that may be imposed on, incurred
by or asserted against such Indemnitee (whether because of action or omission by
such Indemnitee or otherwise), whether or not such Indemnitee shall also be
indemnified as to any such Claim by any other Person and whether or not such
Claim arises or accrues prior to the Initial Advance Date or after the
Completion Date, in any way relating to or arising out of:
(a) the Construction Agency Agreement or any of the
transactions or obligations provided for therein; any other Operative
Document or any transaction, act or omission thereunder to the extent,
in the case of such other Operative Document or transaction, act or
omission thereunder, such Claim arose during or otherwise relates to
any transaction, act or omission occurring prior to the Completion
Date, including any investigation, litigation or proceeding in
connection with any of the foregoing; the Construction Documents or any
other contracts or agreements entered into or assumed by Construction
Agent with any third party, or the design and construction of the
Improvements or the use, possession or any activity by or conducted
under the supervision of any Construction Agency Person of, at or on
the Property, including: (i) Claims arising from any violation of
Applicable Laws and Regulations, including Environmental Laws, or in
tort (arising under principles of strict liability or otherwise), (ii)
Claims arising from damage to the environment (including investigation
costs, cleanup costs, response costs, remediation and removal costs,
costs of corrective action, costs of financial assurance and
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all other damages, costs, fees and expenses, fines and penalties,
including natural resource damages), or death or injury to any Person
and any and all expenses associated with the protection of wildlife,
aquatic species, vegetation, flora and fauna, and any mitigative action
required under any Environmental Laws, (iii) latent or other defects,
whether or not discoverable by Construction Agent or any Indemnitee, or
(iv) any Claims resulting from the existence or Release of any
Hazardous Materials from or with respect to the construction of the
Improvements or any part thereof.
(b) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in
respect thereof;
(c) the Property or any part thereof or interest therein;
(d) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental, lease,
sublease, repossession, maintenance, repair, alteration, modification,
addition or substitution, storage, transfer of title, redelivery, use,
financing, refinancing, disposition, operation, condition, sale
(including any sale pursuant to Section 15.1, 16.2(c), 16.2(e) or 18.3
of the Lease or any sale pursuant to Articles XVIII or XX of the
Lease), return or other disposition of all or any part or any interest
in the Property or the imposition of any Lien (or incurring of any
liability to refund or pay over any amount as a result of any Lien)
thereon, including: (1) Claims or penalties arising from any violation
of law or in tort (strict liability or otherwise), (2) latent or other
defects, whether or not discoverable, (3) any Claim based upon a
violation or alleged violation of the terms of any restriction,
easement, condition or covenant or other matter affecting title to the
Property, (4) the making of any Modifications in violation of any
standards imposed by any insurance policies required to be maintained
by the Construction Agent pursuant to the Lease which are in effect at
any time with respect to the Property or any part thereof, (5) any
Claim for patent, trademark or copyright infringement, and (6) Claims
arising from any public improvements with respect to the Property
resulting in any change or special assessments being levied against the
Property or any plans to widen, modify or realign any street or highway
adjacent to the Property, or any Claim for utility "tap-in" fees;
(e) the breach by the Construction Agent of any covenant,
representation or warranty made by it or deemed made by it in any
Operative Document or any certificate required to be delivered by any
Operative Document;
(f) the retaining or employment of any broker, finder or
financial advisor by the Construction Agent to act on its behalf in
connection with this Participation Agreement;
(g) the existence of any Lien on or with respect to the
Property, the Improvements, any Basic Rent or Supplemental Rent, title
thereto, or any interest therein including any Liens which arise out of
the possession, use, occupancy, construction, repair
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or rebuilding of the Property or by reason of labor or materials
furnished or claimed to have been furnished to the Construction Agent,
or any of its contractors or agents or by reason of the financing of
any personalty or equipment purchased or leased by the Construction
Agent or Modifications constructed by the Lessee, except Lessor Liens
and Liens in favor of the Construction Lender or the Lessor; or
(h) subject to the accuracy of any Participant's
representation set forth in Section 8.1(a), as to such Participant, the
transactions contemplated by the Lease or by any other Operative
Document, in respect of the application of Parts 4 and 5 of Subtitle B
of Title I of ERISA and any prohibited transaction described in Section
4975(c) of the Code;
provided, however, the Construction Agent shall not be required to indemnify any
Indemnitee under this Section 13.1B. for any of the following: (1) any Claim to
the extent resulting from the willful misconduct or gross negligence of such
Indemnitee (or any Affiliate of such Indemnitee) (it being understood that the
Construction Agent shall be required to indemnify an Indemnitee even if the
ordinary (but not gross) negligence of such Indemnitee caused or contributed to
such Claim) or the breach of any representation, warranty or covenant of such
Indemnitee (or any Affiliate of such Indemnitee) set forth in any Operative
Document, (2) any Claim resulting from Lessor Liens which the Indemnitee is
responsible for discharging under the Operative Documents, (3) any Claim to the
extent attributable to acts or events occurring after the expiration of the Term
or the return or remarketing of the Property so long as the Certificate Trustee,
the Construction Lender and the Certificate Purchaser are not exercising
remedies against the Lessee in respect of the Operative Documents, (4) any claim
for the payment of state, county or municipal real estate transfer tax for which
Lessee is not responsible pursuant to Section 12.1 of the Participation
Agreement, (5) any Claim to the extent arising from a breach of representations,
warranties or covenants of an Indemnitee and (6) any Claim to the extent arising
from an Unrelated Indemnity Event. It is expressly understood and agreed that
the indemnity provided for herein shall survive the expiration or termination of
and shall be separate and independent from any remedy under the Lease or any
other Operative Document. Without limiting the express rights of any Indemnitee
under this Section 13.1B., this Section 13.1B. shall be construed as an
indemnity only and not a guaranty of residual value of the Property or as a
guaranty of the Notes or the Certificate. The limitations on indemnities in this
Article XIII do not in any way limit any claims for damages for any Events of
Default under the Operative Documents.
(2) Notwithstanding any provision set forth in this Participation
Agreement or any of the other Operative Documents, (i) in the event of a
Construction Agency Event of Default arising solely from an Unrelated Event
which is also not caused by an Unrelated Indemnity Event, unless and until the
Completion Date has occurred, Lessee shall not be required to pay more than the
Maximum Guaranteed Amount on a recourse basis with respect to any damages which
relate to or arise from any such Construction Agency Event of Default and (ii)
with respect to each specific instance under the Operative Documents in which
the Lessee is not required to pay more than the Maximum Guaranteed Amount on a
recourse basis with respect to an Event of Default, in calculating any such
payment the Lessee shall be entitled to include any amounts previously
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paid by the Lessee to the Lessor pursuant to other specific instances under the
Operative Documents which expressly provide that the Lessee's obligations
thereunder on a recourse basis are limited to the Maximum Guaranteed Amount, but
shall not be entitled to include any other payments or amounts, it being agreed
that nothing in clause (i) or (ii) above shall limit any Claim, or any payments
or amounts payable, with respect to any indemnity under any Operative Document.
(3) Notwithstanding any provision set forth in this Participation
Agreement or any of the other Operative Documents, in the event of a Lease Event
of Default arising solely from a Construction Agency Event of Default under
Section 5.1(b) of the Construction Agency Agreement, unless and until the
Completion Date has occurred, Lessee shall not be required to pay more than the
Maximum Guaranteed Amount on a recourse basis with respect to any damages which
relate to such Construction Agency Event of Default.
C. General Indemnification by Lessor During the Construction Period.
The Lessor agrees, without limitation on the rights of any indemnitee under
Section 13.1A. or 13.1B., whether or not any of the transactions contemplated
hereby shall be consummated, to indemnify, protect, defend, save and keep
harmless the Certificate Purchaser, the Lenders and their respective successors,
assigns, directors, shareholders, partners, officers, employees and agents
(hereinafter collectively referred to in this Section 13.1C. as the
"Indemnitee") from and against any and all Claims that may be imposed on,
incurred by or asserted against such Indemnitee, whether or not such Indemnitee
shall also be indemnified as to any such Claim by any other Person, whether or
not such Claim is covered by the indemnification under Section 13.A. or 13.1B.
and whether or not such Claim arises or accrues prior to the Documentation Date
or the Initial Advance Date, or after the Completion Date, and to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After Tax Basis, from and against, any and all Claims
(including matters based upon or arising from the negligence of the Indemnitee)
that may be imposed on, incurred by or asserted against such Indemnitee (whether
because of action or omission by such Indemnitee or otherwise), whether or not
such Indemnitee shall also be indemnified as to any such Claim by any other
Person and whether or not such Claim arises or accrues prior to the Initial
Advance Date or after the Date, in any way relating to or arising out of:
(a) the Construction Agency Agreement or any of the
transactions or obligations provided for therein; any other Operative
Document or any transaction, act or omission thereunder to the extent,
in the case of such other Operative Document or transaction, act or
omission thereunder, such Claim arose during or otherwise relates to
any transaction, act or omission occurring prior to the Completion
Date, including any investigation, litigation or proceeding in
connection with any of the foregoing; the Construction Documents or any
other contracts or agreements entered into or assumed by Construction
Agent with any third party, or the design and construction of the
Improvements or the use, possession or any activity by or conducted
under the supervision of any Construction Agency Person of, at or on
the Property, including: (i) Claims arising from any violation of
Applicable Laws and Regulations, including Environmental Laws, or
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in tort (arising under principles of strict liability or otherwise),
(ii) Claims arising from damage to the environment (including
investigation costs, cleanup costs, response costs, remediation and
removal costs, costs of corrective action, costs of financial assurance
and all other damages, costs, fees and expenses, fines and penalties,
including natural resource damages), or death or injury to any Person
and any and all expenses associated with the protection of wildlife,
aquatic species, vegetation, flora and fauna, and any mitigative action
required under any Environmental Laws, (iii) latent or other defects,
whether or not discoverable by Construction Agent or any Indemnitee, or
(iv) any Claims resulting from the existence or Release of any
Hazardous Materials from or with respect to the construction of the
Improvements or any part thereof.
(b) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in
respect thereof;
(c) the Property or any part thereof or interest therein;
(d) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental, lease,
sublease, repossession, maintenance, repair, alteration, modification,
addition or substitution, storage, transfer of title, redelivery, use,
financing, refinancing, disposition, operation, condition, sale
(including any sale pursuant to Section 15.1, 16.2(c), 16.2(e) or 18.3
of the Lease or any sale pursuant to Articles XVIII or XX of the
Lease), return or other disposition of all or any part or any interest
in the Property or the imposition of any Lien (or incurring of any
liability to refund or pay over any amount as a result of any Lien)
thereon, including: (1) Claims or penalties arising from any violation
of law or in tort (strict liability or otherwise), (2) latent or other
defects, whether or not discoverable, (3) any Claim based upon a
violation or alleged violation of the terms of any restriction,
easement, condition or covenant or other matter affecting title to the
Property, (4) the making of any Modifications in violation of any
standards imposed by any insurance policies required to be maintained
by the Construction Agent pursuant to the Lease which are in effect at
any time with respect to the Property or any part thereof, (5) any
Claim for patent, trademark or copyright infringement, and (6) Claims
arising from any public improvements with respect to the Property
resulting in any change or special assessments being levied against the
Property or any plans to widen, modify or realign any street or highway
adjacent to the Property, or any Claim for utility "tap-in" fees;
(e) the breach by the Construction Agent of any covenant,
representation or warranty made by it or deemed made by it in any
Operative Document or any certificate required to be delivered by any
Operative Document;
(f) the retaining or employment of any broker, finder or
financial advisor by the Construction Agent to act on its behalf in
connection with this Participation Agreement;
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(g) the existence of any Lien on or with respect to the
Property, the Improvements, any Basic Rent or Supplemental Rent, title
thereto, or any interest therein including any Liens which arise out of
the possession, use, occupancy, construction, repair or rebuilding of
the Property or by reason of labor or materials furnished or claimed to
have been furnished to the Construction Agent, or any of its
contractors or agents or by reason of the financing of any personalty
or equipment purchased or leased by the Construction Agent or
Modifications constructed by the Lessee, except Lessor Liens and Liens
in favor of the Construction Lender or the Lessor; or
(h) subject to the accuracy of any Participant's
representation set forth in Section 8.1(a), as to such Participant, the
transactions contemplated by the Lease or by any other Operative
Document, in respect of the application of Parts 4 and 5 of Subtitle B
of Title I of ERISA and any prohibited transaction described in Section
4975(c) of the Code;
provided, however, the Lessor shall not be required to indemnify any Indemnitee
under this Section 13.1C. for any of the following: (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnitee (or
any Affiliate of such Indemnitee) (it being understood that the Lessor shall be
required to indemnify an Indemnitee even if the ordinary (but not gross)
negligence of such Indemnitee caused or contributed to such Claim) or the breach
of any representation, warranty or covenant of such Indemnitee (or any Affiliate
of such Indemnitee) set forth in any Operative Document, (2) any Claim resulting
from Lessor Liens which the Indemnitee is responsible for discharging under the
Operative Documents, (3) any Claim to the extent attributable to acts or events
occurring after the expiration of the Term or the return or remarketing of the
Property so long as the Certificate Trustee, the Construction Lender and the
Certificate Purchaser are not exercising remedies against the Lessee in respect
of the Operative Documents, (4) any claim for the payment of state, county or
municipal real estate transfer tax for which Lessee is not responsible pursuant
to Section 12.1 of the Participation Agreement, (5) any Claim to the extent
arising from a breach of representations, warranties or covenants of an
Indemnitee and (6) any Claim to the extent arising from an Unrelated Indemnity
Event. It is expressly understood and agreed that the indemnity provided for
herein shall survive the expiration or termination of and shall be separate and
independent from any remedy under the Lease or any other Operative Document.
Without limiting the express rights of any Indemnitee under this Section 13.1C.,
this Section 13.1C. shall be construed as an indemnity only and not a guaranty
of residual value of the Property or as a guaranty of the Notes or the
Certificate. The obligations of the Lessor under this Section 13.1C. shall be
limited to net amounts which the Lessor receives under Section 13.1B. which are
not distributed with respect to indemnity obligations under Section 13.1B.
above. To the extent the Lessor receives insufficient funds under Section 13.1B.
to satisfy the indemnity obligations under Section 13.1B. and 13.1C., then such
amounts received under Section 13.1B. shall be distributed pro rata to the
Certificate Purchaser and the Lenders under Section 13.1B. and 13.1C. based on
the ratio of the outstanding Certificate Amount and Loans of each such
Participant.
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SECTION 13.2. End of Term Indemnity.
(a) If the Lessee elects the Remarketing Option and there
would, after giving effect to the proposed remarketing transactions, be
a Shortfall Amount, then prior to the Expiration Date and as a
condition to the Lessee's right to complete the remarketing of the
Property pursuant to Section 20.1 of the Lease, the Lessee shall cause
to be delivered to the Lessor at least 120 days prior to the Expiration
Date, at the Lessee's sole cost and expense, a report from the
Appraiser in form and substance satisfactory to the Participants (the
"End of the Term Report") which shall state the appraiser's conclusions
as to the reason for any decline in the Fair Market Sales Value of any
of the Property subject to the Lease from that anticipated for such
date in the Appraisal delivered on the Initial Advance Date.
(b) If the Lessee elects the Remarketing Option, then on or
prior to the Expiration Date the Lessee shall pay to the Lessor an
amount (not to exceed the Shortfall Amount) equal to the sum of (x) the
excess, if any, of the Fair Market Sales Value determined by the
foregoing appraisal procedure of the Improvements over the Gross
Proceeds, plus (y) the portion of the Shortfall Amount that the End of
the Term Report demonstrates was the result of a decline in the Fair
Market Sales Value of the Improvements due to
(i) extraordinary use, failure to maintain, to
repair, to restore, to rebuild or to replace, failure to
comply with all Applicable Laws, failure to use, workmanship,
method of installation or removal or maintenance, repair,
rebuilding or replacement, (excepting in each case ordinary
wear and tear), or
(ii) any change to the Plans and Specifications as
submitted to the appraiser for the Appraisal after the Initial
Advance Date, or any Modification made to, or any rebuilding
of, the Property or any part thereof by the Lessee, or
(iii) the existence of any Hazardous Activity,
Hazardous Substance or Environmental Violations, or
(iv) any restoration or rebuilding carried out by the
Lessee, or
(v) any condemnation of any portion of the Property
pursuant to Article XIV of the Lease, or
(vi) any use of the Property or any part thereof by
the Lessee other than as a first class suburban office
building and/or manufacturing facility, or
(vii) any grant, release, dedication, transfer,
annexation or amendment made pursuant to Section 11.2 of the
Lease, or
(viii) the failure of the Lessor to have good and
marketable title to the
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leasehold interest in the Land demised under the Ground Lease
and the ownership interest in the Improvements, in each case
free and clear of all Liens (excluding Permitted Liens), or
(ix) the existence of any sublease relating to the
Property that shall survive the Expiration Date.
SECTION 13.3. Environmental Indemnity. Without limitation of the other
provisions of this Article XIII, the Lessee hereby agrees to indemnify, hold
harmless and defend each Indemnitee from and against any and all claims
(including third party claims for personal injury or real or personal property
damage), losses, damages, liabilities, fines, penalties, charges, administrative
and judicial proceedings (including informal proceedings) and orders, judgments,
remedial action, requirements, enforcement actions of any kind, and all
reasonable and documented costs and expenses incurred in connection therewith
(including but not limited to, reasonable and documented attorneys' and/or
paralegals' fees and expenses), including but not limited to, all costs incurred
in connection with any investigation or monitoring of site conditions or any
clean-up, remedial, removal or restoration work by any federal, state or local
government agency, arising in whole or in part, out of
(a) the presence on or under the Property of any Hazardous
Substances, or any releases or discharges of any Hazardous Substances
on, under, from or onto the Property,
(b) any activity, including construction, carried on or
undertaken on or off the Property, and whether by the Lessee or any
predecessor in title or any employees, agents, contractors or
subcontractors of the Lessee or any predecessor in title, or any other
Persons (including such Indemnitee), in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Substances that at any time are located or
present on or under or that at any time migrate, flow, percolate,
diffuse or in any way move onto or under the Property,
(c) loss of or damage to any property or the environment
(including clean-up costs, response costs, remediation and removal
costs, cost of corrective action, costs of financial assurance, fines
and penalties and natural resource damages), or death or injury to any
Person, and all expenses associated with the protection of wildlife,
aquatic species, vegetation, flora and fauna, and any mitigative action
required by or under Environmental Laws,
(d) any claim concerning lack of compliance with Environmental
Laws, or any act or omission causing an environmental condition that
requires remediation or would allow any Governmental Authority to
record a Lien on the land records, or
(e) any residual contamination on or under the Land, or
affecting any natural resources, and to any contamination of any
property or natural resources arising in connection with the
generation, use, handling, storage, transport or disposal of any such
Hazardous Substances, and irrespective of whether any of such
activities were or will be
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undertaken in accordance with applicable laws, regulations, codes and
ordinances;
provided, however, the Lessee shall not be required to indemnify any Indemnitee
under this Section 13.3 for (1) any Claim to the extent resulting from the
willful misconduct or gross negligence of such Indemnitee, or any Affiliate of
such Indemnitee (it being understood that, unless the applicable Indemnitee was
in possession of the Property and caused the Claim, the Lessee shall be required
to indemnify an Indemnitee even if the ordinary (but not gross) negligence of
such Indemnitee, or any Affiliate of such Indemnitee, caused or contributed to
such Claim) or (2) any Claim to the extent attributable to acts or events
occurring after the expiration of the Term or the return or remarketing of the
Property so long as the Certificate Trustee, the Construction Lender and the
Certificate Purchaser are not exercising remedies against the Lessee in respect
of the Operative Documents. It is expressly understood and agreed that the
indemnity provided for herein shall survive the expiration or termination of and
shall be separate and independent from any remedy under the Lease or any other
Operative Document.
SECTION 13.4. Proceedings in Respect of Claims. With respect to any
amount that the Lessee is requested by an Indemnitee to pay by reason of Section
13.1 or 13.3, such Indemnitee shall, if so requested by the Lessee and prior to
any payment, submit such additional information to the Lessee as the Lessee may
reasonably request and which is in the possession of such Indemnitee to
substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall notify the Lessee of the commencement thereof,
and the Lessee shall be entitled, at its expense, to participate in, and, to the
extent that the Lessee desires to, assume and control the defense thereof;
provided, however, that the Lessee shall have acknowledged in writing its
obligation to fully indemnify such Indemnitee in respect of such action, suit or
proceeding, and, at the request of the Indemnitee, provided collateral security
satisfactory to the Indemnitee, and, the Lessee shall keep such Indemnitee fully
apprised of the status of such action, suit or proceeding and shall provide such
Indemnitee with all information with respect to such action, suit or proceeding
as such Indemnitee shall reasonably request, and provided, further, that the
Lessee shall not be entitled to assume and control the defense of any such
action, suit or proceeding if and to the extent that, (A) in the reasonable
opinion of such Indemnitee, (x) such action, suit or proceeding involves any
risk of imposition of criminal liability or any material risk of imposition of
material civil liability on such Indemnitee or will involve a material risk of
the sale, forfeiture or loss of, or the creation of any Lien (other than a
Permitted Lien) on the Property or any part thereof unless, in the case of civil
liability, the Lessee shall have posted a bond or other security satisfactory to
the relevant Indemnitees in respect to such risk or (y) the control of such
action, suit or proceeding would involve an actual or potential conflict of
interest, (B) such proceeding involves Claims not fully indemnified by the
Lessee which the Lessee and the Indemnitee have been unable to sever from the
indemnified Claim(s), or (C) an Event of Default under the Lease has occurred
and is continuing. The Indemnitee may participate in a reasonable manner at its
own expense and with its own counsel in any proceeding conducted by the Lessee
in accordance with the foregoing. The Lessee shall not enter into any settlement
or other compromise with respect to any Claim which is entitled to be
indemnified under Section 13.1 or 13.3 without the prior written
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consent of the Indemnitee which consent shall not be unreasonably withheld or
delayed in the case of a money settlement not involving an admission of
liability of such Indemnitee.
Each Indemnitee shall supply the Lessee with such information and
documents reasonably requested by the Lessee as are necessary or advisable for
the Lessee to participate in any action, suit or proceeding to the extent
permitted by Section 13.1 or 13.3, and Lessee shall reimburse the Indemnitee for
the reasonable out-of-pocket expenses of supplying such information and
documents. Unless a Lease Event of Default shall have occurred and be
continuing, no Indemnitee shall enter into any settlement or other compromise
with respect to any Claim which is entitled to be indemnified under Section 13.1
or 13.3 without the prior written consent of the Lessee, which consent shall not
be unreasonably withheld, unless such Indemnitee waives its right to be
indemnified under Section 13.1 or 13.3 with respect to such Claim, does not
admit any criminal liability or civil liability on behalf of the Lessee in
connection with such Claim, and uses reasonable efforts to advise the Lessee on
the status of proceedings from time to time during the pendency of such Claim.
Upon payment in full of any Claim by the Lessee pursuant to Section
13.1 or 13.3 to or on behalf of an Indemnitee, the Lessee, without any further
action, shall be subrogated to any and all claims that such Indemnitee may have
relating thereto (other than claims in respect of insurance policies maintained
by such Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be necessary to preserve
any such claims and otherwise cooperate with the Lessee and give such further
assurances as are necessary or advisable to enable the Lessee vigorously to
pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 13.1 or 13.3
shall be paid to such Indemnitee promptly upon receipt of a written demand
therefor from such Indemnitee, accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable.
SECTION 13.5. General Tax Indemnity.
(a) Indemnification. The Lessee shall pay and assume liability
for, and does hereby agree to indemnify, protect and defend the
Property and all Tax Indemnitees, and hold them harmless against, all
Impositions on an After Tax Basis.
(b) Contests. If any claim shall be made against any Tax
Indemnitee or if any proceeding shall be commenced against any Tax
Indemnitee (including a written notice of such proceeding) for any
Imposition as to which the Lessee may have an indemnity obligation
pursuant to this Section 13.5, or if any Tax Indemnitee shall determine
that any Imposition to which the Lessee may have an indemnity
obligation pursuant to this Section 13.5 may be payable, such Tax
Indemnitee shall promptly (and in any event, within 20 days) notify the
Lessee in writing (provided that failure to so notify the Lessee within
20 days shall not alter such Tax Indemnitee's rights under this Section
13.5 except to the
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extent such failure precludes or materially adversely affects the
ability to conduct a contest of any indemnified Taxes) and shall not
take any action with respect to such claim, proceeding or Imposition
without the written consent of the Lessee (such consent not to be
unreasonably withheld or unreasonably delayed) for 30 days after the
receipt of such notice by the Lessee; provided, however, that in the
case of any such claim or proceeding, if such Tax Indemnitee shall be
required by law or regulation to take action prior to the end of such
30-day period, such Tax Indemnitee shall in such notice to the Lessee,
so inform the Lessee, and such Tax Indemnitee shall not take any action
with respect to such claim, proceeding or Imposition without the
consent of the Lessee (such consent not to be unreasonably withheld or
unreasonably delayed) for 10 days after the receipt of such notice by
the Lessee unless the Tax Indemnitee shall be required by law or
regulation to take action prior to the end of such 10-day period.
The Lessee shall be entitled for a period of 30 days from receipt of
such notice from the Tax Indemnitee (or such shorter period as the Tax
Indemnitee has notified the Lessee is required by law or regulation for the Tax
Indemnitee to commence such contest), to request in writing that such Tax
Indemnitee contest the imposition of such Tax, at the Lessee's expense. If (x)
such contest can be pursued in the name of the Lessee and independently from any
other proceeding involving a Tax liability of such Tax Indemnitee for which the
Lessee has not agreed to indemnify such Tax Indemnitee, (y) such contest must be
pursued in the name of the Tax Indemnitee, but can be pursued independently from
any other proceeding involving a Tax liability of such Tax Indemnitee for which
the Lessee has not agreed to indemnify such Tax Indemnitee or (z) the Tax
Indemnitee so requests, then the Lessee shall be permitted to control the
contest of such claim, provided that in the case of a contest described in
clause (y), if the Tax Indemnitee determines in good faith that such contest by
the Lessee could have a material adverse impact on the business or operations of
the Tax Indemnitee and provides a written explanation to the Lessee of such
determination, the Tax Indemnitee may elect to control or reassert control of
the contest, and provided, that by taking control of the contest, Lessee
acknowledges that it is responsible for the Imposition ultimately determined to
be due by reason of such claim, and provided, further, that in determining the
application of clauses (x) and (y) of the preceding sentence, each Tax
Indemnitee shall take any and all reasonable steps to segregate claims for any
Taxes for which the Lessee indemnifies hereunder from Taxes for which the Lessee
is not obligated to indemnify hereunder, so that the Lessee can control the
contest of the former. In all other claims requested to be contested by the
Lessee, the Tax Indemnitee shall control the contest of such claim, acting
through counsel reasonably acceptable to the Lessee. In no event shall the
Lessee be permitted to contest (or the Tax Indemnitee required to contest) any
claim, (A) if such Tax Indemnitee provides the Lessee with a legal opinion of
independent counsel that such action, suit or proceeding involves a material
risk of imposition of criminal liability or will involve a material risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on the Property or any part of any thereof unless the Lessee shall have
posted and maintained a bond or other security satisfactory to the relevant Tax
Indemnitee in respect to such risk, (B) if an Event of Default has occurred and
is continuing unless the Lessee shall have posted and maintained a bond or other
security satisfactory to the relevant Tax Indemnitee in respect of the Taxes
subject to such claim and any and all expenses for which the Lessee is
responsible hereunder reasonably
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foreseeable in connection with the contest of such claim, (C) unless the Lessee
shall have agreed to pay and shall pay, to such Tax Indemnitee on demand all
reasonable out-of-pocket costs, losses and expenses that such Tax Indemnitee may
incur in connection with contesting such Imposition including all reasonable
legal, accounting and investigatory fees and disbursements, or (D) if such
contest shall involve the payment of the Tax prior to the contest, unless the
Lessee shall provide to the Tax Indemnitee an interest-free advance in an amount
equal to the Imposition that the Indemnitee is required to pay (with no
additional net after-tax costs to such Tax Indemnitee). In addition for Tax
Indemnitee controlled contests and claims contested in the name of the Tax
Indemnitee in a public forum, no contest shall be required: (A) unless the
amount of the potential indemnity (taking into account all similar or logically
related claims that have been or could be raised in any audit involving such Tax
Indemnitee for which the Lessee may be liable to pay an indemnity under this
Section 13.5(b)) exceeds $500,000 and (B) unless, if requested by the Tax
Indemnitee, the Lessee shall have provided to the Tax Indemnitee an opinion of
counsel selected by the Lessee (which may be in-house counsel) (except, in the
case of income taxes indemnified hereunder which shall be an opinion of
independent tax counsel selected by the Tax Indemnitee and reasonably acceptable
to the Lessee) that a reasonable basis exists to contest such claim. In no event
shall a Tax Indemnitee be required to appeal an adverse judicial determination
to the United States Supreme Court.
The party conducting the contest shall consult in good faith with the
other party and its counsel with respect to the contest of such claim for Taxes
(or claim for refund) but the decisions regarding what actions to be taken shall
be made by the controlling party in its sole judgement, provided, however, that
if the Tax Indemnitee is the controlling party and the Lessee recommends the
acceptance of a settlement offer made by the relevant Governmental Authority and
such Tax Indemnitee rejects such settlement offer then the amount for which the
Lessee will be required to indemnify such Tax Indemnitee with respect to the
Taxes subject to such offer shall not exceed the amount which it would have owed
if such settlement offer had been accepted. In addition, the controlling party
shall keep the noncontrolling party reasonably informed as to the progress of
the contest, and shall provide the noncontrolling party with a copy of (or
appropriate excerpts from) any reports or claims issued by the relevant auditing
agents or taxing authority to the controlling party thereof, in connection with
such claim or the contest thereof.
Each Tax Indemnitee shall supply the Lessee with such information and
documents reasonably requested by the Lessee as are necessary or advisable for
the Lessee to participate in any action, suit or proceeding to the extent
permitted by this Section 13.5(b), and the Lessee shall promptly reimburse such
Indemnitee for the reasonable out-of-pocket expenses of supplying such
information and documents. No Tax Indemnitee shall enter into any settlement or
other compromise or fail to appeal an adverse ruling with respect to any claim
which is entitled to be indemnified under this Section 13.5 (and with respect to
which contest is required under this Section 13.5(b)) without the prior written
consent of the Lessee, unless such Tax Indemnitee waives its right to be
indemnified under this Section 13.5 with respect to such claim.
Notwithstanding anything contained herein to the contrary, a Tax
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a claim with respect to the
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imposition of any Tax if such Tax Indemnitee shall waive its right to
indemnification under this Section 13.5 with respect to such claim (and any
claim with respect to such year or any other taxable year the contest of which
is materially adversely affected as a result of such waiver).
(c) Payments. Any Imposition indemnifiable under this Section
13.5 shall be paid directly when due to the applicable taxing authority
if direct payment is practicable and permitted. If direct payment to
the applicable taxing authority is not permitted or is otherwise not
made, any amount payable to a Tax Indemnitee pursuant to Section 13.5
shall be paid within thirty (30) days after receipt of a written demand
therefor from such Tax Indemnitee accompanied by a written statement
describing in reasonable detail the amount so payable, but not before
two Business Days prior to the date that the relevant Taxes are due.
Any payments made pursuant to this Section 13.5 shall be made directly
to the Tax Indemnitee entitled thereto or the Lessee, as the case may
be, in immediately available funds at such bank or to such account as
specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to
the order of the payee by certified mail, postage prepaid at its
address as set forth in this Participation Agreement. Upon the request
of any Tax Indemnitee with respect to a Tax that the Lessee is required
to pay, the Lessee shall furnish to such Tax Indemnitee the original or
a certified copy of a receipt for the Lessee's payment of such Tax or
such other evidence of payment as is reasonably acceptable to such Tax
Indemnitee.
(d) Reports. In the case of any report, return or statement
required to be filed with respect to any Taxes that are subject to
indemnification under this Section 13.5 and of which the Lessee has
knowledge, the Lessee shall promptly notify the Tax Indemnitee of such
requirement and, at the Lessee's expense (i) if the Lessee is permitted
(unless otherwise requested by the Tax Indemnitee) by Applicable Law,
timely file such report, return or statement in its own name or (ii) if
such report, return or statement is required to be in the name of or
filed by such Tax Indemnitee or the Tax Indemnitee otherwise requests
that such report, return or statement be filed in the name of or by
such Tax Indemnitee, the Lessee shall prepare such report, return or
statement for filing by such Tax Indemnitee in such manner as shall be
satisfactory to such Tax Indemnitee and send the same to the Tax
Indemnitee for filing no later than 15 days prior to the due date
therefor. In any case in which the Tax Indemnitee will file any such
report, return or statement, the Lessee shall, upon written request of
such Tax Indemnitee, provide such Tax Indemnitee with such information
as is reasonably necessary to allow the Tax Indemnitee to file such
report, return or statement.
(e) Withholding Taxes.
(i) The Lessor or its agent shall withhold any Taxes
required by Applicable Law to be withheld on any payment to
the Certificate Trustee, the Certificate Purchaser, any other
Participant or Sub-Participant or the Construction Lender,
except to the extent that the Certificate Trustee, the
Certificate Purchaser,
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any other Participant or Sub-Participant or the Construction
Lender has furnished such information to the Lessor or its
agent as shall be sufficient under Applicable Law to entitle
such Person to an exemption from withholding Taxes. Except to
the extent set forth in Section 13.10, the amount payable to
the Certificate Trustee, the Certificate Purchaser, any other
Participant or Sub-Participant and the Construction Lender
shall be reduced by the amount of any withholding Taxes
required to be withheld by the Lessor or its agent pursuant to
the preceding sentence, and the Lessee and the Lessor shall
have no liability or obligation to the Certificate Trustee,
the Certificate Purchaser or the Construction Lender with
respect to any such withholding Taxes.
(ii) If and to the extent the Lessor or its agent has
in good faith attempted to comply with its obligation to
withhold Taxes in accordance with clause (i) and a claim
regarding withholding Taxes is made against the Lessor or its
agent, as between the Lessee and the Lessor or its agent, the
Lessee shall be responsible for, and the Lessee shall
indemnify and hold harmless the Lessor (without duplication of
any indemnification required by subsection (a)) on an After
Tax Basis against, such claim to the extent, but only to the
extent, the Lessor or its agent has actually paid funds to a
taxing authority with respect to such withholding taxes or
receives a demand for such payment from any taxing authority.
(iii) Each Participant agrees to reimburse the Lessor
or its agent for any withholding Taxes for which the Lessor or
its agent becomes liable and to reimburse the Lessee for any
Taxes or other amounts paid by the Lessee pursuant to clause
(ii) hereof.
(iv) For purposes of this Section 13.5(e), it shall
be assumed that the Lease constitutes a loan for United States
Federal income tax purposes (as is the parties' intention).
Subject to the provisions of Section 9.3, all amounts
referenced in this Section 13.5 payable or incurred during the
Interim Term shall be paid through Advances to the extent they
are included in the Approved Construction Budget.
SECTION 13.6. Funding Losses. If any payment or prepayment of principal
or conversion of interest rate with respect to any Construction Loan is made on
any day other than the last day of an Interest Period applicable thereto, or if
the Lessor fails to borrow any Construction Loan after notice has been given to
any Participant in accordance with Article III or IV, the Lessee shall reimburse
each Participant within fifteen (15) days after demand for any resulting loss or
expense incurred by it, including any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment, prepayment, conversion or failure to borrow,
provided that such Participant shall have delivered to the Lessee a certificate
as to the amount of such loss or expense, which certificate shall be conclusive
in the absence of manifest error, and provided, further, that such loss shall in
no event exceed the interest on the Construction Loans which would have been
payable for the
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balance of such Interest Period less the Applicable Margin. Such Participant
will, at the request of the Lessee, furnish such additional information
concerning the determination of such loss as the Lessee may reasonably request.
This Section 13.6 shall also be for the benefit of the Certificate Purchaser for
the period that the Certificate Yield Rate is determined in respect of the
Eurodollar Rate and shall be applied to such Certificate Purchaser as if the
outstanding Certificate Amount were Construction Loans.
SECTION 13.7. Regulation D Compensation. For so long as any Participant
is required to maintain reserves against "Eurocurrency liabilities" (or any
other category of liabilities which include deposits by reference to which the
interest on Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of such Participant to
United States residents), and, as a result, the cost to such Participant (or its
Funding Office) of making or maintaining its Construction Loans or Certificate
Amount is increased, then such Participant may require the Lessee to pay,
contemporaneously with each payment of interest on the Construction Loans or
Certificate, an additional amount on the related Construction Loan or
Certificate Amount of such Participant at a rate per annum up to but not
exceeding the excess of (i) (A) the applicable Eurodollar Rate divided by (B)
one minus the Eurocurrency Reserve Requirements and (ii) the applicable
Eurodollar Rate. Any Participant wishing to require payment of such additional
amount (x) shall so notify the Lessee in which case such additional interest on
the Construction Loans or Certificate Amount of such Participant shall be
payable to such Participant at the place indicated in such notice with respect
to each Interest Period commencing at least three Business Days after the giving
of such notice and (y) shall furnish to the Lessee at least five Business Days
prior to each date on which interest is payable on the Construction Loans or
Certificate an officer's certificate setting forth the amount to which such
Participant is then entitled under this Section (which shall be consistent with
such Participant's good faith estimate of the level at which the related
reserves are maintained by it). Each such certificate shall be accompanied by
such information as the Lessee may reasonably request as to the computation set
forth therein. Subject to the provisions of Section 9.3, all amounts referenced
in this Section 13.7 payable or incurred during the Interim Term shall be paid
through Advances to the extent they are included in the Approved Construction
Budget.
SECTION 13.8. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period:
(a) deposits in dollars (in the applicable amounts) are not
being offered to the Construction Lender or the Certificate Purchaser
in the relevant market for such Interest Period, or
(b) the Construction Lender or the Certificate Purchaser
advises the Certificate Trustee that the Eurodollar Rate as determined
by the Construction Lender or the Certificate Purchaser will not
adequately and fairly reflect the cost to the Construction Lender or
the Certificate Purchaser of funding its Construction Loans or
Certificate Amount, as the case may be, for such Interest Period,
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the Certificate Trustee shall forthwith give notice thereof to the
Lessee, whereupon until the Construction Lender or the Certificate
Purchaser notifies the Certificate Trustee and the Lessee that the
circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Construction Lender or the Certificate Purchaser, as
the case may be, to make Construction Loans or Certificate Amounts
shall be suspended and (ii) each outstanding Construction Loan or
Certificate shall begin to bear interest at the Alternate Base Rate on
the last day of the then current Interest Period applicable thereto.
SECTION 13.9. Illegality. If, on or after the date of this
Participation Agreement, the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any
Participant (or its Funding Office) with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for the Construction Lender or the
Certificate Purchaser (or its Funding Office) to make, maintain or fund its
Construction Loans or Certificate Amounts and the Construction Lender or the
Certificate Purchaser shall so notify the Certificate Trustee, the Certificate
Trustee shall forthwith give notice thereof to the other Participants and the
Lessee, whereupon the Construction Lender or the Certificate Purchaser shall, if
practicable, with the consent of the Lessee (which consent shall not
unreasonably be withheld), designate a different Funding Office if such
designation will avoid the illegality or impossibility and will not, in the
judgment of the Construction Lender or the Certificate Purchaser, be otherwise
disadvantageous to the Construction Lender or the Certificate Purchaser, and if
it will be disadvantageous to the Construction Lender or impractical to
designate a different Funding Office, the Construction Loan or Certificate
Amounts will automatically convert into an Alternate Base Rate Construction Loan
or Certificate on the Scheduled Payment Date applicable to such Loan or
investment if the Construction Lender or the Certificate Purchaser may lawfully
continue to maintain and fund such Loan or investment to such day or (b)
immediately if the Construction Lender or Certificate Purchaser shall determine
that it may not lawfully continue to maintain and fund such Construction Loan or
Certificate Amount to such day. If such notice is given the Lessee shall be
entitled upon its request to a reasonable explanation of the factors underlying
such notice.
SECTION 13.10. Increased Cost and Reduced Return.
(a) In the event that the adoption of any applicable law, rule
or regulation, or any change therein or in the interpretation or
application thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof or compliance by any Participant with any request or directive
after the date hereof (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(i) does or shall subject such Participant to any
additional tax of any kind whatsoever with respect to the
Operative Documents or any Loan or Certificate Amount made by
it, or change the basis or the applicable rate of
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taxation of payments to such Participant of principal,
interest or any other amount payable hereunder (except for the
imposition of or change in any tax on or measured by the
overall net income of such Participant (other than any such
tax imposed by means of withholding));
(ii) does or shall impose, modify or hold applicable
any reserve, special deposit, insurance assessment, compulsory
loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Participant
which are not otherwise included in determination of the rate
of interest on or, as applicable, the Certificate Yield Rate
with respect to, Construction Loans, Refinancing Loans or the
Certificate Amount; or
(iii) does or shall impose on such Participant any
other condition;
and the result of any of the foregoing is to increase the cost to such
Participant of making or maintaining such Loans or Certificate Amount or to
reduce any amount receivable hereunder or under any Note or Certificate with
respect thereto, then in any such case, the Lessee shall promptly pay such
Participant, upon its demand, any additional amounts necessary to compensate
such Participant for such increased cost or reduced amount receivable which such
Participant deems to be material as determined by such Participant with respect
to its Refinancing Loans, Construction Loans or Certificate Amount.
(b) If any Participant shall have determined that, after the
date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Participant
(or any entity directly or indirectly controlling such Participant) as
a consequence of such Participant's obligations under the Operative
Documents to a level below that which such Participant (or any entity
directly or indirectly controlling such Participant) could have
achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an
amount deemed by such Participant to be material, then from time to
time, within 15 days after demand by such Participant (with a copy to
the Certificate Trustee), the Lessee shall pay to such Participant such
additional amount or amounts as will compensate such Participant (or
its Parent) for such reduction.
(c) Each Participant will promptly notify the Lessee and the
Certificate Trustee of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Participant to
compensation pursuant to this Section and will, if practicable, with
the consent of the Lessee (which consent shall not unreasonably be
withheld), designate a
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different Funding Office or take any other reasonable action if such
designation or action will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Participant, be
otherwise disadvantageous to such Participant. A certificate of any
Participant claiming compensation under this Section and setting forth
in reasonable detail its computation of the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, such Participant may use
any reasonable averaging and attribution methods. Subject to the
provisions of Section 9.3, all amounts referenced in this Section 13.10
payable or incurred during the Interim Term shall be paid through
Advances to the extent they are included in the Approved Construction
Budget.
SECTION 13.11. Indemnity Payments in Addition to Lease Obligations. The
Lessee acknowledges and agrees that the Lessee's obligations to make indemnity
payments under this Section 13 are separate from, in addition to, and do not
reduce, the Lessee's obligation to pay under the Lease the Lease Balance.
ARTICLE XIV.
MISCELLANEOUS
SECTION 14.1. Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Participation Agreement, the
transfer of the Property to the Certificate Trustee, the construction of any
Improvements, any disposition of any interest of the Certificate Trustee in the
Property or any Improvements or any interest of the Certificate Purchaser in the
Trust and the payment of the Notes and any disposition thereof, the Expiration
Date, and the payment in full in cash of the Lease Balance, and the termination
of the Operative Documents, and shall be and continue in effect notwithstanding
any investigation made by any party and the fact that any party may waive
compliance with any of the other terms, provisions or conditions of any of the
Operative Documents.
SECTION 14.2. No Broker, etc. Each of the parties hereto represents to
the others that it has not retained or employed any broker, finder or financial
adviser to act on its behalf in connection with this Participation Agreement or
the transactions contemplated herein, nor has it authorized any broker, finder
or financial adviser retained or employed by any other Person so to act. Any
party who is in breach of this representation shall indemnify and hold the other
parties harmless from and against any liability arising out of such breach of
this representation.
SECTION 14.3. Notices. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing by United States mail, by nationally recognized
courier service, by hand or by facsimile and any such notice shall become
effective five Business days after being deposited in the mails, certified or
registered with
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appropriate postage prepaid or one Business Day after delivery to a nationally
recognized courier service specifying overnight delivery or, if delivered by
hand, when received, or, if transmitted by facsimile, when transmitted (upon
electronic confirmation thereof) and shall be directed to the address or
facsimile number of such Person as indicated on Schedule III. From time to time
any party may designate a new address for purposes of notice hereunder by
written notice to each of the other parties hereto in accordance with this
Section.
SECTION 14.4. Counterparts. This Participation Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 14.5. Amendments. The provisions of this Participation
Agreement may from time to time be amended, modified or waived, provided that
such amendment, modification or waiver is in writing and consented to by the
Lessee, the Certificate Trustee, the Construction Lender and the Certificate
Purchaser; provided further, however, that the covenants contained in Section
10.3 of this Participation Agreement may be waived as set forth in Section 10.4.
Neither any Operative Document nor any of the terms thereof may be terminated
(except upon payment in full of the Lease Balance plus Make-Whole Premiums, if
any, or effective exercise and consummation of the Remarketing Option in
accordance with Article XX of the Lease and payment in full of all amounts due
in accordance therewith), amended, supplemented, waived or modified without the
written agreement or consent of each party thereto and, regardless of whether
the Construction Lender and the Certificate Purchaser are parties thereto, the
Construction Lender and the Certificate Purchaser; provided, however, that no
such termination, amendment, supplement, waiver or modification that would
increase the obligations of the Lessee thereunder or deprive the Lessee of any
of its rights thereunder, or otherwise adversely affect the Lessee, shall be
effective against the Lessee without the written agreement or consent of the
Lessee, which consent shall not be unreasonably withheld or delayed.
SECTION 14.6. Headings, etc. The Table of Contents and headings of the
various Articles and Sections of this Participation Agreement are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
SECTION 14.7. Parties in Interest. Except as expressly provided herein,
none of the provisions of this Participation Agreement are intended for the
benefit of any Person except the parties hereto. The Lessee shall not assign or
transfer any of its rights or obligations under the Operative Documents without
the prior written consent of the Certificate Trustee, the Construction Lender
and the Certificate Purchaser, which may be withheld in the sole discretion of
any of the foregoing parties.
SECTION 14.8. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 14.9. Severability. Any provision of this Participation
Agreement that is
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prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 14.10. Liability Limited.
(a) It is expressly understood and agreed by the parties
hereto that (a) this Participation Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally, except as
expressly stated herein, but solely as Certificate Trustee of Brush
Creek Business Trust II, a statutory Delaware business trust created
under the Trust Agreement, in the exercise of the powers and authority
conferred and vested in it under the Trust Agreement, (b) each of the
representations, undertakings and agreements herein made by the
Certificate Trustee on the part of the Trust or Certificate Trustee is
made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company, except as expressly stated
herein, but is made and intended for the purpose of binding only the
Trust or Certificate Trustee and (c) except as expressly stated herein,
under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Trust or
Certificate Trustee or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by
the Certificate Trustee or the Trust under this Participation Agreement
or the other Operative Documents.
(b) No Participant shall have any obligation to any other
Participant or to the Lessee, the Certificate Trustee, the Certificate
Purchaser or the Construction Lender with respect to transactions
contemplated by the Operative Documents, except those obligations of
such Participant expressly set forth in the Operative Documents or
except as set forth in the instruments delivered in connection
therewith, and no Participant shall be liable for performance by any
other party hereto of such other party's obligations under the
Operative Documents except as otherwise so set forth.
SECTION 14.11. Further Assurances. The parties hereto shall promptly
cause to be taken, executed, acknowledged or delivered, at the sole expense of
the Lessee, all such further acts, conveyances, documents and assurances as the
other parties may from time to time reasonably request in order to carry out and
effectuate the intent and purposes of this Participation Agreement, the other
Operative Documents, and the transactions contemplated hereby and thereby
(including the preparation, execution and filing of any and all Uniform
Commercial Code financing statements and other filings or registrations which
the parties hereto may from time to time request to be filed or effected);
provided, however, that the Lessee shall not be required to pay expenses
pursuant to this Section to the extent arising from a breach or alleged breach
by the Construction Lender or the Certificate Purchaser of any agreement entered
into in connection with the assignment or participation of any Loan or
Certificate Amount. The Lessee, at its own expense and without need of any prior
request from any other party, shall take such action as may be necessary
(including any action specified in the preceding sentence), or (if
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the Certificate Trustee shall so request) as so requested, in order to maintain
and protect all security interests provided for hereunder or under any other
Operative Document. Subject to the provisions of Section 9.3, all amounts
referenced in this Section 14.11 payable or incurred during the Interim Term
shall be paid through Advances to the extent they are included in the Approved
Construction Budget.
SECTION 14.12. SUBMISSION TO JURISDICTION. THE LESSEE, THE CONSTRUCTION
LENDER, THE CERTIFICATE PURCHASER AND THE CERTIFICATE TRUSTEE HEREBY SUBMIT TO
THE FULLEST EXTENT PERMITTED BY LAW TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA AND OF ANY
COURT OF THE COMMONWEALTH OF PENNSYLVANIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THE OPERATIVE DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY. THE LESSEE, THE CONSTRUCTION LENDER, THE CERTIFICATE
PURCHASER AND THE CERTIFICATE TRUSTEE IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH ANY OF THE FOREGOING MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
SECTION 14.13. Confidentiality. The Certificate Trustee, the
Certificate Purchaser and the Construction Lender represent, warrant, covenant
and agree that they will maintain the confidentiality of any written or oral
information provided under or referenced in the Operative Documents by or on
behalf of the Lessee that has been identified by its source as confidential
("Confidential Information"), subject to the Certificate Trustee's, the
Certificate Purchaser's and the Construction Lender's (a) obligation to disclose
any such Confidential Information pursuant to applicable law or pursuant to an
order under applicable laws and regulations or pursuant to a subpoena or other
legal process (but only after 10 days prior notice to the Lessee (unless during
such 10-day period the Certificate Trustee, the Certificate Purchaser or the
Construction Lender shall be subject to criminal liability, or material civil
liability for which the Lessee has not agreed to indemnify the relevant party)
and an opportunity to challenge such order or subpoena during such period), (b)
right to disclose any such Confidential Information to its bank examiners,
Affiliates, auditors, counsel and other professional advisors but only on a need
to know basis in connection with the Operative Documents and only if such
Persons are similarly bound in a separate writing to the provisions of this
Section 14.13, (c) right to disclose any such Confidential Information in
connection with any litigation or dispute involving the Participants and the
Lessee or any of its Subsidiaries and Affiliates and (d) right to provide such
information to Participants, Sub-Participants, prospective Sub-Participants to
which sales of participating interests are permitted pursuant to this
Participation Agreement and prospective assignees to which assignments of
interest are permitted pursuant to this Participation Agreement, but only if
such Participants, Sub-Participant, prospective Sub-Participant or prospective
assignee agrees in writing to maintain the confidentiality of such information
on terms substantially similar to those
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of this Section as if it were a "Participant" party hereto. Notwithstanding the
foregoing, any such information supplied to a Participant, Sub-Participant,
prospective Sub-Participant or prospective assignee under this Participation
Agreement shall cease to be Confidential Information if it is or becomes known
to such Person by other than unauthorized disclosure, or if it becomes a matter
of public knowledge.
SECTION 14.14. No Bar. Subject to Section 14.10, nothing set forth
herein or in any other Operative Document shall bar, limit, preclude, prevent,
stay or otherwise adversely affect the right or ability of any party hereto to
bring and pursue any action against any other party hereto for any breach or
alleged breach of its obligations hereunder or under any other Operative
Document.
SECTION 14.15. WAIVER OF JURY TRIAL. EACH OF THE LESSEE, THE
CERTIFICATE TRUSTEE, THE CERTIFICATE PURCHASER AND THE CONSTRUCTION LENDER
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THE OPERATIVE DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 14.16. Construction Consultant. The Construction Lender shall,
from time to time, be entitled to hire a Construction Consultant upon the
submission by the Construction Lender of a certificate to the Lessee describing
in detail the work, information, services or other monitoring which the
Construction Consultant has been retained to provide. The Lessee shall promptly
reimburse the Construction Lender for the reasonable fees of the Construction
Consultant, which amounts shall be payable through Advances to the extent
provided in the Approved Construction Budget.
SECTION 14.17. Cooperation in Connection with Subdivisions.
Construction Lender and Certificate Purchaser acknowledge that Lessee intends to
develop as many as two additional buildings (the "Additional Buildings") on the
Land in the future, and that such development may require shifting of lot lines,
resubdivisions or similar land use actions to effect such development.
Construction Lender, the Tranche A Lender, the Tranche B Lender and Certificate
Purchaser, and each of their successors and assigns, hereby agree to take such
further actions and execute and deliver such further documents as may be
required to effect such lot line changes or subdivision modifications in
connection with the development and leasing of the Additional Buildings so long
as (i) the Base Term of the Lease has commenced and no Default shall then exist
under any Operative Document, and such matters do not impair the value, utility
or remaining useful life of the Property, which shall be confirmed by an
appraisal of the Property, in form and substance satisfactory to the Lenders and
the Certificate Purchaser, performed by an appraiser selected by the Lenders and
the Certificate Purchaser, (ii) such matters are reasonably necessary in
connection with the development of the Additional Buildings, (iii) such matters
will not cause the Property or any portion thereof to fail to comply in any
respect with the provisions of the Lease or any other Operative Document or any
Requirements of Law (including, without limitation, all applicable zoning,
planning, building and subdivision ordinances, all applicable restrictive
covenants and all
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Participation Agreement
<PAGE> 67
applicable architectural approval requirements), or otherwise cause a Default
under any Operative Document, (iv) all governmental consents or approvals
required prior to such matters have been obtained, and all filings required
prior to such action have been made, (v) such matters will not result in any
down-zoning of the Property or any portion thereof or a material reduction in
the maximum density or development rights available to the Property under all
Requirements of Law, (vi) the Lessee shall remain obligated under this Lease and
under any instrument executed by the Lessee consenting to the assignment of the
Lessor's interest in this Lease as security for indebtedness, in each such case
in accordance with their terms, as though such matters had not been effected,
and the obligations of the Lessee, the Construction Agent and each Guarantor,
and the rights and benefits of each Participant as against the Lessee,
Construction Agent and Guarantor, under any Operative Document shall not be
impaired, (vii) the Lessor and the Lenders shall receive endorsements to the
existing title policy and a revised Survey insuring Lessor's and Lenders' right,
title and interest in and to the Property, (viii) Lessee, Construction Agent and
each Guarantor shall take sure further acts and execute such further documents
as shall be reasonably requested by the Lessor or any Lender in connection with
this Section 14.17. Such additional actions of the Lessor, Construction Lender,
Tranche A Lender and Tranche B Lender may include, without limitation, (i) the
execution or consent to a resubdivision of the Land to accommodate the
Additional Buildings as positioned on one or more separately subdivided parcels,
(ii) execution and delivery of easements and rights of way necessary or
desirable for parking and traffic flow in the office complex, (iii) execution
and delivery of easements for utilities and other similar services to the
Additional Buildings, and (iv) the release of property on which Additional
Buildings and appurtenant land (including grading areas and parking areas) and
improvements will be developed from the liens, encumbrances and restrictions of
the Ground Lease (and any memorandum thereof), the Lease (and any memorandum
thereof), the Mortgage and the other Operative Documents.
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IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
Attest: FORE SYSTEMS, INC., as Lessee, Guarantor
and Construction Agent
/s/ CHRISTOPHER H. GEBHARDT By:/s/ BRUCE E. HANEY
- -------------------------------- -------------------------------------
Name: BRUCE E. HANEY
-----------------------------------
Title: SR. VP & CHIEF FINANCIAL OFFICER
----------------------------------
Account Information
for Advances:
S-1
Participation Agreement
<PAGE> 69
Attest: WILMINGTON TRUST COMPANY not in its
individual capacity, except as expressly
stated herein, but solely as Certificate
Trustee
/s/ Illegible By:/s/ DONALD G. MACKELCAN
- -------------------------------- -------------------------------------
Name: DONALD G. MACKELCAN
-----------------------------------
Title: ASSISTANT VICE PRESIDENT
----------------------------------
Remittance Instructions for the
Construction Lender and the Certificate
Purchaser:
S-2
Participation Agreement
<PAGE> 70
Attest: MELLON FINANCIAL SERVICES
CORPORATION #4, as Certificate Purchaser
/s/ MICHAEL SLOYER By:/s/ STEPHEN R. VIEHE
- -------------------------------- -------------------------------------
Name: STEPHEN R. VIEHE
-----------------------------------
Title: VICE PRESIDENT
----------------------------------
S-3
Participation Agreement
<PAGE> 71
Attest: MELLON BANK, N.A., as the Construction
Lender
/s/ MICHAEL SLOYER By:/s/ MICHAEL T. ANSELMO
- -------------------------------- -------------------------------------
Name: MICHAEL T. ANSELMO
-----------------------------------
Title: VICE PRESIDENT
----------------------------------
S-4
Participation Agreement
<PAGE> 72
APPENDIX 1
to Participation Agreement
Definitions and Interpretation
<PAGE> 73
Exhibit 10.1
APPENDIX 1
to
Participation Agreement,
Lease, Construction Loan Agreement and Mortgage
(Construction Program for a
Manufacturing/Office Facility
in Allegheny County, Pennsylvania)
----------------------------------
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative
Document), document or instrument means such agreement, document or
instrument (including the Plans and Specifications) as amended or
modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms of the other Operative Documents
and reference to any promissory note includes any promissory note which
is an extension or renewal thereof or a substitute or replacement
therefor;
(v) reference to any Applicable Law means such Applicable Law
as amended, modified, codified, replaced or reenacted, in whole or in
part, and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision
of any Applicable Law means that provision of such Applicable Law from
time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section
or other provision;
(vi) reference in any Operative Document to any Article,
Section, Appendix, Schedule or Exhibit means such Article or Section
thereof or Appendix, Schedule or Exhibit thereto;
(vii) "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to an Operative Document as a whole
and not to any particular Article, Section or other provision thereof;
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APPENDIX 1
<PAGE> 74
(viii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;
(ix) relative to the determination of any period of time,
"from" means "from and including" and "to" means "to but excluding";
and
(x) reference to the Certificate Trustee refers to the
Certificate Trustee acting on behalf of the Trust and is intended to be
binding on the Trust as a separate legal entity.
B. Accounting Terms. In each Operative Document, unless expressly
otherwise provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in accordance with
GAAP.
C. Conflict in Operative Documents. If there is any conflict between
any Operative Documents, such Operative Document shall be interpreted and
construed, if possible, so as to avoid or minimize such conflict but, to the
extent (and only to the extent) of such conflict, the Participation Agreement
shall prevail and control.
D. Legal Representation of the Parties. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
E. Defined Terms. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document.
"Acceleration" is defined in Section 6 of the Construction Loan
Agreement.
"Account" is defined in Section 5.1 of the Construction Loan Agreement.
"Actual Loss" means the all-in costs and expenses incurred by Lessor,
and any other damages incurred by Lessor (except in connection with an Unrelated
Indemnity Event) under the Operative Documents and under Applicable Laws, less
the value of the Property as determined after an Event of Default by (i) a sale
of the Property, (ii) the re-leasing of the Property or (iii) the Appraiser. The
Lessor shall in its sole discretion determine which of the methods described in
clauses (i), (ii) or (iii) above that Lessor elects to use to determine Actual
Loss. Furthermore, if the Lessor elects the method described in clause (iii)
above, then upon a later sale or releasing of the Property (which sale or
re-leasing shall occur within a reasonable time following the method in clause
(iii)) pursuant to clauses (i) or (ii) above, the Actual Loss shall be
recalculated based on such amounts and any appropriate adjustments shall be made
as provided in the Operative Documents.
"Advance" means an advance of funds by the Lessor to the Construction
Agent pursuant to Article III of the Participation Agreement.
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APPENDIX 1
<PAGE> 75
"Affiliate" means, when used with respect to any Person, any other
Person directly or indirectly Controlling or Controlled by or under direct or
indirect common Control with such Person.
"After Tax Basis" means, with respect to any payment to be received,
the amount of such payment increased so that, after deduction of the amount of
all taxes required to be paid by the recipient (less any tax savings actually
realized) with respect to the receipt by the recipient of such amounts, such
increased payment (as so reduced) is equal to the payment otherwise required to
be made.
"Alternate Base Rate" means, for any period, an interest rate per annum
equal to the sum of (i) the Federal Funds Effective Rate most recently
determined by the Lender plus .50% and (ii) the Applicable Margin or Certificate
Margin, as the case may be. If the aforesaid rate changes from time to time
after the date of the Construction Loan Agreement, the Alternate Base Rate shall
be automatically increased or decreased, if appropriate and as the case may be,
without notice to the Lessee or the Lessor, as of the effective time of each
change, provided that the Lender shall endeavor to notify the Lessor of any such
change but shall have no liability for any failure to do so.
"Applicable Law" means all existing and future applicable laws, rules,
regulations (including Environmental Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority, and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment (including
wetlands) and those pertaining to the construction, use or occupancy of the
Property) and any restrictive covenant or deed restriction or easement of record
affecting the Property or any other material asset of the Lessee.
"Applicable Margin" means at any time with respect to Eurodollar Rate
Construction Loans, 1/2 of 1%.
"Appraisal" means an appraisal, prepared by Barone, Murtha, Shonberg &
Associates, Inc. or another reputable appraiser selected by the Lenders and
approved by the Certificate Purchaser, of the Land and Improvements on an
as-built basis in accordance with the Plans and Specifications, to be delivered
pursuant to Section 6.1(j) of the Participation Agreement.
"Appraiser" means an independent MAI appraiser having no less then
three (3) years of experience appraising real property in Western Pennsylvania,
selected by the Lessor.
"Approved Construction Budget" means the budget attached as Schedule 2
to the Construction Agency Agreement.
"Approved Construction Schedule" means the schedule attached as
Schedule 3 to the Construction Agency Agreement.
"Appurtenant Rights" means (i) all agreements, easements, rights of way
or use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the Land or the Improvements, including the use of any streets, ways, alleys,
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APPENDIX 1
<PAGE> 76
vaults or strips of land adjoining, abutting, adjacent or contiguous to the Land
and (ii) all permits, licenses and rights, whether or not of record, appurtenant
to the Land.
"Architect" means, collectively, Studios Architecture, and any other
reputable additional or substitute architect engaged from time to time by the
Lessee in connection with the construction of the Improvements. Any requirement
in any Operative Document that a certificate of the Architect be delivered shall
be satisfied by delivery of certificate(s) from one or more of the foregoing so
long as such certificates collectively satisfy the requirements set forth in
such Operative Documents.
"Assignment of Construction Agency Agreement" means the Construction
Agency Agreement Assignment, dated as of the Initial Advance Date, from the
Certificate Trustee to the Lender.
"Assignment of Leases and Rents" means the Assignment of Leases and
Rents and Assignment of Open End Mortgage, dated as of the Documentation Date,
from the Certificate Trustee, as assignor, to the Lenders, as assignees.
"Available Certificate Purchaser Commitment" means an amount equal to
the excess, if any, of (a) the amount of the Certificate Purchaser Commitment
over (b) the aggregate original amount of the Certificate Amounts.
"Available Commitments" means the Available Lenders Commitment and the
Available Certificate Purchaser Commitment.
"Available Lenders Commitment" means at any time, an amount equal to
the excess, if any, of (a) the amount of the Construction Loan Commitment over
(b) the aggregate original principal amount of all Construction Loans.
"Bankruptcy Code" is defined in Section 6(f) of the Loan Agreement.
"Base Date" means the Construction Period Termination Date.
"Base Term" is defined in Section 2.3 of the Lease.
"Basic Rent" means, the sum of (i) the Lenders Basic Rent and (ii) the
Certificate Purchaser Basic Rent, calculated as of the applicable date on which
Basic Rent is due.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Board" means the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banks in Wilmington, Delaware or Pittsburgh,
Pennsylvania or (if interest or Certificate
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APPENDIX 1
<PAGE> 77
Yield is being determined by reference to the Eurodollar Rate) London, England
are generally authorized or obligated, by law or executive order, to close.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is, or is required to be, accounted for as a capital lease
on the balance sheet of that Person.
"Capitalized Lease Obligations" means all obligations under Capital
Leases of any Person, in each case taken at the amount thereof accounted for as
liabilities in accordance with GAAP.
"Casualty" means any damage or destruction of all or any portion of the
Property as a result of a fire or other casualty.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. sections 9601 et. seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986.
"Certificate" means the certificate issued under the Trust Agreement,
substantially in the form of Exhibit A thereto, and any and all certificates
issued in replacement or exchange therefor.
"Certificate Amount" is defined in Section 3.2 of the Participation
Agreement.
"Certificate Balance" means as of any date of determination an amount
equal to the sum of the outstanding Certificate Amounts together with all
accrued and unpaid Certificate Yield thereon.
"Certificate Margin" means at any time with respect to Certificate
Amounts, 4%.
"Certificate Purchaser" means Mellon Financial Services Corporation #4,
a Pennsylvania corporation.
"Certificate Purchaser Basic Rent" means the sum of (i) amounts due
with respect to the Certificate Amounts and (ii) the amount of accrued
Certificate Yield due on the Certificate Amounts, in each case determined in
accordance with Section 4.1 of the Participation Agreement as of any Payment
Date and excluding any interest at the applicable Overdue Rate on any
installment of Certificate Purchaser Basic Rent not paid when due and any fine,
penalty, interest or cost assessed or added under any agreement with a third
party for nonpayment or late payment of Certificate Purchaser Basic Rent.
"Certificate Register" is defined in Section 2.4 of the Trust
Agreement.
"Certificate Trustee" means Wilmington Trust Company, a banking
corporation organized in the State of Delaware, not in its individual capacity,
but solely as trustee of Brush Creek Business Trust II, a statutory Delaware
business trust created under the Trust Agreement, and any successor or
replacement Certificate Trustee expressly permitted under the Operative
Documents.
"Certificate Yield" is defined in Section 4.1(a) of the Participation
Agreement.
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APPENDIX 1
<PAGE> 78
"Certificate Yield Payment Advance" is defined in Section 4.1(d) of the
Participation Agreement.
"Certificate Yield Rate" means, (i) for the period from and including
the Initial Advance Date until the Construction Period Termination Date, the
Eurodollar Rate and thereafter, the yield calculated with reference to the rate
given (a) on the USD Screen of Bloomberg Financial Markets Service (the
"Service") at 11:00 a.m. Eastern standard time three Business Days prior to such
date, or if such rate is unavailable, then (b) by the Statistical Release No.
H.15 (519) then most recently published by the F.R.S. Board prior to such date
(the "Statistical Release") as the yield, in either case, of a hypothetical U.S.
Treasury security with a remaining term equal to the remaining term to maturity
(rounded to the nearest month) of the Certificate (assuming that the Certificate
will mature on December 31, 2007), provided, if no maturity exactly corresponds
to the remaining assumed term to maturity of the Certificate, yields for the two
published maturities most closely corresponding to such maturity shall be
selected by (x) reference to the Service, or if such Service is unavailable,
then (y) the Statistical Release, and the yield shall be interpolated from such
yields on a straight-line basis, rounding in each period to the nearest month,
plus (ii) the Certificate Margin.
"Certifying Party" is defined in Section 22.1 of the Lease.
"Claims" means any and all obligations, liabilities, losses, actions,
suits, judgments, penalties, fines, claims, demands, settlements, costs and
expenses (including reasonable legal fees and expenses) of any nature
whatsoever.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
"Collateral" means all of the Trust Estate now owned or hereafter
acquired, upon which a Lien is purported to be created by the Security
Documents.
"Collateral Account" is defined in Section 2 of the Pledge and Security
Agreement.
"Collateral Requirement" is defined in Section 2(e)(ii) of the Pledge
and Security Agreement.
"Collateral Value" has the meaning attributed to it in the Pledge and
Security Agreement.
"Commitment" means (i) with respect to the Lenders, the obligation of
the Lenders to make Construction Loans to the Certificate Trustee at the request
of the Lessee in an aggregate principal amount not to exceed the amount set
forth opposite each Lender's name on Schedule IV to the Participation Agreement,
as such amount may be reduced from time to time in accordance with the
provisions of the Construction Loan Agreement, (ii) with respect to the
Certificate Purchaser, the obligation of the Certificate Purchaser to make
available Certificate Amounts to the Certificate Trustee at the request of the
Lessee in an aggregate principal amount at any one time outstanding not to
exceed the amount set forth opposite the Certificate Purchaser's name on
Schedule IV to the Participation Agreement, (and (iii) with respect to the
Certificate Trustee, the obligation of the Certificate Trustee to make Advances
(to the extent the Certificate Trustee receives Certificate Amounts,
Construction Loans and Refinancing Loans).
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APPENDIX 1
<PAGE> 79
"Commitment Percentage" means, as to any Participant, the percentage
set forth opposite such Participant's name under the heading "Commitment
Percentage" on Schedule IV to the Participation Agreement.
"Commitment Period" means the period from and including the Initial
Advance Date to the date immediately preceding the Base Date or such earlier
date on which the Commitments shall terminate as provided in the Operative
Documents.
"Completion Date" means the date Substantial Completion occurs.
"Condemnation" means any condemnation, requisition, confiscation,
seizure or other taking (or sale in lieu thereof) of the use, access, occupancy,
material easement rights or title to the Property or any part thereof, wholly or
partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including an action by a Governmental
Authority to change the grade of, or widen the streets adjacent to, the Property
or alter the vehicular traffic flow to the Property so as to result in a
material adverse change in access to such Property, or by or on account of an
eviction by paramount title or any transfer made in lieu of any such proceeding
or action. A "Condemnation" shall be deemed to have occurred on the earliest of
the dates that use, occupancy or title vests in the condemning authority.
"Confidential Information" is defined in Section 14.13 of the
Participation Agreement.
"Consolidated Available Earnings" means, for any period, the
Consolidated EBITR for such period.
"Consolidated EBITR", means for any period, Consolidated Net Income for
such period, before giving effect to any extraordinary gains or losses
calculated pursuant to GAAP for such period, plus, to the extent deducted in the
calculation of Consolidated Net Income for such period, the sum of (i) Federal,
State, local and foreign income taxes for such period, (ii) Consolidated
Interest Expense and (iii) Consolidated Rental Expense.
"Consolidated Fixed Charges" means, for any period, the sum of (i)
Consolidated Interest Expense plus (ii) Consolidated Rental Expense for such
period.
"Consolidated Funded Indebtedness" means, to the extent the following
would be reflected on a balance sheet of the Lessee and its Subsidiaries on a
consolidated basis prepared in accordance with GAAP, the principal amount or
principal equivalent of all Debt of the Lessee and its Subsidiaries having a
final maturity of more than one year from the date of determination (or which is
renewable or extendable at the option of the obligor for a period of more than
one year from the date of determination), excluding Consolidated Short-Term
Funded Indebtedness.
"Consolidated Indebtedness" means, at any time, the sum of all
Consolidated Funded Indebtedness and Consolidated Short Term Funded Indebtedness
at such time.
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<PAGE> 80
"Consolidated Interest Expense" means, for any period, the gross
consolidated interest expense of the Lessee and its Subsidiaries for such
period.
"Consolidated Net Income (or Loss)" means, for any period, the
consolidated net earnings (or loss) after taxes of the Lessee and its
Subsidiaries for such period, but excluding all nonrecurring items separately
stated in computing income from continuing operations.
"Consolidated Rental Expense" means, for any period, all payment
obligations of the Lessee and its Subsidiaries accrued during such period under
agreements for rent, lease, hire or use of any real or personal property,
including obligations in the nature of operating leases but excluding Capital
Lease Obligations.
"Consolidated Shareholders' Equity" means, as of any date of
determination, all amounts (without duplication) which, in accordance with GAAP,
would be included under shareholder's equity on a consolidated balance sheet of
the Lessee and its Subsidiaries.
"Consolidated Short Term Funded Indebtedness" means all or the portion
of Debt with a maturity of less than one year from the date of determination.
"Construction" means the construction and installation of all
Improvements contemplated by the Plans and Specifications.
"Construction Agency Agreement" means the Construction Agency
Agreement, dated as of the Initial Advance Date, between the Certificate Trustee
and the Construction Agent.
"Construction Agency Agreement Event of Default" means a "Construction
Agency Agreement Event of Default" as defined in Section 5.1 of the Construction
Agency Agreement.
"Construction Agency Person" means the Lessee, the Construction Agent,
the Architect, the Guarantor, the Prime Contractor, any other contractor or
subcontractor or other Person directly or indirectly performing work or
providing services or materials on the Property, or relating to the Construction
or the Property, through and including the period ending on the Completion Date
(regardless of when such Person commenced performing such work or providing such
services or materials, including any period prior to the Documentation Date),
and all of their respective officers, directors, shareholders, partners,
employees, agents, consultants (on the Property), service-providers (on the
Property), successors and assigns.
"Construction Agent" means Fore Systems, Inc., as construction agent
under the Construction Agency Agreement.
"Construction Breakage Costs" shall mean any costs or expenses incurred
by Lessor or any Participant in connection with the termination of any of the
Construction Documents following the occurrence of a Construction Agency Event
of Default.
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<PAGE> 81
"Construction Consultant" means such consulting engineer as the
Construction Lender may select to monitor the Construction on behalf of the
Construction Lender, the Certificate Purchaser and the Lessor.
"Construction Costs" shall mean the amounts required to construct the
Improvements (including Soft Costs) and to pay Transaction Costs in accordance
with the Plans and Specifications and the Operative Documents.
"Construction Documents" is defined in Section 2.6 of the Construction
Agency Agreement.
"Construction Documents Assignment" means the Assignment of
Construction Documents that is attached to the Construction Agency Agreement as
Exhibit A.
"Construction Lender" means Mellon Bank, N.A., a national banking
association, in its capacity as lender under the Construction Loan Agreement.
"Construction Loan" is defined in Section 2.1 of the Construction Loan
Agreement.
"Construction Loan Agreement" means the Construction Loan Agreement,
dated as of the Initial Advance Date, among the Certificate Trustee, as
borrower, and the Lenders.
"Construction Loan Agreement Default" means any event, act or condition
which with notice or lapse of time, or both, would constitute a Construction
Loan Agreement Event of Default.
"Construction Loan Agreement Event of Default" is defined in Section
6.1(a) of the Construction Loan Agreement.
"Construction Loan Balance" means as of any date of determination an
amount equal to the principal amounts outstanding under the Construction Loans.
"Construction Loan Commitment" means the Commitment of the Lenders in
the amount set forth on Schedule I to the Participation Agreement.
"Construction Loan Documents" means the Construction Loan Agreement,
the Notes and the Security Documents.
"Construction Loan Expiration Date" is defined in Section 2.3 of the
Construction Loan Agreement.
"Construction Period" means the period commencing on the Initial
Advance Date and ending on the Construction Period Termination Date.
"Construction Period Termination Date" means the earlier of (i) the
date on which Substantial Completion has occurred with respect to the
construction of the Facility, and (ii) March 31, 2000.
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<PAGE> 82
"Control" means (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, the possession directly or indirectly, of the power to direct or cause
the direction of the management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Custodian" means Mellon Bank, in its capacity as custodian under the
Custody Agreement.
"Custody Agreement" has the meaning attributed to it in the Pledge and
Security Agreement.
"Debt" means, for any Person, (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services, (ii)
all obligations of such Person under any conditional sale or other title
retention agreement relating to property purchased by such Person, (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on any
property owned by such Person, whether or not such indebtedness has been
assumed, (iv) all obligations of such Person as lessee under leases that have
been or should be, in accordance with GAAP, recorded as Capital Leases, (v) all
obligations of such Person under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (i) through (iv) above,
and (vi) all current or past due liabilities of such Person in respect of
unfunded vested benefits under plans covered by Title IV of ERISA.
"Deed" means a special warranty deed with respect to the real property
comprising the Property, in conformity with Applicable Law and appropriate for
recording with the applicable Governmental Authorities, conveying fee simple
title to such real property to the Lessee, subject only to Permitted Liens and
substantially in the form of Exhibit I to the Participation Agreement.
"Default" means any event or condition which, with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
"Default Completion Costs" shall mean any and all costs of any kind or
description incurred by any Participant or the Lessor in completing the
construction of the Improvements following a Construction Agency Event of
Default in excess of those set forth in the Approved Construction Budget,
including, without limitation, costs of removal and restoration of defective
work, shut down and startup costs for any party under any of the Construction
Documents, redesign, rebidding, repermitting and other costs incurred in
connection with any revision of the Plans and Specifications, construction
supervision costs, carry during any period of delay in the completion of the
Improvements beyond the Outside Completion Date, legal fees incurred in
connection with the negotiation, enforcement, termination or any other action or
proceeding in connection with any of the Construction Documents or any of the
foregoing.
"Documentation Date" is defined in Section 2.1 of the Participation
Agreement.
"Dollars" and "$" mean dollars in lawful currency of the United States
of America.
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"Eligible Project Costs" shall mean, as of any date of determination,
the aggregate amount of Construction Costs accrued, and following a Construction
Agency Event of Default, any Default Completion Costs or Construction Breakage
Costs which may become payable that are properly capitalized in accordance with
GAAP, or which are incurred, at any time prior to the Completion Date, whether
or not paid, in each case which are properly capitalized in accordance with
GAAP, but excluding (i) all Certificate Yield which is capitalized during the
Interim Term pursuant to the Operative Documents, (ii) all Transaction Expenses
other than Transaction Expenses properly capitalized in accordance with GAAP,
and (iii) any payments under Sections 13.5, 13.7, 13.10 and 14.11 of the
Participation Agreement to the extent such amounts are included in the Approved
Construction Budget under the heading "Eligible Project Costs Reimbursables".
Attached to the Construction Agency Agreement as Schedule 2 is the Approved
Construction Budget, which details the Eligible Project Costs.
"End of the Term Report" is defined in Section 13.2(a) of the
Participation Agreement.
"Environmental Audit" means a Phase One environmental site assessment
(the scope and performance of which meets or exceeds ASTM Standard Practice
E1527-93 Standard Practice for Environmental Site Assessments:
Phase One Environmental Site Assessment Process) of the Property.
"Environmental Law" means, whenever enacted or promulgated, any
applicable Federal, state, county or local law, statute, ordinance, rule,
regulation, license, permit, authorization, approval, covenant, criteria,
guideline, administrative or court order, judgment, decree, injunction, code or
requirement or any agreement with a Governmental Authority:
(x) relating to pollution (or the cleanup, removal,
remediation or encapsulation thereof, or any other response thereto),
or the regulation or protection of human health, safety or the
environment, including air, water, vapor, surface water, groundwater,
drinking water, land (including surface or subsurface), plant, aquatic
and animal life, or
(y) concerning exposure to, or the use, containment, storage,
recycling, treatment, generation, discharge, emission, Release or
threatened Release, transportation, processing, handling, labeling,
containment, production, disposal or remediation of any Hazardous
Substance, Hazardous Condition or Hazardous Activity,
in each case as amended and as now or hereafter in effect, and any common law or
equitable doctrine (including injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries (whether personal or property) or damages due to or
threatened as a result of the presence of, exposure to, or ingestion of, any
Hazardous Substance, whether such common law or equitable doctrine is now or
hereafter recognized or developed. Applicable laws include, but are not limited
to, CERCLA; the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
section 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. section
1251 et seq.; the Clean Air Act, 42 U.S.C. sections 7401 et seq.; the National
Environmental Policy Act, 42 U.S.C. section 4321; the Refuse Act, 33 U.S.C.
sections 401 et seq.; the Hazardous Materials Transportation Act of 1975, 49
U.S.C. sections 1801-1812; the Toxic Substances Control Act, 15 U.S.C. sections
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
sections 136 et seq.; the Safe Drinking Water Act, 42 U.S.C. sections 300f et
seq., each as
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amended and as now or hereafter in effect, and their state and local
counterparts or equivalents, including any regulations promulgated thereunder.
"Environmental Violation" means any activity, occurrence or condition
that violates or results in non-compliance in any material respect with any
Environmental Law.
"Equipment" means all screens, awnings, shades, blinds, curtains,
draperies, carpets, storm doors and windows, heating, electrical, and mechanical
equipment, lighting, plumbing, ventilation, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators, elevators,
window cleaning apparatus, underground sprinkler systems and other fire
prevention and extinguishing apparatus and materials and security systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time or any successor Federal statute.
"ERISA Affiliate" means each entity required to be aggregated with the
Lessee pursuant to the requirements of Section 414(b) or (c) of the Code.
"ERISA Group" means Fore Systems, Inc., a Delaware corporation, and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with Fore
Systems, Inc., are treated as a single employer under Section 414 of the Code.
"Eurocurrency Reserve Requirements" means, for any day the percentage
(expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as
determined in good faith by the Construction Lender (which determination shall
be conclusive), which is in effect on such day as prescribed by the Board
representing the maximum reserve requirement (including, without limitation,
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "Eurocurrency liabilities") of a
member bank in the Federal Reserve System. The Eurodollar Rate shall be adjusted
automatically as of the effective date of each change in the Eurocurrency
Reserve Requirements.
"Eurodollar Rate" means with respect to each day during the applicable
Interest Period, the rate per annum determined by the Construction Lender by
dividing (the resulting quotient to be rounded upward to the nearest 1/100 of
1%) (a) the rate of interest (which shall be the same for each day in such
Interest Period) determined in good faith by the Construction Lender in
accordance with its usual procedures (which determination shall be conclusive)
to be the average of the rates per annum for deposits in Dollars offered to
major money center banks in the London interbank market at approximately 11:00
a.m., London time, two Business Days prior to the first day of such Interest
Period for delivery on the first day of such Interest Period in amounts
comparable to the proposed Construction Loan (or, if there are no such
comparable amounts actively traded, the smallest amounts actively traded) and
having maturities comparable to such Interest Period, by (b) a number equal to
1.00 minus the Eurocurrency Reserve Requirements. The "Eurodollar Rate" may also
be expressed by the following formula:
[average of the rates offered to major money ]
[center banks in the London interbank market ]
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Eurodollar Rate =[as determined by the Construction Lender as set forth above]
[1.00 - Eurocurrency Reserve Requirements ]
"Event of Default" means a Lease Event of Default, a Construction
Agency Agreement Event of Default, or a Loan Agreement Event of Default.
"Excepted Payments" means:
(a) all indemnity payments (excluding indemnity payments made
pursuant to Section 13.2 of the Participation Agreement) to which the
Certificate Trustee, Trust Company, Lenders, the Certificate Purchaser
or any of their respective Affiliates, agents, officers, directors or
employees is entitled;
(b) any amounts (other than Basic Rent or amounts payable by
Lessee pursuant to Section 15.2 or Articles XVI, XVIII or XX of the
Lease) payable under any Operative Document to reimburse the
Certificate Trustee, Trust Company, the Certificate Purchaser or any of
their respective Affiliates (including the reasonable expenses of the
Certificate Trustee, Trust Company, the Certificate Purchaser or such
Affiliates incurred in connection with any such payment) for performing
or complying with any of the obligations of the Lessee under and as
permitted by any Operative Document;
(c) any amount payable to the Certificate Purchaser by any
transferee permitted under the Operative Documents of the interest of
the Certificate Purchaser as the purchaser thereof (or a portion
thereof);
(d) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies other than
such proceeds or payments payable to the Lender or the Certificate
Purchaser;
(e) any insurance proceeds under policies maintained by the
Certificate Trustee, Trust Company or the Certificate Purchaser;
(f) Transaction Expenses or other amounts or expenses paid or
payable to or for the benefit of the Certificate Trustee, Trust Company
or the Certificate Purchaser;
(g) all right, title and interest of the Certificate Purchaser
or the Certificate Trustee to the Property or any portion thereof or
any other property to the extent any of the foregoing has been released
from the Liens of the Mortgage, the Assignment of Lease and Rents and
the Construction Agency Agreement Assignment pursuant to the terms
thereof following the payment of the Loan Balance;
(h) all proceeds from Collateral (as defined in the Pledge and
Security Agreement) held in the Collateral Account; and
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(i) any payments in respect of interest to the extent
attributable to payments referred to in clauses (a) through (h) above.
"Excess Proceeds" means the excess, if any, of the aggregate of all
awards, compensation or insurance proceeds payable in connection with a Casualty
or Condemnation over the sum of the Lease Balance paid by the Lessee pursuant to
Articles XIV and XV of the Lease with respect to such Casualty or Condemnation,
and all proceeds received by the Lessor in connection with any sale of the
Property pursuant to the Lessor's exercise of remedies under Section 16.2 of the
Lease or the Lessee's exercise of the Remarketing Option under Article XX of the
Lease over the amounts owing by Lessee under the Operative Documents at such
time.
"Existing Lease" means that certain Lease and Open End Mortgage dated
as of December 13, 1995, between Lessor and Lessee.
"Expiration Date" means October 31, 2007, or the scheduled expiration
of the then current Renewal Term, if any.
"Expiration Date Purchase Obligation" means the Lessee's obligation,
pursuant to Section 18.2 of the Lease, to purchase all (but not less than all)
of the Improvements on the Expiration Date.
"Facility" means the manufacturing/office building to be constructed on
the Land pursuant to the Construction Agency Agreement as shown on the Plans and
Specifications.
"Fair Market Sales Value" means the amount, which in any event shall
not be less than zero, that would be paid in cash in an arm's-length transaction
between an informed and willing purchaser and an informed and willing seller,
neither of whom is under any compulsion to purchase or sell, respectively, for
the ownership of all of the Property or the Improvements (without regard to the
Land), as applicable. The Fair Market Sales Value of the Improvements shall be
determined based on the assumption that, except for purposes of Article XVI of
the Lease and Section 13.2 of the Participation Agreement, the Improvements are
in the condition and state of repair required under Section 9.1 of the Lease and
the Lessee is in compliance with the other requirements of the Operative
Documents.
"Fixtures" means all fixtures relating to the Improvements, including
all components thereof, located in or on the Improvements, together with all
replacements, modifications, alterations and additions thereto.
"Force Majeure Event" means any event (the existence of which was not
known and would not reasonably have been expected to be discovered through the
exercise of commercially reasonable due diligence by the Lessee or the
Construction Agent, taking into account the contemplated use of the Land and the
Construction, prior to the Initial Advance Date) beyond the control of the
Lessee, the Construction Agent and any Construction Agency Person, including,
but not limited to, strikes, lockouts, adverse soil conditions, acts of God,
adverse weather conditions, inability to obtain labor or materials, government
activities, civil commotion and enemy action; but excluding any event, cause or
condition that results from the Construction Agent's or any Construction Agency
Person's financial condition or failure to pay or any
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event, cause or condition which could have been avoided or which could be
remedied through the exercise of commercially reasonable efforts or the
commercially reasonable expenditure of funds.
"Funding Date" means the tenth Business Day of any calendar month.
"Funding Office" means the office of each Participant identified on
Schedule VI to the Participation Agreement as its Funding Office.
"Funding Request" is defined in Section 3.4(a) of the Participation
Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time consistently applied in
accordance with a Person's past accounting practices or concurred in by such
Person's independent certified public accountants certifying the relevant
audited financial statements.
"Governmental Action" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, written
interpretations, decrees, licenses, exemptions, publications, filings, notices
to and declarations of or with, or required by, any Governmental Authority, or
required by any Applicable Law, and shall include all environmental and
operating permits and licenses that are required for the full use, occupancy,
zoning and operation of the Property.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Gross Proceeds" means the gross proceeds from the sale of the Property
in accordance with Section 20.1 of the Lease without deduction for any
marketing, closing, legal or other costs, prorations or commissions.
"Gross Proceeds from Improvements" means the portion of the Gross
Proceeds allocable to the Improvements, which amount shall be determined based
upon the relative cost of the Improvements to the cost of the Land and
Improvements.
"Ground Lease" means the Ground Lease, dated as of the date hereof, by
and between Fore Systems, Inc., as landlord, and the Certificate Trustee, as
Tenant.
"Guarantor" means FORE Systems, Inc., a Delaware corporation, as
guarantor under the Guaranty, and FORE Systems Holding Corporation, a Delaware
corporation, as guarantor under the Guaranty Agreement.
"Guaranty" means the Guaranty, dated as of the Date, made by the
Guarantor in favor of the Lenders and the Certificate Purchaser.
"Guaranty Agreement" means the Guaranty Agreement, dated as of the
Initial Advance Date, made by FORE Systems Holding Corporation and Lessee in
favor of the Lenders and the Certificate Purchaser.
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"Hazardous Activity" means any activity, process, procedure or
undertaking that directly or indirectly (i) produces, generates or creates any
Hazardous Substance; (ii) causes or results in (or materially threatens to cause
or result in) the Release of any Hazardous Substance into the environment
(including air, water vapor, surface water, groundwater, drinking water, land
(including surface or subsurface), plant, aquatic and animal life); (iii)
involves the containment or storage of any Hazardous Substance; or (iv) would be
regulated as hazardous waste treatment, storage or disposal within the meaning
of any Environmental Law.
"Hazardous Condition" means any condition that violates or threatens to
violate, or that results in or threatens noncompliance with, any Environmental
Law.
"Hazardous Substance" means any of the following: (i) any petroleum or
petroleum product, explosives, radioactive materials, asbestos,
ureaformaldehyde, polychlorinated biphenyls, lead and radon gas; (ii) any
substance, material, product, derivative, compound or mixture, mineral,
chemical, waste, gas, medical waste, or pollutant, in each case whether
naturally occurring, man-made or the by-product of any process, that is toxic,
harmful or hazardous to the environment or human health or safety, as defined
under any Environmental Law; or (iii) any substance, material, product,
derivative, compound or mixture, mineral, chemical, waste, gas, medical waste or
pollutant that would support the assertion of any claim under any Environmental
Law, whether or not defined as hazardous as such under any Environmental Law.
"Impositions" means any and all liabilities, losses, expenses and costs
of any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever ("Taxes") (including (i)
real and personal property taxes, including personal property taxes on any
property covered by the Lease that is classified by Governmental Authorities as
personal property, and real estate or ad valorem taxes in the nature of property
taxes; (ii) sales taxes, use taxes and other similar taxes (including rent taxes
and intangibles taxes); (iii) any excise taxes; (iv) real estate transfer taxes,
conveyance taxes, mortgage taxes, intangible taxes, stamp taxes and documentary
recording taxes and fees; (v) taxes that are or are in the nature of franchise,
income, value added, gross receipts, privilege and doing business taxes, license
and registration fees; and (vi) assessments on the Property, including all
assessments for public improvements or benefits, whether or not such
improvements are commenced or completed within the Term), and in each case all
interest, additions to tax and penalties thereon, which at any time may be
levied, assessed or imposed by any Federal, state or local authority upon or
with respect to (a) any Tax Indemnitee, the Property or any part thereof or
interest therein, or the Lessee or any sublessee or user of the Property; (b)
the financing, refinancing, demolition, construction, substitution, subleasing,
assignment, control, condition, occupancy, servicing, maintenance, repair,
ownership, possession, purchase, rental, lease, activity conducted on, delivery,
insuring, use, operation, improvement, transfer, return or other disposition of
such Property or any part thereof or interest therein; (c) the Notes or other
indebtedness with respect to the Property or any part thereof or interest
therein or transfer thereof; (d) the rentals, receipts or earnings arising from
the Property or any part thereof or interest therein; (e) the Operative
Documents or any payment made or accrued pursuant thereto; (f) the income or
other proceeds received with respect to the Property or any part thereof or
interest therein upon the sale or disposition thereof; (g) any contract
(including the Construction Agency Agreement) relating to the construction,
acquisition or delivery of the Improvements or any part thereof or interest
therein; (h) the issuance of the Notes; or (i) otherwise in connection with the
transactions contemplated by the Operative Documents.
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Notwithstanding anything in the first paragraph of this definition
(except as provided in the final paragraph of this definition) the term
"Imposition" shall not mean or include:
(i) Taxes and impositions (other than Taxes that are, or are
in the nature of, sales, use, rental or property taxes) that are
imposed by any Governmental Authority and that are based upon or
measured by the gross or net income or gross or net receipts (including
any minimum taxes, withholding taxes or taxes on, measured by or in the
nature of capital, net worth, excess profits, items of tax preference,
capital stock, franchise, business privilege or doing business taxes);
provided that this clause (i) shall not be interpreted to prevent a
payment from being made on an After Tax Basis if such payment is
otherwise required to be so made;
(ii) any Tax or imposition to the extent, but only to such
extent, it relates to any act, event or omission that occurs, or
relates to a period, after the termination of the Lease (but not any
Tax or imposition that relates to any period prior to the termination
of the Lease with respect to the Property to which such Imposition
relates);
(iii) any Tax or imposition for so long as, but only for so
long as, it is being contested in accordance with the provisions of
Section 13.5(b) of the Participation Agreement, provided that the
foregoing shall not limit the Lessee's obligation under Section 13.5(b)
of the Participation Agreement to advance to such Tax Indemnitee
amounts with respect to Taxes that are being contested in accordance
with Section 13.5(b) of the Participation Agreement or any expenses
incurred by such Tax Indemnitee in connection with such contest;
(iv) any Taxes or impositions imposed upon a Tax Indemnitee
with respect to any voluntary transfer, sale, financing or other
voluntary disposition of any interest in the Property or any part
thereof, or any interest therein or any interest or obligation under
the Operative Documents or any Note or Certificates, or from any sale,
assignment, transfer or other disposition of any interest in a Tax
Indemnitee or any Affiliate thereof, (other than any transfer in
connection with (1) the exercise by the Lessee of its Purchase Option
or any termination option or other purchase of the Property by the
Lessee, (2) the occurrence of a Lease Event of Default or a Loan
Agreement Event of Default, (3) a Casualty or Condemnation affecting
the Property, or (4) any sublease, modification or addition to the
Property by the Lessee);
(v) any Taxes or impositions imposed on a Tax Indemnitee, to
the extent such Tax Indemnitee actually receives a credit (or otherwise
has a reduction in a liability for Taxes) in respect thereof against
Taxes that are not indemnified under the Participation Agreement (but
only to the extent such credit is not taken into account in calculating
the indemnity payment on an After Tax Basis);
(vi) any Taxes imposed against or payable by a Tax Indemnitee
resulting from, or that would not have been imposed but for, the gross
negligence or willful misconduct of such Tax Indemnitee;
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(vii) Taxes imposed on or payable by a Tax Indemnitee to the
extent such Taxes would not have been imposed but for a breach by the
Tax Indemnitee or any Affiliate thereof of any representations,
warranties or covenants set forth in the Operative Documents (unless
such breach is caused by the Lessee's breach of its representations,
warranties or covenants set forth in the Operative Documents);
(viii) Taxes to the extent resulting from such Tax
Indemnitee's failure to comply with the provisions of Section 13.5(b)
of the Participation Agreement, which failure precludes or materially
adversely affects the ability to conduct a contest pursuant to Section
13.5(b) of the Participation Agreement (unless such failure is caused
by the Lessee's breach of its obligations);
(ix) Taxes which are included in Property Improvements Cost if
and to the extent actually paid by Construction Agent;
(x) Taxes imposed on or with respect to or payable as a result
of activities of a Tax Indemnitee or Affiliate thereof unrelated to the
transactions contemplated by the Operative Documents;
Notwithstanding the foregoing, the exclusions from the definition of Impositions
set forth in clauses (i), (ii), (iv), and (x) (to the extent that any such tax
is imposed by its express terms in lieu of or in substitution for a Tax set
forth in clauses (i), (ii), (iv), and (x)) above shall not apply (but the other
exclusions shall apply) to any Taxes or any increase in Taxes imposed on a Tax
Indemnitee net of any decrease in taxes realized by such Tax Indemnitee, to the
extent that such tax increase or decrease would not have occurred if on each
Funding Date the Lessor and the Lender had advanced funds to the Lessee in the
form of a loan secured by the Property in an amount equal to the Property
Improvement Cost funded on such Funding Date, with debt service for such loan
equal to the Basic Rent payable on each Scheduled Payment Date and a principal
balance at the maturity of such loan in an amount equal to the then outstanding
amount of the Loans and Certificate purchaser Amounts at the end of the term of
the Lease.
"Improvement Costs" shall for purposes of the definition of "Soft
Costs" mean the maximum amount of up to Fourteen Million, Two Hundred Ten
Thousand and xx/100 Dollars ($14,210,000.00) adjusted from time to time solely
as provided in the Construction Agency Agreement.
"Improvements" means the Site Work, Facility, Fixtures, Equipment, and
other improvements of every kind existing at any time and from time to time
(including those constructed pursuant to the Construction Agency Agreement and
those purchased with amounts advanced by the Participants pursuant to the
Participation Agreement) on or under the Land, together with any and all
appurtenances to such buildings, structures or improvements, including
sidewalks, utility pipes, conduits and lines, parking areas and roadways, and
including all Modifications and other additions to or changes in the
Improvements at any time.
"Indemnitee" means the Certificate Trustee, in its individual and its
trust capacity, the Lenders, the Certificate Purchaser, their respective
Affiliates and their respective successors, assigns, directors, shareholders,
partners, officers, employees and agents.
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"Initial Advance Date" is defined in Section 2.2 of the Participation
Agreement.
"Initial Collateral" has the meaning attributed to it in the Pledge and
Security Agreement.
"Insurance Requirements" means all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Construction Agency Agreement to be maintained by the
Construction Agent, and all requirements of the issuer of any such policy.
"Interest Payment Construction Loan" is defined in Section 2.2 of the
Construction Loan Agreement.
"Interest Period" means, with respect to any Construction Loan and on
and prior to the Refinancing, the Certificate:
(a) initially, the period commencing on the funding with
respect to such Construction Loan and Certificate and ending on the
tenth Business Day of the next succeeding month; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Loan and Certificate
and ending any month from one, two, three, six, nine and twelve months
thereafter;
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period that would otherwise extend beyond
the Construction Loan Expiration Date shall end on the Construction
Loan Expiration Date;
(iii) the Lessee shall select Interest Periods so as not to
require a payment or prepayment of any Construction Loan during an
Interest Period for such Construction Loan; and
(iv) any Interest Period in respect of a Certificate shall end
on the date the Refinancing is consummated.
"Interim Term" is defined in Section 2.3 of the Lease.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"Land" means the parcel of real property described on Exhibit A to the
Lease and all Appurtenant Rights attached thereto.
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"Lease" means the Lease and Open End Mortgage, dated as of the Initial
Advance Date, between the Lessor and the Lessee.
"Lease Balance" means, as of any date of determination, an amount equal
to the sum of the Loan Balance and the Certificate Balance.
"Lease Default" means any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute a Lease Event of
Default.
"Lease Event of Default" is defined in Section 16.1 of the Lease.
"Lenders" means collectively, the Construction Lender together with its
successors and assigns from time to time including the Tranche A Lenders and the
Tranche B Lenders in connection with the Refinancing.
"Lenders Basic Rent" means, as determined as of any Payment Date, the
sum of (i) amounts due with respect to scheduled repayments of the principal of
the Loans and (ii) the interest due on the Loans, excluding any interest at the
applicable Overdue Rate on any installment of Basic Rent not paid when due and
any fine, penalty, interest or cost assessed or added under any agreement with a
third party for nonpayment or late payment of Basic Rent.
"Lenders Financing Statements" means UCC financing statements
appropriately completed and executed for filing in the applicable jurisdiction
in order to perfect a security interest in favor of the Lenders in the Equipment
located on the Property or in any Improvements on the Property.
"Lessee" means Fore Systems, Inc., a Delaware corporation, as lessee or
mortgagor under the Lease.
"Lessor" means the Certificate Trustee.
"Lessor Financing Statements" means UCC financing statements
appropriately completed and executed for filing in the applicable jurisdiction
in order to protect the Lessor's interest under the Lease to the extent the
Lease is a security agreement.
"Lessor Lien" means any Lien against the Property, the Trust Estate,
the Lease or any payment of Rent as a result of (a) any act of or Claim against
the Lessor, Trust Company or any Participant not resulting from the transactions
contemplated by the Operative Documents, or (b) any Claim against the Lessor,
Trust Company or any Participant, with respect to Taxes against which Lessee is
not required to indemnify Lessor, Trust Company or any Participant, in its
individual capacity, pursuant to Article IX of the Participation Agreement.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including any
irrevocable license, conditional sale or other title retention agreement, any
lease in the nature thereof, or any other right of or arrangement with any
creditor to have its claim satisfied out of any specified property or asset with
the proceeds therefrom prior to the satisfaction of
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the claims of the general creditors of the owner thereof, whether or not filed
or recorded, or the filing of, or agreement to execute as "debtor", any
financing or continuation statement under the Uniform Commercial Code of any
jurisdiction or any federal, state or local lien imposed pursuant to any
Environmental Law.
"Loan Agreement Default" means any event or condition which with notice
or lapse of time, or both, would constitute a Loan Agreement Event of Default.
"Loan Agreement Event of Default" means a Construction Loan Agreement
Event of Default or an event of default under a Refinancing Credit Facility
Agreement.
"Loan Agreements" means collectively the Construction Loan Agreement
and the Refinancing Credit Facility Agreements, or any of them.
"Loan Balance" means as of any date of determination the sum of the
Construction Loan Balance and, following the Refinancing, the Refinancing Loan
Balance.
"Loan Documents" means, collectively, the Construction Loan Documents
and the Refinancing Loan Documents.
"Loans" means, collectively, the Construction Loans and, following the
Refinancing, the Refinancing Loans.
"Make-Whole Premium" means as at any date a payment with respect to the
Certificate, a Tranche A Loan or Tranche B Loan is made prior to [Insert Date of
Scheduled Termination of Base Term] the excess, if any, of (i) the present value
as at the payment date (determined using a discount rate equal to the Reference
Treasury Yield plus 50 basis points) of the sum of the remaining principal of
the Loan or Certificate Amounts being prepaid and the amount of interest or
yield (exclusive of interest or yield accrued to the date of prepayment) that
would have been payable in respect of the principal or Certificate Amount being
prepaid if such prepayment had not been made, over (ii) the aggregate principal
amount of the Certificate or such Loan then to be so prepaid. To the extent that
the Reference Treasury Yield plus the 0.50% at the time of determination of the
Make-Whole Premium is equal to or higher than the Certificate Yield Rate or the
interest rate on the Loan being prepaid, whichever is applicable, the Make-Whole
Premium shall be zero.
"Marketable Collateral" means, at any time, any Debt instrument issued
by the United States Treasury maturing not more than three (3) years after such
time or any certificates of deposit issued by Mellon Bank or investments in
Dreyfus Treasury Prime Cash Management or such other money market mutual fund
which invests solely in U.S. Treasury Securities acceptable to Mellon Bank.
"Marketing Period" means the period commencing on the date 365 days
prior to the Expiration Date and ending on the Expiration Date.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $1,000,000.
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"Maximum Guaranteed Amount" means 89.95% of Eligible Project Costs.
"Mellon Bank" is defined in the preamble to the Participation
Agreement.
"Mellon Prime Rate" means the interest rate per annum announced from
time to time by Mellon Bank as its prime rate. The Mellon Prime Rate may be
greater or less than other interest rates charged by Mellon Bank to other
borrowers and is not solely based or dependent upon the interest rate which
Mellon Bank may charge any particular borrower or class of borrowers.
"Mellon Revolver Facility" means the Revolving Line of Credit
Agreement, dated as of September 30, 1997, between Mellon Bank and the Lessee.
"Modifications" is defined in Section 10.1(a) of the Lease.
"Mortgage" means the Mortgage, dated as of the Initial Advance Date
made by the Certificate Trustee in favor of the Lender and satisfactory in form
and substance to the Lender in order to create a first priority mortgage lien on
the Property.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Proceeds" means all amounts paid in connection with any Casualty
or Condemnation or any sale of the Property pursuant to Lessor's exercise of
remedies under Section 16.2 of the Lease or the Lessee's exercise of the
Remarketing Option under Article XX of the Lease, and all interest earned
thereon, less the expense of claiming and collecting such amounts, including all
costs and expenses in connection therewith for which the Lender or the Lessor is
entitled to be reimbursed pursuant to the Lease.
"Note" is defined in Section 2.3 of the Construction Loan Agreement.
"Obligations" means all obligations and liabilities of the Lessee, the
Construction Agent, each Guarantor and each other obligor under the Operative
Documents, the Refinancing Loan Documents and the Swap Agreement (including,
with respect to the Swap Agreement, all rights of the Lessor thereunder).
"Operative Documents" means the following:
(a) the Participation Agreement;
(b) the Lease;
(c) the Trust Agreement;
(d) the Certificate;
(e) the Construction Loan Agreement;
(f) the Note;
(g) the Guaranty;
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(h) the Pledge and Security Agreement;
(i) the Assignment of Leases and Rents;
(j) the Deed;
(k) the Mortgage;
(l) the Construction Agency Agreement;
(m) the Assignment of Construction Agency Agreement;
(n) the Construction Documents Assignment;
(o) the Guaranty Agreement;
(p) the Ground Lease;
(q) the Memorandum of Ground Lease..
"Original Executed Counterpart" is defined in Section 26.10 of the
Lease.
"Outside Completion Date" means March 31, 2000.
"Overdue Rate" means the lesser of (x) the maximum interest rate then
permitted under applicable law and (y) the greater of (A) 12% per annum and (B)
the Mellon Prime Rate plus 4%.
"Participants" means the Lenders and the Certificate Purchaser,
collectively.
"Participation Agreement" means the Participation Agreement, dated as
of the Documentation Date, among the Lessee, as Lessee, Guarantor, and
Construction Agent, the Trust Company, the Certificate Trustee, the Certificate
Purchaser, and the Lender.
"Payment Date" means (a) any Scheduled Payment Date, (b) any date on
which interest or principal is payable pursuant to Section 2.6(c)(ii) of the
Construction Loan Agreement in connection with any prepayment of the
Construction Loans and any date on which a Refinancing Credit Facility Agreement
is prepaid in whole or in part.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means with respect to the Property:
(i) the respective rights and interests of the parties to the
Operative Documents as provided in the Operative Documents;
(ii) the rights of any sublessee or assignee under a sublease
or an assignment expressly permitted by the terms of the Lease;
(iii) Liens for Taxes that either are not yet due or are being
contested in accordance with the provisions of Section 12.1 of the
Lease;
(iv) Liens arising by operation of law, materialmen's,
mechanics', workers', repairmen's, employees', carriers',
warehousemen's and other like Liens relating to the construction of the
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Improvements or in connection with any Modifications or arising in the
ordinary course of business for amounts not to exceed $500,000 that
either are not more than 30 days past due or are being diligently
contested in good faith by appropriate proceedings, so long as such
proceedings satisfy the conditions for the continuation of proceedings
to contest Taxes set forth in Section 12.2 of the Lease;
(v) Liens of any of the types referred to in clause (iv) above
that have been bonded for not less than the full amount in dispute (or
as to which other security arrangements satisfactory to the Lessor have
been made), which bonding (or arrangements) shall comply with
applicable Requirements of Law, and has effectively stayed any
execution or enforcement of such Liens;
(vi) Liens arising out of judgments or awards with respect to
which appeals or other proceedings for review are being prosecuted in
good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have been
made, so long as such proceedings have the effect of staying the
execution of such judgments or awards and satisfy the conditions for
the continuation of proceedings to contest set forth in Section 12.1 of
the Lease;
(vii) easements, rights of way and other encumbrances on title
to real property pursuant to Section 11.2 of the Lease;
(viii) Lessor Liens;
(ix) Liens created by the Lessee with the consent of the
Lessor; and
(x) Liens described on the title insurance policy and
consented to by Mellon delivered pursuant to Section 6.1(k) of the
Participation Agreement other than Liens described in clause (iv) or
(vi) above that are not removed within 30 days of their origination.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental authority or any other entity.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"Plans and Specifications" means the plans and specifications for the
Construction, as more particularly described in Exhibit B to the Construction
Agency Agreement.
"Pledge and Security Agreement" means the Pledge and Security
Agreement, dated as of the Initial Advance Date, among FORE Systems Holding
Corporation, the Lenders, the Certificate Trustee and Mellon Bank, as custodian
thereunder.
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"Prime Contractor" means, collectively, Mascaro Incorporated and Penn
Transportation or such other Person who shall, with the prior written consent of
the Lenders and the Certificate Purchaser, have been designated by the Lessee to
act as the prime contractors for purposes of the Construction.
"Property" means the Land and all of the Improvements at any time
located on or under the Land.
"Property Improvements Cost" means out-of pocket costs of the
Construction Agent incurred and properly payable under the Construction Agency
Agreement in accordance with the Operative Documents, including all Soft Costs
and all costs allocable to Site Work.
"Purchase Notice" is defined in Section 18.1 of the Lease.
"Purchase Option" is defined in Section 18.1 of the Lease.
"Purchase Option Price" is defined in Section 18.1 of the Lease.
"Qualified Assets" is defined in Section 2(e) of the Pledge and
Security Agreement.
"Reference Treasury Yield" means, relative to any prepayment of the
Tranche A Loans, Tranche B Loans and Certificates, the yield calculated with
reference to the rate given (i) on the USD screen of Bloomberg Financial Markets
Service at 11:00 a.m., Eastern standard time three Business Days prior to the
date of such prepayment, or if such rate is unavailable then (ii) by the
Statistical Release No. H.15 (519) then most recently published by the F.R.S.
Board three Business Days prior to the date of such prepayment, as the yield, in
either case, of a hypothetical U.S. Treasury security with a remaining term
equal to the weighted average remaining term to maturity (rounded to the nearest
month) of the Loan or Certificate being prepaid in whole or in part. If no
maturity exactly corresponds to the weighted average remaining term to maturity
of the Tranche A Loans, Tranche B Loans or Certificates, yields for two
published maturities most closely corresponding to such weighted average shall
be selected in the Statistical Release and the yield shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in each period
to the nearest month.
"Refinancing" means the refinancing of the Construction Loan Balance on
or prior to the Base Date pursuant to the Refinancing Loan Documents, which
shall be in form and substance satisfactory to Mellon Bank and Mellon Financial
Service Corporation #4 in its sole discretion.
"Refinancing Credit Facility Agreements" means the loan agreements,
credit facilities or other similar extensions of credit entered into by the
Lessor, as borrower, with Mellon Bank and Mellon Financial Services Corporation
#4, in form and substance satisfactory to such entities in their sole discretion
pursuant to one or more such agreements, the proceeds of which are used to repay
in full the Construction Loan Balance and all other amounts owing under the
Construction Loan Agreement.
"Refinancing Loan Balance" means as of the date of determination an
amount equal to the sum of the principal amounts outstanding under the
Refinancing Credit Facility Agreements.
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"Refinancing Loan Documents" means the Refinancing Credit Facility
Agreements, the notes evidencing the Lessor's obligations thereunder and any
mortgages, deeds of trust, security agreements, assignments or the similar
agreements securing the Lessor's obligations under any Refinancing Credit
Facility Agreement.
"Refinancing Loans" means the Tranche A Loan or Tranche B Loan or both.
"Release" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Substance that constitutes an Environmental Violation.
"Remarketing Option" is defined in Section 20.1 of the Lease.
"Remarketing Payments" means any of the following: Gross Proceeds from
Improvements, the Termination Rental Amount and any payment made by Lessee
pursuant to Section 13.2 of the Participation Agreement.
"Renewal Option" is defined in Section 19.1 of the Lease.
"Renewal Term" is defined in Section 19.1 of the Lease.
"Rent" means, collectively, the Basic Rent and the Supplemental Rent,
in each case payable under the Lease.
"Requesting Party" is defined in Section 22.1 of the Lease.
"Required Modification" is defined in Section 10.1(a) of the Lease.
"Required Participants" means those Participants holding an aggregate
of 51% of the outstanding Loans and Certificate Amounts.
"Requirements of Law" means all Federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Property, the Improvements or
the demolition, construction, use or alteration thereof, whether now or
hereafter enacted and in force, including any that require repairs,
modifications or alterations in or to the Property or in any way limit the use
and enjoyment thereof (including all building, zoning and fire codes and the
Americans with Disabilities Act of 1990, 42 U.S.C. section 1201 et. seq. and any
other similar Federal, state or local laws or ordinances and the regulations
promulgated thereunder) and any that may relate to environmental requirements
(including all Environmental Laws), and all permits, certificates of occupancy,
licenses, authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments which are
either of record or known to the Lessee affecting the Property, the Appurtenant
Rights and any easements, licenses or other agreements entered into pursuant to
Section 11.2 of the Lease.
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"Responsible Employee" means the Chief Executive Officer, Treasurer, or
Chief Financial Officer of the Construction Agent.
"Responsible Employee's Certificate" means a certificate signed by any
Responsible Employee, which certificate shall certify as true and correct the
subject matter being certified to in such certificate.
"Scheduled Payment Date" means the tenth Business Day of each calendar
month during the Interest Period and the last day of each Interest Period, and
any date on which a payment is due under a Refinancing Credit Facility
Agreement. Each Scheduled Payment Date following the Refinancing should fall on
the same date as each "Scheduled Payment Date" as such term is defined in the
Existing Lease.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Security Documents" means the collective reference to the Mortgage,
the Assignment of Leases and Rents and the Construction Agency Agreement
Assignment, the Guaranty, the Pledge and Security Agreement, and all other
security documents hereafter delivered to the Lenders granting a Lien on any
asset or assets of any Person to secure the obligations and liabilities of the
Certificate Trustee under any of the Loan Agreements and/or under any of the
other Loan Documents.
"Shortfall Amount" means, as of the Expiration Date, the amount that
the Lease Balance will exceed the Loan Balance upon the completion of a sale of
the Improvements pursuant to Article XX of the Lease.
"Significant Casualty" means (x) the actual or constructive total loss
of the Facility or damage to the Facility to an extent rendering repair
impractical or uneconomical, in any case as reasonably determined in good faith
and as certified to the Participants by the Board of Directors of the Lessee or
(y) damage to the Facility which results in an insurance settlement on the basis
of a total loss or a constructive total loss (including title insurance
proceeds) in respect of a total loss of the Facility.
"Significant Condemnation" means (a) a Condemnation that involves a
taking of Lessor's entire title to the Land, or (b) a Condemnation that in the
good faith judgment of the Lessee, as certified to the Participants by the Board
of Directors of the Lessee, either (i) renders the Facility unsuitable for
continued use as property of the type of the Facility or (ii) is such that
restoration of the Facility to substantially its condition as existed
immediately prior to such Condemnation would be impracticable or impossible.
"Site Work" shall mean all work necessary in connection with the
development of the Land and the construction of the Improvements, including, but
not limited to, site planning services, grading (including obtaining any
necessary slope easement rights from adjacent land owners and installation and
proper compaction, reinforcement, and seeding of such slopes), pedestrian and
vehicular connections, landscaping, seeding, and planting, storm drainage,
utility connections, tap-ins, and extensions, installation of all utility lines,
any required off-site improvements not to exceed $50,000.00 coordination and
securing of local site utility approvals, securing appropriate zoning approvals,
installation, paving, striping, and lighting of all parking areas, installation
and lighting of all pedestrian walkways and circulation areas, all as shown on
the Plans and Specification submitted by the Lessee.
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"Site Work Costs" shall for purposes of the definition of "Soft Costs"
mean the maximum amount of One Million, Five Hundred Eighty-Five Thousand and
xx/100 Dollars ($1,585,000.00)
"Soft Costs" shall mean all costs contained in the Approved
Construction Budget, of whatever kind or nature, of performing the Site Work and
the construction of the Improvements (other than the purchase price for the Land
and Lessee's costs in connection with the acquisition of the Land, such as the
cost of title insurance, the Improvement Costs, and the Site Work Costs), but
including Transaction Expenses, engineering costs for Site Work, costs of
architects and engineers with respect to inspection of the Construction and the
issuance of certificates as provided in the Operative Documents, and sums
expended by the Lessee prior to the date hereof properly allocated to or
otherwise included in Soft Costs.
"Solvent" means with respect to any Person on a particular date, that
on such date (i) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person, (ii) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (iii) such Person is
able to realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course
of business, (iv) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature, and (v) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability taking into account any subrogation and contribution rights.
"Submitted Financial Statements" means the financial statements of Fore
Systems, Inc. for the fiscal year ended in 1997 which were audited by
PriceWaterhouseCoopers, copies of which have been delivered to the Lender.
"Sub-Participant" is defined in Section 12.2 of the Participation
Agreement.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of:
(a) the outstanding capital stock having Voting Power to elect
a majority of the Board of Directors of such corporation (irrespective
of whether at the time capital stock of any other class or classes of
such corporation shall or might having Voting Power upon the occurrence
of any contingency),
(b) the interest in the capital or profits of such partnership
or joint venture, or
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(c) the beneficial interest of such trust or estate, is at the
time directly or indirectly owned by such Person, by such Person and
one or more of its Subsidiaries or by one or more of such Person's
Subsidiaries.
"Substantial Completion" means such time as the conditions set forth in
Article VII of the Participation Agreement are satisfied with respect to any
Facility.
"Subtenant" is defined in Section 6.2 of the Lease.
"Supplemental Rent" means any and all amounts, liabilities and
obligations (other than Basic Rent) which the Certificate Trustee agrees or is
otherwise obligated to pay under the Loan Agreement, the Trust Agreement, the
Ground Lease or any other Operative Document (whether or not designated as
Supplemental Rent) to the Lender, the Certificate Purchaser, or any other
Person, including Make-Whole Premiums, indemnities and damages for breach of any
covenants, representations, warranties or agreements, or any other amounts
designated as Supplemental Rent under the Operative Documents.
"Swap Agreement" means any agreement among Lessee, Lessor and/or one or
more third parties which has the effect of fixing the Treasury Rate and/or
Eurodollar Rate for the Term.
"Tangible Net Worth" means, as of any date of determination, all
amounts (without duplication) which, in accordance with GAAP, would be included
under shareholder's equity on a balance sheet of the Lessee and its
Subsidiaries, excluding intangible assets such as patents, copyrights,
trademarks, franchises and goodwill.
"Tax Indemnitee" means the Lessor, the Certificate Purchaser, the
Certificate Trustee, Trust Company and each Participant.
"Taxes" is defined in the definition of Impositions.
"Tenant Improvement Work" means the performance of finish work for the
Improvements to make such Improvements ready for occupancy by the Lessee.
"Term" is defined in Section 2.3 of the Lease.
"Termination Date" means the earlier of (i) the date as defined in
Section 15.2(a) and 16.2(e) of the Lease, and (ii) [the "Termination Date" as
such term is defined in the Existing Lease.]
"Termination Notice" is defined in Section 15.1 of the Lease.
"Termination Rental Amount" means an amount equal to 79.44758% of the
aggregate amount of Advances made by Lessor on each Funding Date; provided,
however, in the event Lessee is required to make a Supplemental Rent payment in
accordance with Section 5.3(h) of the Construction Agency Agreement, the
principal amounts of the Tranche A Loans, Tranche B Loans and the Certificate
Amount shall be recalculated, such that the Lease may be treated as an operating
lease under Statement of Financial Accounting Standards No. 13, to account for
any such Supplemental Rent payment and any
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Certificate Yield paid in connection therewith (minus any interest earned on
the Money Market Account, as defined in Section 5.1(d) of the Construction Loan
Agreement) being minimum lease payments at the inception of the Base Term, with
such Supplemental Rent not being in excess of an amount that would cause the
Termination Rental Amount as recalculated minus the present value of Certificate
Yield payable thereon (plus any interest earned on the Money Market Account) to
be less than zero, and the Termination Rental Amount shall equal the principal
amount of the Tranche A Loans, as recalculated, and; provided, further, in the
event of an Unrelated Indemnity Event, the Termination Rental Amount and all
Basic Rent related to the Unrelated Indemnity Event shall be calculated based on
the aggregate amount of Advances made by Lessor, but shall not include sums
advanced by Lessor for or related to the Unrelated Indemnity Event.
"Total Assets" means such term as it appears in the Submitted Financial
Statements with respect to any Person, and in subsequent audited financial
statements of such entity, determined in accordance with those generally
accepted accounting principles applied in the preparation of the Submitted
Financial Statements.
"Total Capitalization" means the principal amount of all Consolidated
Indebtedness plus Consolidated Shareholders' Equity.
"Tranche A Lenders" means Mellon Bank.
"Tranche A Loans" means any Refinancing Loan other than a Tranche B
Loan.
"Tranche B Lender" means Mellon Financial Services Corporation #4, a
Pennsylvania corporation.
"Tranche B Loans" means any Refinancing Loan made by the Tranche B
Lender.
"Transaction Expenses" means all costs and expenses in connection with
the preparation, execution and delivery of the Operative Documents, the
Refinancing Loan Documents and the transactions contemplated by the Operative
Documents and the Refinancing Loan Documents including:
(a) the reasonable fees, out-of-pocket expenses and
disbursements of counsel, local counsel and special counsel for each of
the Lessor, the Certificate Purchaser, the Certificate Trustee, the
Lenders, the Lessee in negotiating the terms of the Operative Documents
and the other transaction documents, preparing for the closing under,
and rendering opinions in connection with, such transactions and in
rendering other services customary for counsel representing parties to
transactions of the types involved in the transactions contemplated by
the Operative Documents, and the Refinancing Loan Documents and the
reasonable initial fees and expenses of the Lessor;
(b) the reasonable fees, out-of-pocket expenses and
disbursements of any law firm or other external counsel to each of the
Lessor, the Certificate Purchaser, the Certificate Trustee, and the
Lenders in connection with (1) any amendment, supplement, waiver or
consent with respect to any Operative Documents requested or approved
by the Lessee, (2) any enforcement of any rights or remedies against
the Lessee or the Guarantor in respect of the Operative Documents and
(3) the Refinancing;
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(c) fees relating to residual value insurance obtained by the
Lessor or any Participant, not to exceed $3,000;
(d) any and all Taxes and fees incurred in recording,
registering or filing any Operative Document, Refinancing Loan Document
or any other transaction document, any deed, declaration, mortgage,
security agreement, notice or financing statement with any public
office, registry or governmental agency in connection with the
transactions contemplated by the Operative Documents or the Refinancing
Loan Documents, unless the Operative Documents or the Refinancing Loan
Documents expressly provide that such Taxes or fees are required to be
paid by a Person other than the Lessee;
(e) any title fees, premiums and escrow costs and other
expenses relating to title insurance and the closings contemplated by
the Operative Documents or the Refinancing Loan Documents, and any
expenses incurred by the Construction Lender for analysis of the
construction costs and inspection of the Property in connection with
the Advances, and all premiums for insurance during the Construction
Period;
(f) all expenses relating to all Environmental Audits and
appraisals prepared from time to time under the Operative Documents or
the Refinancing Loan Documents;
(g) all fees relating to Lenders' Construction Consultant;
(h) the initial and ongoing fees and reasonable expenses of
the Certificate Trustee and its special counsel;
(i) any other reasonable out-of-pocket fees and expenses
incurred by any Participant in connection with the negotiation and
consummation of the transactions contemplated by the Operative
Documents or the Refinancing Loan Documents;
(j) fees payable by the Lessee under Sections 4.5 and 4.6 of
the Participation Agreement; and
(k) all other fees, costs and expenses payable by Lessee under
the Operative Documents (except in connection with a Default or Event
of Default) not otherwise included as Soft Costs, to the extent amounts
are included in the Approved Construction Budget under the heading
"Eligible Project Costs Reimbursables".
"Transferee" is defined in Section 12.3 of the Participation Agreement.
"Treasury Rate" means, relative to the Tranche B Loans, the yield
calculated with reference to the rate given (i) on the USD screen of Bloomberg
Financial Markets Service at 11:00 a.m., Eastern standard time three (3)
Business Days prior to the date the Tranche B Lender advances its Tranche B
Loan, or if such rate is unavailable then (ii) by the Statistical Release No.
H.15 (519) then most recently published by the F.R.S. Board three (3) Business
Days prior to the date the Tranche B Lender advances its Tranche B Loan, as the
yield, in either case, of a hypothetical U.S. Treasury security with an
interpolated rate, using
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the most actively traded five year and ten year U.S. Treasury securities, with
a weighted average remaining term of eight years.
"Trigger Event" is defined in Section 2.7 of the Construction Agency
Agreement.
"Trust" means Brush Creek Business Trust II, a statutory Delaware
business trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
as of the Documentation Date, between the Certificate Purchaser and Trust
Company.
"Trust Company" means the institution serving as Certificate Trustee or
any successor financial institution acting as Certificate Trustee under the
Operative Documents, in each case in its individual capacity.
"Trust Estate" is defined in Section 1.2(b) of the Trust Agreement.
"UCC Financing Statements" means collectively the Lender Financing
Statements and the Lessor Financing Statements.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Uniform Commercial Code" and "UCC" means the Uniform Commercial Code
as in effect in any applicable jurisdiction.
"Unrelated Event" means any Construction Agency Event of Default
relating to Construction other than a Construction Agency Event of Default
resulting from (i) the Willful Act or Omission of any Construction Agency
Person, (ii) acts described in Section 16.1(g) or (h) of the Lease, (iii)
fraudulent acts of any Construction Agency Person, (iv) illegal acts of any
Construction Agency Person or (v) application of funds by any Construction
Agency Person except as expressly permitted by the Operative Documents and
which, in the case of clause (i) above, could not have been avoided or remedied
by the exercise of commercially reasonable efforts by any Construction Agency
Person, assuming the availability of Commitments.
"Unrelated Indemnity Event" means an event arising from or related to
an act or omission of any Person other than a Construction Agency Person which
occurs notwithstanding the compliance by all Construction Agency Persons with
the provisions of the Operative Documents.
"Voting Power" means, with respect to securities issued by any Person,
the combined voting power of all securities of such person which are issued and
outstanding at the time of determination and which are entitled to vote in the
election of directors of such Person, other than securities having such power
only by reason of the happening of a contingency.
-32-
APPENDIX 1
<PAGE> 105
"Willful Act or Omission" means an act or omission of any Construction
Agency Person which is not the direct result of a Force Majeure Event.
-33-
APPENDIX 1
<PAGE> 1
Exhibit 10.2
================================================================================
LEASE AND OPEN END MORTGAGE
THIS DOCUMENT SECURES FUTURE ADVANCES
Dated as of December 14, 1998
between
FORE SYSTEMS, INC.,
as the Lessee and Mortgagor
and
WILMINGTON TRUST COMPANY,
not in its individual capacity
except as expressly stated herein,
but solely as certificate trustee of
BRUSH CREEK BUSINESS TRUST II,
as the Lessor and Mortgagee
================================================================================
Construction Program For a
Manufacturing/Office Facility
in Allegheny County, Pennsylvania
================================================================================
This Lease and Open End Mortgage is subject to a lien in favor of the Lenders
under a Construction Loan Agreement dated as of the date hereof, among the
Lessee and the Lenders, as amended or supplemented from time to time. This Lease
has been executed in several counterparts. To the extent, if any, that this
Lease and Open End Mortgage constitutes chattel paper (as such term is defined
in the Uniform Commercial Code as in effect in any applicable jurisdiction), no
lien on this Lease and Open End Mortgage may be created through the transfer or
possession of any counterpart other than the original counterpart containing the
receipt therefor executed by Mellon Bank, N.A. on or following the signature
page hereof.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
ARTICLE I. DEFINITIONS.....................................................3
1.1. Definitions; Interpretation..............................................................................3
ARTICLE II. PURCHASE AND LEASE.............................................3
2.1. Acceptance and Lease of Property.........................................................................3
2.2. Acceptance Procedure.....................................................................................3
2.3. Lease Term...............................................................................................3
2.4. Title....................................................................................................3
2.5. Waiver by Lessor of Lien and Distraint...................................................................4
ARTICLE III. PAYMENT OF RENT...............................................4
3.1. Rent.....................................................................................................4
3.2. Payment of Basic Rent....................................................................................4
3.3. Supplement Rent..........................................................................................4
3.4. Method of Payment........................................................................................5
ARTICLE IV. QUIET ENJOYMENT................................................5
4.1. Quiet Enjoyment..........................................................................................5
ARTICLE V. NET LEASE, ETC..................................................5
5.1. Net Lease................................................................................................5
5.2. No Termination or Abatement..............................................................................6
5.3. No Bar...................................................................................................6
ARTICLE VI. SUBLEASES......................................................6
6.1. Subletting...............................................................................................6
6.2. Assignment of Subleases and Business Interruption Insurance to Lessor....................................7
ARTICLE VII. LESSEE ACKNOWLEDGMENTS.................................................7
7.1. Condition of the Property................................................................................7
7.2. Risk of Loss.............................................................................................8
ARTICLE VIII. POSSESSION AND USE OF THE PROPERTY, ETC........................................8
8.1. Utility Charges..........................................................................................8
8.2. Possession and Use of the Property.......................................................................8
8.3. Compliance with Requirements of Law and Insurance Requirements...........................................8
8.4. Assignment by Lessee.....................................................................................9
ARTICLE IX. MAINTENANCE AND REPAIR; RETURN..........................................9
9.1. Maintenance and Repair; Return...........................................................................9
ARTICLE X. MODIFICATIONS, ETC..............................................9
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<C> <S> <C>
10.1. Modifications, Substitutions and Replacements...........................................................9
ARTICLE XI. WARRANT OF TITLE; EASEMENTS............................................10
11.1. Warrant of Title.......................................................................................10
11.2. Grants and Releases of Easements; Lessor's Waivers.....................................................11
ARTICLE XII. PERMITTED CONTESTS....................................................11
12.1. Permitted Contests in Respect of Applicable Law........................................................11
12.2. Permitted Contests in Respect of Real Property Taxes...................................................12
12.3. Joinder of Lessor......................................................................................12
ARTICLE XIII. INSURANCE...................................................12
13.1. Public Liability and Workers' Compensation Insurance...................................................12
13.2. Hazard and Other Insurance.............................................................................13
13.3. Insurance Coverage.....................................................................................13
ARTICLE XIV. CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS.........................................14
14.1. Casualty and Condemnation..............................................................................14
14.2. Environmental Matters..................................................................................16
14.3. Notice of Environmental Matters........................................................................16
ARTICLE XV. TERMINATION OF LEASE..........................................17
15.1. Mandatory Partial or Complete Termination Upon Certain Events..........................................17
15.2. Termination Procedures.................................................................................17
ARTICLE XVI. EVENTS OF DEFAULT............................................18
16.1. Lease Events of Default................................................................................18
16.2. Remedies...............................................................................................20
16.3. Waiver of Certain Rights...............................................................................23
16.4. Ownership of Common Stock..............................................................................23
16.5. Limitation of Recourse During the Interim Term.........................................................24
ARTICLE XVII. LESSOR'S RIGHT TO CURE......................................24
17.1. The Lessor's Right to Cure the Lessee's Lease Defaults.................................................24
ARTICLE XVIII. PURCHASE PROVISIONS.................................................25
18.1. Purchase Option........................................................................................25
18.2. Expiration Date Purchase Obligation....................................................................25
18.3. Acceleration of Purchase Obligation....................................................................25
ARTICLE XIX. RENEWAL TERMS...............................................26
19.1. Renewal................................................................................................26
ARTICLE XX. REMARKETING OPTION.................................................27
20.1. Option to Market.......................................................................................27
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<C> <S> <C>
20.2. Certain Obligations Continue...........................................................................29
20.3. Termination of Operative Documents.....................................................................29
ARTICLE XXI. PROCEDURES RELATING TO PURCHASE OR REMARKETING..........................................30
21.1. Provisions Relating to the Exercise of Purchase Option or Obligation and Conveyance Upon
Remarketing and Conveyance Upon Certain Other Events...................................................30
ARTICLE XXII. ESTOPPEL CERTIFICATES............................................31
22.1. Estoppel Certificates..................................................................................31
ARTICLE XXIII. ACCEPTANCE OF SURRENDER.............................................31
23.1. Acceptance of Surrender................................................................................31
ARTICLE XXIV. NO MERGER OF TITLE.............................................32
24.1. No Merger of Title.....................................................................................32
ARTICLE XXV. INTENT OF THE PARTIES.............................................32
25.1. Ownership of the Property..............................................................................32
25.2. Open-End Mortgage......................................................................................33
ARTICLE XXVI. MISCELLANEOUS..................................................34
26.1. Survival; Severability; Etc............................................................................34
26.2. Amendments and Modifications...........................................................................34
26.3. No Waiver..............................................................................................34
26.4. Notices................................................................................................34
26.5. Successors and Assigns.................................................................................34
26.6. Headings and Table of Contents.........................................................................34
26.7. Counterparts...........................................................................................35
26.8. GOVERNING LAW..........................................................................................35
26.9. Limitations on Recourse................................................................................35
26.10. Original Lease.........................................................................................35
26.11. SUBMISSION OF JURISDICTION.............................................................................35
26.12. POWER TO CONFESS JUDGMENT..............................................................................36
26.13. POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING.........................................................36
26.14. No Merger..............................................................................................37
SCHEDULE 1 SCHEDULE 1 TO LEASE AND OPEN END MORTGAGE
</TABLE>
iii
<PAGE> 5
LEASE AND OPEN END MORTGAGE
THIS DOCUMENT SECURES FUTURE ADVANCES
THIS LEASE AND OPEN END MORTGAGE (this "Lease"), dated as of December
14, 1998, is between WILMINGTON TRUST COMPANY, a banking corporation organized
in the State of Delaware, having an office at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890, not in its individual capacity,
except as otherwise expressly stated herein, but solely as trustee of BRUSH
CREEK BUSINESS TRUST II, as the Lessor and as mortgagee (the "Lessor"), and FORE
SYSTEMS, INC., a Delaware corporation, having a principal office at 1000 Fore
Drive, Warrendale, Pennsylvania 15086, as the Lessee and as mortgagor (the
"Lessee").
W I T N E S S E T H:
--------------------
WHEREAS, the Lessee is the owner of the fee simple interest in the Land
described on Exhibit A attached hereto and made a part hereof;
WHEREAS, pursuant to the terms of the Ground Lease, the Lessee has
leased to the Lessor, and the Lessor has leased from the Lessee, the Land;
WHEREAS, the Lessor wishes to sublease to the Lessee, and the Lessee
wishes to sublease from the Lessor, the Land;
WHEREAS, the Lessor wishes to finance the development of certain
Improvements on the Land to be used by the Lessee;
WHEREAS, pursuant to a Participation Agreement dated as of the date
hereof (as amended, modified, restated or supplemented from time to time, the
"Participation Agreement"), among the Lessee, the Lessor, the Certificate
Purchaser and the Construction Lender, the Participants have agreed to finance
the development of certain Improvements on the Land to be used by the Lessee;
WHEREAS, pursuant to the terms of the Construction Agency Agreement,
the Lessee, as Construction Agent, will construct certain Improvements which
will be the property of the Lessor and will become part of the Property subject
to the terms of this Lease; and
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
2
Lease
<PAGE> 6
ARTICLE I
DEFINITIONS
1.1. Definitions; Interpretation. Capitalized terms used but not
otherwise defined in this Lease have the respective meanings specified in
Appendix 1 to the Participation Agreement; and the rules of interpretation set
forth in Appendix 1 to the Participation Agreement shall apply to this Lease.
ARTICLE II
PURCHASE AND LEASE
2.1. Acceptance and Lease of Property. Subject to the terms and
conditions of this Lease, on the Initial Advance Date the Lessor shall demise
and sublease to the Lessee hereunder for the Term (as hereinafter defined) the
Lessor's interest in the Land, and shall demise and lease to the Lessee for the
Term the Lessor's interest in the Improvements together with any Improvements
which hereafter may be constructed thereon pursuant to the Construction Agency
Agreement or this Lease, and the Lessee hereby agrees, expressly for the direct
benefit of the Lessor, to sublease from the Lessor for the Term the Lessor's
interest in the Land, and to lease from the Lessor for the Term the Lessor's
interest in any Improvements on the Land and in any Improvements on the Land
which hereafter may be constructed thereon pursuant to the Construction Agency
Agreement or this Lease.
2.2. Acceptance Procedure. The Lessee hereby agrees that the execution
and delivery by the Lessee of this Lease shall, without further act, constitute
the irrevocable acceptance by the Lessee of all of the Property for all purposes
of this Lease and the other Operative Documents on the terms set forth therein
and herein, and that all of the Property, together with any Improvements
constructed thereon pursuant to the Construction Agency Agreement or this Lease,
shall be deemed to be included in the leasehold estate of this Lease and shall
be subject to the terms and conditions of this Lease as of the Initial Advance
Date.
2.3. Lease Term. This Lease shall commence and be in full force and
effect on the Initial Advance Date. The Interim Term (the "Interim Term") shall
begin on the Initial Advance Date and shall end on the earlier of (i) the
Completion Date and (ii) the Property becoming subject to this Lease pursuant to
the last sentence of Section 5.1 of the Construction Agency Agreement. The Base
Term (the "Base Term") shall begin on the Base Date and end on the Termination
Date, unless the Base Term is renewed or earlier terminated in accordance with
the provisions of this Lease (the Interim Term and Base Term, as renewed in
accordance with the provisions of this Lease, are referred to collectively as
the "Term"); provided, however, that in no event shall the Term end later than
the tenth (10th) anniversary of the Termination Date.
2.4. Title. The Property is leased to the Lessee without any
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title (including
Permitted Liens other than Lessor Liens) and all applicable Requirements of Law.
The Lessee shall in no event have any recourse against the Lessor for any defect
in or exception to title to the Property other than to the extent resulting from
Lessor Liens.
2.5. Waiver by Lessor of Lien and Distraint. The Lessor expressly
waives, releases and relinquishes unto the Lessee (i) any and all rights the
Lessor has or may have to acquire, perfect or benefit from any statutory or
common law lien against any personal property of the Lessee provided to
landlords under any Applicable Law and (ii) any and all rights the Lessor has or
may have to distraint of the personal property of the Lessee arising from
statutory or common law rights provided to landlords under any
3
Lease
<PAGE> 7
Applicable Law; provided, however, the foregoing shall in no way negate or
otherwise adversely affect any Lien on any Equipment, Fixtures or other property
of the Lessee located in the Property for which the Lessee has granted a Lien
unto the Lessor pursuant to the Operative Documents.
ARTICLE III
PAYMENT OF RENT
3.1. Rent.
(a) During the Term, the Lessee shall pay Basic Rent on each
Payment Date, on the date required under Section 20.1(i) in connection
with the Lessee's exercise of the Remarketing Option and on any date on
which this Lease shall terminate. Notwithstanding the foregoing, Lessee
shall be under no obligation to pay Basic Rent with respect to the
Facility prior to the expiration of the Interim Term.
(b) Basic Rent shall be due and payable in lawful money of the
United States and shall be paid by wire transfer of immediately
available funds on the due date therefor to such account or accounts at
such bank or banks or to the Lessor or in such other manner as the
Lessor shall from time to time direct in a written notice to the
Lessee.
(c) Neither the Lessee's inability or failure to take
possession of all or any portion of the Property when delivered by the
Lessor, whether or not attributable to any act or omission of the
Lessee or any act or omission of the Lessor, or for any other reason
whatsoever, shall delay or otherwise affect the Lessee's obligation to
pay Rent for the Property in accordance with the terms of this Lease.
3.2. Payment of Basic Rent. Basic Rent shall be paid absolutely net to
the Lessor, so that this Lease shall yield to the Lessor the full amount
thereof, without setoff, deduction or reduction.
3.3. Supplement Rent. The Lessee shall pay to the Lessor or the Person
entitled thereto any and all Supplemental Rent (including the payment required
pursuant to Section 5.3(h) of the Construction Agency Agreement) promptly as the
same shall become due and payable, and if the Lessee fails to pay any
Supplemental Rent, the Lessor shall have all rights, powers and remedies
provided for herein or by law or equity or otherwise in the case of nonpayment
of Basic Rent. The Lessee shall pay to the Lessor, as Supplemental Rent, among
other things, on demand, to the extent permitted by applicable Requirements of
Law, interest at the applicable Overdue Rate on any installment of Basic Rent
not paid when due for the period for which the same shall be overdue and on any
payment of Supplemental Rent not paid when due or demanded by the Lessor for the
period from the due date or the date of any such demand, as the case may be,
until the same shall be paid. The expiration or other termination of the
Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of the Lessee with respect to Supplemental Rent. Unless expressly
provided otherwise in this Lease, in the event of any failure on the part of the
Lessee to pay and discharge any Supplemental Rent as and when due, the Lessee
shall also promptly pay and discharge any fine, penalty, interest or cost which
may be assessed or added under any agreement with a third party for nonpayment
or late payment of such Supplemental Rent, all of which shall also constitute
Supplemental Rent.
3.4. Method of Payment. Each payment of Rent shall be made by the
Lessee to the Lessor prior to 11:00 a.m., Eastern standard time at the place of
payment in funds consisting of lawful currency of the United States of America
which shall be immediately available on the scheduled date when such
4
Lease
<PAGE> 8
payment shall be due, unless such scheduled date shall not be a Business Day, in
which case such payment shall be made on the next succeeding Business Day.
Payments received after 1:00 p.m., Eastern standard time on the date due shall
for the purpose of Section 16.1 hereof be deemed received on such day; provided,
however, that for the purposes of the second sentence of Section 3.3 hereof,
such payments shall be deemed received on the next succeeding Business Day and,
unless the Lessor is otherwise able to invest or employ such funds on the date
received, subject to interest at the Overdue Rate as provided in such Section
3.3.
ARTICLE IV
QUIET ENJOYMENT
4.1. Quiet Enjoyment. Subject to Sections 2.4 hereof and Section
10.1(e) of the Participation Agreement, and subject to the rights of the Lessor
contained in Article XV and the other terms of the Operative Documents to which
the Lessee is a party, the Lessee shall peaceably and quietly have, hold and
enjoy the Property for the Term, free of any claim or other action by the Lessor
or anyone claiming by, through or under the Lessor (other than the Lessee) with
respect to any matters arising from and after the Initial Advance Date. Such
right of quiet enjoyment is independent of, and shall not affect the Lessor's
rights otherwise to initiate legal action to enforce, the obligations of the
Lessee under this Lease.
ARTICLE V
NET LEASE, ETC.
5.1. Net Lease. This Lease shall constitute a net lease. Any present or
future law to the contrary notwithstanding, this Lease shall not terminate, nor
shall the Lessee be entitled to any abatement, suspension, deferment, reduction,
setoff, counterclaim, or defense with respect to the Rent, nor shall the
obligations of the Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) by
reason of: (i) any defect in the condition, merchantability, design,
construction, quality or fitness for use of the Property or any part thereof, or
the failure of the Property to comply with all Requirements of Law, including
any inability to occupy or use the Property by reason of such non-compliance;
(ii) any damage to, removal, abandonment, salvage, loss, contamination of or
Release from, scrapping or destruction of or any requisition or taking of the
Property or any part thereof; (iii) any restriction, prevention or curtailment
of or interference with any use of the Property or any part thereof including
eviction; (iv) any defect in title to or rights to the Property or any Lien on
such title or rights or on the Property; (v) any change, waiver, extension,
indulgence or other action or omission or breach in respect of any obligation or
liability of or by the Lessor or any Participant; (vi) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to the Lessee, the Lessor, any Participant or
any other Person, or any action taken with respect to this Lease by any trustee
or receiver of the Lessee, the Lessor, any Participant or any other Person, or
by any court, in any such proceeding; (vii) any claim that the Lessee has or
might have against any Person, including the Lessor, any vendor, manufacturer,
contractor of or for any portion of the Property or any Participant; (viii) any
failure on the part of the Lessor to perform or comply with any of the terms of
this Lease (other than performance by the Lessor of its obligations set forth in
Section 2.1 hereof), of any other Operative Document or of any other agreement;
(ix) any invalidity or unenforceability or illegality or disaffirmance of this
Lease against or by the Lessee or any provision hereof or any of the other
Operative Documents or any provision of any thereof; (x) the impossibility or
illegality of performance by the Lessee, the Lessor or both; (xi) any action by
any court, administrative agency or other Governmental Authority; (xii) any
restriction, prevention or curtailment of or interference with the construction
on or any use of the Property or any part thereof; or (xiii) any other cause or
circumstances whether similar or dissimilar to the foregoing and whether or not
the Lessee shall have notice or knowledge of any of the foregoing. The parties
intend that the obligations of the Lessee hereunder shall be covenants and
agreements that are
5
Lease
<PAGE> 9
separate and independent from any obligations of the Lessor hereunder or under
any other Operative Documents and the obligations of the Lessee shall continue
unaffected unless such obligations shall have been modified or terminated in
accordance with an express provision of this Lease.
5.2. No Termination or Abatement. The Lessee shall remain obligated
under this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting the Lessor or any Participant, or any action with respect
to this Lease which may be taken by any trustee, receiver or liquidator of the
Lessor or any Participant or by any court with respect to the Lessor or any
Participant. The Lessee hereby waives all right (i) to terminate or surrender
this Lease (except as expressly provided herein) or (ii) to avail itself of any
abatement, suspension, deferment, reduction, setoff, counterclaim or defense
with respect to any Rent. The Lessee shall remain obligated under this Lease in
accordance with its terms and the Lessee hereby waives any and all rights now or
hereafter conferred by statute or otherwise to modify or to avoid strict
compliance with its obligations under this Lease. Notwithstanding any such
statute or otherwise, the Lessee shall be bound by all of the terms and
conditions contained in this Lease.
5.3. No Bar. Notwithstanding the foregoing, nothing set forth herein
shall bar, limit, preclude, prevent, stay or otherwise adversely affect the
Lessee's right or ability to bring and pursue any action for monetary damages
against the Lessor or any other Person for any breach or alleged breach of its
obligations hereunder.
ARTICLE VI
SUBLEASES
6.1. Subletting. Lessee agrees to occupy 100% of the Property at all
times during the Term and to use the Property for manufacturing, engineering and
corporate headquarters office purposes, and for no other use, except as
expressly provided in this Section 6.1. The Lessee may not, without the prior
written consent of the Lessor (which may be granted or withheld in the sole
discretion of the Lessor), sublease (or sub-sublease) or license the Property or
any portion thereof to any Person, or permit the Property or any portion thereof
to be used or occupied by any other Person. Any such sublease or attempted
sublease of the Property or any portion thereof without the prior written
consent of the Lessor shall be void and of no force or effect. Except as
expressly set forth in this Section 6.1, the Lessee may, without the consent of
the Lessor, sublease space in the Facility, provided that the aggregate amount
of such subleased space does not exceed 33% of the aggregate space in the
Facility, and provided that (i) no Lease Event of Default shall have occurred
and be continuing, (ii) the proposed subtenant shall have a financial standing,
be of a character, be engaged in a business, and propose to use the Property in
a manner in keeping with the standards set forth in this Lease, (iii) the
character of the business to be conducted or the proposed use of the Facility by
the proposed subtenant shall not violate any provision or restrictions herein
relating to the use or occupancy of the Property, (iv) the subletting shall be
expressly subject to all of the terms, covenants, conditions and obligations on
Lessee's part to be observed and performed under this Lease and the further
condition and restriction that the sublease shall not be assigned, encumbered or
otherwise transferred or the subleased premises further sublet by the subtenant
in whole or in part, or any part thereof suffered or permitted by the subtenant
to be used or occupied by others, without the prior written consent of the
Lessor in each instance, which may be withheld in the Lessor's sole discretion,
(v) the subletting shall end no later than one (1) day before the Expiration
Date, and (vi) at no time shall there be more than four (4) occupants, including
the Lessee, in the Facility. No sublease or other relinquishment of possession
of the Property shall in any way discharge or diminish any of the Lessee's
obligations to the Lessor hereunder and the Lessee shall remain directly and
primarily liable under this Lease as to the
6
Lease
<PAGE> 10
Property, or portion thereof, so sublet. Any sublease of the Property shall
expressly be made subject to and subordinated to this Lease and to the rights of
the Lessor hereunder.
6.2. Assignment of Subleases and Business Interruption Insurance to
Lessor. To secure the prompt and full payment by the Lessee of the Rent, the
Lessee hereby assigns to the Lessor, subject to the conditions hereinafter set
forth, all of the Lessee's right, title and interest in and to all subleases
affecting the Property and all rents, issues and profits accruing thereunder,
and all guarantees and security deposits with respect to such subleases, and the
Lessee hereby confers upon the Lessor, the Lenders, the Certificate Purchaser
and their respective agents and representatives, a right of entry in, and
sufficient possession of, the Property to permit and insure the collection by
the Lessor of the rentals and other sums payable under such subleases together
with the proceeds of any business interruption insurance maintained as provided
under Section 13.2 hereof; provided, however, that such assignment, although
presently effective, is given solely as security, and the Lessor hereby
irrevocably waives the right to exercise the Lessor's rights pursuant to this
Section until and unless a Lease Event of Default shall occur and be continuing.
The Lessee hereby irrevocably directs each tenant under any such sublease (each,
a "Subtenant") to pay to the Lessor the rentals or other sums payable under such
Subtenant's sublease when, as and if directed to do so by the Lessor in a
written notice to such Subtenant in which the Lessor shall certify that a Lease
Event of Default shall have occurred and be continuing under this Lease. The
Lessee hereby irrevocably notifies and directs each Subtenant to pay such
amounts to the Lessor in the event such Subtenant receives any such notice from
the Lessor, and the Lessee hereby irrevocably waives any claims for non-payment
of such rentals or other sums that might arise as a result of such payments to
the Lessor. The exercise of the Lessor's right of entry under this Section shall
not constitute an eviction of the Lessee from the Property or any portion
thereof.
ARTICLE VII
LESSEE ACKNOWLEDGMENTS
7.1. Condition of the Property. THE LESSEE ACKNOWLEDGES AND AGREES THAT
ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS, THE
CONSTRUCTION AGENT IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE CONSTRUCTION
AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE
IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS. THE LESSEE FURTHER
ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE PROPERTY "AS IS" WITHOUT
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR, TRUST
COMPANY, THE CERTIFICATE PURCHASER OR THE LENDERS AND IN EACH CASE SUBJECT TO
(A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION
THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION
MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE
DATE HEREOF OR ON THE INITIAL ADVANCE DATE. NEITHER THE LESSOR, TRUST COMPANY,
THE CERTIFICATE PURCHASER NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE
MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE
DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR
LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR
USE OF THE PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY
OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY (OR ANY
PART THEREOF) AND NEITHER THE LESSOR, TRUST COMPANY, THE CERTIFICATE PURCHASER
NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN
(OTHER
7
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THAN FOR LESSOR LIENS) OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY REQUIREMENT OF LAW.
7.2. Risk of Loss. During the Term the risk of loss of or decrease in
the enjoyment and beneficial use of the Property as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by the Lessee, and the Lessor shall in no event be
answerable or accountable therefor.
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTY, ETC.
8.1. Utility Charges. The Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Property during the
Term. The Lessee shall be entitled to receive any credit or refund with respect
to any utility charge paid by the Lessee and the amount of any credit or refund
received by the Lessor on account of any utility charges paid by the Lessee, net
of the costs and expenses reasonably incurred by the Lessor in obtaining such
credit or refund, shall be promptly paid over to the Lessee.
8.2. Possession and Use of the Property. The Property shall be used in
a manner consistent with the Construction Agency Agreement and, after the Base
Date, as a first class manufacturing, engineering and corporate headquarters
office facility, and for no other purpose, and in a manner consistent with the
standards applicable to properties of a similar nature in the geographic area in
which the Facility is located. Lessee (or its sublessees in accordance with
Section 6.1) shall continuously use and occupy substantially all of the useable
area of the Facility during the Term. The Lessee shall pay, or cause to be paid,
all charges and costs required in connection with the use of the Property as
contemplated by this Lease and the Construction Agency Agreement. The Lessee
shall not commit or permit any waste of the Property or any part thereof.
8.3. Compliance with Requirements of Law and Insurance Requirements.
Subject to the terms of Article XII relating to permitted contests, the Lessee,
at its sole cost and expense, shall (a) comply in all respects with all
Requirements of Law (including all Environmental Laws) and Insurance
Requirements relating to the Property, including the use, construction,
operation, maintenance, repair and restoration thereof and the remarketing
thereof pursuant to Article XX, whether or not compliance therewith shall
require structural or extraordinary changes in the Improvements or interfere
with the use and enjoyment of the Property, and (b) procure, maintain and comply
in all respects with all licenses, permits, orders, approvals, consents and
other authorizations required for the construction, use, maintenance and
operation of the Property and for the use, operation, maintenance, repair and
restoration of the Improvements.
8.4. Assignment by Lessee. The Lessee may not assign this Lease or any
of its rights or obligations hereunder in whole or in part to any Person.
ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
9.1. Maintenance and Repair; Return.
(a) The Lessee, at its sole cost and expense, shall maintain
the Property in a first class condition (ordinary wear and tear
excepted) and make all necessary repairs thereto, of every kind
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and nature whatsoever, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural or foreseen or unforeseen,
in each case as required by all Requirements of Law and Insurance
Requirements and on a basis consistent with the operation and
maintenance of properties comparable in type and location to the
Property.
(b) The Lessor shall under no circumstances be required to
build any improvements on the Property, make any repairs, replacements,
alterations or renewals of any nature or description to the Property,
make any expenditure whatsoever in connection with the Property (other
than for Advances made in accordance with and pursuant to the terms of
the Participation Agreement and the other Operative Documents) or
maintain the Property in any way. The Lessor shall not be required to
maintain, repair or rebuild all or any part of the Property, and the
Lessee waives any right to (i) require the Lessor to maintain, repair,
or rebuild all or any part of the Property, or (ii) make repairs at the
expense of the Lessor pursuant to any Requirement of Law, Insurance
Requirement, contract, agreement, or covenant, condition or restriction
in effect at any time during the Term.
(c) The Lessee shall, upon the expiration or earlier
termination of this Lease, vacate and surrender such Property to the
Lessor in its then-current, "AS IS" condition, subject to the Lessee's
obligations under Sections 8.3, 9.1(a), 10.1, 11.1, 14.1(d), 14.2 and
20.1 of this Lease, unless the Lessee has purchased the Property from
the Lessor as provided herein.
ARTICLE X
MODIFICATIONS, ETC.
10.1. Modifications, Substitutions and Replacements. The Lessee, at its
sole cost and expense, may at any time and from time to time make alterations,
renovations, improvements and additions to the Property or any part thereof and
substitutions and replacements therefor (collectively, "Modifications");
provided, however, that: (i) except for any Modification required to be made
pursuant to a Requirement of Law or an Insurance Requirement (a "Required
Modification"), no Modification shall impair the value, utility or useful life
of the Property or any part thereof from that which existed immediately prior to
such Modification; (ii) the Modification shall be done expeditiously and in a
good and workmanlike manner; (iii) the Lessee shall comply with all Requirements
of Law (including all Environmental Laws) and Insurance Requirements applicable
to the Modification, including the obtaining of all permits and certificates of
occupancy, and the structural integrity of the Property shall not be materially
adversely affected; (iv) subject to the terms of Article XII relating to
permitted contests, the Lessee shall pay all costs and expenses and shall
discharge (or cause to be insured or bonded over) within thirty (30) days after
the same shall be filed (or otherwise become effective) any Liens arising with
respect to the Modification; (v) such Modifications shall comply with Sections
8.3 and 9.1(a); and (vi) the Lessee shall be required to obtain the prior
written approval of the Lessor, which approval shall not be unreasonably
withheld, with respect to any alterations (other than Required Modifications
and/or alterations authorized by the Construction Agency Agreement) that shall
(A) affect any structural element of the Improvements or any major building
system and cost in excess of $500,000 or (B) materially change the nature of the
Facility or the amount of usable area therein or the utility thereof for the
purposes contemplated by the Lessor and the Lessee as of the date hereof. All
Modifications shall remain part of the realty and shall be subject to this Lease
and title thereto shall immediately vest in the Lessor; provided, however, that
Modifications that (x) are not Required Modifications and (y) were not financed
by the Lessor and are readily removable without impairing the value, utility or
remaining useful life of the Property shall be the property of the Lessee and
shall not be subject to this Lease. So long as no Lease Event of Default has
occurred and is continuing, the Lessee may place upon the Property any trade
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fixtures, machinery, equipment or other property belonging to the Lessee or
third parties and may remove the same at any time during the Term, subject,
however, to the terms of Section 9.1(a); provided that such trade fixtures,
machinery, equipment or other property do not materially impair the value,
utility or remaining useful life of the Property; provided, further, that the
Lessee shall keep and maintain at the Property and shall not remove from the
Property any Equipment financed or otherwise paid for (directly or indirectly)
by the Lessor, the Certificate Purchaser or any Lender pursuant to the
Participation Agreement.
ARTICLE XI
WARRANT OF TITLE; EASEMENTS
11.1. Warrant of Title.
(a) The Lessee agrees that except as otherwise provided herein
and subject to the terms of Article XII relating to permitted contests,
the Lessee shall not directly or indirectly create or allow to remain,
and shall promptly discharge at its sole cost and expense, any Lien,
defect, attachment, levy, title retention agreement or claim upon the
Property or any Modifications or any Lien, attachment, levy or claim
with respect to the Rent or with respect to any amounts held by the
Lenders pursuant to the Loan Agreement or the other Loan Documents,
other than Lessor Liens, Permitted Liens and Liens on machinery,
equipment, general intangibles and other personal property not financed
by the proceeds of the Loans or Certificate Amounts.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of the Lessor, expressed or
implied, to or for the performance by any contractor, mechanic,
laborer, materialman, supplier or vendor of any labor or services or
for the furnishing of any materials for any construction, alteration,
addition, repair or demolition of or to the Property or any part
thereof. NOTICE IS HEREBY GIVEN THAT NEITHER THE LESSOR, TRUST COMPANY,
THE CERTIFICATE PURCHASER NOR ANY LENDER IS OR SHALL BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE
LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART THEREOF THROUGH
OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH
LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF
THE LESSOR, THE CERTIFICATE PURCHASER OR ANY LENDER IN AND TO THE
PROPERTY.
11.2. Grants and Releases of Easements; Lessor's Waivers. Provided that
no Lease Event of Default shall have occurred and be continuing and subject to
the provisions of Articles VII, IX and X and Section 8.3 the Lessor hereby
consents in each instance (and shall obtain the consent of any Lenders as may
reasonably be requested by the Lessee) to the following actions by the Lessee,
in the name and stead of the Lessor, but at the Lessee's sole cost and expense:
(a) the granting of easements, licenses, rights-of-way and other rights and
privileges in the nature of easements reasonably necessary or desirable for the
use, repair, or maintenance of the Property as herein provided; (b) the release
of existing easements or other rights in the nature of easements which are for
the benefit of the Property; (c) if required by applicable Governmental
Authority in connection with the Construction, the dedication or transfer of
unimproved portions of the Property for road, highway or other public purposes;
and (d) the execution of amendments to any covenants and restrictions affecting
the Property; provided, however, that in each case (i) such grant, release,
dedication, transfer or amendment does not impair the value, utility or
remaining useful life of the Property, (ii) such grant, release, dedication,
transfer, annexation or amendment is reasonably necessary in connection with the
use, maintenance, alteration or improvement of the Property, (iii) such grant,
release, dedication, transfer, annexation or amendment will not cause the
Property or any portion thereof to fail to
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comply in any respect with the provisions of this Lease or any other Operative
Documents and all Requirements of Law (including, without limitation, all
applicable zoning, planning, building and subdivision ordinances, all applicable
restrictive covenants and all applicable architectural approval requirements);
(iv) all governmental consents or approvals required prior to such grant,
release, dedication, transfer, annexation or amendment have been obtained, and
all filings required prior to such action have been made; (v) such grant,
release, dedication, transfer, annexation or amendment will not result in any
down-zoning of the Property or any portion thereof or a material reduction in
the maximum density or development rights available to the Property under all
Requirements of Law; (vi) the Lessee shall remain obligated under this Lease and
under any instrument executed by the Lessee consenting to the assignment of the
Lessor's interest in this Lease as security for indebtedness, in each such case
in accordance with their terms, as though such grant, release, dedication,
transfer, annexation or amendment had not been effected and (vii) the Lessee
shall pay and perform any obligations of the Lessor under such grant, release,
dedication, transfer, annexation or amendment. The Lessor acknowledges the
Lessee's right to finance and to secure under the Uniform Commercial Code,
inventory, furnishings, furniture, equipment, machinery, leasehold improvements
and other personal property located at the Property other than Equipment, and
Lessor agrees to execute from time to time Lessor waiver forms in favor of any
purchase money seller, lessor or lender which has financed or may finance in the
future such items. Without limiting the effectiveness of the foregoing, provided
that no Lease Event of Default shall have occurred and be continuing, the Lessor
shall, upon the request of the Lessee, and at the Lessee's sole cost and
expense, execute and deliver (and cause the Lenders to execute and deliver) any
instruments necessary or appropriate to confirm any such grant, release,
dedication, transfer, annexation or amendment to any Person permitted under this
Section 11.2 including landlord waivers with respect to any of the foregoing.
ARTICLE XII
PERMITTED CONTESTS
12.1. Permitted Contests in Respect of Applicable Law. If, to the
extent and for so long as (a) a test, challenge, appeal or proceeding for review
of any Applicable Law relating to the Property shall be prosecuted diligently
and in good faith in appropriate proceedings by the Lessee or (b) compliance
with such Applicable Law shall have been excused or exempted by a valid
nonconforming use, variance permit, waiver, extension or forbearance, the Lessee
shall not be required to comply with such Applicable Law but only if and so long
as any such test, challenge, appeal, proceeding, waiver, extension, forbearance
or noncompliance shall not, in the reasonable opinion of the Lessor, the Lenders
and the Certificate Purchaser, involve (A) any risk of criminal liability being
imposed on the Lessor, Trust Company, the Lenders, the Certificate Purchaser or
the Property, or (B) any material risk of (1) foreclosure, forfeiture or loss of
the Property, or any material part thereof, or (2) the nonpayment of Rent or (C)
any risk of (1) the sale of, or the creation of any Lien (other than a Permitted
Lien) on, any part of the Property, (2) material civil liability being imposed
on the Lessor, Trust Company, the Certificate Purchaser, any Lender or the
Property, or (3) enjoinment of, or interference with, the use, possession or
disposition of the Property in any material respect.
12.2. Permitted Contests in Respect of Real Property Taxes.
Notwithstanding anything to the contrary contained in Article XIII of the
Participation Agreement or any other provision of any Operative Documents,
Lessee shall have the absolute right to contest, appeal or otherwise challenge
(i) any assessment of the Property for real property Tax imposed by any
Governmental Authority, (ii) the millage rates imposed for real property Tax by
any Governmental Authority, (iii) the allocation of the items constituting real
property and personal property included within the Property made by any
Governmental Authority in connection with such real property Tax and (iv) the
uniformity or constitutionality of such real property Tax; provided, however,
(A) such contest is diligently pursued and prosecuted in good faith to
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completion by the Lessee, (B) no Lease Event of Default has occurred and is
continuing, (C) the Property is not subject to imminent foreclosure or sale by
any Governmental Authority and (D) neither the Lessor nor any Participant will
be subject to criminal liability or any material civil liability in connection
with such contest, appeal or challenge.
12.3. Joinder of Lessor. The Lessor will not be required to join in any
proceedings pursuant to this Article XII unless a provision of any Applicable
Law requires, or, in the good faith opinion of the Lessee, it is helpful to the
Lessee, that such proceedings be brought by or in the name of the Lessor; and in
that event the Lessor will join in the proceedings or permit them or any part
thereof to be brought in its name if and so long as (i) no Lease Event of
Default or Lease Default has occurred and is continuing and (ii) the Lessee pays
all related expenses and indemnifies the Lessor and the Participants to the
satisfaction of the respective indemnitees.
ARTICLE XIII
INSURANCE
13.1. Public Liability and Workers' Compensation Insurance. (a) During
the Term the Lessee shall procure and carry, at the Lessee's sole cost and
expense, and shall cause each contractor to procure and carry, commercial
general liability insurance for claims for injuries or death sustained by
persons or damage to property while on the Property and such other public
liability coverages as are ordinarily procured by the Lessee or its Affiliates
who own or operate similar properties. Such insurance shall be on terms and in
amounts that are no less favorable than insurance maintained by the Lessee or
its Affiliates with respect to similar properties that they own and that are in
accordance with normal industry practice, but in any case shall provide
liability coverage of at least $5,000,000 per person, $10,000,000 per occurrence
and $5,000,000 for property damage per occurrence. The policy shall be endorsed
to name the Lessor, Trust Company, the Certificate Purchaser and the Lenders as
additional insureds. The policy shall also specifically provide that the policy
shall be considered primary insurance which shall apply to any loss or claim
before any contribution by any insurance which the Lessor, Trust Company, the
Certificate Purchaser or the Lenders may have in force.
(b) The Lessee shall, in the construction of the Improvements
(including in connection with any Modifications thereof) and the operation of
the Property, comply with the applicable workers' compensation laws.
13.2. Hazard and Other Insurance. During the Term the Lessee shall
keep, or cause to be kept, the Property insured against loss or damage by fire
and other risks on terms and in amounts that are no less favorable than
insurance covering other similar properties owned by the Lessee or its
Affiliates and that are in accordance with normal industry practice, but in any
event in amounts not less than the then full insurable value (actual replacement
value) of the Improvements and Equipment. During the construction of any
Improvements the Lessee shall also maintain or cause to be maintained builders'
risk insurance in form and substance as set forth on Schedule 1, together with
such additional requirements to the extent comparable to the insurance required
for projects similar to the construction contemplated by the Operative
Documents. All insurance proceeds in respect of any loss or occurrence for which
the proceeds related thereto are (i) less than or equal to $1,000,000, in the
absence of the occurrence and continuance of an Event of Default, shall be
adjusted by and paid to the Lessee for application toward the reconstruction,
repair or refurbishment of the Property and (ii) greater than $1,000,000, shall
be adjusted jointly by the Lessee and the Lessor (unless an Event of Default has
occurred and is continuing, in which case such proceeds shall be adjusted solely
by the Lessor) and held by the Lessor for application in accordance with
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Article XIV hereof. In addition, the Lessee shall at all times during the Term
maintain business interruption insurance payable in an aggregate amount not less
than $10,000,000.
13.3. Insurance Coverage.
(a) The Lessee shall furnish the Lessor, the Certificate
Purchaser and the Lenders with certificates showing the insurance
required under Sections 13.1 and 13.2 to be in effect and naming the
Lessor, Trust Company, the Certificate Purchaser and the Lenders as
additional insureds with respect to liability coverage (excluding
worker's compensation insurance), naming the Lenders, the Lessor, the
Certificate Purchaser and the Lessee as their interests may appear with
respect to casualty coverage and naming the Lenders as loss payee with
respect to casualty coverage and showing the mortgagee endorsement
required by Section 13.3(c) with respect to such coverage. All such
insurance shall be maintained at the cost and expense of the Lessee,
except that during the Interim Term such insurance shall be maintained
at the cost and expense of the Lessor. Such certificates shall include
a provision for no less than thirty (30) days' advance written notice
by the insurer to the Lessor and the Lenders in the event of
cancellation or reduction of such insurance. In addition, the Lessee
shall cause the Lessor, the Trust Company, the Certificate Purchaser
and the Lenders as additional insureds under all liability policies
maintained with respect to the Construction.
(b) The Lessee agrees that the insurance policy or policies
required by Section 13.2, shall include an appropriate clause pursuant
to which such policy shall provide that it will not be invalidated
should the Lessee waive, in writing, prior to a loss, any or all rights
of recovery against any party for losses covered by such policy, and
that the insurance in favor of the Lessor, Trust Company, the
Certificate Purchaser and the Lenders and their respective rights under
and interests in said policies shall not be invalidated or reduced by
any act or omission or negligence of the Lessee or any other Person
having any interest in the Property. The Lessee hereby waives any and
all such rights against the Lessor, Trust Company, the Certificate
Purchaser and the Lenders to the extent of payments made under such
policies.
(c) Except as otherwise permitted by clause (d), all such
insurance shall be written by reputable insurance companies that are
financially sound and solvent and otherwise reasonably appropriate
considering the amount and type of insurance being provided by such
companies. Any insurance company selected by the Lessee shall have a
general policyholder rating of "A" and a financial rating of at least
"12" or (if not so rated) be otherwise reasonably acceptable to the
Lenders and the Certificate Purchaser. All insurance policies required
by Section 13.2 shall include a standard form mortgagee endorsement in
favor of the Lenders.
(d) The Lessee may meet the requirements of this Article XIII
with respect to liability and worker's compensation insurance through
one or more policies covering more than one location of Lessee. Except
during the Interim Term, the Lessee may meet the requirements of this
Article XIII with respect to worker's compensation insurance through a
self-insurance program of the Lessee and its Affiliates.
(e) The Lessor shall not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any insurance
required under this Article XIII except that the Lessor may carry
separate liability insurance so long as (i) the Lessee's insurance is
designated as primary and in no event excess or contributory to any
insurance the Lessor may have in force which would apply to a loss
covered under the Lessee's policy and (ii) each such insurance policy
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will not cause the Lessee's insurance required under this Article XIII
to be subject to a coinsurance exception of any kind.
(f) Except during the Interim Term, the Lessee shall pay as
they become due all premiums for the insurance required by Section 13.1
and Section 13.2, and shall renew or replace each policy prior to the
expiration date thereof. Throughout the Term, at the time each of the
Lessee's insurance policies is renewed (but in no event less frequently
than once each year), the Lessee shall deliver to the Lessor, the
Certificate Purchaser and the Lenders certificates of insurance
evidencing that all insurance required by this Article XIII is being
maintained by the Lessee and is in effect.
(g) The Lessee agrees that notwithstanding anything to the
contrary in this Article XIII, during the Interim Term, the insurance
policy or policies required by Section 13.1 and 13.2 shall not (i) be
funded by a program of self-insurance (or any similar funding
mechanism), and (ii) carry any deductible or similar co-payment of any
kind in excess of $1,000. During the Interim Term, the amount of any
deductibles permitted under this clause (g) shall be paid through
Advances to the extent available under the Approved Construction
Budget, including contingencies listed therein to the extent not
previously utilized.
ARTICLE XIV
CASUALTY AND CONDEMNATION;
ENVIRONMENTAL MATTERS
14.1. Casualty and Condemnation.
(a) Subject to the provisions of this Article XIV, if all or a
portion of the Facility is subject to a Casualty or if the use, access,
occupancy, easement rights or title to the Facility or any part
thereof, is the subject of a Condemnation, then (i) in the case of any
Casualty where the cost of restoration of the Facility is less than or
equal to $1,000,000, any insurance proceeds payable with respect to
such Casualty shall be paid directly to the Lessee, or if received by
the Lessor or the Lenders, shall be paid over to the Lessee for the
reconstruction, refurbishment and repair of the Facility, (ii) in the
case of any Casualty not constituting a Significant Casualty where the
cost of restoration of the Facility is greater than $1,000,000, any
insurance proceeds payable with respect to such Casualty shall be paid
directly to the Lessor, and at the option of the Lessee (x) to be
applied, in accordance with the then prevailing construction loan
guidelines of the Lenders, to reimburse the Lessee for the
reconstruction, refurbishment and repair of the Facility, or (y) to be
applied toward the payment of the Lease Balance with respect to the
Facility, (iii) in the case of a Significant Casualty, any insurance
proceeds payable with respect to such Casualty shall be paid to the
Lenders to be applied in the Lenders' discretion to the restoration of
the Facility or toward the payment of the Lease Balance with respect to
the Facility and (iv) in the case of a Condemnation of any part of the
Land (not including the Facility) that does not render the Facility
unsuitable for continued use as property of the type of the Facility
immediately prior to such Condemnation, any award or compensation
relating thereto shall be paid to the Lessee and in the case of all
other Condemnations such award or compensation shall be paid to the
Lenders to be applied in their reasonable discretion to the restoration
of the Property or toward the payment of the Lease Balance; provided,
however, that if a Lease Event of Default shall have occurred and be
continuing, all such awards, compensation or insurance proceeds shall
be paid directly to the Lenders or, if received by the Lessee, shall be
held in trust for the Lenders, and shall be paid over by the Lessee to
the Lenders (or, if the Loans have been fully paid, to the Lessor). If,
contrary to such provision, any such award, compensation or insurance
proceeds are paid to the Lessee or the
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Lessor rather than to the Lenders, the Lessee and the Lessor, as the
case may be, hereby agree to transfer any such payment to the Lenders.
All amounts held by the Lessor or the Lenders when a Lease Event of
Default exists hereunder on account of any award, compensation or
insurance proceeds either paid directly to the Lessor or the Lenders or
turned over to the Lessor or the Lenders shall either be (i) paid to
the Lessee for the repair of damage caused by such Casualty or
Condemnation in accordance with paragraph (d) of this Section 14.1, or
(ii) applied to the purchase price of the Facility on the date of
purchase pursuant to Section 15.1 hereof or the Lessor's remedies
pursuant to Article XVI hereof, with any Excess Proceeds being payable
to the Lessee.
(b) The Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At the Lessee's
reasonable request, and at the Lessee's sole cost and expense, the
Lessor and the Lenders shall participate in any such proceeding,
action, negotiation, prosecution or adjustment. The Lessor and the
Lessee agree that this Lease shall control the rights of the Lessor and
the Lessee in and to any such award, compensation or insurance payment.
(a) If the Lessor or the Lessee shall receive notice of a
Casualty or of an actual, pending or threatened Condemnation of the
Facility or any interest therein, the Lessor or the Lessee, as the case
may be, shall give notice thereof to the other and to the Lenders
promptly after the receipt of such notice.
(d) If pursuant to this Section 14.1 and Section 15.1 this
Lease shall continue in full force and effect following a Casualty or
Condemnation with respect to the Facility, the Lessee shall, at its
sole cost and expense (and, without limitation, if any award,
compensation or insurance payment is not sufficient to restore the
Facility in accordance with this paragraph, the Lessee shall pay the
shortfall[, subject in all events to Section 14.1(g) below]), promptly
and diligently repair any damage to the Facility caused by such
Casualty or Condemnation in conformity with the requirements of
Sections 9.1 and 10.1 using the as-built Plans and Specifications for
the Facility (as modified to give effect to any subsequent
Modifications, any Condemnation affecting the Facility and all
applicable Requirements of Law) so as to restore the Facility to at
least the same operation, use and value as existed immediately prior to
such Casualty or Condemnation with such Modification as the Lessee may
elect in accordance with Section 10.1. In such event, title to the
Facility shall remain with the Lessor. Upon completion of such
restoration, the Lessee shall furnish the Lessor an architect's
certificate of substantial completion and a Responsible Employee's
Certificate confirming that such restoration has been completed
pursuant to this Lease.
(e) In no event shall a Casualty or Condemnation affect the
Lessee's obligations to pay Rent pursuant to Section 3.1 or to perform
its obligations and pay any amounts due on the Expiration Date or
pursuant to Articles XVIII and XXI.
(f) Absent a Lease Event of Default, Excess Proceeds received
by the Lessor or the Lenders in respect of a Casualty or Condemnation
shall be turned over to the Lessee.
(g) Notwithstanding any provision to the contrary contained
herein (including in Article XV) or in the other Operative Documents,
should a Casualty or Condemnation occur during the Interim Term (A) as
the result of an Unrelated Indemnity Event, such Casualty or
Condemnation shall not be an Event of Default under any Operative
Document and such Casualty or Condemnation shall not give rise to any
obligation on the part of the Lessee, Construction, Holding
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or Guarantor under any indemnity obligation under the Operative
Documents, including under Article XIII of the Participation Agreement
or (B) as the result of a non-willful act or omission of any
Construction Agency Person, Lessee, Construction Agent, Holding and
Guarantor shall not be required to pay more than the Maximum Guaranteed
Amount on a recourse basis for any damages or other payments arising
from such Casualty or Condemnation. Notwithstanding any provision to
the contrary in the Operative Documents, during the Interim Term in the
event of a Casualty or Condemnation covered in Section 14.1(g)(A), all
proceeds shall be paid to the Participants and distributed pursuant to
the Construction Loan Agreement and all negotiating and adjustments
with any insurance company or Governmental Authority shall be conducted
solely by the Participants. The Lessee shall have no right to
participate in or be included in any way in such proceeds, negotiations
or adjustments.
14.2. Environmental Matters. Promptly upon the Lessee's actual
knowledge of the existence of an Environmental Violation, the Lessee shall
notify the Lessor in writing of such Environmental Violation. If the Lessor
elects not to terminate this Lease pursuant to Section 15.1, at the Lessee's
sole cost and expense, the Lessee shall promptly and diligently commence any
response, clean up, remedial or other action necessary to remove, clean up or
remediate the Environmental Violation in accordance with the terms of Section
8.3. If the Lessor does not deliver a Termination Notice with respect to such
Property pursuant to Section 15.1, the Lessee shall, upon completion of remedial
action by the Lessee, cause to be prepared by an environmental consultant
reasonably acceptable to the Lessor a report describing the Environmental
Violation and the actions taken by the Lessee (or its agents) in response to
such Environmental Violation, and a statement by the consultant that the
Environmental Violation has been remedied in compliance in all respects with
applicable Environmental Law. Nothing in this Article XIV shall reduce or limit
the Lessee's obligations under Sections 13.1, 13.2 or 13.3 of the Participation
Agreement.
14.3. Notice of Environmental Matters. Promptly, but in any event
within ten (10) Business Days after the date the Lessee has actual knowledge
thereof, the Lessee shall provide to the Lessor written notice of any material
pending or threatened claim, action or proceeding involving any Environmental
Law or any Release on or in connection with the Property. All such notices shall
describe in reasonable detail the nature of the claim, action or proceeding and
the Lessee's proposed response thereto. In addition, the Lessee shall provide to
the Lessor, within ten (10) Business Days of receipt, copies of all material
written communications with any Governmental Authority relating to any
Environmental Violation in connection with the Property. The Lessee shall also
promptly provide such detailed reports of any such material environmental claims
as may reasonably be requested by the Lessor, the Lenders or the Certificate
Purchaser. In the event that the Lessor receives written notice of any material
pending or threatened claim, action or proceeding involving any Environmental
Law or any Release on or in connection with the Property, the Lessor shall
promptly give notice thereof to the Lessee.
ARTICLE XV
TERMINATION OF LEASE
15.1. Mandatory Partial or Complete Termination Upon Certain Events.
Subject to the provisions of Section 14.1(g), if either:
(a) a Significant Condemnation occurs; or
(b) a Significant Casualty occurs; or
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(c) an Environmental Violation is discovered the cost of
remediation of which would exceed $100,000, and the Lessee has not
within ten (10) Business Days of such discovery of such Environmental
Violation deposited with the Custodian (x) additional cash in the
Collateral Account in an amount equal to the anticipated cost of the
remediation (which anticipated cost shall be subject to review and
adjustment by the Participants after consultation with an environmental
engineer) of such Environmental Violation, together with an amount
equal to any other costs and expenses which are reasonably likely to be
incurred in connection with such Environmental Violation, or (y) in
lieu of cash in the amounts described in clause (x) above, Marketable
Collateral having a Collateral Value equivalent to the amount of cash
required to be deposited in accordance with clause (x); or
(d) an Environmental Violation occurs or is discovered the
cost of remediation of which would exceed $5,000,000;
and the Lessor shall have given written notice to the Lessee that the Lease is
to be terminated with respect to the Facility as a consequence of the occurrence
of such an event (a "Termination Notice"), then, the Lessee shall be obligated
to purchase the Lessor's interest in the Facility on or prior to the date
occurring thirty (30) days after the date of the Termination Notice by paying
the Lessor an amount equal to the Lease Balance and any Supplemental Rent
(exclusive of the Make-Whole Premium in connection with a termination as the
result of an occurrence under clause (a) or (b) above, and with a Make-Whole
Premium in connection with a termination as the result of an occurrence under
clause (c) or (d) above) then due and payable.
15.2. Termination Procedures. On the date of the payment by the Lessee
of the entire Lease Balance and any accrued but unpaid interest and yield in
accordance with Section 15.1 (such date, the "Termination Date"), this Lease
shall terminate with respect to the Facility and, concurrent with the Lessor's
receipt of such payment,
(a) the Lessor shall execute and deliver to the Lessee (or to
the Lessee's designee) at the Lessee's cost and expense a quitclaim
deed with respect to the Facility, an assignment (without recourse,
representation or warranty by the Lessor other than as to the absence
of Lessor Liens) of the Lessor's interest in and to the Ground Lease, a
quitclaim bill of sale with respect to the Equipment and an assignment
of the Lessor's entire interest in the Facility (which shall include an
assignment of all of the Lessor's right, title and interest in and to
any Net Proceeds not previously received by the Lessor and existing
subleases and security deposits thereunder), in each case in recordable
form and otherwise in conformity with local custom and free and clear
of the Lien of the Mortgage and any Lessor Liens attributable to the
Lessor;
(b) the Facility shall be conveyed to such Person "AS IS" and
in its then present physical condition; and
(c) in the case of a termination pursuant to clause (a) or (b)
of Section 15.1, the Lessor shall convey to the Lessee any Net Proceeds
with respect to the Casualty or Condemnation giving rise to the
termination of this Lease theretofore received by the Lessor or at the
request of the Lessee, such amounts shall be applied against sums due
hereunder.
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ARTICLE XVI
EVENTS OF DEFAULT
16.1. Lease Events of Default. The occurrence of any one or more of the
following events (whether such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall constitute a "Lease Event of
Default" and a "Lease Event of Default" as such term is defined in the Existing
Lease:
(a) the Lessee shall fail to make payment of (i) any Basic
Rent after the same has become due and payable or (ii) any Purchase
Option Price, Loan Balance or Lease Balance, including amounts due
pursuant to Section 15.1, 18.1, 18.2, 18.3 or 20.1; provided, however,
that the failure to make any payment described in clause (i) or (ii)
shall not constitute a Lease Event of Default so long as (x) such
payment is made within five (5) days of the date such payment is due
and payable, (y) such failure shall not have occurred more than five
(5) times during the Term, and (z) such failure shall not have occurred
for more than two consecutive payments due under this Lease; or
(b) the Lessee shall fail to make payment of any Supplemental
Rent (other than Supplemental Rent referred to in clause (a) of this
Section) due and payable within five (5) Business Days after receipt of
notice thereof; or
(c) the Lessee shall fail to maintain insurance as required by
Article XIII of this Lease or shall violate the observance of its
obligations under Sections 6.1 or 8.2 hereof, or under Section 10.3 of
the Participation Agreement; or
(d) The Lessee shall fail to observe or perform any term,
covenant or condition of the Lessee under this Lease or the
Participation Agreement other than those described in Section 16.1(a),
(b) or (c) hereof, or shall fail to perform or observe in any respect
any covenant, condition or agreement to be performed or observed by it
under any other Operative Document (except those described in the
parenthetical of Section 16.1(f)), and, in each such case, such failure
shall have continued for thirty (30) days after the earlier of (i)
delivery to the Lessee of written notice thereof from Lessor or (ii) a
Responsible Employee of the Lessee shall have knowledge of such
failure; provided, however, that if such failure is capable of cure but
cannot be cured by payment of money or cannot be cured by diligent
efforts within such thirty (30)-day period but such diligent efforts
shall be properly commenced within the cure period and the Lessee is
diligently pursuing, and shall continue to pursue diligently, remedy of
such failure, the cure period shall be extended for an additional
period of time as may be necessary to cure not to exceed an additional
one hundred fifty (150) days or to extend beyond the Expiration Date;
provided further, that failure by the Lessee to fully comply with the
requirements of Section 20.1 hereof shall not be subject to any cure
period; or
(e) any representation or warranty made by the Lessee in any
of the Operative Documents shall prove to have been inaccurate in any
material respect at the time made, and if such inaccuracy can be cured,
it shall not have been cured within forty-five (45) days, after the
earlier of (i) delivery to the Lessee of written notice thereof from
the Lessor or (ii) a Responsible Employee of the Lessee shall have
knowledge of such inaccuracy; or
(f) a default by Lessee or Holding beyond any applicable grace
period shall have occurred and be continuing under the Construction
Agency Agreement, the Guaranty, the Guaranty
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Agreement, the Pledge and Security Agreement, the Existing Lease, the
Swap Agreement or any "Operative Document" as such term is defined in
the Existing Lease, or any of the agreements, documents or instruments
executed in connection with the Mellon Revolver Facility (other than a
default arising solely under Sections 6.1(o), 8.3(z), 10.1(a)(vi) and
(vii) or from the Allegheny Agreements, as defined in the Existing
Lease (except for a failure by Lessee to pay sums due under the
Allegheny Agreements) and, during the Interim Term, Section 10.3 of the
Participation Agreement under the Existing Lease (if the failure to
comply with such Section shall arise from, be caused by or relate to,
any act or omission of the Lessee, anything within the reasonable
control of the Lessee or anything that could have been avoided through
the use of best efforts by the Lessee), Sections 3.1(d) and 3.1(j) of
the Guaranty Agreement under the Existing Lease, Sections 13.2 and 16.4
of the Lease under the Existing Lease, Sections 3(a)(4), 4(i)(1) and
5(i) of the Note and Security Agreement pertaining to the Mellon
Revolver Facility), or the Existing Lease shall have terminated; or
(g) the Lessee shall (i) admit in writing its inability to pay
its debts generally as they become due, (ii) file a petition under the
United States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof, (iii) make a general assignment for the benefit of its
creditors, (iv) consent to the appointment of a receiver of itself or
the whole or any substantial part of its property, (v) fail to cause
the discharge of any custodian, trustee or receiver appointed for it,
or the whole or a substantial part of its property within sixty (60)
days after such appointment, or (vi) file a petition or answer seeking
or consenting to reorganization under the United States bankruptcy laws
or any other applicable insolvency law or statute of the United States
of America or any State or Commonwealth thereof; or
(h) insolvency proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof shall be filed against the Lessee and not dismissed within
sixty (60) days from the date of its filing, or a court of competent
jurisdiction shall enter an order or decree appointing, without the
consent of the Lessee, a receiver of the Lessee, or the whole or a
substantial part of any of its property, and such order or decree shall
not be vacated or set aside within ninety (90) days from the date of
the entry thereof; or
(i) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $500,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of
$500,000; or
(j) any final, non-appealable judgments or orders for the
payment of money individually or in the aggregate in excess of
$2,695,150 (which amount shall be adjusted annually, on the date of the
submission by the Lessee of the financial statements referred to in
Section 10.1(a)(i) of the
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Participation Agreement, to an amount equal to 0.5% of the Tangible Net
Worth of the Lessee as shown on such financial statements) shall be
rendered against the Lessee, and such judgment or order shall continue
unsatisfied, unstayed (pursuant to laws, rules or court orders) and
unbonded for a period of thirty (30) days; or
(k) an event of default (beyond any applicable grace and cure
period) as defined in any agreement, mortgage, indenture or instrument,
under which there may be issued, or by which there may be secured or
evidenced, any Debt of the Lessee, whether such Debt now exists or
shall hereafter be created, shall occur and such Debt individually or
in the aggregate shall exceed $5,393,000 (which amount shall be
adjusted annually, on the date of the submission by the Lessee of the
financial statements referred to in Section 10.1(a)(i) of the
Participation Agreement, to an amount equal to 1.0% of the Tangible Net
Worth of the Lessee as shown on such financial statements); provided,
however, an Event of Default shall occur under this Section only if the
event of default causing the acceleration of Debt is the result of an
event of default by the Lessee that would constitute an Event of
Default under this Lease, such as (by way of example) the failure to
make payments when due on such Debt; or
(l) any Lien granted under any Operative Document shall, in
whole or in part, terminate, cease to be effective against, or cease to
be the legal, valid, binding and enforceable obligation of, the Lessee
as a result of any act or omission of the Lessee; or
(m) the Lessee or Holding shall directly or indirectly contest
the validity of any Operative Document in any manner in any court of
competent jurisdiction or any Lien granted by any Operative Document,
or the Lessee shall repudiate, or purport to discontinue or terminate,
the Guaranty or Guaranty Agreement, or the Guaranty or Guaranty
Agreement shall cease to be a legal, valid and binding obligation or
shall cease to be in full force and effect for any reason.
16.2. Remedies. Upon the occurrence of any Lease Event of Default and
at any time thereafter, the Lessor may, so long as such Lease Event of Default
is continuing, do one or more of the following as the Lessor in its sole
discretion shall determine, without limiting any other right or remedy the
Lessor may have on account of such Lease Event of Default (including the
obligation of the Lessee to purchase the Property as set forth in Section 18.3):
(a) The Lessor may, by notice to the Lessee, rescind or
terminate this Lease as of the date specified in such notice; however,
(i) no reletting, reentry or taking of possession of the Property (or
any portion thereof) by the Lessor will be construed as an election on
the Lessor's part to terminate this Lease unless a written notice of
such intention is given to the Lessee, (ii) notwithstanding any
reletting, reentry or taking of possession, the Lessor may at any time
thereafter elect to terminate this Lease for a continuing Lease Event
of Default and (iii) no act or thing done by the Lessor or any of its
agents, representatives or employees and no agreement accepting a
surrender of the Property shall be valid unless the same be made in
writing and executed by the Lessor;
(b) The Lessor may (i) demand that the Lessee, and the Lessee
shall upon the written demand of the Lessor, return the Property
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Articles VII and
IX and Section 8.3 hereof as if the Property were being returned at the
end of the Term, and the Lessor shall not be liable for the
reimbursement of the Lessee for any costs and expenses incurred by the
Lessee in connection therewith and (ii) without prejudice to any other
remedy which the Lessor
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may have for possession of the Property, and to the extent and in the
manner permitted by Applicable Law, enter upon the Property and take
immediate possession of (to the exclusion of the Lessee) the Property
or any part thereof and expel or remove the Lessee and any other Person
who may be occupying the Property, by summary proceedings or otherwise,
all without liability to the Lessee for or by reason of such entry or
taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise and, in addition to the Lessor's
other damages, the Lessee shall be responsible for all costs and
expenses incurred by the Lessor, the Lenders and/or the Certificate
Purchaser in connection with any reletting, including reasonable
brokers' fees and all costs of any alterations or repairs made by the
Lessor;
(c) The Lessor may (i) sell all or any part of the Property at
public sale free and clear of any rights of the Lessee and without any
duty to account to the Lessee with respect to such action or inaction
or any proceeds (except that Excess Proceeds are payable to and shall
be paid to the Lessee) with respect thereto (except to the extent
required by clause (ii) below if the Lessor shall elect to exercise its
rights thereunder) in which event the Lessee's obligation to pay Basic
Rent hereunder for periods commencing after the date of such sale shall
be terminated or proportionately reduced, as the case may be; and (ii)
if the Lessor shall so elect, demand that the Lessee pay to the Lessor,
and the Lessee shall pay to the Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (the
parties agreeing that the Lessor's actual damages would be difficult to
predict, but the aforementioned liquidated damages represent a
reasonable approximation of such amount) (in lieu of Basic Rent due for
periods commencing on or after the Payment Date coinciding with such
date of sale (or, if the sale date is not a Payment Date, the Payment
Date next preceding the date of such sale)), an amount equal to (A) the
excess, if any, of (1) the Lease Balance calculated as of such Payment
Date (including all Rent due and unpaid to and including such Payment
Date), over (2) the net proceeds of such sale (that is, after deducting
all costs and expenses incurred by the Lessor, the Lenders and the
Certificate Purchaser incident to such conveyance, including
repossession costs, brokerage commissions, prorations, transfer taxes,
fees and expenses for counsel, title insurance fees, survey costs,
recording fees, and any repair costs); plus (B) interest at the Overdue
Rate on the foregoing amount from such Payment Date until the date of
payment;
(d) The Lessor may, at its option, elect not to terminate this
Lease and continue to collect all Basic Rent, Supplemental Rent, and
all other amounts due the Lessor (together with all costs of
collection) and enforce the Lessee's obligations under this Lease as
and when the same become due, or are to be performed, and at the option
of the Lessor, upon any abandonment of the Property by the Lessee or
re-entry of same by the Lessor, the Lessor may, in its sole and
absolute discretion, elect not to terminate this Lease and may make the
necessary repairs in order to relet the Property, and relet the
Property or any part thereof for such term or terms (which may be for a
term extending beyond the Term of this Lease) and at such rental or
rentals and upon such other terms and conditions as the Lessor in its
reasonable discretion may deem advisable; and upon each such reletting
all rentals actually received by the Lessor from such reletting shall
be applied to the Lessee's obligations hereunder and the other
Operative Documents in such order, proportion and priority as the
Lessor may elect in the Lessor's sole and absolute discretion. If such
rentals received from such reletting during any period are less than
the Rent with respect to the Property to be paid during that period by
the Lessee hereunder, the Lessee shall pay any deficiency, as
calculated by the Lessor, to the Lessor on the next Payment Date;
(e) Unless the Property has been sold in its entirety, the
Lessor may, whether or not the Lessor shall have exercised or shall
thereafter at any time exercise any of its rights under
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paragraph (b), (c) or (d) of this Section 16.2 with respect to the
Property or portions thereof, demand, by written notice to the Lessee
specifying a date (a "Termination Date") not earlier than 10 days after
the date of such notice, that the Lessee purchase, on such Termination
Date, the Improvements (or the remaining portion thereof) in accordance
with the provisions of Article XXI and Section 18.2;
(f) The Lessor may exercise any other right or remedy that may
be available to it under Applicable Law, or proceed by appropriate
court action (legal or equitable) to enforce the terms hereof or to
recover damages for the breach hereof. Separate suits may be brought to
collect any such damages for any period(s), and such suits shall not in
any manner prejudice the Lessor's right to collect any such damages for
any subsequent period(s), or the Lessor may defer any such suit until
after the expiration of the Term, in which event such suit shall be
deemed not to have accrued until the expiration of the Term;
(g) The Lessor may retain and apply against the Lessor's
damages all sums which the Lessor would, absent such Lease Event of
Default, be required to pay to, or turn over to, the Lessee pursuant to
the terms of this Lease; or
(h) If a Lease Event of Default shall have occurred and be
continuing, the Lessor, as a matter of right and without notice to the
Lessee, shall have the right to apply to any court having jurisdiction
to appoint a receiver or receivers of the Property, and the Lessee
hereby irrevocably consents to any such appointment. Any such
receiver(s) shall have all of the usual powers and duties of receivers
in like or similar cases and all of the powers and duties of the Lessor
in case of entry, and shall continue as such and exercise such powers
until the date of confirmation of the sale of the Property unless such
receivership is sooner terminated.
(i) To the maximum extent permitted by law, the Lessee hereby
waives the benefit of any appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all
rights of marshaling in the event of any sale of the Property or any
interest therein.
(j) The Lessor shall be entitled to enforce payment of the
indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of
the other Operative Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the obligations
secured hereby may now or hereafter be otherwise secured, whether by
mortgage, security agreement, pledge, lien, assignment or otherwise.
Neither the acceptance of this instrument nor its enforcement, shall
prejudice or in any manner affect the Lessor's right to realize upon or
enforce any other security now or hereafter held by the Lessor, it
being agreed that the Lessor shall be entitled to enforce this
instrument and any other security now or hereafter held by the Lessor
in such order and manner as the Lessor may determine in its absolute
discretion. No remedy herein conferred upon or reserved to the Lessor
is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given
by any of the Operative Documents to the Lessor or to which it may
otherwise be entitled, may be exercised, concurrently or independently,
from time to time and as often as may be deemed expedient by the
Lessor. In no event shall the Lessor, in the exercise of the remedies
provided in this instrument (including in connection with the
assignment of rents to Lessor, or the appointment of a receiver and the
entry of such receiver on to all or any part of the Property), be
deemed a "mortgagee in possession," and the Lessor shall not in
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any way be made liable for any act, either of commission or omission,
in connection with the exercise of such remedies.
(k) An action of mortgage foreclosure as now provided by
Pennsylvania Procedural Rules 1141 to 1148, both inclusive, or other
appropriate proceedings now or hereafter prescribed by law, may
forthwith be commenced and prosecuted to judgment, execution and sale,
for the collection of the whole amount of such Lease Balance and the
Make-Whole Premium, together with all fees, costs and expenses of such
proceedings, including reasonable attorney's fees and expenses. And all
errors in such proceedings, together with any stays of or exemptions
from execution, or extensions of time of payment, which may be given by
any Act or Acts of Assembly now in force, or which may be enacted
hereafter, are hereby forever waived and released.
If, pursuant to the exercise by the Lessor of its remedies pursuant to this
Section 16.2, the Lease Balance and all other amounts due and owing from the
Lessee under this Lease and the other Operative Documents have been paid in
full, then the Lessor shall remit to the Lessee any excess amounts received by
the Lessor. Amounts received by the Lessor from the Collateral Account will be
applied against the Lessee's liabilities hereunder.
16.3. Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 16.2, the Lessee waives, to the fullest extent permitted by
law, (a) any notice of re-entry or the institution of legal proceedings to
obtain re-entry or possession; (b) any right of redemption, re-entry or
repossession; (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt or limiting the Lessor with respect
to the election of remedies; and (d) any other rights which might otherwise
limit or modify any of the Lessor's rights or remedies under this Article XVI.
16.4. Ownership of Common Stock. In the event that (i) during the
Interim Term as the result of any act or omission of Lessee, or anything within
the control of Lessee, or anything that could not have been avoided through the
use of best efforts by Lessee, or (ii) during the Base Term more than 50% of the
common stock of the Lessee shall at any time be owned by any single Person
and/or the Affiliates of such Person, which is not an owner of more than 50% of
the common stock of the Lessee as of the Documentation Date, without the prior
written consent of the Board of Directors of the Lessee, the Construction
Lender, the Certificate Purchaser and all Tranche A Lenders and Tranche B
Lenders, then the principal amount of the Construction Loan, the Certificate,
the Tranche A Notes and/or Tranche B Notes held by such non-consenting
Construction Lender, Certificate Purchaser, Tranche A Lenders and/or Tranche B
Lenders, as the case may be, shall at the option of any such Person become
immediately due and payable.
16.5. Limitation of Recourse During the Interim Term. Notwithstanding
any provision to the contrary contained in this Lease or any other Operative
Documents, prior to the commencement of the Base Term, the aggregate amount
payable by the Lessee on a recourse basis under this Article XVI and under
Section 18.3 as the result of a Construction Agency Event of Default which is
due solely to an Unrelated Event shall be subject to the limitations on recourse
liability set forth in Section 13.1B.(2) of the Participation Agreement and (ii)
prior to the commencement of the Base Term, before requiring Lessee to pay
amounts in connection with a Construction Agency Event of Default as set forth
in Section 13.1B.(2), Lessor shall determine Lessor's Actual Loss with respect
to such Construction Agency Event of Default, it being agreed that upon the
occurrence of a Construction Agency Event of Default, Lessor may exercise one or
more of Lessor's remedies set forth in Sections 16.2(a), (b), (c), (f), (g) and
(k), and Lessee shall be liable to Lessor only for an amount on a recourse basis
(excluding any amounts which Lessor may receive upon a sale of the Property)
equal to the lesser of Lessor's Actual Loss and the amount Lessee may be
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required to pay pursuant to Section 13.1B.(2) of the Participation Agreement
(and in the case of any Construction Agency Event of Default not related to an
Unrelated Event, Lessee shall be liable for the full Actual Loss, and the
foregoing limits in Section 13.1B(2) of the Participation Agreement shall not
apply); provided, however, in the event that Lessor, in the course of exercising
Lessor's remedies, determines that the Actual Loss to Lessor is in excess of the
Actual Loss previously determined, Lessee shall pay to Lessor such excess
amounts immediately upon demand, but in no event shall Lessee be required to pay
on a recourse basis (excluding any amounts which Lessor may receive upon a sale
of the Property) sums to Lessor in excess of that Lessee may be required to pay
pursuant to Section 13.1B.(2) of the Participation Agreement (except in the case
of a Construction Agency Event of Default not related to an Unrelated Event, in
which case Lessee shall be liable for the full Actual Loss, and the foregoing
limits in Section 13.1B(2) of the Participation Agreement shall not apply).
ARTICLE XVII
LESSOR'S RIGHT TO CURE
17.1. The Lessor's Right to Cure the Lessee's Lease Defaults. The
Lessor, upon two (2) Business Days prior notice (except that in any circumstance
in which there is a risk of imminent harm to any Person or property or any
possibility of criminal liability to any Participant, no notice shall be
required), without waiving or releasing any obligation or Lease Event of
Default, may (but shall be under no obligation to) remedy any Lease Default or
Lease Event of Default for the account and at the sole cost and expense of the
Lessee, including the failure by the Lessee to maintain the insurance required
by Article XIII, and may, to the fullest extent permitted by law, and
notwithstanding any right of quiet enjoyment in favor of the Lessee, enter upon
the Property for such purpose and take all such action thereon as may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
the Lessee. All reasonable out-of-pocket costs and expenses so incurred
(including fees and expenses of counsel), together with interest thereon at the
Overdue Rate from the date on which such sums or expenses are paid by the
Lessor, shall be paid by the Lessee to the Lessor on demand.
ARTICLE XVIII
PURCHASE PROVISIONS
18.1. Purchase Option. Without limitation of the Lessee's purchase
obligation pursuant to Sections 18.2 or 18.3, the Lessee shall have the option
at any time (exercisable by giving the Lessor irrevocable written notice (the
"Purchase Notice") of the Lessee's election to exercise such option) to purchase
the Improvements on the date specified in such Purchase Notice at a price equal
to the Lease Balance(the "Purchase Option Price") (plus all other amounts owing
in respect of Rent including Supplemental Rent theretofore accruing), provided,
however, that Lessee may only give notice of and exercise the Purchase Option
(hereinafter defined) under this Section 18.1 simultaneously with and on the
same date of Lessee's exercise of its rights with respect to all "Improvements"
under Section 18.1 of the Existing Lease, as such term is defined in the
Existing Lease, and may only exercise its rights under Section 18.1 of the
Existing Lease with respect to all "Improvements" (and not merely with respect
to the "Manufacturing Facility") as such terms are defined in the Existing
Lease, and may only do so simultaneously with its exercise of its rights under
this Section 18.1. The Lessee shall deliver the Purchase Notice to the Lessor
not more than three hundred sixty (360) days and not less than ninety (90) days
prior to such purchase. If the Lessee exercises its option to purchase the
Improvements pursuant to this Section 18.1 (the "Purchase Option"), the Lessor
shall transfer to the Lessee or its designee all of the Lessor's right, title
and interest in and to the Improvements as of the date specified in the Purchase
Notice upon receipt of the Purchase Option Price in accordance with Section
21.1(a) and the "Purchase Option Price" as such term is defined in the Existing
Lease in accordance with Section 21.1(a) of the Existing Lease.
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18.2. Expiration Date Purchase Obligation. Unless (a) the Lessee shall
have properly exercised the Purchase Option pursuant to Section 18.1 and
purchased the Improvements pursuant thereto, or (b) the Lessee shall have
properly exercised the Remarketing Option and shall have fulfilled all of the
conditions of clauses (a) through (k) of Section 20.1 hereof and the Lessor
shall have sold its interest in the Improvements pursuant thereto, then, subject
to the terms, conditions and provisions set forth in this Article, and in
accordance with the terms of Section 21.1(a), the Lessee shall purchase from the
Lessor, and the Lessor shall convey to the Lessee, on the Expiration Date all of
the Lessor's interest in the Improvements for an amount equal to the Lease
Balance (plus all other amounts owing in respect of Rent including Supplemental
Rent theretofore accruing). The Lessee may designate, in a notice given to the
Lessor not less than ten (10) Business Days prior to the closing of such
purchase (time being of the essence), the transferee or transferees to whom the
conveyance shall be made (if other than to the Lessee), in which case such
conveyance shall (subject to the terms and conditions set forth herein) be made
to such designee; provided, however, that such designation of a transferee or
transferees shall not cause the Lessee to be released, fully or partially, from
any of its obligations under this Lease, including the obligation to pay the
Lessor the Lease Balance on such Expiration Date.
18.3. Acceleration of Purchase Obligation.
(a) The Lessee shall be obligated to purchase for an amount
equal to the Lease Balance (plus all other amounts owing in respect of
Rent including Supplemental Rent theretofore accruing) the Lessor's
interest in the Improvements (notwithstanding any prior election to
exercise its Purchase Option pursuant to Section 18.1) (i)
automatically and without notice upon the occurrence of any Lease Event
of Default specified in clause (g) or (h) of Section 16.1 and (ii) as
provided for at Section 16.2(e) immediately upon written demand of the
Lessor upon the occurrence of any other Lease Event of Default in
existence at the expiration of the Interim Term.
(b) After the expiration of the Interim Term, the Lessee shall
be obligated to purchase for an amount equal to the Lease Balance (plus
all other amounts owing in respect of Rent including Supplemental Rent
theretofore accruing) immediately upon written demand of the Lessor the
Lessor's interest in the Improvements at any time during the Term when
(i) the Lessor ceases to have title as contemplated by Section 11.1 or
(ii) any Operative Document to which the Lessee is a party shall cease
to be in full force and effect, or shall cease to give the Lessor or
the Lenders the Liens, rights, powers and privileges purported to be
created thereby or (iii) the purchase obligation under the Existing
Lease shall have been accelerated for reasons other than an
acceleration as a result of a default under provisions in the Existing
Lease and documents related to the Existing Lease as expressly listed
in Section 16.1(f).
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ARTICLE XIX
RENEWAL TERMS
19.1. Renewal. Subject to the conditions set forth herein, the Lessee
and the Lessor may agree to renew the Base Term for the Property for one or more
terms (each, a "Renewal Term"), with each such Renewal Term to commence on the
first day following the Expiration Date then in effect for the Property and end
on the fifth anniversary of such day, provided, however, that Lessee may only
exercise its renewal rights under this Section 19.1 simultaneously with and on
the same day of Lessee's exercise of its rights under Section 19.1 of the
Existing Lease. The effective extension of the Base Term for the "Property" as
such term is defined the Existing Lease and the Property under this Lease shall
be subject to the satisfaction of each of the conditions contained in Section
19.1 of the Existing Lease and each of the following conditions:
(a) the Lessee shall have delivered, not later than 365 days
prior to the Expiration Date then in effect for the Property, written
notice to the Lessor and each Participant of the Lessee's request to
extend the Base Term for the Property;
(b) on both the date of delivery of the notice referred to in
clause (a) and on the Expiration Date then in effect for the Property,
(i) no Event of Default shall have occurred and be continuing, and (ii)
by delivery of written notice of its intent to renew the Base Term, the
Lessee shall be deemed to represent to the Lessor as to the matters set
forth in clause (i) of this condition (b);
(c) the Lessee shall not have exercised the Remarketing Option
with respect to the Improvements; and
(d) the Certificate Purchaser, the Tranche A Lenders and the
Tranche B Lender, in the exercise of their sole discretion, shall have
agreed with the Lessee (w) to the extension of the Maturity Date with
respect to the Loans and Certificate Amounts, (x) upon the Rent
applicable for such Renewal Term, (y) upon the conditions for
permitting such renewal (including the delivery of an appraisal
satisfactory in form and substance to each Participant and such other
conditions as any Participant, in its sole discretion, may request) and
(z) upon such other modification to this Lease as the Participants and
the Lessor then deem appropriate;
provided, however, that in no event shall there be more than two Renewal Terms
for the Property.
ARTICLE XX
REMARKETING OPTION
20.1. Option to Market. Subject to the fulfillment of each of the
conditions set forth in this Section 20.1, the Lessee shall have the option (the
"Remarketing Option") to market and complete the sale of the Improvements for
the Lessor , provided, however, that Lessee may only exercise the Remarketing
Option under this Section 20.1 simultaneously with and on the same date of
Lessee's exercise of its rights under Section 20.1 of the Existing Lease.
The Lessee's effective exercise and consummation of the "Remarketing
Option" as such term is defined under the Existing Lease, and the Remarketing
Option hereunder shall be subject to the due and timely fulfillment of each of
the provisions set forth in Section 20.1 of the Existing Lease and each of the
following provisions as to the Land and Improvements as of the dates set forth
below.
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(a) Not later than 365 days prior to the Expiration Date, the
Lessee shall give to the Lessor written notice of the Lessee's exercise
of the Remarketing Option. In connection with the Remarketing Option,
the Land and Improvements shall be sold together in the same
transaction to the same purchaser(s). At any time after electing to
exercise the Remarketing Option and prior to the sale of the Property
(or the execution and delivery of a binding agreement to sell the
Property) pursuant to the Remarketing Option, the Lessee may elect, in
its sole discretion, to exercise the Purchase Option.
(b) Not later than one hundred twenty (120) days prior to the
Expiration Date, the Lessee shall deliver to the Lessor an
Environmental Audit for the Property. Such Environmental Audit shall be
prepared by an environmental consultant selected by the Lessor in the
Lessor's reasonable discretion and shall contain conclusions reasonably
satisfactory to the Lessor as to the environmental status of the
Property. If any such Environmental Audit indicates any exceptions, the
Lessee shall have also delivered a Phase Two environmental assessment
by such environmental consultant prior to the Expiration Date showing
the completion of the remedying of such exceptions in compliance with
Applicable Law.
(c) On the date of the Lessee's notice to the Lessor of the
Lessee's exercise of the Remarketing Option, no Lease Event of Default
or Lease Default shall exist, and thereafter, no Lease Event of Default
or Lease Default shall exist.
(d) The Improvements shall have been constructed in accordance
with the Plans and Specifications not later than one day prior to the
Expiration Date. The Lessee shall have completed in all material
respects all Modifications, restoration and rebuilding of the affected
Property pursuant to Sections 10.1 and 14.1 (as the case may be), shall
have removed any walkways and other Improvements connecting the
Property to any other property, to the extent requested by any
Participant, and shall have fulfilled in all material respects all of
the conditions and requirements in connection therewith pursuant to
said Sections, in each case by the date on which the Lessor receives
the Lessee's notice of the Lessee's exercise of the Remarketing Option
(time being of the essence), regardless of whether the same shall be
within the Lessee's control. The Lessee shall have also paid the cost
of all Modifications commenced prior to the Expiration Date. The Lessee
shall not have been excused pursuant to Section 12.1 from complying
with any Applicable Law that involved the extension of the ultimate
imposition of such Applicable Law beyond the last day of the Term. Any
Permitted Liens (other than Lessor Liens) on the Property that were
contested by the Lessee shall be removed prior to the Expiration Date.
(e) During the Marketing Period, the Lessee shall, as
nonexclusive agent for the Lessor, use commercially reasonable efforts
to sell the Lessor's interest in the Improvements (as well as its
interest in the Land) for cash and will attempt to obtain for the
Improvements the highest purchase price therefor, and in any event not
less than the Lease Balance. The Lessee will be responsible for hiring
brokers and making the Property available for inspection by prospective
purchasers. The Lessee shall promptly upon request permit inspection of
the Property and any maintenance records relating to the Property by
the Lessor, any Participant and any potential purchasers, and shall
otherwise do all things necessary to sell and deliver possession of the
Property to any purchaser. All such marketing of the Property shall be
at the Lessee's sole expense. The Lessee shall allow the Lessor and any
potential qualified purchaser reasonable access to the Property for the
purpose of inspecting the same.
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(f) The Lessee shall submit all bids to the Lessor and the
Participants, and the Lessor will have the right to review the same and
the right to submit any one or more bids. All bids shall be on an
all-cash basis unless the Lessor and the Participants shall otherwise
agree in their sole discretion. The Lessee shall procure bids from one
or more bona fide prospective purchasers and shall deliver to the
Lessor and the Participants not less than ninety (90) days prior to the
Expiration Date a binding written unconditional (except as set forth
below), irrevocable offer by such purchaser or purchasers offering the
highest all cash bid to purchase the Property (unless otherwise agreed
to by the Lessor and the Participants). No such purchaser shall be the
Lessee, or any Subsidiary or Affiliate of the Lessee. The written offer
must specify the Expiration Date as the closing date unless the Lessor
and the Participants shall otherwise agree in their sole discretion.
(g) In connection with any such sale of the Property, the
Lessee will provide to the purchaser all customary "seller's"
indemnities, representations and warranties regarding title, absence of
Liens (except Lessor Liens) and the condition of such Property,
including an environmental indemnity to the extent the same are
required by the purchaser. The Lessee shall have obtained, at its cost
and expense, all required governmental and regulatory consents and
approvals and shall have made all filings as required by Applicable Law
in order to carry out and complete the transfer of the Property. As to
the Lessor, any such sale shall be made on an "as is, with all faults"
basis without representation or warranty by the Lessor other than the
absence of Lessor Liens. Any agreement as to such sale shall be made
subject to the Lessor's rights hereunder and shall be in form and
substance satisfactory to the Lessor. Should the Lessee submit a bona
fide, arms-length offer from a third-party to purchase the Property
acceptable to the Participants, and the provisions of this Section 20.1
shall have been satisfied in the sole discretion of the Participants,
and provided that no Lease Event of Default shall have occurred and be
continuing, the Lessor shall notify the Lessee of its approval of the
offer and acknowledge that the Lessor will deliver the agreements and
instruments which it is obligated to deliver pursuant to Section 21.1.
(h) The Lessee shall pay or cause to be paid directly, and not
from the sale proceeds, any prorations, credits, costs and expenses of
the sale of the Property, whether incurred by the Lessor or the Lessee,
including the cost of all title insurance, surveys, environmental
reports, appraisals, transfer taxes, the Lessor's reasonable attorneys'
fees, the Lessee's attorneys' fees, commissions, escrow fees, recording
fees, and all applicable documentary and other transfer taxes.
(i) Lessee shall pay to the Lessor on the Expiration Date (or
to such other Person as the Lessor shall notify the Lessee in writing,
or in the case of Supplemental Rent, to the Person entitled thereto) an
amount equal to Basic Rent and all other amounts under any Operative
Document which have accrued as of the Expiration Date, in the type of
funds specified in Section 3.4 hereof.
(j) Lessee shall pay to the Lessor on or prior to the
Expiration Date the amounts, if any, required to be paid pursuant to
Section 13.2 of the Participation Agreement.
(k) Lessee shall pay to the Lessor on the Expiration Date the
Termination Rental Amount.
(l) The purchase of the Property shall be consummated on the
Expiration Date and the Gross Proceeds from Improvements shall be paid
directly to the Lessor or its assignee; provided, however, that if the
sum of the Gross Proceeds from Improvements, the amounts, if any,
required to be paid pursuant to Section 13.2 of the Participation
Agreement, the principal portion of Basic Rent and the Termination
Rental Amount exceeds the Lease Balance (minus amounts paid by the
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Lessor solely as a result of Unrelated Indemnity Events) as of such
date, then the excess shall be paid to the Lessee on the Expiration
Date.
If one or more of the foregoing provisions or the provisions set forth
in Section 20.1 of the Existing Lease shall not be fulfilled as of the date set
forth above with respect to the Property, then the Lessor shall declare by
written notice to the Lessee the Remarketing Option and the "Remarketing Option"
as such term is defined in the Existing Lease to be null and void (whether or
not it has been theretofore exercised by the Lessee), in which event all of the
Lessee's rights under this Section 20.1 and under Section 20.1 of the Existing
Lease shall immediately terminate and the Lessee shall be obligated to purchase
the Improvements pursuant to Section 18.2 and the "Improvements" as such term is
defined in the Existing Lease on the Expiration Date.
Except as expressly set forth herein, the Lessee shall have no right,
power or authority to bind the Lessor in connection with any proposed sale of
the Improvements.
Notwithstanding anything to the contrary in this Section 20.1, Section
5.2(iii) of the Participation Agreement and of the "Participation Agreement" as
such term is defined in the Existing Lease shall be controlling.
20.2. Certain Obligations Continue. During the Marketing Period, the
obligation of the Lessee to pay Rent (including the installment of Basic Rent
due on the Expiration Date) shall continue undiminished until payment in full of
all other amounts due to the Lessor with respect to the Property under the
Operative Documents to which the Lessee is a party. The Lessor shall have the
right, but shall be under no duty, to solicit bids, to inquire into the efforts
of the Lessee to obtain bids or otherwise to take action in connection with any
such sale, other than as expressly provided in this Article XX.
20.3. Termination of Operative Documents. Upon the closing of the sale
of the Property pursuant to the Remarketing Option in accordance with Article XX
of this Lease and payment by Lessee of all other obligations then due and
payable hereunder and under the other Operative Documents, the obligation of the
Lessee to pay any remaining Lease Balance (exclusive of those obligations that
expressly survive the Expiration Date) shall terminate and become null and void,
all Liens created under the Operative Documents shall be terminated of record
and the Lease Balance shall be deemed to be fully paid in its entirety;
provided, that such obligations shall be reinstated in their entirety if at any
time any payment (in whole or in part) of any such obligations is rescinded or
must otherwise be restored upon the insolvency, bankruptcy or reorganization of
the Lessee or otherwise.
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
21.1. Provisions Relating to the Exercise of Purchase Option or
Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other
Events.
(a) In connection with the Lessee's exercise of its Purchase
Option or Expiration Date Purchase Obligation, upon the Expiration
Date, or in connection with a purchase of the Improvements under
Article XV or Section 16.2(e) hereof or the payment of all amounts due
under Section 5.1 of the Construction Agency Agreement and upon tender
by the Lessee of the amounts set forth in Article XV, Sections 16.2(e),
18.1, 18.2 or 18.3 hereof or Section 5.1 of the Construction Agency
Agreement, as applicable:
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(i) the Lessor shall execute and deliver to the
Lessee (or to the Lessee's designee) at the Lessee's cost and
expense a quitclaim deed with respect to the Improvements, an
assignment of the Lessor's interest in the Ground Lease (or a
termination of the Ground Lease, if applicable, quitclaim bill
of sale with respect to the Equipment and an assignment of the
Lessor's entire interest in the Improvements (which shall
include an assignment of all of the Lessor's right, title and
interest in and to any Net Proceeds not previously received by
the Lessor), in each case in recordable form and otherwise in
conformity with local custom and free and clear of the Lien of
the Mortgage (and any other Lien arising in connection with
the Operative Documents) and any Lessor Liens attributable to
the Lessor;
(ii) the Improvements shall be conveyed to the Lessee
"AS IS" and in its then present physical condition;
(iii) the Lessor shall execute and deliver to Lessee
and the Lessee's title insurance company an affidavit as to
the absence of any Lessor Liens and shall cause the
Participants to execute and deliver a release of Mortgage and
termination statements for any financing statements which are
of record on the Initial Advance Date;
(iv) the Lessor shall execute and deliver such other
affidavits and certificates reasonably requested by any title
insurance company insuring title to the Property with respect
to the absence of Lessor Liens, as well as a FIRPTA affidavit;
and
(v) in the event of a sale of the Property to a
Person other than the Lessee, the Lessor and the Lessee shall
execute an instrument in recordable form declaring this Lease
to be terminated as of the date of closing of the sale of the
Property, and releasing any Lien granted pursuant to this
Lease encumbering the Property.
(b) If the Lessee properly exercises the Remarketing Option,
then the Lessee shall, on the Expiration Date, and at its own cost,
transfer possession of the Property to the independent purchaser(s)
thereof, in each case by surrendering the same into the possession of
the Lessor or such purchaser(s), as the case may be, free and clear of
all Liens other than Lessor Liens and the lien of the Mortgage, in good
condition (as modified by Modifications permitted by this Lease),
ordinary wear and tear excepted, and in compliance with Applicable Law
and the provisions of this Lease, and the Lessee shall execute and
deliver to the purchaser at the Lessee's cost and expense a special
warranty deed with respect to the Property, a bill of sale with respect
to the Equipment, in each case in recordable form and otherwise in
conformity with local custom and free and clear of all Liens, other
than Permitted Liens; the Lessee shall execute and deliver to purchaser
and the purchaser's title insurance company an affidavit as to the
absence of any Liens (other than Permitted Liens), and such other
affidavits and certificates reasonably requested by any title insurance
company insuring title to the Property, as well as a FIRPTA affidavit,
and an instrument in recordable form declaring this Lease to be
terminated on the date of closing of the sale of the Property; the
Lessor shall execute and deliver to purchaser an assignment of Lessor's
interest in the Ground lease without recourse, representation or
warranty. The Lessee shall, on and within a reasonable time before and
up to one year after the Expiration Date, cooperate reasonably with the
Lessor and the independent purchaser(s) of the Property in order to
facilitate the purchase by such purchaser(s) of the Property, which
cooperation shall include the following, all of which the Lessee shall
do on or before the Expiration Date or as soon thereafter as is
reasonably practicable: providing all books and records regarding the
maintenance and ownership of the Property and all know-how, data and
technical information relating thereto, providing a current copy of the
Plans
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and Specifications for the Improvements, granting or assigning all
licenses necessary for the operation and maintenance of the Property
and cooperating reasonably in seeking and obtaining all necessary
Governmental Action. The obligations of the Lessee under this paragraph
shall survive the expiration or termination of this Lease.
ARTICLE XXII
ESTOPPEL CERTIFICATES
22.1. Estoppel Certificates. At any time and from time to time upon not
less than twenty (20) days' prior request by the Lessor or the Lessee (the
"Requesting Party"), the other party (whichever party shall have received such
request, the "Certifying Party") shall furnish to the Requesting Party (but in
the case of the Lessor, as Certifying Party, not more than four times per year
unless required to satisfy the requirements of any sublessees and only to the
extent that the required information has been provided to the Lessor by the
Lessee or the Lenders) a certificate signed by an individual having the office
of vice president or higher in the Certifying Party certifying that this Lease
is in full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications); the dates to which the Basic Rent
and Supplemental Rent have been paid; to the best knowledge of the signer of
such certificate, whether or not the Requesting Party is in default under any of
its obligations hereunder (and, if so, the nature of such alleged default); and
such other matters under this Lease as the Requesting Party may reasonably
request. Any such certificate furnished pursuant to this Article XXII may be
relied upon by the Requesting Party, and any existing or prospective mortgagee,
purchaser or lender, and any accountant or auditor, of, from or to the
Requesting Party (or any Affiliate thereof).
ARTICLE XXIII
ACCEPTANCE OF SURRENDER
23.1. Acceptance of Surrender. No surrender to the Lessor of this Lease
or of all or any portion of the Property or of any part of any thereof or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by the Lessor and, prior to the payment or performance of all
obligations under the Loan Agreement and termination of the Commitments, the
Lenders, and no act by the Lessor or the Lenders or any representative or agent
of the Lessor or the Lenders, other than a written acceptance, shall constitute
an acceptance of any such surrender.
ARTICLE XXIV
NO MERGER OF TITLE
24.1. No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) the fee or ground leasehold estate in the Property,
except as may expressly be stated in a written instrument duly executed and
delivered by the appropriate Person or (c) a beneficial interest in the Lessor.
ARTICLE XXV
INTENT OF THE PARTIES
25.1. Ownership of the Property. (a) It is the intent of the parties
hereto that for all purposes other than financial accounting purposes,
including, state, real estate, commercial law, bankruptcy and
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federal, state and local income tax purposes, the transaction contemplated
hereby is a financing arrangement and preserves ownership in the Property in the
Lessee.
(b) It is the intent of the parties hereto that
(i) the obligations of the Lessee under the Lease to
pay Basic Rent and Supplemental Rent or Lease Balance in
connection with any purchase of the Property pursuant to the
Lease shall be treated as payments of interest on and
principal of, respectively, loans from the Lessor, the
Certificate Purchaser and the Lenders to the Lessee, and (ii)
the Lease grants a security interest and mortgage, as the case
may be, on the Property to the Lessor to secure Lessee's
performance under and payment of all amounts under the Lease
and the other Operative Documents.
(c) Specifically, without limiting the generality of
subsection (b) of this Section 25.1, the Lessor and the Lessee intend
and agree that with respect to the nature of the transactions evidenced
by the Lease in the context of the exercise of remedies under the
Operative Documents, including, in the case of any insolvency or
receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of
the United States of America or any State or Commonwealth thereof
affecting the Lessee, the Lessor, the Certificate Purchaser or any
Participant or any enforcement or collection actions, the transactions
evidenced by the Lease are loans made by the Lessor, Certificate
Purchaser and the Lenders as unrelated third party lenders to the
Lessee secured by the Property (it being understood that Lessee hereby
mortgages, grants, bargains, sells, releases, confirms, conveys,
assigns, transfers and sets over to the Lessor, for the benefit of the
Lenders and the Certificate Purchaser, and grants a security interest
in, the Property (consisting of a first fee mortgage with respect to
all right, title and interest of the Lessee in and to the fee title to,
and reversionary interest in, the Land and Improvements) and a first
leasehold mortgage on the Lessee's leasehold estate under this Lease,
all to secure such loans, effective on the date hereof, to have and to
hold such interests in the Property unto the Lessor, for the benefit of
the Lenders and the Certificate Purchaser and their respective
successors and assigns, forever, to secure all Obligations and all
amounts payable by Lessee, the Construction Agent and the Guarantors
under the Operative Documents, provided always that these presents are
upon the express condition that, if all amounts due under the Lease and
the other Operative Documents shall have been paid and satisfied in
full, then this instrument and the estate hereby granted shall cease
and become void).
(d) Specifically, but without limiting the generality of
subsection (b) of this Section 25.1, the Lessor and the Lessee further
intend and agree that, with respect to that portion of the Property
constituting personal property, for the purpose of securing the
Lessee's obligations for the repayment of the above-described loans
from the Lessor, the Certificate Purchaser and the Lenders to the
Lessee, (i) the Lease shall also be deemed to be a security agreement
and financing statement within the meaning of Article 9 of the Uniform
Commercial Code; (ii) the conveyance provided for hereby shall be
deemed to be a grant by the Lessee to the Lessor, for the benefit of
the Lenders and the Certificate Purchaser, of a mortgage lien and
security interest in all of the Lessee's present and future right,
title and interest in and to such portion of the Property, including
but not limited to the Lessee's leasehold estate therein and all
proceeds of the conversion, voluntary or involuntary, of the foregoing
into cash, investments, securities or other property, whether in the
form of cash, investments, securities or other property to secure such
loans, effective on the date hereof, to have and to hold such interests
in the Property unto the Lessor, for the benefit of the Lenders and the
Certificate Purchaser and their respective successors and assigns,
forever, provided always that
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these presents are upon the express condition that, if all amounts due
under the Lease shall have been paid and satisfied in full, then this
instrument and the estate hereby granted shall cease and become void;
(iii) the possession by the Lessor of notes and such other items of
property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party"
for purposes of perfecting the security interest pursuant to Section
9-305 of the Uniform Commercial Code; and (iv) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations
from financial intermediaries, bankers or agents (as applicable) of the
Lessee shall be deemed to have been given for the purpose of perfecting
such security interest under Applicable Law. The Lessor and the Lessee
shall, to the extent consistent with the Lease, take such actions and
execute, deliver, file and record such other documents, financing
statements, mortgages and deeds of trust as may be necessary to ensure
that, if the Lease were deemed to create a security interest in the
Property in accordance with this Section, such security interest would
be deemed to be a perfected security interest with priority over all
Liens other than Permitted Liens, under Applicable Law and will be
maintained as such throughout the Term.
25.2. Open-End Mortgage. In the event that a court of competent
jurisdiction rules that this instrument constitutes a mortgage, deed or trust or
other secured financing as is the intent of the parties pursuant to Section
25.1, this instrument shall be deemed to be an Open-End Mortgage as defined in
42 Pa. C.S.A. section 8143(f) and, as such, is entitled to the benefits of
Senate Bill 693, 1989 session of the General Assembly of Pennsylvania (the
"Act") as codified at 42 Pa. C.S.A. section 8143 et seq. The parties to this
instrument intend that, in addition to any other debt or obligations secured
hereby, this instrument shall secure unpaid balances of advances made pursuant
to the Operative Documents after this instrument is left for record with the
Recorder's Office of the County where the Property is located, whether such
advances are made pursuant to an obligation of the Lessor or otherwise. The
maximum principal amount of unpaid indebtedness secured by this instrument is
TWENTY-FIVE MILLION DOLLARS ($25,000,000) plus interest thereon, which
indebtedness may consist of present and future loans made under the Operative
Documents, fees payable pursuant thereto, advances made with respect to the
Property for the payment of, among other things, taxes, assessments, maintenance
charges, insurance premiums and the like, and costs and expenses, including but
not limited to attorney's fees, incurred for the protection of the Property or
the lien and security of this instrument or by reason of a Lease Event of
Default.
ARTICLE XXVI
MISCELLANEOUS
26.1. Survival; Severability; Etc. Anything contained in this Lease to
the contrary notwithstanding, all claims against and liabilities of the Lessee
or the Lessor arising from events commencing prior to the expiration or earlier
termination of this Lease shall survive such expiration or earlier termination
for a period of one year except as to indemnification which shall continue to
survive. If any term or provision of this Lease or any application thereof shall
be declared invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any
right or option of the Lessee provided in this Lease, including any right or
option described in Articles XIV, XV, XVIII, XIX or XX, would, in the absence of
the limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years after the date of death of the last
survivor of the descendants of Franklin D. Roosevelt, the former President of
the United States, Henry Ford, the deceased automobile manufacturer, and John D.
Rockefeller, the founder of
33
Lease
<PAGE> 37
the Standard Oil Company, known to be alive on the date of the execution,
acknowledgment and delivery of this Lease.
26.2. Amendments and Modifications. Subject to the requirements,
restrictions and conditions set forth in the Participation Agreement, neither
this Lease nor any provision hereof may be amended, waived, discharged or
terminated except by an instrument in writing in recordable form signed by the
Lessor and the Lessee.
26.3. No Waiver. No failure by the Lessor or the Lessee to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy upon a default hereunder, and no acceptance of full or partial payment of
Rent during the continuance of any such default, shall constitute a waiver of
any such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
26.4. Notices. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing (including by facsimile), and
directed to the address described in, and deemed received in accordance with the
provisions of, Section 14.3 of the Participation Agreement.
26.5. Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
26.6. Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
26.7. Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
26.8. GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
26.9. Limitations on Recourse. The parties hereto agree that except as
specifically set forth in the Lease or in any other Operative Document, Trust
Company shall have no personal liability whatsoever to the Lessee or its
respective successors and assigns for any claim based on or in respect of this
Lease or any of the other Operative Documents or arising in any way from the
transactions contemplated hereby or thereby; provided, however, that Trust
Company shall be liable in its individual capacity (a) for its own willful
misconduct or gross negligence (or negligence in the handling of funds), or (b)
for any Tax based on or measured by any fees, commission or compensation
received by it for acting as the Lessor as contemplated by the Operative
Documents. It is understood and agreed that, except as provided in the preceding
sentence: (i) Trust Company shall have no personal liability under any of the
Operative Documents as a result of acting pursuant to and consistent with any of
the Operative Documents; (ii) all obligations of Trust Company to the Lessee are
solely nonrecourse obligations except to the extent that it has received payment
from others; (iii) all such personal liability of Trust Company is expressly
waived and released as a condition of, and as consideration for, the execution
and delivery of the Operative Documents by Trust Company; and (iv) this Lease is
executed and delivered by Trust Company solely in the exercise of the powers
expressly conferred upon it as the Lessor under the Trust Agreement. It is
expressly understood and agreed by the parties hereto that (a) this Lease is
executed and delivered by
34
Lease
<PAGE> 38
Wilmington Trust Company, not individually or personally, except as expressly
stated herein, but solely as Certificate Trustee of Brush Creek Business Trust
II, a statutory Delaware business trust created under the Trust Agreement, in
the exercise of the powers and authority conferred and vested in it under the
Trust Agreement, (b) each of the representations, undertakings and agreements
herein made by the Certificate Trustee on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company, except as expressly stated herein, but is made and
intended for the purpose of binding only the Trust and (c) except as expressly
stated herein or in the other Operative Documents, under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Certificate Trustee or the Trust under this Lease or the other Operative
Documents.
26.10. Original Lease. The single executed original of this Lease
marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on or following
the signature page thereof and containing the receipt of the Certificate Trustee
therefor on or following the signature page thereof shall be the Original
Executed Counterpart of this Lease (the "Original Executed Counterpart"). To the
extent that this Lease constitutes chattel paper, as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction, no security
interest in this Lease may be created through the transfer or possession of any
counterpart other than the Original Executed Counterpart.
26.11. SUBMISSION OF JURISDICTION. TO THE FULLEST EXTENT PERMITTED BY
LAW, THE LESSOR AND LESSEE HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA AND ANY
COURT OF THE COMMONWEALTH OF PENNSYLVANIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR IN CONNECTION WITH THE OPERATIVE DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY. THE LESSOR AND LESSEE IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDINGS BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
/s/ BEH
- ---------
26.12. POWER TO CONFESS JUDGMENT. THE LESSEE HEREBY AUTHORIZES AND
EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE
COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE AFTER A DEFAULT UNDER THIS LEASE, THE
GUARANTY, THE CONSTRUCTION AGENCY AGREEMENT, OR ANY OF THE OPERATIVE DOCUMENTS
TO APPEAR FOR THE LESSEE, AND, WITH OR WITHOUT DECLARATION FILED, CONFESS
JUDGMENT AGAINST THE LESSEE IN FAVOR OF THE LESSOR, AS OF ANY TERM, FOR THE
UNPAID OBLIGATIONS HEREUNDER, AND INCLUDING, WITHOUT LIMITATION, ALL ACCRUED AND
UNPAID INTEREST, CHARGES, EXPENSES OR OTHER AMOUNTS PAYABLE UNDER THIS LEASE,
THE GUARANTY, THE CONSTRUCTION AGENCY AGREEMENT, OR UNDER ANY OF THE OPERATIVE
DOCUMENTS, WHETHER BY ACCELERATION OR OTHERWISE WITH COSTS OF SUIT AND A
REASONABLE ATTORNEY'S COMMISSION AS CERTIFIED BY THE LESSOR WITH RELEASE OF ALL
ERRORS, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION TO
THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE LESSEE. NO SINGLE
EXERCISE OF THE FOREGOING POWER TO CONFESS
35
Lease
<PAGE> 39
JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE
SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE, OR VOID, BUT THE POWER SHALL
CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE
LESSOR SHALL ELECT, UNTIL SUCH TIME AS THE LESSOR SHALL HAVE RECEIVED PAYMENT IN
FULL OF THE RENT, OBLIGATIONS, INTEREST AND COSTS AND ALL AMOUNTS PAYABLE UNDER
THIS LEASE.
BY SIGNING THIS INSTRUMENT, THE LESSEE HEREBY ACKNOWLEDGES THAT IT HAS
READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL, UNDERSTANDS,
AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE CONFESSION OF
JUDGMENT PROVISION AND UNDERSTANDS THAT A CONFESSION OF JUDGMENT CONSTITUTES A
WAIVER OF RIGHTS IT OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE A
JUDGMENT IS ENTERED AGAINST IT AND WHICH MAY RESULT IN A COURT JUDGMENT AGAINST
THE LESSEE WITHOUT PRIOR NOTICE OR HEARING AND THAT THE AMOUNTS PAYABLE UNDER
THIS LEASE MAY BE COLLECTED FROM THE LESSEE REGARDLESS OF ANY CLAIM THE LESSEE
MAY HAVE AGAINST THE LESSOR.
/s/ BEH
- ---------
26.13. POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING. THE LESSEE
HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF
RECORD OR THE SHERIFF WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, TO
TAKE ALL ACTION ALLOWED BY OR PROVIDED FOR IN THE PENNSYLVANIA RULES OF CIVIL
PROCEDURE OR OTHER APPLICABLE RULES OF CIVIL PROCEDURE TO EXECUTE ON ANY
JUDGMENT ENTERED AGAINST THE LESSEE PURSUANT TO THE CONFESSION OF JUDGMENT SET
FORTH ABOVE WITHOUT PRIOR NOTICE OR HEARING OF ANY NATURE WHATSOEVER, WAIVING
ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION, TO THE EXTENT THAT
SUCH LAWS MAY LAWFULLY BE WAIVED BY THE LESSEE. NO SINGLE EXERCISE OF THE
FOREGOING POWER TO EXECUTE ON JUDGMENT WITHOUT A HEARING SHALL BE DEEMED TO
EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT
TO BE VALID, VOIDABLE OF VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT
MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE LESSOR SHALL ELECT UNTIL SUCH
TIME AS THE LESSOR SHALL HAVE RECEIVED PAYMENT IN FULL OF THE RENT, OBLIGATIONS,
INTEREST AND COSTS AND ALL AMOUNTS PAYABLE UNDER THIS LEASE.
BY SIGNING THIS INSTRUMENT THE LESSEE HEREBY ACKNOWLEDGES THAT IT HAS
READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL, UNDERSTANDS
AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE POWER TO EXECUTE ON
JUDGMENT WITHOUT A HEARING, AND UNDERSTANDS THAT THE POWER TO EXECUTE ON A
JUDGMENT WITHOUT A HEARING CONSTITUTES A WAIVER OF RIGHTS IT OTHERWISE WOULD
HAVE TO PRIOR NOTICE AND A HEARING BEFORE EXECUTION ON A JUDGMENT, AND THAT THE
AMOUNTS PAYABLE UNDER THIS LEASE MAY BE COLLECTED FROM THE LESSEE REGARDLESS OF
ANY CLAIM THAT THE LESSEE MAY HAVE AGAINST THE LESSOR.
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Lease
<PAGE> 40
26.14. No Merger. If the fee simple interest in the Property and the
leasehold interest therein shall be held by the same party, the interest in the
Property granted to the Certificate Trustee pursuant to the Ground Lease and the
interest of the Lessee in the Lease shall not terminate or be merged and the
Ground Lease and the Lease shall remain in full force and effect.
37
Lease
<PAGE> 41
IN WITNESS WHEREOF, the parties have caused this Lease be duly executed
and delivered as of the date first above written.
Attest: FORE SYSTEMS, INC.
/s/ E. SAMMARTINO By: /s/ BRUCE E. HANEY
- --------------------- -----------------------------------
Name: Bruce E. Haney
--------------------------------
Title: SR. VP & CHIEF FINANCIAL OFFICER
--------------------------------
Attest:
/s/ CHRISTOPHER H. GEBHARDT
- ---------------------------
Secretary
S-1
<PAGE> 42
Attest: WILMINGTON TRUST COMPANY, not in its
individual capacity except as expressly stated
herein, but solely as Certificate Trustee
/s/ Illegible By: /s/ PATRICIA A. EVANS
- --------------------- -----------------------------------
Name: Patricia A. Evans
--------------------------------
Title: FINANCIAL SERVICES OFFICER
--------------------------------
Certificate of Residence
------------------------
I hereby certify that the precise and complete post office address of
the within named mortgagee is Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
/s/ DEBRA EBERLY
----------------------------------------------
Attorney for Wilmington Trust Company, as
Certificate Trustee
S-2
<PAGE> 43
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
Attest: MELLON BANK, N.A.
/s/ MICHAEL SLOYER By: /s/ MICHAEL T. ANSELMO
- ----------------------- -----------------------------
Name: Michael T. Anselmo
---------------------------
Title: Vice President
--------------------------
S-3
<PAGE> 44
STATE OF PENNSYLVANIA )
------------ ) ss.:
COUNTY OF ALLEGHENY )
---------
The foregoing Lease was acknowledged before me, the
undersigned Notary Public, in the County of ALLEGHENY, PENNSYLVANIA, this 4TH
--------- ------------ ---
day of December, 1998, by BRUCE E. HANEY, as SR. V.P. & CFO, of FORE
--------------- --------------
SYSTEMS, INC., a Delaware corporation, on behalf of the corporation.
/s/ KAREN M. LUTSKO
[Notarial Seal] -----------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires: 7-5-2001
---------------------
<PAGE> 45
STATE OF DELAWARE )
-------- ) ss.:
COUNTY OF NEW CASTLE )
----------
The foregoing Lease was acknowledged before me, the
undersigned Notary Public, in the County of NEW CASTLE, DE, this 14TH
---------- --- ----
day of December, 1998, by PATRICIA A. EVANS, as FIN. SVS. OFFICER, of
----------------- -----------------
Wilmington Trust Company, a Delaware banking corporation, not in its individual
capacity, but solely as Certificate Trustee, on behalf of the Certificate
Trustee.
/s/ KATHLEEN A. PEDELINI
[Notarial Seal] -----------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires: October 31, 2002
---------------------
<PAGE> 46
COMMONWEALTH OF PENNSYLVANIA )
------------ ) ss.:
COUNTY OF ALLEGHENY )
---------
The foregoing Lease was acknowledged before me, the
undersigned Notary Public, in the County of ALLEGHENY, PENNA., this 14TH
--------- ------ ----
day of December, 1998, by MICHAEL ANSELMO, as Vice President, of Mellon
--------------- --------------
Bank, N.A., on behalf of the Mellon Bank, N.A.
/s/ DOROTHY A. BROWN
[Notarial Seal] -----------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires: November 23, 2000
---------------------
<PAGE> 47
Commonwealth of Pennsylvania )
) ss.
County of Allegheny )
RECORDED on this _______ day of ____________ A.D.
19__, in the Recorder's office of said County, in Mortgage Book Vol. ______,
Page ________.
Given under my hand and the seal of the said
office, the date above written.
, Recorder
- ------------------
<PAGE> 1
Exhibit 10.3
GUARANTY
THIS GUARANTY (this "Guaranty") dated as of December 14, 1998 is made
by FORE SYSTEMS, INC., a Delaware corporation (the "Guarantor"), in favor of
MELLON BANK, N.A., as Construction Lender (together with the various financial
institutions which may from time to time become lenders under the Construction
Loan Agreement referred to below, and in the event of a Refinancing, the Tranche
A Lenders and the Tranche B Lender, collectively, the "Lender") and MELLON
FINANCIAL SERVICES CORPORATION #4, as Certificate Purchaser (together with its
successors and assigns in such capacity, the "Certificate Purchaser"; the Lender
and the Certificate Purchaser are referred to collectively as the "Funding
Parties" and individually as a "Funding Party").
W I T N E S S E T H:
WHEREAS, pursuant to a Construction Loan Agreement, dated as of the
date hereof (together with all amendments, restatements and other modifications,
if any, from time to time hereafter made thereto, the "Loan Agreement"), between
Wilmington Trust Company, not in its individual capacity except as expressly
stated therein, but solely as Certificate Trustee and the Construction Lender,
the Construction Lender has agreed, subject to the terms and conditions thereof,
to make Loans to the Certificate Trustee;
WHEREAS, pursuant to the terms of a Trust Agreement, dated as of the
date hereof (together with all amendments, restatements and other modifications,
if any, from time to time hereafter made thereto, the "Trust Agreement"),
between Wilmington Trust Company, not in its individual capacity except as
expressly stated therein, but solely as Certificate Trustee and the Certificate
Purchaser, the Certificate Purchaser has agreed to purchase the Certificate;
WHEREAS, as a condition to the occurrence of the Documentation Date
under the Participation Agreement, dated as of the date hereof (together with
all amendments, restatements and other modifications, if any, from time to time
hereafter made thereto, the "Participation Agreement"), among the Guarantor, the
Certificate Trustee, the Certificate Purchaser, and the Construction Lender, the
Guarantor is required to execute and deliver this Guaranty in favor of the
Funding Parties;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial benefits from the
transactions contemplated by the Loan Agreement, the Trust Agreement and the
Participation Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Construction Lender to
enter into the Loan Agreement and the Certificate Purchaser to purchase the
Certificate, and intending to be legally bound hereby, the Guarantor agrees, for
the benefit of the Funding Parties, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Holder" shall mean any assignee or transferee of an Interest which is
assigned or otherwise transferred (in accordance with Section 12.1 of the
Participation Agreement to the extent that Section 12.1 is applicable to such
transfer).
"Interest" shall mean all or any of the right, title, or interest and
obligations of any Funding Party or any Holder in and to the Loan Agreement or
the other Operative Documents, and in the event of a Refinancing, the
Refinancing Loan Documents, all or any of the benefits, advantages and
obligations of any Funding Party or any Holder under the Loan Agreement or the
other Operative Documents, and in the event of a Refinancing, the Refinancing
Loan Documents, and all or any right, title and interest of any Funding Party or
any Holder in and to the Property.
"Lender" is defined in the preamble.
"Lessee" means the Guarantor, in its capacity as Lessee under the
Participation Agreement and the Lease.
"Loan Agreement" is defined in the first recital.
"Obligations" means all of the following, in each case howsoever
created, arising or evidenced, whether direct or indirect, joint or several,
absolute or contingent, or now or hereafter existing, or due or to become due:
all principal of the Note, interest accrued thereon, the Certificate Amount,
Certificate Yield accrued thereon and all additional amounts and other sums at
any time due and owing, and required to be paid, to the Participants by the
Certificate Trustee under the terms of the Loan Agreement, the Note or any other
Operative Documents and, in the event of a Refinancing, to the Tranche A Lenders
and the Tranche B Lender under any Refinancing Loan Document (including, without
limitation, Section 2.6 of the Construction Loan Agreement); provided, however,
that with respect to an exercise of the Remarketing Option pursuant to Section
20.1 of the Lease the amount guaranteed hereunder shall not exceed the aggregate
amounts required to be paid by the Lessee pursuant to the Lease in connection
with such exercise; and, provided further, that prior to the commencement of the
Base Term, the aggregate amount payable by the Guarantor hereunder and Holding
under the Guaranty Agreement with respect to a Construction Agency Event of
Default arising solely from an Unrelated Event shall be subject to the
limitations on recourse liability applicable to the Lessee set forth in Section
13.1B.(2) of the Participation Agreement.
-2-
Guaranty
<PAGE> 3
"Organic Document" means, relative to the Guarantor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Participation Agreement" is defined in the third recital.
"Trust Agreement" is defined in the second recital.
"U.C.C." means the Uniform Commercial Code as in effect in the
Commonwealth of Pennsylvania.
SECTION 1.2. Participation Agreement Definitions. Capitalized terms
used but not otherwise defined in this Guaranty have the respective meanings
specified in Appendix 1 to the Participation Agreement; and the rules of
interpretation set forth in Appendix 1 to the Participation Agreement shall
apply to this Guaranty.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Guaranty, including its preamble and recitals, with such
meanings.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due (after
giving effect to any applicable grace period), whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise, of all Obligations, whether for principal, interest, fees,
expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a)), and the
operation of Sections 502(b) and 506(b) of the United States Bankruptcy
Code, 11 U.S.C. Section 502(b) and Section 506(b)), and
(b) indemnifies and holds harmless each Funding Party and each
Holder for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by each Funding Party or such
Holder, as the case may be, in enforcing any rights under this
Guaranty.
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Funding Party or any Holder exercise any right, assert any claim or
demand or enforce any remedy whatsoever against the Lessee (or any other Person)
before or as a condition to the obligations of the Guarantor hereunder.
-3-
Guaranty
<PAGE> 4
SECTION 2.2. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations have
been paid in full, all obligations of the Guarantor hereunder shall have been
paid in full and all commitments of the Funding Parties under the Loan Agreement
and the other Operative Documents, and in the event of a Refinancing, under the
Refinancing Loan Documents, shall have terminated. The Guarantor guarantees that
the Obligations will be paid strictly in accordance with the terms of the Loan
Agreement and each other Operative Document, and in the event of a Refinancing,
each of the Refinancing Loan Documents, under which they arise, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Funding Party or any Holder
with respect thereto. The liability of the Guarantor under this Guaranty shall
be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the
Loan Agreement or any other Operative Document or Refinancing Loan
Document;
(b) the failure of any Funding Party or any Holder
(i) to assert any claim or demand or to enforce any
right or remedy against the Certificate Trustee or any other
Person (including any other guarantor) under the provisions of
the Loan Agreement, any other Operative Document or
Refinancing Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Obligations;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
extension, compromise or renewal of any Obligation;
(d) any reduction, limitation, impairment or termination of
the Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and
the Guarantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of
the invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the
Obligations;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Loan Agreement or any other Operative Document or Refinancing Loan
Document;
(f) any addition, exchange, release, surrender or
nonperfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Funding Party or any Holder securing any of
the Obligations; or
-4-
Guaranty
<PAGE> 5
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Certificate Trustee, any surety or any guarantor.
SECTION 2.3. Reinstatement, etc. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must otherwise be restored by any Funding Party or any Holder, upon
the insolvency, bankruptcy or reorganization of Lessee or otherwise, as though
such payment had not been made.
SECTION 2.4. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Lessee and this Guaranty and any requirement that any Funding
Party or any Holder protect, secure, perfect or insure any security interest or
Lien, or any property subject thereto, or exhaust any right or take any action
against the Certificate Trustee or any other Person (including any other
guarantor) or entity or any collateral securing the Obligations.
SECTION 2.5. Waiver of Subrogation. The Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
the Certificate Trustee that arise from the existence, payment, performance or
enforcement of the Guarantor's obligations under this Guaranty or any other
Operative Document or Refinancing Loan Document, including any right of
subrogation, reimbursement, exoneration, or indemnification, any right to
participate in any claim or remedy of any Funding Party or any Holder against
the Lessee or any collateral which any Funding Party now has or hereafter
acquires, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including the right to take or receive from the
Certificate Trustee, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights. If any amount shall be paid to the Guarantor in violation of the
preceding sentence and the Obligations shall not have been paid in cash in full
and all Commitments of the Funding Parties under the Loan Agreement and the
other Operative Documents, and in the event of a Refinancing, under the
Refinancing Loan Documents, have not been terminated, such amount shall be
deemed to have been paid to the Guarantor for the benefit of, and held in trust
for, the Funding Parties or any Holder or Holders, and shall forthwith be paid
to the Funding Parties for the benefit of the Funding Parties and any such
Holder or Holders to be credited and applied upon the Obligations, whether
matured or unmatured. The Guarantor acknowledges that it will receive benefits
from the financing and other arrangements contemplated by the Loan Agreement,
the Trust Agreement, the Participation Agreement and, in the event of a
Refinancing, under the Refinancing Loan Documents, and that the waiver set forth
in this Section is knowingly made in contemplation of such benefits.
SECTION 2.6. Successors, Transferees and Assigns; Transfers of
Interests, etc. This Guaranty shall:
(a) be binding upon the Guarantor and its successors,
transferees and assigns; and
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Guaranty
<PAGE> 6
(b) inure to the benefit of and be enforceable by each Funding
Party, each Holder and each of their respective successors.
Without limiting the generality of clause (b), any Lender and/or any Holder may,
in accordance with Article 12 of the Participation Agreement, and the
Certificate Purchaser and any Tranche A Lenders and the Tranche B Lender may,
assign or otherwise transfer (in whole or in part) any Interest held by it to
any Holder, and such Holder shall thereupon become vested with all rights and
benefits in respect thereof granted to the respective Funding Parties under any
Operative Document (including this Guaranty), Refinancing Document or otherwise.
SECTION 2.7. Consent to Jurisdiction; Waiver of Immunities. The
Guarantor hereby acknowledges and agrees that:
(a) It irrevocably submits to the jurisdiction of any federal
court sitting in Pennsylvania in any action or proceeding arising out
of or relating to this Guaranty, and the Guarantor hereby irrevocably
agrees that all claims in respect of such action or proceeding may be
heard and determined in such federal court. The Guarantor hereby
irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding. The Guarantor agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law.
(b) Nothing in this Section shall affect the right of any
Funding Party or any Holder to serve legal process in any other manner
permitted by law or affect the right of any Funding Party or any Holder
to bring any action or proceeding against the Guarantor or its property
in the courts of any other jurisdictions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Guarantor hereby
represents and warrants to each Funding Party as set forth in Section 8.3 and
8.4 of the Participation Agreement, which representations and warranties are
hereby incorporated by reference.
ARTICLE IV
COVENANTS
SECTION 4.1. Covenants. The Guarantor covenants and agrees that, so
long as any portion of the Obligations shall remain unpaid or any Funding Party
shall have any outstanding Commitments under the Loan Agreement or the other
Operative Documents, or in the event of a Refinancing, under any Refinancing
Loan Document, the Guarantor will, unless each Funding Party shall otherwise
consent in writing, comply with and perform the obligations set forth in
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Guaranty
<PAGE> 7
Section 10.1 of the Participation Agreement, which covenants are hereby
incorporated by reference.
ARTICLE V.
MISCELLANEOUS PROVISIONS
SECTION 5.1. Operative Document. This Guaranty is an Operative
Document executed pursuant to the Loan Agreement and the Participation
Agreement.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment
of Guaranty. In addition to, and not in limitation of, Section 2.6, this
Guaranty shall be binding upon the Guarantor and its successors, transferees and
assigns and shall inure to the benefit of and be enforceable by each Funding
Party and each Holder and their respective successors and assigns (to the full
extent provided pursuant to Section 2.6); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of each Funding Party and each Holder.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by each Funding Party and each Holder, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 5.4. Addresses for Notices. All notices, demands, requests,
consents, approvals and other communications hereunder shall be in writing and
directed to the address described in, and deemed received in accordance with the
provisions of, Section 14.3 of the Participation Agreement.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation
of, Section 2.2 and Section 2.4, no failure on the part of any Funding Party or
any Holder to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Section Captions. Section captions used in this Guaranty
are for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 5.7. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
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Guaranty
<PAGE> 8
SECTION 5.8. Termination of Guaranty. The Guarantor's obligations under
this Guaranty shall terminate on the date upon which all Obligations are
satisfied in full, subject to reinstatement as provided in Section 2.3 hereof.
SECTION 5.9. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES. FOR PURPOSES OF ANY ACTION OR PROCEEDING
INVOLVING THIS GUARANTY, THE GUARANTOR HEREBY EXPRESSLY SUBMITS TO THE
JURISDICTION OF ALL FEDERAL AND STATE COURTS LOCATED IN THE COMMONWEALTH OF
PENNSYLVANIA AND CONSENTS THAT IT MAY BE SERVED WITH ANY PROCESS OR PAPER BY
REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE COMMONWEALTH OF
PENNSYLVANIA.
SECTION 5.10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THE LOAN
AGREEMENT AND THE CERTIFICATE PURCHASER PURCHASING THE CERTIFICATE.
/s/ BEH
- -------
Initial
SECTION 5.11. POWER TO CONFESS JUDGMENT. THE GUARANTOR HEREBY
AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD
WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE AFTER AN EVENT OF DEFAULT
UNDER THIS GUARANTY, THE LEASE, THE CONSTRUCTION AGENCY AGREEMENT, OR ANY OF THE
OPERATIVE DOCUMENTS AND, IN THE EVENT OF A REFINANCING, ANY REFINANCING LOAN
DOCUMENT, TO APPEAR FOR THE GUARANTOR, AND, WITH OR WITHOUT DECLARATION FILED,
CONFESS JUDGMENT AGAINST THE GUARANTOR IN FAVOR OF THE FUNDING PARTIES, AS
OF ANY TERM, FOR THE UNPAID OBLIGATIONS HEREUNDER, AND INCLUDING, WITHOUT
LIMITATION, ALL ACCRUED AND UNPAID INTEREST, CHARGES, EXPENSES OR OTHER AMOUNTS
PAYABLE UNDER THIS GUARANTY, THE LEASE, THE CONSTRUCTION AGENCY AGREEMENT, OR
UNDER ANY OF THE OPERATIVE DOCUMENTS, AND, IN THE EVENT OF A REFINANCING, ANY
REFINANCING LOAN DOCUMENT, WHETHER BY ACCELERATION OR OTHERWISE WITH COSTS OF
SUIT AND A REASONABLE ATTORNEY'S COMMISSION AS CERTIFIED BY THE FUNDING PARTIES
WITH RELEASE OF ALL ERRORS, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY
FROM EXECUTION TO THE EXTENT THAT SUCH LAWS
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Guaranty
<PAGE> 9
MAY LAWFULLY BE WAIVED BY THE GUARANTOR. NO SINGLE EXERCISE OF THE FOREGOING
POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT
ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE, OR VOID, BUT
THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME
AS OFTEN AS THE FUNDING PARTIES SHALL ELECT, UNTIL SUCH TIME AS THE FUNDING
PARTIES SHALL HAVE RECEIVED PAYMENT IN FULL OF THE OBLIGATIONS, INTEREST AND
COSTS AND ALL AMOUNTS PAYABLE UNDER THIS GUARANTY.
BY SIGNING THIS INSTRUMENT, THE GUARANTOR HEREBY ACKNOWLEDGES THAT IT
HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS, AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE
CONFESSION OF JUDGMENT PROVISION AND UNDERSTANDS THAT A CONFESSION OF JUDGMENT
CONSTITUTES A WAIVER OF RIGHTS IT OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A
HEARING BEFORE A JUDGMENT IS ENTERED AGAINST IT AND WHICH MAY RESULT IN A COURT
JUDGMENT AGAINST THE GUARANTOR WITHOUT PRIOR NOTICE OR HEARING AND THAT THE
AMOUNTS PAYABLE UNDER THIS GUARANTY MAY BE COLLECTED FROM THE GUARANTOR
REGARDLESS OF ANY CLAIM THE GUARANTOR MAY HAVE AGAINST ANY FUNDING PARTY.
/s/ BEH
- -------
Initial
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Guaranty
<PAGE> 10
SECTION 5.12. POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING. THE
GUARANTOR HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY
COURT OF RECORD OR THE SHERIFF WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR
ELSEWHERE, TO TAKE ALL ACTION ALLOWED BY OR PROVIDED FOR IN THE PENNSYLVANIA
RULES OF CIVIL PROCEDURE OR OTHER APPLICABLE RULES OF CIVIL PROCEDURE TO EXECUTE
ON ANY JUDGMENT ENTERED AGAINST THE GUARANTOR PURSUANT TO THE CONFESSION OF
JUDGMENT SET FORTH ABOVE WITHOUT PRIOR NOTICE OR HEARING OF ANY NATURE
WHATSOEVER, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION,
TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE GUARANTOR. NO SINGLE
EXERCISE OF THE FOREGOING POWER TO EXECUTE ON JUDGMENT WITHOUT A HEARING SHALL
BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD
BY ANY COURT TO BE VALID, VOIDABLE OF VOID, BUT THE POWER SHALL CONTINUE
UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE FUNDING
PARTIES SHALL ELECT UNTIL SUCH TIME AS THE FUNDING PARTIES SHALL HAVE RECEIVED
PAYMENT IN FULL OF THE OBLIGATIONS, INTEREST AND COSTS AND ALL AMOUNTS PAYABLE
UNDER THIS GUARANTY.
/s/ BEH
- -------
BY SIGNING THIS INSTRUMENT THE GUARANTOR HEREBY ACKNOWLEDGES THAT IT
HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE POWER
TO EXECUTE ON JUDGMENT WITHOUT A HEARING, AND UNDERSTANDS THAT THE POWER TO
EXECUTE ON A JUDGMENT WITHOUT A HEARING CONSTITUTES A WAIVER OF RIGHTS IT
OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE EXECUTION ON A
JUDGMENT, AND THAT THE AMOUNTS PAYABLE UNDER THIS GUARANTY MAY BE COLLECTED FROM
THE GUARANTOR REGARDLESS OF ANY CLAIM THAT THE GUARANTOR MAY HAVE AGAINST ANY
FUNDING PARTY.
SECTION 5.13. SUBMISSION OF JURISDICTION. THE FUNDING PARTIES AND ALL
HOLDERS HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA AND ANY COURT OF THE
COMMONWEALTH OF PENNSYLVANIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR IN CONNECTION WITH THIS GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY.
THE FUNDING PARTIES AND ALL HOLDERS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF THE VENUE OF ANY SUCH PROCEEDINGS BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
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<PAGE> 11
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
Attest: FORE SYSTEMS, INC.
/s/ CHRISTOPHER H. GEBHARDT By: /s/ BRUCE E. HANEY
- ---------------------------- ---------------------------------------
Name: Bruce E. Haney
---------------------------------
Title: SR. VP & Chief Financial Officer
--------------------------------
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Guaranty
<PAGE> 1
Exhibit 10.4
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty Agreement") dated as of
December 14, 1998 is made by FORE SYSTEMS HOLDING CORPORATION, a Delaware
corporation (the "Guarantor"), in favor of MELLON BANK, N.A., as Construction
Lender (together with the various financial institutions which may from time to
time become lenders under the Construction Loan Agreement referred to below, and
in the event of a Refinancing, the Tranche A Lenders and the Tranche B Lender,
collectively, the "Lender") and MELLON FINANCIAL SERVICES CORPORATION #4, as
Certificate Purchaser (together with its successors and assigns in such
capacity, the "Certificate Purchaser"; the Lender and the Certificate Purchaser
are referred to collectively as the "Funding Parties" and individually as a
"Funding Party").
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to a Construction Loan Agreement, dated as of the
date hereof (together with all amendments, restatements and other modifications,
if any, from time to time hereafter made thereto, the "Loan Agreement"), between
Wilmington Trust Company, not in its individual capacity except as expressly
stated therein, but solely as Certificate Trustee and the Construction Lender,
the Construction Lender has agreed, subject to the terms and conditions thereof,
to make Loans to the Certificate Trustee;
WHEREAS, pursuant to the terms of a Trust Agreement, dated as of the
date hereof (together with all amendments, restatements and other modifications,
if any, from time to time hereafter made thereto, the "Trust Agreement"),
between Wilmington Trust Company, not in its individual capacity except as
expressly stated therein, but solely as Certificate Trustee and the Certificate
Purchaser, the Certificate Purchaser has agreed to purchase the Certificate;
WHEREAS, as a condition to the occurrence of the Documentation Date
under the Participation Agreement, dated as of the date hereof (together with
all amendments, restatements and other modifications, if any, from time to time
hereafter made thereto, the "Participation Agreement"), among Fore Systems, Inc.
("Fore"), the Certificate Trustee, the Certificate Purchaser, and the
Construction Lender, the Guarantor is required to execute and deliver this
Guaranty Agreement in favor of the Funding Parties;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty Agreement; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty Agreement inasmuch as the Guarantor will derive substantial benefits
from the transactions contemplated by the Loan Agreement, the Trust Agreement
and the Participation Agreement;
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Construction Lender to
enter into the Loan Agreement and the Certificate Purchaser to purchase the
Certificate, and intending to be legally bound hereby, the Guarantor agrees, for
the benefit of the Funding Parties, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Guarantor" is defined in the preamble.
"Guaranty Agreement" is defined in the preamble.
"Holder" shall mean any assignee or transferee of an Interest which is
assigned or otherwise transferred (in accordance with Section 12.1 of the
Participation Agreement to the extent that Section 12.1 is applicable to such
transfer).
"Interest" shall mean all or any of the right, title, or interest and
obligations of any Funding Party or any Holder in and to the Loan Agreement or
the other Operative Documents, and in the event of a Refinancing, the
Refinancing Loan Documents, all or any of the benefits, advantages and
obligations of any Funding Party or any Holder under the Loan Agreement or the
other Operative Documents, and in the event of a Refinancing, the Refinancing
Loan Documents, and all or any right, title and interest of any Funding Party or
any Holder in and to the Property.
"Lender" is defined in the preamble.
"Lessee" means Fore, in its capacity as Lessee under the Participation
Agreement and the Lease.
"Loan Agreement" is defined in the first recital.
"Obligations" means all of the following, in each case howsoever
created, arising or evidenced, whether direct or indirect, joint or several,
absolute or contingent, or now or hereafter existing, or due or to become due:
all principal of the Note, interest accrued thereon, the Certificate Amount,
Certificate Yield accrued thereon and all additional amounts and other sums at
any time due and owing, and required to be paid, to the Participants by the
Certificate Trustee under the terms of the Loan Agreement, the Note or any other
Operative Documents and, in the event of a Refinancing, to the Tranche A Lenders
and the Tranche B Lender under any Refinancing Loan Document (including, without
limitation, Section 2.6 of the Construction Loan Agreement); provided, however,
except for the representations and warranties of Guarantor provided herein, the
liability of the Guarantor hereunder shall be strictly limited to the amount of
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Guaranty Agreement
<PAGE> 3
the collateral required to be pledged by the Guarantor under the Pledge and
Security Agreement from time to time; provided further, that prior to the
commencement of the Base Term, the aggregate amount payable by the Guarantor
hereunder and the Lessee under the Guaranty with respect to a Construction
Agency Event of Default arising solely from an Unrelated Event shall be subject
to the limitations on recourse liability applicable to the Lessee set forth in
Section 13.1B.(2) of the Participation Agreement; and provided further, that
with respect to an exercise of the Remarketing Option pursuant to Section 20.1
of the Lease, the amount guaranteed under this Guaranty shall not exceed the
aggregate amounts Lessee is required to pay under the Lease and the other
Operative Documents.
"Organic Document" means, relative to the Guarantor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Participation Agreement" is defined in the third recital.
"Trust Agreement" is defined in the second recital.
"U.C.C." means the Uniform Commercial Code as in effect in the
Commonwealth of Pennsylvania.
SECTION 1.2. Participation Agreement Definitions. Capitalized terms
used but not otherwise defined in this Guaranty Agreement have the respective
meanings specified in Appendix 1 to the Participation Agreement; and the rules
of interpretation set forth in Appendix 1 to the Participation Agreement shall
apply to this Guaranty Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Guaranty Agreement, including its preamble and recitals, with
such meanings.
ARTICLE II
GUARANTY AGREEMENT PROVISIONS
SECTION 2.1. Guaranty Agreement. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due (after
giving effect to any applicable grace period), whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise, of all Obligations, whether for principal, interest, fees,
expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a)), and the
operation of Sections 502(b) and 506(b) of the United States Bankruptcy
Code, 11 U.S.C. Section 502(b) and Section 506(b)), and
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Guaranty Agreement
<PAGE> 4
(b) indemnifies and holds harmless each Funding Party and each
Holder for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by each Funding Party or such
Holder, as the case may be, in enforcing any rights under this Guaranty
Agreement.
This Guaranty Agreement constitutes a guaranty of payment when due and not of
collection, and the Guarantor specifically agrees that it shall not be necessary
or required that any Funding Party or any Holder exercise any right, assert any
claim or demand or enforce any remedy whatsoever against the Lessee (or any
other Person) before or as a condition to the obligations of the Guarantor
hereunder.
SECTION 2.2. Guaranty Agreement Absolute, etc. This Guaranty Agreement
shall in all respects be a continuing, absolute, unconditional and irrevocable
guaranty of payment, and shall remain in full force and effect until all
Obligations have been paid in full, all obligations of the Guarantor hereunder
shall have been paid in full and all commitments of the Funding Parties under
the Loan Agreement and the other Operative Documents, and in the event of a
Refinancing, under the Refinancing Loan Documents, shall have terminated. The
Guarantor guarantees that the Obligations will be paid strictly in accordance
with the terms of the Loan Agreement and each other Operative Document, and in
the event of a Refinancing, each of the Refinancing Loan Documents, under which
they arise, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of any
Funding Party or any Holder with respect thereto. The liability of the Guarantor
under this Guaranty Agreement shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of the
Loan Agreement or any other Operative Document or Refinancing Loan
Document;
(b) the failure of any Funding Party or any Holder
(i) to assert any claim or demand or to enforce any
right or remedy against the Certificate Trustee or any other
Person (including any other guarantor) under the provisions
of the Loan Agreement, any other Operative Document or
Refinancing Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Obligations;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
extension, compromise or renewal of any Obligation;
(d) any reduction, limitation, impairment or termination of
the Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and
the Guarantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of
the
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<PAGE> 5
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the
Obligations;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Loan Agreement or any other Operative Document or Refinancing Loan
Document;
(f) any addition, exchange, release, surrender or
nonperfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Funding Party or any Holder securing any of the
Obligations; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Certificate Trustee, any surety or any guarantor.
SECTION 2.3. Reinstatement, etc. The Guarantor agrees that this
Guaranty Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any payment (in whole or in part) of any of the
Obligations is rescinded or must otherwise be restored by any Funding Party or
any Holder, upon the insolvency, bankruptcy or reorganization of Lessee, or
otherwise, as though such payment had not been made.
SECTION 2.4. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Lessee and this Guaranty Agreement and any requirement that
any Funding Party or any Holder protect, secure, perfect or insure any security
interest or Lien, or any property subject thereto, or exhaust any right or take
any action against the Certificate Trustee or any other Person (including any
other guarantor) or entity or any collateral securing the Obligations.
SECTION 2.5. Waiver of Subrogation. The Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
the Certificate Trustee that arise from the existence, payment, performance or
enforcement of the Guarantor's obligations under this Guaranty Agreement or any
other Operative Document or Refinancing Loan Document, including any right of
subrogation, reimbursement, exoneration, or indemnification, any right to
participate in any claim or remedy of any Funding Party or any Holder against
the Lessee or any collateral which any Funding Party now has or hereafter
acquires, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including the right to take or receive from the
Certificate Trustee, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights. If any amount shall be paid to the Guarantor in violation of the
preceding sentence and the Obligations shall not have been paid in cash in full
and all Commitments of the Funding Parties under the Loan Agreement and the
other Operative Documents, and in the event of a Refinancing, under the
Refinancing Loan Documents, have not been terminated, such amount shall be
deemed to have been paid to the Guarantor for the benefit of, and held in trust
for, the Funding Parties or
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Guaranty Agreement
<PAGE> 6
any Holder or Holders, and shall forthwith be paid to the Funding Parties for
the benefit of the Funding Parties and any such Holder or Holders to be credited
and applied upon the Obligations, whether matured or unmatured. The Guarantor
acknowledges that it will receive benefits from the financing and other
arrangements contemplated by the Loan Agreement, the Trust Agreement, the
Participation Agreement and, in the event of a Refinancing, under the
Refinancing Loan Documents, and that the waiver set forth in this Section is
knowingly made in contemplation of such benefits.
SECTION 2.6. Successors, Transferees and Assigns; Transfers of
Interests, etc. This Guaranty Agreement shall:
(a) be binding upon the Guarantor and its successors,
transferees and assigns; and
(b) inure to the benefit of and be enforceable by each Funding
Party, each Holder and each of their respective successors.
Without limiting the generality of clause (b), any Lender and/or any Holder may,
in accordance with Section 12.1 of the Participation Agreement, and the
Certificate Purchaser and any Tranche A Lenders and the Tranche B Lender may,
assign or otherwise transfer (in whole or in part) any Interest held by it to
any Holder, and such Holder shall thereupon become vested with all rights and
benefits in respect thereof granted to the respective Funding Parties under any
Operative Document (including this Guaranty Agreement), Refinancing Document or
otherwise.
SECTION 2.7. Consent to Jurisdiction; Waiver of Immunities. The
Guarantor hereby acknowledges and agrees that:
(a) It irrevocably submits to the jurisdiction of any federal
court sitting in Pennsylvania in any action or proceeding arising out
of or relating to this Guaranty Agreement, and the Guarantor hereby
irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such federal court. The
Guarantor hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Guarantor agrees that a
final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
(b) Nothing in this Section shall affect the right of any
Funding Party or any Holder to serve legal process in any other manner
permitted by law or affect the right of any Funding Party or any Holder
to bring any action or proceeding against the Guarantor or its property
in the courts of any other jurisdictions.
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<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Guarantor hereby
represents and warrants to each Funding Party as set forth below:
(a) Corporate Status. The Guarantor (i) is a duly organized
and validly existing corporation in good standing under the laws of the
State of Delaware and (ii) has duly qualified and is authorized to do
business and is in good standing in all jurisdictions where the failure
to do so might have a material adverse effect on it or its properties.
The Guarantor is and shall at all times remain a 100% wholly-owned
subsidiary of the Lessee.
(b) Corporate Power and Authority. The Guarantor has the
corporate power and authority to execute, deliver and carry out the
terms and provisions of the Operative Documents to which it is or will
be a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Operative Documents to
which it is a party and has duly executed and delivered each Operative
Document required to be executed and delivered by it and, assuming the
due authorization, execution and delivery thereof on the part of each
other party thereto, each such Operative Document constitutes a legal,
valid and binding obligation enforceable against it in accordance with
its terms, except as the same may be limited by insolvency, bankruptcy,
reorganization or other laws relating to or affecting the enforcement
of creditors' rights or by general equitable principles.
(c) No Violation. Neither the execution, delivery and
performance by the Guarantor of the Operative Documents to which it is
or will be a party nor compliance with the terms and provisions
thereof, nor the consummation by the Guarantor of the transactions
contemplated therein (i) result or will result in a violation by the
Guarantor of any Applicable Law applicable to it or the Property, (ii)
violate or result in any breach which would constitute a default under,
or (other than pursuant to the Operative Documents) result in the
creation or imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of the Guarantor pursuant to
the terms of any indenture, loan agreement or other agreement for
borrowed money to which the Guarantor is a party or by which it or any
of its property or assets is bound or to which it may be subject (other
than Permitted Liens), or (iii) will violate any provision of the
certificate of incorporation or by-laws of the Guarantor.
(d) Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Guarantor, threatened that question
the validity of the Operative Documents or the rights or remedies of
the Lessor, the Certificate Purchaser or the Construction Lender with
respect to the Guarantor or the Property under the Operative Documents.
(e) Governmental Approvals. No Governmental Action by any
Governmental
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<PAGE> 8
Authority having jurisdiction over the Guarantor or the Property is
required to authorize or is required in connection with (i) the
execution, delivery and performance by the Guarantor of any Operative
Document to which it is a party and (ii) the legality, validity,
binding effect or enforceability against the Guarantor of any Operative
Document to which it is a party.
(f) Investment Company Act. The Guarantor is not an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act.
(g) Public Utility Holding Company Act. The Guarantor is not a
"holding company" or a "subsidiary company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Company Act of 1935, as
amended.
(h) All United States Federal income tax returns and all other
tax returns which are required to have been filed have been or will be
filed by or on behalf of the Guarantor by the respective due dates,
including extensions, and all taxes due with respect to the Guarantor
pursuant to such returns or pursuant to any assessment received by the
Guarantor have been or will be paid. The charges, accruals and reserves
on the books of the Guarantor in respect of taxes or other governmental
charges are, in the opinion of the Guarantor, adequate.
(i) Solvency. The Guarantor is Solvent.
ARTICLE IV
COVENANTS
SECTION 4.1. Covenants. The Guarantor, so long as any portion of the
Obligations shall remain unpaid or any Funding Party shall have any outstanding
Commitments under the Loan Agreement or the other Operative Documents, or in the
event of a Refinancing, under any Refinancing Loan Document, covenants and
agrees as set forth below:
(a) Compliance with Laws. The Guarantor shall comply in all
material respects with all Applicable Laws.
(b) Required Transfers. The Guarantor will maintain, or cause
to be maintained, at all times throughout the Interim Term, the Base
Term and any Renewal Term, Qualified Assets in the amounts, and
transfer Qualified Assets in the amounts at the times and to the
accounts, all as provided in the Pledge and Security Agreement.
(c) Payment of Taxes, Etc. The Guarantor shall pay and
discharge before the
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<PAGE> 9
same shall become delinquent, (i) all taxes, assessments and
governmental charges or levies imposed upon it or upon its property,
and (ii) all lawful claims that, if unpaid, might by law become a Lien
upon its property, other than those arising from Permitted Liens;
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Operative Document. This Guaranty Agreement is an
Operative Document executed pursuant to the Loan Agreement and the Participation
Agreement.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment
of Guaranty Agreement. In addition to, and not in limitation of, Section 2.6,
this Guaranty Agreement shall be binding upon the Guarantor and its successors,
transferees and assigns and shall inure to the benefit of and be enforceable by
each Funding Party and each Holder and their respective successors and assigns
(to the full extent provided pursuant to Section 2.6); provided, however, that
the Guarantor may not assign any of its obligations hereunder without the prior
written consent of each Funding Party and each Holder.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty Agreement, nor consent to any departure by the
Guarantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by each Funding Party and each Holder, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 5.4. Addresses for Notices. All notices, demands, requests,
consents, approvals and other communications hereunder shall be in writing and
directed to the address described in, and deemed received in accordance with the
provisions of, Section 14.3 of the Participation Agreement.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation
of, Section 2.2 and Section 2.4, no failure on the part of any Funding Party or
any Holder to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Section Captions. Section captions used in this Guaranty
Agreement are for convenience of reference only, and shall not affect the
construction of this Guaranty Agreement.
SECTION 5.7. Severability. Wherever possible each provision of this
Guaranty Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
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<PAGE> 10
invalidating the remainder of such provision or the remaining provisions of this
Guaranty Agreement.
SECTION 5.8. Termination of Guaranty Agreement. The Guarantor's
obligations under this Guaranty Agreement shall terminate on the date upon which
all Obligations are satisfied in full, subject to reinstatement as provided in
Section 2.3 hereof.
SECTION 5.9. GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS. FOR PURPOSES OF ANY ACTION OR
PROCEEDING INVOLVING THIS GUARANTY AGREEMENT, THE GUARANTOR HEREBY EXPRESSLY
SUBMITS TO THE JURISDICTION OF ALL FEDERAL AND STATE COURTS LOCATED IN THE
COMMONWEALTH OF PENNSYLVANIA AND CONSENTS THAT IT MAY BE SERVED WITH ANY PROCESS
OR PAPER BY REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
COMMONWEALTH OF PENNSYLVANIA.
SECTION 5.10. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY AGREEMENT. THE GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THE
LOAN AGREEMENT AND THE CERTIFICATE PURCHASER PURCHASING THE CERTIFICATE.
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/s/ GJB
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Initial
SECTION 5.11. POWER TO CONFESS JUDGMENT. THE GUARANTOR HEREBY
AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD
WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE AFTER AN EVENT OF DEFAULT
UNDER THIS GUARANTY AGREEMENT, THE LEASE, THE CONSTRUCTION AGENCY AGREEMENT, OR
ANY OF THE OPERATIVE DOCUMENTS AND, IN THE EVENT OF A REFINANCING, ANY
REFINANCING LOAN DOCUMENT, TO APPEAR FOR THE GUARANTOR, AND, WITH OR WITHOUT
DECLARATION FILED, CONFESS JUDGMENT AGAINST THE GUARANTOR IN FAVOR OF THE
FUNDING PARTIES, AS OF ANY TERM, FOR THE UNPAID OBLIGATIONS HEREUNDER, AND
INCLUDING, WITHOUT LIMITATION, ALL ACCRUED AND UNPAID INTEREST, CHARGES,
EXPENSES OR OTHER AMOUNTS PAYABLE UNDER THIS GUARANTY AGREEMENT, THE LEASE, THE
CONSTRUCTION AGENCY AGREEMENT, OR UNDER ANY OF THE OPERATIVE DOCUMENTS, AND, IN
THE EVENT OF A REFINANCING, ANY REFINANCING LOAN DOCUMENT, WHETHER BY
ACCELERATION OR OTHERWISE WITH COSTS OF SUIT AND A REASONABLE ATTORNEY'S
COMMISSION AS CERTIFIED BY THE FUNDING PARTIES WITH RELEASE OF ALL ERRORS,
WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION TO THE
EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE GUARANTOR. NO SINGLE
EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST
THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE
VALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY
BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE FUNDING PARTIES SHALL ELECT,
UNTIL SUCH TIME AS THE FUNDING PARTIES SHALL HAVE RECEIVED PAYMENT IN FULL OF
THE OBLIGATIONS, INTEREST AND COSTS AND ALL AMOUNTS PAYABLE UNDER THIS GUARANTY
AGREEMENT.
BY SIGNING THIS INSTRUMENT, THE GUARANTOR HEREBY ACKNOWLEDGES THAT IT
HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS, AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE
CONFESSION OF JUDGMENT PROVISION AND UNDERSTANDS THAT A CONFESSION OF JUDGMENT
CONSTITUTES A WAIVER OF RIGHTS IT OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A
HEARING BEFORE A JUDGMENT IS ENTERED AGAINST IT AND WHICH MAY RESULT IN A COURT
JUDGMENT AGAINST THE GUARANTOR WITHOUT PRIOR NOTICE OR HEARING AND THAT THE
AMOUNTS PAYABLE UNDER THIS GUARANTY AGREEMENT MAY BE COLLECTED FROM THE
GUARANTOR REGARDLESS OF ANY CLAIM THE GUARANTOR MAY HAVE AGAINST ANY FUNDING
PARTY.
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/s/ GJB
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Initial
SECTION 5.12. POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING. THE
GUARANTOR HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY
COURT OF RECORD OR THE SHERIFF WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR
ELSEWHERE, TO TAKE ALL ACTION ALLOWED BY OR PROVIDED FOR IN THE PENNSYLVANIA
RULES OF CIVIL PROCEDURE OR OTHER APPLICABLE RULES OF CIVIL PROCEDURE TO EXECUTE
ON ANY JUDGMENT ENTERED AGAINST THE GUARANTOR PURSUANT TO THE CONFESSION OF
JUDGMENT SET FORTH ABOVE WITHOUT PRIOR NOTICE OR HEARING OF ANY NATURE
WHATSOEVER, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION,
TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE GUARANTOR. NO SINGLE
EXERCISE OF THE FOREGOING POWER TO EXECUTE ON JUDGMENT WITHOUT A HEARING SHALL
BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD
BY ANY COURT TO BE VALID, VOIDABLE OF VOID, BUT THE POWER SHALL CONTINUE
UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE FUNDING
PARTIES SHALL ELECT UNTIL SUCH TIME AS THE FUNDING PARTIES SHALL HAVE RECEIVED
PAYMENT IN FULL OF THE OBLIGATIONS, INTEREST AND COSTS AND ALL AMOUNTS PAYABLE
UNDER THIS GUARANTY AGREEMENT.
BY SIGNING THIS INSTRUMENT THE GUARANTOR HEREBY ACKNOWLEDGES THAT IT
HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE POWER
TO EXECUTE ON JUDGMENT WITHOUT A HEARING, AND UNDERSTANDS THAT THE POWER TO
EXECUTE ON A JUDGMENT WITHOUT A HEARING CONSTITUTES A WAIVER OF RIGHTS IT
OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE EXECUTION ON A
JUDGMENT, AND THAT THE AMOUNTS PAYABLE UNDER THIS GUARANTY AGREEMENT MAY BE
COLLECTED FROM THE GUARANTOR REGARDLESS OF ANY CLAIM THAT THE GUARANTOR MAY HAVE
AGAINST ANY FUNDING PARTY.
SECTION 5.13. SUBMISSION OF JURISDICTION. THE FUNDING PARTIES AND ALL
HOLDERS HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA AND ANY COURT OF THE
COMMONWEALTH OF PENNSYLVANIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR IN CONNECTION WITH THIS GUARANTY AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY. THE FUNDING PARTIES AND ALL HOLDERS IRREVOCABLY WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR
HEREAFTER HAVE
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TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDINGS BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
Attest: FORE SYSTEMS HOLDING CORPORATION
/s/ CHRISTOPHER H. GEBHARDT By: /s/ GARY J. BRUNNER
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Name: Gary J. Brunner
---------------------------------
Title: Treasurer
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<PAGE> 1
Exhibit 10.5
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of December 14, 1998 (this
"Agreement"), is made by FORE SYSTEMS HOLDING CORPORATION, a Delaware
corporation (the "Pledgor"), MELLON BANK, N.A., as Construction Lender and
Collateral Agent, and MELLON FINANCIAL SERVICE CORPORATION #4, as Certificate
Purchaser (each a "Pledgee" and collectively, the "Pledgees"), and MELLON BANK,
N.A., as securities intermediary for the Collateral Account (in such capacity,
the "Securities Intermediary").
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the Participation Agreement dated as of the date
hereof, among the Pledgor, the Construction Lender, the Certificate Purchaser
and Wilmington Trust Company, not in its individual capacity, but solely as
Certificate Trustee of Brush Creek Business Trust II, the Participants have
agreed to finance the development of certain Improvements on the Land to be used
by the Pledgor;
WHEREAS, the Construction Lender and the Certificate Trustee have
entered into the Construction Loan Agreement dated as of the date hereof,
pursuant to which the Construction Lender has agreed to make Construction Loans
to the Certificate Trustee, to be evidenced by the Note, to provide a portion of
the funds to pay the Property Improvements Costs, Transactions Costs, accrued
interest and Certificate Yield during construction;
WHEREAS, the Certificate Purchaser has purchased the Certificate,
pursuant to the Trust Agreement dated as of the date hereof, the proceeds of
which will provide a portion of the funds to pay the Property Improvements
Costs, Transaction Costs, accrued interest and Certificate Yield during
construction;
WHEREAS, the principal amount of the loans outstanding as evidenced by
the Note is expected to be refinanced by the Tranche A Loans and the Tranche B
Loans;
WHEREAS, pursuant to the terms of the Participation Agreement, the
Pledgor has agreed to satisfy the Collateral Requirement; and
WHEREAS, the Pledgor acknowledges and agrees that it will derive
substantial benefits from the execution and delivery of the Participation
Agreement, the Operative Documents, the Refinancing Loan Documents, and the
transactions contemplated thereunder, and has executed and delivered to the
Pledgees the Guaranty Agreement dated as of the date hereof, pursuant to which
Pledgor has guaranteed the full and punctual payment of the Obligations;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Pledgor, the Pledgees, and the Securities
Intermediary, intending to be legally bound, hereby agree as follows:
<PAGE> 2
ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Additional Pledged Property" is defined in clause (a) of Section 6.1.
"Agreement" is defined in the preamble.
"Authorized Signatory" means, relative to any Person, each of its
officers or any attorney-in-fact of any such officer authorized to deliver
certificates, requests or communications or otherwise act on behalf of such
Person pursuant to an appropriate power of attorney (in form and substance
satisfactory to the Pledgees and the Collateral Agent and certified copies of
which shall have been delivered to the Pledgees, the Securities Intermediary and
the Lenders) granted to such Person.
"Collateral Agent" means Mellon Bank, N.A. in its capacity as
collateral agent for Pledgees pursuant to Section 3.3.
"Collateral Account" is defined in Section 3.1.
"Collateral Value" shall mean 90% of the Fair Market Value of the
Marketable Collateral.
"Collateral Value Notice" is defined in Section 3.2(b).
"Control Agreement" means any agreement establishing or providing
control (as defined in the UCC) in or to any Person with respect to the Pledged
Property.
"Distributions" is defined in clause (b) of Section 5.4.
"Fair Market Value" shall mean in the case of cash, the amount of such
cash, and otherwise, the market value of the applicable Marketable Collateral as
determined by reference to market quotes at the opening of business provided on
the date of valuation by Bloomberg Financial Market Service, or if such rate is
unavailable, by Interactive Data Services Inc., Telerate, Reuters and/or any
major daily financial publication such as The Wall Street Journal or The New
York Times.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"Margin Loans" means all borrowings used to fund the purchase of Margin
Stock, including, without limitation, money borrowed pursuant to the Operative
Documents.
"Margin Stock" shall have the meaning specified for such term in
Regulation U of the F.R.S. Board as from time to time in effect.
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Pledge and Security Agreement
<PAGE> 3
"Pledge" means the pledge of the Pledged Property to Pledgees as
security for the Obligations.
"Pledged Property" is defined in Section 2.1.
"Pledgee" and "Pledgees" are defined in the preamble.
"Pledgor" is defined in the preamble.
"Substituted Pledged Property" is defined in clause (a) of Section 6.1.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the Commonwealth of Pennsylvania.
SECTION 1.2 Participation Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Agreement,
including its preamble and recitals, have the meanings provided in the
Participation Agreement, and the rules of interpretation set forth therein shall
apply to this Agreement.
SECTION 1.3 UCC Definitions. Unless otherwise defined herein, in the
Participation Agreement or the context otherwise requires, terms for which
meanings are provided in the UCC are used in this Agreement, including its
preamble and recitals, with such meanings.
ARTICLE 2
PLEDGE
SECTION 2.1 Initial Grant of Security Interest. As collateral security
for the prompt payment in full when due (whether at stated maturity, by
acceleration or mandatory prepayment or otherwise) of the Obligations and all
other obligations of the Lessee, the Construction Agent or any Guarantor under
the Operative Documents, the Pledgor hereby pledges, hypothecates, assigns,
charges, mortgages, delivers, grants and transfers to each Pledgee, for its
benefit, a continuing security interest in and to all of the Pledgor's right,
title and interest in and to the following property whether now owned by the
Pledgor or hereafter acquired and whether now existing or hereafter coming into
existence, and wherever located (all being collectively referred to herein as
"Pledged Property"):
(a) the Collateral Account, together with all cash, Marketable
Collateral and other property from time to time credited to or on
deposit in the Collateral Account;
(b) any and all property received in exchange or substitution
for any such cash, Marketable Collateral or other property;
(c) all moneys or property representing principal of or
interest on any of the foregoing, or representing a dividend on or
other distribution in respect of any of the foregoing, or resulting
from reclassification or other like change of any of the foregoing or
otherwise received in exchange
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Pledge and Security Agreement
<PAGE> 4
therefor, and any subscription, warrants, rights or options issued to
the holders of, or otherwise in respect of, any of the foregoing;
(d) such other property of Pledgor as may be delivered to
Collateral Agent as collateral hereunder and is described in a
Specification of Additional Collateral in the form of Annex I hereto
that has been executed by Pledgor;
(e) any and all corrections or amendments to, or renewals,
extensions or ratifications of, or replacements or substitutions for,
any of the foregoing, or any instrument relating thereto, and all
accounts, contracts, contract rights, general intangibles and nominee
agreements, covering, relating to, or arising from or in connection
with, any of the foregoing, and all other things incident thereto
(including, without limitation, any and all liens, lien rights,
security interests and other rights and interests) which the Pledgor
might at any time have or be entitled to with respect to the foregoing;
and
(f) all proceeds of any of the property of the Pledgor
described in clauses (a) through (e) above (including any proceeds of
insurance thereon).
SECTION 2.2 Security for Obligations. This Agreement secures the
payment in full of all the Obligations and all other obligations of the Lessee,
the Construction Agent or any Guarantor under the Operative Documents and all
obligations of each Guarantor now or hereafter existing under the Guaranty, the
Guaranty Agreement, the Participation Agreement, the Notes and each other
Operative Document to which such Guarantor is or may become a party, whether for
principal, interest, Rent, costs, fees, expenses, penalties or otherwise.
SECTION 2.3 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Property and shall
(a) remain in full force and effect until the termination of
the Pledge contemplated by Section 7.14 hereof,
(b) be binding upon the Pledgor and its successors,
transferees and assigns, and
(c) inure, together with the rights and remedies of the
Pledgees, to the benefit of each Pledgee and their respective
successors, transferees and assigns.
Upon the termination of the Pledge, the security interest and security
entitlement granted herein shall terminate and all rights to the Pledged
Property shall revert to the Pledgor in accordance with the terms of Section
7.14.
SECTION 2.4 Transfers to Collateral Account. Pledgor shall:
(a) transfer all property that is to constitute a part of the
Pledged Property to the Securities Intermediary for credit to the
Collateral Account or, in the case of any such property that is already
maintained in another account of Pledgor with the Securities
Intermediary, instruct the Securities Intermediary to transfer such
property into the Collateral Account;
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<PAGE> 5
(b) give, execute, deliver, file and record any notice,
instrument, document, agreement, Control Agreement or other papers that
may be necessary or desirable in the reasonable judgment of the
Collateral Agent to create, perfect, preserve and validate the security
interest in the Pledged Property created hereunder, and to enable the
Collateral Agent to exercise and enforce its rights hereunder with
respect to such security interest.
(c) keep full and accurate books and records relating to the
Pledged Property, and stamp or otherwise mark such books and records in
such manner as the Collateral Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(d) permit representatives of the Collateral Agent, upon
reasonable notice and at any time during normal business hours, to
inspect and make abstracts from the Pledgor's books and records
pertaining to the Pledged Property, and forward copies of any notices
or communications received by the Pledgor with respect to the Pledged
Property all in such manner as the Collateral Agent may reasonably
require; and
(e) upon the reasonable request of the Collateral Agent,
deliver to Collateral Agent, at the expense of the Pledgor, opinions of
local counsel, in form and substance satisfactory to the Collateral
Agent and its respective counsel, as to the perfection of the
Collateral Agent's security interest in any of the Pledged Property
contemplated by this Agreement and as to the protection of the
Collateral Agent with respect to adverse claims relating to the Pledged
Property.
ARTICLE 3
COLLATERAL REQUIREMENT
SECTION 3.1 Establishment of Collateral Account; Control.
(a) Concurrently herewith the Pledgor has established at the
branch of the Securities Intermediary located at One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258, a collateral account designated
on the records of the Securities Intermediary as "Fore Systems Holding
Corporation Collateral Account, Mellon Bank, N.A., as Agent for the
Pledgees", account number S-038218-W (herein, together with any
substitution therefor, the "Collateral Account"). The Collateral
Account shall be segregated from any and all other accounts or other
property of the Pledgor. The Securities Intermediary acknowledges and
agrees that it has established the Collateral Account and that the
Collateral Account constitutes a securities account for purposes of
Article 8 of the UCC. The Securities Intermediary further agrees to
treat all assets credited to the Collateral Account, including without
limitation, any and all cash (whether in the form of money or credit
balances) and Marketable Collateral, as financial assets for purposes
of Article 8 of the UCC. For the avoidance of doubt, the parties agree
that the Collateral Account shall be governed by the laws of the
Commonwealth of Pennsylvania, which shall be the Securities
Intermediary's jurisdiction for purposes of the UCC.
(b) For the purpose of providing control over the Collateral
Account to the Pledgees, the Securities Intermediary hereby agrees as
follows:
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Pledge and Security Agreement
<PAGE> 6
(i) the Securities Intermediary will comply with
entitlement orders originated by either of the Pledgees
(including Mellon Bank, N.A. acting either as Construction
Lender or as Collateral Agent) with respect to the Collateral
Account without further consent from the Pledgor.
(ii) Without limitation of the obligation of the
Securities Intermediary to accept entitlement orders
originated by a Pledgee pursuant to Section 3.1(b)(i), each
Pledgee agrees with and for the sole benefit of the Pledgor
that the Collateral Agent will not originate any entitlement
orders with respect to the Collateral Account except as
permitted under Sections 5.6 and 6.1.
(iii) Notwithstanding the foregoing, the Pledgor
shall be entitled to originate entitlement orders with respect
to the Collateral Account to the extent permitted under
Sections 3.2(d), 3.5 and 6.1.
(iv) The Securities Intermediary will not enter into
a Control Agreement with any party other than the Pledgees
without the prior written consent of the Pledgor and the
Pledgees.
(c) The Pledgor shall deliver with any certificated or
uncertificated securities delivered to the Securities Intermediary for
credit to the Collateral Account, all appropriate undated bond powers,
duly executed or indorsed to the Securities Intermediary or in blank
and any and all other forms related to transfer requested by the
Collateral Agent, completed or executed so as to make such transfer
valid under applicable law and the rules of any securities exchange
or otherwise.
(d) The Pledgor and each Pledgee agree to do or take all
actions (or omit from taking actions) in order to make all transfers
contemplated hereby valid under applicable law and the rules of any
securities exchange or otherwise.
(e) To the extent that any financial assets relating to the
Pledged Property constitute certificated securities, the Securities
Intermediary shall retain physical possession of the certificates or
instruments representing or evidencing such Marketable Collateral or
shall have such financial assets credited to the Securities
Intermediary's account at The Depository Trust Company ("DTC"). To the
extent that any such financial assets constitute uncertificated
securities, the Securities Intermediary shall cause such financial
assets to be (i) credited to the account of Securities Intermediary or
its nominee at DTC or, if appropriate, the Federal Reserve Bank of New
York; or (ii) registered on the books of the issuer thereof in the name
of the Securities Intermediary. In addition, subject to Section 3.5
hereof, the Securities Intermediary shall at all times have the right
to exchange certificates or instruments representing or evidencing
financial assets relating to Marketable Collateral for certificates or
instruments in smaller or larger denominations for any purpose
consistent with its performance of this Agreement; provided that the
aggregate principal amount of the certificates or instruments received
upon such an exchange shall not be less than the aggregate principal
amount of the certificates or instruments tendered for exchange.
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SECTION 3.2 Maintenance of Marketable Collateral.
(a) The Pledgor at all times shall maintain during the Term
Marketable Collateral in the Collateral Account in an amount (the
"Collateral Requirement") having a Collateral Value equal to or greater
than (i) beginning on the Initial Advance Date and until the
Refinancing has occurred, 100 percent of the principal amount plus all
accrued interest with respect to the Construction Loans and (ii)
following the Refinancing, the sum of (A) 100 percent of the aggregate
principal amount of all Tranche A Loans plus any interest accrued
thereon and (B) (x) 50 percent of the aggregate principal amount of all
Tranche B Loans plus any accrued interest thereon, or (y) at all times
when Lessee has elected to refinance the Tranche A Loans pursuant to
Section 3.7(c) of the Participation Agreement, 100 percent of the
aggregate principal balance of all Tranche B Loans and Certificate
Amounts plus any yield and interest accrued thereon.
(b) On the first Business Day of each calendar month during
the Term, the Securities Intermediary shall determine the aggregate
Collateral Value of the Marketable Collateral in the Collateral
Account, and such determination shall be promptly furnished, in
writing, to the Pledgor and each Pledgee ("Collateral Value Notice").
(c) At any time when the Collateral Value Notice reveals there
is insufficient Marketable Collateral in the Collateral Account to
satisfy the Collateral Requirement, the Pledgor shall deposit, no later
than five (5) Business Days after receipt of the Collateral Value
Notice, additional Marketable Collateral in the Collateral Account to
the extent necessary to satisfy the Collateral Requirement.
(d) At any time when (i) the Collateral Value Notice reveals
there is excess Marketable Collateral in the Collateral Account to
satisfy the Collateral Requirement and (ii) no Default or Event of
Default has occurred or is continuing, the Pledgor may request by
written notice to the Pledgees, with a copy to the Securities
Intermediary, to release such excess Marketable Collateral to the
Pledgor or upon its order or the order of its designee, and the
Pledgees shall release and direct the Securities Intermediary to
release such excess Marketable Collateral to the Pledgor or upon its
order, provided, however, that no release of Marketable Collateral
pursuant to this Section 3.2(d) shall occur if such release will
violate the Collateral Requirement.
SECTION 3.3 Appointment of the Collateral Agent.
(a) The Pledgees hereby appoint the Collateral Agent as the
Pledgees' agent for the purpose of (i) obtaining and maintaining
control with respect to such Pledged Property; and (ii) taking any and
all actions necessary for the protection of the Pledgees' interests in
the Pledged Property, all in accordance with the provisions of this
Agreement. All Pledged Property shall be in the Collateral Account and
segregated from all other property, including, without limitation, that
of the Pledgor and the Pledgees. The Collateral Agent hereby accepts
such appointment.
(b) The Collateral Agent acknowledges receipt of this
Agreement, certifies that no notice of any other security agreement or
claim affecting the Pledged Property has been received by it, states
that the Pledged Property will be held in the Collateral Account for
the benefit of the Pledgees and agrees to hold the Pledged Property
solely for the benefit of the Pledgees and subject to the control of
the Pledgees, as provided in this Agreement. The Collateral Agent
agrees to exercise the same degree of care as exercised by banks
generally for similar property in exercising
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its duties under this Agreement. The duties of the Collateral Agent
under this Agreement shall only be those set forth in this Agreement.
SECTION 3.4 Consent of Pledgor. The Pledgor hereby consents to allow
the appointment by the Pledgees of the Collateral Agent, as contemplated by this
Article III, waives any defenses or objections to such transfer given to the
Pledgor in any agreement, including without limitation any of the terms in the
Operative Documents, and shall not challenge, or permit any of its Subsidiaries
to challenge the transfer of the security interests in the Pledged Property
contemplated by the Pledge. The Pledgor further agrees to take all actions and
give other aid reasonably required by the Collateral Agent in meeting the
Pledgor's obligations under this Agreement.
SECTION 3.5 Investment of Pledged Property. So long as no Event of
Default or Default shall have occurred and be continuing, the Securities
Intermediary shall honor entitlement orders or other instructions of Pledgor to
invest all moneys credited or on deposit from time to time (including moneys on
deposit upon the sale or maturity of securities) to or in the Collateral Account
in Marketable Collateral having an equal or greater Collateral Value than the
sold or matured security. Such investments, together with any interest or other
earnings resulting from such investments, shall be maintained in the Collateral
Account and shall be reinvested as provided in this paragraph. Neither the
Securities Intermediary, in the absence of gross negligence or willful
misconduct, nor the Pledgees, shall be liable or responsible for any loss
resulting from any such investments.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Pledgor Warranties, etc. The Pledgor hereby represents and
warrants to each Pledgee and the Collateral Agent, as at the date of each pledge
and delivery hereunder by the Pledgor of any Pledged Property, as follows:
(a) Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign), such Pledged Property, free
and clear of all liens, security interests, options, security
entitlements, Control Agreements or other charges or encumbrances,
except any lien or security interest granted pursuant hereto in favor
of the Pledgees.
(b) Valid Security Interest. The transfer of the Pledged
Property to the Collateral Account, as contemplated by this Agreement,
will be effective to create a valid, perfected, first- priority
security interest in such Pledged Property and all proceeds thereof in
favor of Collateral Agent on behalf of the Pledgees, subject to no
other liens, security interests, options, security entitlements,
Control Agreements or other charges or encumbrances, and such security
interest shall be maintained as such at all times during the Term. No
filing or other action will be necessary to perfect or protect such
security interests.
(c) Authorization, Approval, etc. No authorization, approval,
or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either:
(i) for the pledge by the Pledgor of any Pledged
Property pursuant to this Agreement or for the execution,
delivery, and performance of this Agreement by the Pledgor, or
(ii) for the exercise by the Pledgees, or by the
Collateral Agent following its appointment as contemplated by
Article III of this Agreement, of the voting or other rights
provided for in this Agreement, or the remedies in respect of
the Pledged Property pursuant to this Agreement.
(d) Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and
orders of every governmental authority, the non-compliance with which
might materially adversely affect the business, properties, assets,
operations, condition (financial or otherwise) or prospects of the
Pledgor or the value of the Pledged Property or the worth of the
Pledged Property as Pledged Property security, or otherwise affect the
Pledge.
(e) Office of Pledgor. The Pledgor represents and warrants
that its place of business and chief executive office and the office
where it keeps its records concerning the Pledged Property is located
at 1000 FORE Drive, Warrendale, Pennsylvania 15086.
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ARTICLE 5
COVENANTS; REMEDIES
SECTION 5.1 Covenants. In furtherance of the pledge and grant of the
security interest pursuant to the terms hereof, the Pledgor hereby covenants and
agrees to perform its obligations under this Article V.
SECTION 5.2 Other Financing Statements and Liens. The Pledgor shall
not, without the prior written consent of the Collateral Agent, file or suffer
to be on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement, or file or authorize any like instrument,
with respect to the Pledged Property in which the Pledgees or the Collateral
Agent are not named as the sole secured parties. Without the prior written
consent of the Collateral Agent, the Pledgor shall not authorize, permit, or
enter into any Control Agreement granting any Person control of the Pledged
Property other than the Pledgees or the Collateral Agent.
SECTION 5.3 Preservation of Rights. The Collateral Agent shall not be
required to take steps necessary to preserve any rights against other parties
to any of the Pledged Property.
SECTION 5.4 Voting Rights and Distributions.
(a) So long as no Event of Default shall have occurred and be
continuing, the Pledgor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Pledged
Property; provided, that the Pledgor agrees that it will not vote any
of the Pledged Property in any manner that is inconsistent with the
terms of this Agreement, the Participation Agreement, the Note or any
other Operative Document; and the Securities Intermediary shall execute
and deliver to the Pledgor or cause to be executed and delivered to the
Pledgor all such proxies, powers of attorney and other orders, and all
such instruments, without recourse, as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to exercise the rights
and powers which it is entitled to exercise pursuant to this Section
5.4.
(b) Any principal of and interest on, and any dividends or
distributions with respect to, any Pledged Property (such principal,
interest, dividends and distributions which the Pledgor is entitled to
receive and retain under this clause being herein called
"Distributions"), shall be paid directly to the Securities
Intermediary, retained by it and deposited into the Collateral Account
as additional Pledged Property, subject to the terms of this Agreement,
and, if the Collateral Agent shall so request in writing, the Pledgor
agrees to execute and deliver to the Securities Intermediary
appropriate orders and documents to effectuate the provisions of this
clause (b).
SECTION 5.5 Events of Default. Each of the following events shall
constitute an event of default under this Agreement (each, an "Event of
Default"):
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(a) The failure of the Pledgor to pay, after three days prior
notice by means of invoice, the reasonable fees and expenses of the
Collateral Agent; or
(b) The failure of the Pledgor to comply with any of the terms
or provisions of this Agreement, which (except as provided in (a)
above) failure shall have continued for a period of five (5) days; or
(c) A Lease Event of Default, Loan Agreement Event of Default
or Construction Agency Agreement Event of Default shall occur and be
continuing.
SECTION 5.6 Remedies, etc. During the period in which an Event of
Default shall have occurred and be continuing:
(a) The Collateral Agent may originate entitlement orders in
respect of the Pledged Property or otherwise exercise in respect of the
Pledged Property, in addition to other rights and remedies provided for
herein or otherwise available to it under the Operative Documents or at
law or in equity, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Pledged Property).
(b) The Collateral Agent may:
(i) deliver and pay over all or any portion of the
Pledged Property in the Collateral Account to the Pledgees, to
be applied to satisfy accrued and unpaid Obligations,
(ii) sell the Pledged Property, or any part thereof,
at any public or private sale or on any securities exchange,
for cash, upon credit or for future delivery, as the Pledgees
shall deem appropriate. The Pledgees shall be authorized at
any such sale to restrict the prospective bidders or
purchasers to persons who will represent and agree that they
are purchasing the Pledged Property for their own account for
investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale, the Pledgees
shall have the right to assign and transfer and have the
Collateral Agent transfer and deliver to the purchaser or
purchasers thereof the Pledged Property so sold. Each such
purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the
Pledgor and its Affiliates, and each of the Pledgor and its
Affiliates hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule or law or
statute now existing or hereafter enacted. The Pledgees shall
give the Pledgor at least ten (10) days' written notice of the
Pledgees' intention to make any such public or private sale or
sales at any broker's board or on any such securities
exchange. Such notice, in case of public sale, shall state the
time and place fixed for such sale. Any such public sale shall
be held at such time or times within ordinary business hours
and at such place or places, as the Pledgees may fix in the
notice of such sale. At any such sale, the Pledged Property,
or portion thereof, to be sold may be sold in one sale as an
entirety or in separate sales, as the Pledgees may (in their
sole and absolute discretion) determine and the Pledgees may
bid (which bid may be in whole or in part, in the form of
cancellation of indebtedness) for and purchase for the account
of the Pledgees the whole or any part of the Pledged Property.
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The Pledgees shall not be obligated to make any sale of
Pledged Property if it shall determine not to do so,
regardless of the fact that notice of sale of Pledged Property
may have been given. The Pledgees may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the
same was so adjourned. In case a sale of all or any part of
the Pledged Property is made on credit or for future delivery,
the Pledged Property so sold may be retained by the Pledgees
until the sale price is paid by the purchaser or purchasers
thereof, but the Pledgees shall not incur any liability in
case any such purchaser or purchasers shall fail to take up
and pay for the Pledged Property so sold and, in case of any
such failure, such Pledged Property may be sold again upon
like notice,
(iii) proceed by a suit or suits at law or in equity
to foreclose the security interest granted under this
Agreement and to sell the Pledged Property, or any portion
thereof, pursuant to a judgment or decree of a court or courts
of competent jurisdiction,
(iv) transfer all or any part of the Pledged Property
into the name of the Collateral Agent or its nominee, with or
without disclosing that such Pledged Property is subject to
the lien and security interest hereunder,
(v) notify the parties obligated on any of the
Pledged Property to make payment to the Collateral Agent of
any amount due or to become due thereunder,
(vi) enforce collection of any of the Pledged
Property by suit or otherwise, and surrender, release or
exchange all or any part thereof, or compromise or extend or
renew for any period (whether or not longer than the original
period) any obligations of any nature of any party with
respect thereto,
(vii) endorse any checks, drafts, or other writings
in the Pledgor's name to allow collection of the Pledged
Property,
(viii) take control of any proceeds of the Pledged
Property, and
(ix) execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Pledged Property. The Pledgees agree, solely for
the benefit of the Participants, and not for the benefit of
the Lessee, the Guarantor or any other Person, to seek to be
repaid any amounts owing to the Pledgees from the proceeds of
the Pledged Property prior to the proceeds of the Property.
In addition, the Pledgees shall have all of the rights granted to the
Pledgees under this Agreement upon the occurrence of an Event of Default.
The Pledgor and the Lessee shall be liable for the deficiency if the
proceeds of any sale or other disposition of the Pledged Property are
insufficient to pay all amounts to which the Pledgees are entitled, and the fees
and disbursements of any attorneys employed by the Pledgees to collect such
deficiency.
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SECTION 5.7 Change of Address or Name. Without at least 30 days' prior
written notice to the Collateral Agent, the Pledgor shall not maintain any of
its books or records with respect to the Pledged Property at any office or
maintain its chief executive office or its principal place of business at any
place other than at the address specified in Section 4.1(e), or change its name,
or name under which it does business, from the name shown on the signature page
hereto.
SECTION 5.8 Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless each Pledgee and the Collateral Agent from and against any and
all claims, losses, and liabilities arising out of or resulting from this
Agreement (including enforcement of this Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or willful
misconduct. Upon demand, the Pledgor will pay to the Pledgees and the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents, which such
payee may incur in connection with:
(a) the exercise or enforcement of any of the rights of such
party hereunder; or
(b) the failure by the Pledgor to perform or observe any of
the provisions hereof.
The Pledgor also hereby indemnifies, exonerates and holds free and harmless the
Collateral Agent, each Pledgee and their respective counsel from any suits,
actions, causes of action or proceedings brought by any Person relating to or
arising out of this Agreement or any Operative Document.
SECTION 5.9 Further Assurances. The Pledgor covenants and agrees that,
from time to time upon the written request of any Pledgee or the Collateral
Agent, the Pledgor will execute and deliver such further documents and do such
other acts and things as any Pledgee or the Collateral Agent may reasonably
request in order fully to effect the purposes of this Agreement and to protect
and preserve the priority and validity of the security interest granted
hereunder.
SECTION 5.10 Amendments to Other Documents. The Pledgor covenants and
agrees that it shall not consent to any amendment or other modification or
supplement to any of the documentation or instruments relating to any Pledged
Property if, in the reasonable judgment of the Collateral Agent, such
modification would limit the right of the Collateral Agent to exercise
foreclosure remedies with respect thereto or adversely affect the rights of the
Collateral Agent hereunder. The Pledgor shall furnish to the Collateral Agent
promptly after receipt thereof copies of all amendments, modifications and
supplements to documentation relating to the Pledged Property.
SECTION 5.11 Pledgees Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Pledgees and the Collateral Agent, acting either individually or
jointly, as the Pledgor's attorney-in-fact for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which they may deem necessary or advisable to accomplish the purposes hereof,
which appointment is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, both the Pledgees and the Collateral Agent,
acting either individually or jointly, shall have the right and power to
receive, endorse and correct all checks, drafts and other orders for the payment
of money made payable to the Pledgor representing any interest payment or other
distribution payable or distributable in respect of the Pledged Property or any
part thereof and to give full discharge for the same.
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SECTION 5.12 Change of Collateral Agent. No change in Collateral Agent
may occur without the express written consent of the Pledgees and the Pledgor.
The Collateral Agent may resign by giving thirty (30) days' notice to the
parties to this Agreement. The Pledgees may then appoint a successor Collateral
Agent with the prior written consent of the Pledgor, which shall not be
unreasonably withheld or delayed, whereupon the successor Collateral Agent shall
succeed to the rights, powers and duties of the Collateral Agent.
ARTICLE 6
SALES AND SUBSTITUTIONS OF CASH COLLATERAL;
ADDITIONAL PLEDGED PROPERTY
SECTION 6.1 Sales and Substitutions of Pledged Property; Additional
Pledged Property.
(a) Subject to clauses (b) and (c) below and in addition to its rights
under Section 3.5, upon notice to and with the consent of the Collateral Agent,
the Pledgor (or any Authorized Signatory thereof) shall have the right to sell
Pledged Property, to substitute other Pledged Property (the "Substituted Pledged
Property") or pledge additional Pledged Property (the "Additional Pledged
Property") so long as no Event of Default exists or, in the sole opinion of the
Collateral Agent, would result therefrom, upon giving effect to such sale,
substitution, or additional pledge of Pledged Property. A substitution of
Pledged Property shall be effected by the Collateral Agent originating an
entitlement order, or authorizing the Securities Intermediary to honor an
entitlement order from the Pledgor, to deliver or transfer to the Pledgor or its
designee the Pledged Property being replaced against the receipt by the
Securities Intermediary for credit to the Collateral Account of the Substituted
Pledged Property. The Collateral Agent will execute any documents of release
reasonably requested by the Pledgor. The Collateral Agent shall not be required
to release any Pledged Property to the Pledgor unless (i) the Collateral Agent
shall have determined, in accordance with clause (c) below, that no violation of
any rule or regulation of the Federal Reserve Board would result therefrom and
(ii) the Pledgor shall first reimburse the Collateral Agent and the Pledgees for
any reasonable expenses incurred or taxes imposed in connection with such
release. The Pledgor shall comply with all its obligations under this Agreement
as to Substituted Pledged Property or Additional Pledged Property, including,
but not limited to, its obligations with respect to delivery of the Substituted
Pledged Property or Additional Pledged Property and perfection of the Collateral
Agent's first-priority security interest in the Substituted Pledged Property or
Additional Pledged Property. The Pledgor shall deliver such certificates, if
necessary, and take such other action as may be necessary to transfer such a
first-priority perfected security interest in any Substituted Pledged Property
or Additional Pledged Property to the Collateral Agent.
(b) The delivery of a written notice pursuant to clause (a) above by
the Pledgor to the Collateral Agent, prior to effecting any substitution or
additional pledge of Pledged Property as contemplated by this Section 6.1 shall
constitute a representation and warranty by the Pledgor that no violation of the
rules and regulations of the Federal Reserve Board exists with respect to the
Loans and such sale, substitution or pledge of Pledged Property will not result
in a violation of any rule or regulation of the Federal Reserve Board.
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(c) In order to effect a release of Pledged Property and as
contemplated by clause (a) above, the Collateral Agent will confirm the release
in a certificate, if necessary, and take such other action as may be necessary
to release its security interest therein.
ARTICLE 7
MISCELLANEOUS PROVISIONS
SECTION 7.1 Operative Document. This Agreement is an Operative Document
executed pursuant to the Participation Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof. As such, the Collateral Agent has, on
behalf of itself and each Pledgee, all powers incidental to the execution of
each of the terms of this Agreement, as contemplated by the parties hereto.
SECTION 7.2 Waivers, Amendments, etc. The provisions of this Agreement
may from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the Pledgor and the
Collateral Agent in accordance with the terms of the Participation Agreement. No
failure or delay on the part of the Collateral Agent or the holder of any Note
in exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No notice to or demand on the Pledgor in any case shall entitle
it to any notice or demand in similar or other circumstances. No waiver or
approval by the Collateral Agent or the holder of any Note under this Agreement
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 7.3 Protection of Pledged Property. The Collateral Agent may
from time to time, at its option, perform any act which the Pledgor agrees
hereunder to perform and which the Pledgor shall fail to perform after being
requested in writing so to perform (it being understood that no such request
need be given after the occurrence and during the continuance of an Event of
Default) and the Collateral Agent may from time to time take any other action
which the Collateral Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Pledged Property or of its security
interest therein.
SECTION 7.4 Notices. All notices and other communications provided for
hereunder shall be in writing and addressed and delivered or transmitted to the
respective address or facsimile number specified in the Participation Agreement,
or as to any Person, at such other address or facsimile number as may be
designated by such Person in a notice to each other such Person complying as to
delivery with the terms of this Section 7.4. Any notice, if mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when transmitted (upon electronic
confirmation of transmission).
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SECTION 7.5 Headings. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provisions hereof.
SECTION 7.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 7.7 Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Pledgor and the Collateral
Agent (or notice thereof satisfactory to the Collateral Agent) shall have been
received by the Collateral Agent.
SECTION 7.8 Governing Law, Entire Agreement, etc. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR CASH COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE COMMONWEALTH OF PENNSYLVANIA. THIS AGREEMENT AND THE OTHER
OPERATIVE DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9 Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY HERETO SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA OR IN THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY CASH COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH CASH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE
PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE COMMONWEALTH OF PENNSYLVANIA AND OF THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PLEDGOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE COMMONWEALTH OF
PENNSYLVANIA. PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THE PLEDGOR MAY HAVE OR HEREAFTER
MAY
16
Pledge and Security Agreement
<PAGE> 17
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT PLEDGOR HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PLEDGOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.
SECTION 7.10 Waiver of Jury Trial. THE PLEDGOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS THE PLEDGOR MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR
IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE OTHER PARTIES HERETO OR
THE PLEDGOR. THE PLEDGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE OTHER PARTIES HERETO ENTERING INTO THE PARTICIPATION
AGREEMENT AND EACH SUCH OTHER OPERATIVE DOCUMENT.
SECTION 7.11 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Pledgor may not assign or
transfer its rights or obligations hereunder.
SECTION 7.12 The Agents. The Collateral Agent may employ agents and
attorneys-in-fact, which may include branches, Affiliates and Subsidiaries of
the Collateral Agent, in connection herewith and, so long as such agents or
attorneys-in-fact are not branches, Affiliates or Subsidiaries of the Collateral
Agent, the Collateral Agent shall not be responsible for the negligence of any
such agents or attorneys-in-fact selected by it in good faith.
SECTION 7.13 Expenses. The Pledgor agrees to pay to each Pledgee and
the Collateral Agent on demand all out-of-pocket expenses of such payee
(including all reasonable fees and out-of-pocket expenses of counsel to such
payee and of local counsel, if any, who may be retained by counsel to that
payee) relating to the enforcement of any of the provisions of this Agreement,
or performance by the Collateral Agent of any obligations of the Pledgor in
respect of the Pledged Property which the Pledgor has failed or refused to
perform, or any actual or attempted exchange, enforcement, collection,
compromise or settlement in respect of any of the Pledged Property, and for the
care of the Pledged Property and defending or asserting rights and claims of the
Pledgees or the Collateral Agent in respect thereof, by litigation or otherwise,
and all such expenses shall constitute obligations secured under this Agreement.
SECTION 7.14 Termination. When all obligations secured by this
Agreement shall have been paid in full and the Commitment of the Lenders under
the Construction Loan Agreement or any Refinancing Loan Document shall have
expired or been terminated, this Agreement shall terminate, and the
17
Pledge and Security Agreement
<PAGE> 18
Collateral Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever (other than as to there being no Liens resulting from any act of or
claim against the Collateral Agent), any remaining Pledged Property and money
received in respect thereof to or on the order of the Pledgor.
[SIGNATURE PAGES FOLLOW]
18
Pledge and Security Agreement
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Security Agreement to be duly executed as of the day and year first above
written.
FORE SYSTEMS HOLDING CORPORATION,
as Pledgor
By: /s/ GARY J. BRUNNER
-------------------------------------
Name: Gary J. Brunner
-----------------------------------
Title: Treasurer
----------------------------------
MELLON FINANCIAL SERVICES CORPORATION #4,
as Pledgee
By: /s/ STEPHEN R. VIEHE
------------------------------------
Name: Stephen R. Viehe
----------------------------------
Title: Vice President
---------------------------------
MELLON BANK, N.A., as Pledgee
By: /s/ MICHAEL T. ANSELMO
-------------------------------------
Name: Michael T. Anselmo
-----------------------------------
Title: Vice President
-----------------------------------
MELLON BANK, N.A., as Securities Intermediary
By: /s/ MICHAEL T. ANSELMO
-------------------------------------
Name: Michael T. Anselmo
-----------------------------------
Title: Vice President
-----------------------------------
S-1
Pledge and Security Agreement
<PAGE> 20
ANNEX I TO
PLEDGE AND SECURITY AGREEMENT
SPECIFICATION OF ADDITIONAL COLLATERAL
Pursuant to Section 2.1(d) of that certain Pledge and Security
Agreement, dated as of December __, 1998 (the "Agreement"), is made by Fore
Systems Holding Corporation, a Delaware corporation (the "Pledgor"), Mellon
Bank, N.A., as Construction Lender and Collateral Agent and Mellon Financial
Service Corporation #4, as Certificate Purchaser (each a "Pledgee" and
collectively, the "Pledgees"), and Mellon Bank, N.A., as securities intermediary
for the Collateral Account (in such capacity, the "Securities Intermediary"),
Pledgor hereby delivers to Collateral Agent the following property as additional
collateral and as a part of the "Pledged Property" thereunder:
---------------------------------------------------------------------------
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This Specification of Additional Collateral is made as of this ____ day
of _________, ____.
FORE SYSTEMS HOLDING CORPORATION,
as Pledgor
By:______________________________
Name:
Title:
2
Pledge and Security Agreement
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 189,432
<SECURITIES> 172,048
<RECEIVABLES> 130,684
<ALLOWANCES> 6,521
<INVENTORY> 87,053
<CURRENT-ASSETS> 627,330
<PP&E> 150,329
<DEPRECIATION> 79,481
<TOTAL-ASSETS> 704,820
<CURRENT-LIABILITIES> 148,049
<BONDS> 0
0
0
<COMMON> 640,871
<OTHER-SE> (84,100)
<TOTAL-LIABILITY-AND-EQUITY> 704,820
<SALES> 444,208
<TOTAL-REVENUES> 444,208
<CGS> 201,185
<TOTAL-COSTS> 201,185
<OTHER-EXPENSES> 410,014
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (155,828)
<INCOME-TAX> 12,177
<INCOME-CONTINUING> (168,005)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (168,005)
<EPS-PRIMARY> (1.61)
<EPS-DILUTED> (1.61)
</TABLE>
