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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1999.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED).
For the transition period from to
Commission File No. 1-13300
CAPITAL ONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1719854
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042-4525
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code: (703) 205-1000
Securities registered pursuant to section 12(b) of the act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $.01 Par Value New York Stock Exchange
Preferred Stock Purchase Rights* New York Stock Exchange
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* Attached to each share of Common Stock is a Right to acquire 1/100th of a
share of the Registrant's Cumulative Participating Preferred Stock, par
value $.01 per share, which Rights are not presently exercisable.
Securities Registered Pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of the close of business on February 29, 2000.
Common Stock, $.01 Par Value: $7,263,238,371*
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* In determining this figure, the registrant assumed that the executive
officers of the registrant and the registrant's directors are affiliates of
the registrant. Such assumption shall not be deemed to be conclusive for any
other purpose.
The number of shares outstanding of the registrant's common stock as of the
close of business on February 29, 2000:
Common Stock, $.01 Par Value: 196,988,353 shares
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to stockholders for the year ended December
31, 1999 are incorporated by reference into Parts I, II and IV.
2. Portions of the Proxy Statement for the annual meeting of stockholders to
be held on April 27, 2000 are incorporated by reference into Part III.
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CAPITAL ONE FINANCIAL CORPORATION
1999 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Item 1. Business............................................................................... 1
Overview............................................................................... 1
Business Segments...................................................................... 2
Operations............................................................................. 3
Funding................................................................................ 5
Competition............................................................................ 5
Employees.............................................................................. 5
Supervision and Regulation............................................................. 5
Risk Factors........................................................................... 11
Item 2. Properties............................................................................. 15
Item 3. Legal Proceedings...................................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders.................................... 15
Item 5. Market for Company's Common Stock and Related Stockholder Matters...................... 16
Item 6. Selected Financial Data................................................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 16
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............................. 16
Item 8. Financial Statements and Supplementary Data............................................ 16
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure... 16
Item 10. Directors and Executive Officers of the Company........................................ 17
Item 11. Executive Compensation................................................................. 17
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 17
Item 13. Certain Relationships and Related Transactions......................................... 17
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-k........................ 18
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PART I
Item 1. Business.
Overview
Capital One Financial Corporation (the "Corporation"), is a holding
company, incorporated in Delaware on July 21, 1994, whose subsidiaries provide
a variety of products and services to consumers using its proprietary
information-based strategy ("IBS"). The Corporation's principal subsidiary,
Capital One Bank (the "Bank"), a limited-purpose Virginia state chartered
credit card bank, offers credit card products. The Bank originally conducted
its operations as a division of Signet Bank, a wholly-owned subsidiary of
Signet Banking Corporation ("Signet")(/1/). Capital One, F.S.B. (the "Savings
Bank"), a federally chartered savings bank, offers consumer lending and
deposit products. Capital One Services, Inc., another subsidiary of the
Corporation, provides various operating, administrative and other services to
the Corporation and its subsidiaries. Unless indicated otherwise, the terms
"Company", "we", "us", and "our" refer to the Corporation and its consolidated
subsidiaries and for periods prior to our separation from Signet Bank, Signet
Bank's credit card division.
We began operations in 1953 as part of Signet Bank, the same year as the
formation of what is now MasterCard International, and we are one of the
oldest continually operating bank card issuers in the United States. The Bank
separated from Signet on November 24, 1994 and became a subsidiary of the
Corporation. As of December 31, 1999, we had 23.7 million customers and $20.2
billion in managed consumer loans outstanding. We are among the ten largest
issuers of Visa and MasterCard credit cards in the United States based on
managed credit card loans outstanding as of December 31, 1999. The success of
our IBS, which we initiated in 1988, in addition to credit card industry
dynamics, has led to our growth in managed credit card loans and accounts.
In June 1996, we established the Savings Bank to expand our product
offerings and our relationship with our cardholders. The Savings Bank
currently takes deposits and offers a variety of credit card products and
installment loans. Through the Savings Bank, we expect to offer multiple
financial products and services to existing cardholders and other households
applying IBS and existing information technology systems.
We offer credit card products outside of the United States through a branch
of the Bank in the United Kingdom and several non-bank subsidiaries. We
currently have foreign operations primarily in the United Kingdom and Canada.
We may also, from time to time, consider establishing our business in
additional foreign jurisdictions as opportunities arise. We also offer various
non-card consumer lending products, automobile financing and
telecommunications services through our subsidiaries both in the United States
and elsewhere.
We use IBS to differentiate among customers based on credit risk, usage and
other characteristics and to match customer characteristics with appropriate
product offerings. IBS involves developing sophisticated models, information
systems, well-trained personnel and a flexible culture to create credit card
or other products and services that address the demands of changing consumer
and competitive markets. By actively testing a wide variety of product and
service features, marketing channels and other aspects of offerings, we design
customized solicitations that are targeted at various credit customer
segments, thereby enhancing customer response levels and maximizing returns on
investment within given underwriting parameters.
We build on information derived from our initial sources with continued
integrated testing and model development to improve the quality, performance
and profitability of our solicitation and account management initiatives. We
apply IBS to all areas of our business, including solicitations, account
management, credit line management, pricing strategies, usage stimulation,
collections, recoveries and account and balance retention.
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(1) Signet Bank and Signet Banking Corporation have since been acquired by
First Union National Bank and First Union Corporation, respectively, as of
November 30, 1997.
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Our common stock is listed on the New York Stock Exchange under the symbol
COF. Our principal executive office is located at 2980 Fairview Park Drive,
Suite 1300, Falls Church, Virginia 22042-4525 (telephone number (703) 205-
1000).
Business Segments
We maintain three distinct business segments: lending, telecommunications
and "other." The lending segment is comprised primarily of credit card lending
activities. The telecommunications segment consists primarily of direct
marketing wireless service. The "other" segment consists of various, non-
lending new business initiatives.
Lending
We offer a wide variety of credit card products throughout the United
States and internationally, including the United Kingdom and Canada. Applying
IBS, we customize our products to appeal to different consumer preferences and
needs by combining different product features, including annual percentage
rates, fees and credit limits, rewards programs and other special features. We
constantly test new products to develop packages that appeal to different and
changing consumer preferences. Our customized products include both products
targeted at a range of consumer credit risk profiles, such as low rate cards
and secured cards, as well as products aimed at special consumer interests,
such as affinity, co-brand and student cards. Our pricing strategies are risk-
based; lower risk customers may likely be offered products with more favorable
pricing and we expect these products to yield lower delinquencies and credit
losses. On products offered to many higher risk customers, however, we may
experience higher delinquencies and losses, and we price these products
accordingly. In general, however, IBS allows us to provide appropriate
products to individual consumers with a wide range of credit histories.
Additionally, we have been applying our IBS to other financial and non-
financial products and services. In 1998, we acquired Summit Acceptance
Corporation ("Summit"), an automobile finance lender located and incorporated
in Dallas, Texas. Summit offers loans, secured by automobiles, through dealer
networks throughout the United States. Summit is our platform to test and
apply IBS to the automobile loan market.
We have also expanded our existing operations outside of the United States,
and are currently operating primarily in the United Kingdom and Canada. We
have experienced continuing growth in the number of accounts and loan balances
in our international business with most of our growth coming from our business
in the United Kingdom. To support the continued growth of our United Kingdom
business and any future business in Europe, we opened a new operations center
in Nottingham, England in July 1998 and expanded it in early 1999.
Telecommunications
Through our subsidiary, America One Communications, Inc. ("America One"),
we resell analog and digital wireless services through direct marketing
channels. In 1999, we announced that we would change the focus of our efforts
to market telecommunications services. In the first half of 1999, America
One's primary business, the reselling of analog and digital wireless services
through direct marketing channels, began experiencing significant competitive
pressures in its markets. In response to these changing market conditions, we
have decreased our marketing investment in our core wireless markets and have
been testing wireless products and services in other market segments that are
not being adequately served by the major wireless telecommunications
competitors.
Geographic Diversity
Loan portfolio concentration within a specific geographic region or
demographic portion of the population may be regarded as positive or negative
based upon the current and expected credit characteristics and performance of
the portfolio. Our consumer loan portfolio is geographically diverse. See Note
O to Consolidated Financial Statements on page 68 of the Company's Annual
Report to its stockholders for the year ended December 31, 1999 (the "Annual
Report"), which is incorporated herein by reference.
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Operations
Marketing
IBS is the cornerstone of our marketing strategy, and since its
introduction in 1988 we have steadily increased our marketing efforts. We
generate accounts primarily through direct mail and telemarketing
solicitations, although we also solicit accounts through the internet,
newspaper, magazine, radio and television advertising and location and event
marketing. Many of our solicitations are targeted at potential customers that
have been prescreened for creditworthiness. We track and periodically review
the results of our various solicitation campaigns. In developing our targeting
strategies, we use customer information only in accordance with our privacy
policies and respect for the privacy of our customers and potential customers.
Risk Management
We employ a comprehensive risk management process that integrates all
aspects of an account's life cycle, from origination to closure. We have a
credit policy group that makes marketing and credit policy decisions. This
credit policy group consists of senior management representatives from the
credit operations, risk management, marketing and analysis, and legal units.
This group originates credit policy from the viewpoints of both profitability
and credit risk, based on prescreening criteria, proprietary model development
and usage, as well as reviews of test programs and test results. We review
significant test results before the widespread introduction of a tested policy
or product.
An important element of our risk management process is our sophisticated
screening process to target potential consumers which we have developed since
the introduction of IBS. We intend for our prescreening and underwriting
criteria to identify and avoid potential losses, however, we cannot identify
all potential losses. Management information systems and processes enable
management to monitor the effectiveness of prescreening and underwriting
criteria. We modify our criteria based on the results obtained from this
process.
Credit Operations
Senior management actively manages our credit extension process which is
designed to bring consistency in credit practices and operating efficiencies.
Our scoring technology and verification procedures are highly automated with
limited judgmental review. Our credit evaluation process is based on
proprietary models using, among other things, credit scores developed by
nationally recognized scoring firms which may be tailored to individual
programs. We validate, monitor and maintain these scores as part of IBS. The
scores provide us with a statistically measurable way to make decisions about
applications and to monitor an account throughout its life cycle to adjust
credit lines, pricing and collection policies.
Our prescreened account solicitation process uses information from credit
reporting agencies to identify consumers who are likely to be approved for a
credit card account. We vary the underwriting criteria used to prescreen
potential applicants from time to time in accordance with our established
policies and procedures relating to the operation of our consumer revolving
lending business. We may change such policies from time to time. In order to
establish the amount of the customer's credit line, we analyze, and in some
cases verify, the information on returned applications. We usually offer each
customer whose credit request meets all of the applicable underwriting
criteria a line of credit equal to or in excess of a minimum level we have
established for each product offering. We also may review manually
applications that are rejected by our credit scoring system because of
inconsistencies in application information, inquiries from rejected applicants
or for other reasons. Our credit analysts then have the ability to override
decisions made by the system upon the receipt of additional information from
an applicant or otherwise.
For non-pre-screened solicitations, we generate names of prospective
customers from a variety of sources, including third party list vendors and
our internal sources, and then edit the list using internal and external
sources to ensure quality and accuracy. We approve or decline prospective
customers who respond to a solicitation based on information from both their
application and one or more credit reporting agencies.
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Account Management
We have found that active account management is necessary in order to
respond to the changing economic environment and cardholder risk, usage and
payment patterns. We apply new credit scores to each account multiple times
each year and new behavioral scores for open accounts each month. We use this
information in account management strategies relating to credit lines,
pricing, usage stimulation, retention and collection. For creditworthy and
profitable accounts, such periodic review may result in more favorable
pricing, higher credit lines or other enhancements which, based on testing,
are likely to increase account usage or the overall profitability of an
account. Conversely, for delinquent or other accounts with significant credit
risk, periodic review may result in an account being reassigned to a higher
risk category and hence not being eligible for credit line increases or, in
certain circumstances, having pricing adjusted upward or the credit line
reduced.
The IBS approach has helped us to develop our retention strategies. We have
developed integrated systems which evaluate account profitability and risk,
test various strategies for cost and effectiveness in retaining cardholders
and assist service representatives in negotiating potential pricing
alternatives. Some of our products, including the introductory interest rate
product and the balance transfer product, have a repricing feature after an
initial period. We have developed methodologies for retaining these accounts
and the balances in these accounts after the expiration of the initial period.
Collection Procedures
We have used IBS to customize our collections strategies and determine the
timing of collection activity based on models designed to predict charge-off
behavior. We generally consider an account delinquent if we have not received
a minimum payment by the accountholder's payment due date. We currently refer
delinquent accounts for contact by phone between seven and 60 days after
contractual delinquency, depending on the accountholder's risk profile. We
design our policies and procedures to encourage accountholders to pay
delinquent amounts; for example, once a delinquent account has re-established
a payment pattern with three consecutive minimum monthly payments, it can be
re-aged as current. Federal guidelines restrict how frequently an account can
be re-aged, renewed or extended. We reserve the right to suspend charging
privileges at any time after an account enters the collections process. We may
also, at our discretion, enter into arrangements with delinquent
accountholders to extend or otherwise change payment schedules.
We charge-off as uncollectible an account (net of collateral) at 180 days
past-due, except with respect to certain installment loans, which we charge-
off as uncollectible at 120 days past-due. In connection with a secured credit
card account, except as set forth below, we apply funds deposited as
collateral to payment on the account shortly before the account is charged off
as uncollectible. With respect to bankrupt customers, we charge-off the
account within 30 days after we receive the bankruptcy petition and, with
respect to secured credit card accounts, we apply funds deposited as
collateral in satisfaction of the account only after the bankruptcy automatic
stay is lifted. We charge-off accounts of deceased customers within 60 days of
receiving proper notice if no estate exists against which a proof of claim can
be filed, no other party remits payments or no other responsible party is
available. We may change our credit evaluation, servicing and charge-off
policies and collection practices over time in accordance with our business
judgment, applicable law and guidelines established by applicable regulatory
authorities.
Technology/Systems
A key part of our strategic focus is the development of flexible, high-
volume systems capable of handling our growth and changes in marketing and
account management strategies. Management believes that the continued
development and integration of these systems is important to our efforts to
reduce our operating costs and maintain a competitive advantage.
We have developed proprietary integrated systems which allow our employees
to manage the large volumes of data collected through the IBS process and to
use such data in our account solicitations, application processing,
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account management and retention strategies. We use this information to
predict consumer behavior and then match prospects to lending products with
various terms and fees. These systems also allow our customer service
representatives to access account specific information when responding to
customer inquiries.
Funding
Our primary methods of funding include loan securitizations, issuing
certificates of deposit, senior notes and other borrowings, and fed funds
purchased from financial institutions. For a discussion of our funding
program, see pages 29-30 and pages 38-39 of the Annual Report under the
respective headings "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Managed Consumer Loan Portfolio" and "--
Funding," which are incorporated herein by reference.
Competition
As a marketer of credit card products, we face intense competition in all
aspects of our business from numerous bank and non-bank providers of financial
services. Many of these companies are substantially larger and have more
resources than we do. We compete with international, national, regional and
local issuers of Visa and MasterCard credit cards. In addition, American
Express, Discover Card, Diner's Club and, to a certain extent, smart cards and
debit cards, represent additional competition in the general purpose credit
card market. In general, customers are attracted to credit card issuers
largely on the basis of price, credit limit and other product features and
customer loyalty is often limited. We believe that IBS allows us to more
effectively compete in both our current and new markets. There can be no
assurance, however, that our ability to market services successfully or to
obtain adequate yield on our loans will not be impacted by the nature of the
competition that now exists or may later develop.
In addition, we face competition in seeking public funding from banks,
savings banks, money market funds and a wide variety of other entities that
take deposits and/or sell debt securities, some of which are publicly traded.
Many of these companies are substantially larger, have more capital and other
resources and have better financial ratings than we do. Accordingly, there can
be no assurance that competition from these other borrowers will not increase
our cost of funds.
Employees
As of December 31, 1999, we employed 14,104 full-time and 239 part-time
employees, which we refer to as "associates." A central part of our philosophy
is to attract and maintain a highly capable staff. We view current associate
relations to be satisfactory. None of our associates are covered under
collective bargaining agreements.
Supervision and Regulation
General
The Bank is a banking corporation chartered under Virginia law and a member
of the Federal Reserve System, the deposits of which are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC"). The
Bank is subject to comprehensive regulation and periodic examination by the
Bureau of Financial Institutions of the Virginia State Corporation Commission
(the "Bureau of Financial Institutions"), the Federal Reserve Board (the
"Federal Reserve"), the Federal Reserve Bank of Richmond, the FDIC and in the
case of the United Kingdom branch of the Bank, the Financial Services
Authority. The Bank is not a "bank" under the Bank Holding Company Act of
1956, as amended (the "BHCA"), because it (i) engages only in credit card
operations, (ii) does not accept demand deposits or deposits that the
depositor may withdraw by check or similar means for payment to third parties
or others, (iii) does not accept any savings or time deposits of less than
$100,000, other than as permitted as collateral for extensions of credit, (iv)
maintains only one office that accepts deposits and (v) does not engage in the
business of making commercial loans. Due to the Bank's
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status as a limited purpose credit card bank, our non-credit card operations
must be conducted in our other operating subsidiaries.
The Savings Bank is a federal savings bank chartered by the Office of
Thrift Supervision (the "OTS") and is a member of the Federal Home Loan Bank
System. Its deposits are insured by the Savings Association Insurance Fund of
the FDIC. The Savings Bank is subject to comprehensive regulation and periodic
examination by the OTS and the FDIC.
The Corporation is not a bank holding company under the BHCA as a result of
its ownership of the Bank because the Bank is not a "bank" as defined under
the BHCA. If the Bank failed to meet the credit card bank exemption criteria
described above, its status as an insured depository institution would make
the Corporation subject to the provisions of the BHCA, including certain
restrictions as to the types of business activities in which a bank holding
company and its affiliates may engage. Becoming a bank holding company under
the BHCA would affect the Corporation's ability to engage in certain non-
banking businesses. In addition, for purposes of the BHCA, if the Bank failed
to qualify for the credit card bank exemption, any entity that acquired direct
or indirect control of the Bank and also engaged in activities not permitted
for bank holding companies could be required either to discontinue the
impermissible activities or to divest itself of control of the Bank.
As a result of the Corporation's ownership of the Savings Bank, the
Corporation is a unitary savings and loan holding company subject to
regulation by the OTS and the provisions of the Savings and Loan Holding
Company Act. As a unitary savings and loan holding company, the Corporation
generally is not restricted under existing laws as to the types of business
activities in which it may engage so long as the Savings Bank continues to
meet the qualified thrift lender test (the "QTL Test"). If the Corporation
ceased to be a unitary savings and loan holding company as a result of its
acquisition of an additional savings institution, as a result of the failure
of the Savings Bank to meet the QTL Test, or as a result of a change in
control of the Savings Bank, the types of activities that the Corporation and
its non-savings association subsidiaries would be able to engage in would
generally be limited to those eligible for bank holding companies.
Under recently-enacted financial services modernization legislation
(discussed in detail below), bank holding companies may engage in an expanded
range of activities, including the securities and insurance businesses. To do
so, a bank holding company may voluntarily elect to become a new type of
company called a "financial holding company." While these changes are
significant in their impact upon the traditional banking, securities and
insurance industries, the impact upon us is less significant in light of the
fact that we are regulated as a unitary thrift holding company and not as a
bank holding company or a financial holding company. As a result, we may
engage in both the full range of activities authorized for bank or financial
holding companies, as well as additional non-banking activities typically
impermissible for such entities.
While the new financial modernization legislation does not impact the
permissible range of our activities, it does impose some limitations on the
future activities of unitary thrift holding companies. Existing unitary thrift
holding companies such as the Corporation are "grandfathered" with full powers
to continue and expand their current activities. Grandfathered unitary thrift
holding companies, however, may not be acquired by nonfinancial companies and
maintain their grandfathered powers. In addition, if a grandfathered unitary
thrift holding company is acquired by a financial company without such
grandfather rights, it may lose its ability to engage in certain non-banking
activities otherwise ineligible for bank holding companies or financial
holding companies.
The Corporation is also registered as a financial institution holding
company under Virginia law and as such is subject to periodic examination by
Virginia's Bureau of Financial Institutions.
Dividends and Transfers of Funds
The principal source of funds for the Corporation to pay dividends on
stock, make payments on debt securities and meet other obligations is
dividends from its direct and indirect subsidiaries. There are various federal
and Virginia law limitations on the extent to which the Bank and the Savings
Bank can finance or
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otherwise supply funds to the Corporation through dividends, loans or
otherwise. These limitations include minimum regulatory capital requirements,
Federal Reserve, OTS and Virginia law requirements concerning the payment of
dividends out of net profits or surplus, Sections 23A and 23B of the Federal
Reserve Act governing transactions between an insured depository institution
and its affiliates and general federal and Virginia regulatory oversight to
prevent unsafe or unsound practices. In general, federal banking laws prohibit
an insured depository institution, such as the Bank and the Savings Bank, from
making dividend distributions if such distributions are not paid out of
available earnings or would cause the institution to fail to meet applicable
capital adequacy standards. In addition, the Savings Bank is required to give
the OTS at least 30 days' advance notice of any proposed dividend. Under OTS
regulations, other limitations apply to the Savings Bank's ability to pay
dividends, the magnitude of which depends upon the extent to which the Savings
Bank meets its regulatory capital requirements. In addition, under Virginia
law, the Bureau of Financial Institutions may limit the payment of dividends
by the Bank if the Bureau of Financial Institutions determines that such a
limitation would be in the public interest and necessary for the Bank's safety
and soundness.
Capital Adequacy
The Bank and the Savings Bank are currently subject to capital adequacy
guidelines adopted by the Federal Reserve and the OTS, respectively. For a
further discussion of the capital adequacy guidelines, see page 40 of the
Annual Report under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Adequacy" and Note J to
Consolidated Financial Statements on page 51, which are incorporated herein by
reference.
In June 1999, the Basle Committee on Banking Supervision issued for public
comment through March 31, 2000 a proposal to revise significantly the current
international capital adequacy accord. This proposal seeks to address more
precisely various underlying bank risks, to refine the risk weighting
currently given to various bank credit exposures and to recognize interest
rate and operational risk from a capital perspective. If ultimately adopted,
this proposal may require some banks to increase their current capital levels.
FDICIA
Among other things, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") requires federal bank regulatory authorities to take
"prompt corrective action" ("PCA") in respect of insured depository
institutions that do not meet minimum capital requirements. FDICIA establishes
five capital ratio levels: well-capitalized, adequately-capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. The capital categories are determined solely for the
purposes of applying FDICIA's PCA provisions, as discussed below, and such
capital categories may not constitute an accurate representation of the
overall financial condition or prospects of the Bank or the Savings Bank. As
of December 31, 1999, each of the Bank and the Savings Bank met the
requirements for a "well-capitalized" institution. A "well-capitalized"
classification should not necessarily be viewed as describing the condition or
future prospects of a depository institution, including the Bank and the
Savings Bank.
Under FDICIA's PCA system, an insured depository institution in the
"undercapitalized category" must submit a capital restoration plan guaranteed
by its parent company. The liability of the parent company under any such
guarantee is limited to the lesser of 5.00% of the insured depository
institution's assets at the time it became undercapitalized, or the amount
needed to comply with the plan. An insured depository institution in the
undercapitalized category also is subject to limitations in numerous areas
including, but not limited to, asset growth, acquisitions, branching, new
business lines, acceptance of brokered deposits and borrowings from the
Federal Reserve. Progressively more burdensome restrictions are applied to
insured depository institutions in the undercapitalized category that fail to
submit or implement a capital plan and to insured depository institutions that
are in the significantly undercapitalized or critically undercapitalized
categories. In addition, an insured depository institution's primary federal
banking agency is authorized to downgrade the institution's capital category
to the next lower category upon a determination that the institution is in an
unsafe or unsound condition or is engaged in an unsafe or unsound practice. An
unsafe or unsound practice can include receipt by the
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institution of a less than satisfactory rating on its most recent examination
with respect to its capital, asset quality, management, earnings or liquidity.
"Critically undercapitalized" insured depository institutions (which are
defined to include institutions that still have a positive net worth) may not,
beginning 60 days after becoming critically undercapitalized, make any payment
of principal or interest on their subordinated debt (subject to certain
limited exceptions). Thus, in the event an institution became critically
undercapitalized, it would generally be prohibited from making payments on its
subordinated debt securities. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator.
FDICIA also requires the FDIC to implement a system of risk-based premiums
for deposit insurance pursuant to which the premiums paid by a depository
institution will be based on the probability that the FDIC will incur a loss
in respect of such institution. The FDIC has since adopted a system that
imposes insurance premiums based upon a matrix that takes into account an
institution's capital level and supervisory rating.
The Bank and the Savings Bank may accept brokered deposits as part of their
funding. Under FDICIA, only "well-capitalized" and "adequately-capitalized"
institutions may accept brokered deposits. Adequately-capitalized
institutions, however, must first obtain a waiver from the FDIC before
accepting brokered deposits, and such deposits may not pay rates that
significantly exceed the rates paid on deposits of similar maturity from the
institution's normal market area or the national rate on deposits of
comparable maturity, as determined by the FDIC, for deposits from outside the
institution's normal market area.
Liability for Commonly-Controlled Institutions
Under the "cross-guarantee" provision of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA"), insured depository
institutions such as the Bank and the Savings Bank may be liable to the FDIC
in respect of any loss or reasonably anticipated loss incurred by the FDIC
resulting from the default of, or FDIC assistance to, any commonly controlled
insured depository institution. The Bank and the Savings Bank are commonly
controlled within the meaning of the FIRREA cross-guarantee provision.
Investment Limitation and Qualified Thrift Lender Test
Federally-chartered savings banks such as the Savings Bank are subject to
certain investment limitations. For example, federal savings banks are not
permitted to make consumer loans (i.e., certain open-end or closed-end loans
for personal, family or household purposes, excluding credit card loans) in
excess of 35% of the savings bank's assets. Federal savings banks are also
required to meet the QTL Test, which generally requires a savings bank to
maintain at least 65% "portfolio assets" (total assets less (i) specified
liquid assets up to 20% of total assets, (ii) intangibles, including goodwill
and (iii) property used to conduct business) in certain "qualified thrift
investments" (residential mortgages and related investments, including certain
mortgage backed and mortgage related investments, small business related
securities, certain state and federal housing investments, education loans and
credit card loans) on a monthly basis in nine out of every 12 months. Failure
to qualify under the QTL Test could subject the Savings Bank to substantial
restrictions on its activities, including the activity restrictions that apply
generally to bank holding companies and their affiliates and potential loss of
grandfathered rights under the Gramm-Leach-Bliley Act. As of December 31,
1999, 81.44 % of the Savings Bank's portfolio assets were held in qualified
thrift investments, and the Savings Bank was in compliance with the QTL Test.
Regulation of Lending Activities
The activities of the Bank and the Savings Bank as consumer lenders also
are subject to extensive regulation under various federal laws including the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Community Reinvestment Act and the Soldiers' and Sailors'
Civil Relief Act, as well as to various state laws. Regulators are authorized
to impose penalties for violations of these statutes and, in certain
8
<PAGE>
cases, to order the Bank and the Savings Bank to pay restitution to injured
borrowers. Borrowers may also bring actions for certain violations. Federal
bankruptcy and state debtor relief and collection laws also affect the ability
of the Bank and the Savings Bank to collect outstanding balances owed by
borrowers who seek relief under these statutes.
Year 2000
On October 15, 1998, the Office of the Comptroller of the Currency--
Department of Treasury, the Federal Reserve, the FDIC and the OTS--Department
of Treasury, together published Interagency Guidelines establishing Year 2000
Standards for Safety and Soundness. These were made effective November 2,
1998, by the Federal Reserve (Amendments to Regulation H Membership of State
Banking Institutions in the Federal Reserve System, Appendix D-2--Interagency
Guidelines Establishing Year 2000 Standards for Safety and Soundness) (the
"Standards"). Among other things, the Standards required components and
timetables for the review of mission critical systems for year 2000 readiness,
renovation of internal and external mission critical systems, testing of
mission critical systems, business resumption contingency planning,
remediation contingency planning, customer risk assessment and involvement of
the board of directors and management. Our year 2000 plan is subject to and in
compliance with the Standards. For a further discussion of our preparation for
the year 2000 and the continuing impact of those preparations since January 1,
2000, see page 44 of the Annual Report under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Business Outlook--The Year 2000 Issue."
Legislation
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Financial Services Modernization Act of 1999 (the "Act"). The principal
purpose of the Act is to permit greater affiliations within the financial
services industry, primarily banking, securities and insurance. The Act
repeals the Glass-Steagall Act, which separated commercial banking from
investment banking, and substantially amends the BHCA, which limited the
ability of bank holding companies to engage in the securities and insurance
businesses. To achieve this purpose, the Act creates a new type of company,
the "financial holding company." While these laws go into effect on March 11,
2000, the Federal Reserve Board is accepting public comment on proposed
implementing regulations until March 27, 2000. While this aspect of the Act is
significant in its impact upon the traditional banking, securities and
insurance industries, the impact of these provisions on us is less significant
in light of our current corporate structure. Because the Corporation is a
unitary thrift holding company and owns a limited-purpose credit card bank, it
is not regulated as a bank holding company. Therefore, we were already able to
engage in the full range of activities authorized by the Act, as well as non-
banking activities not available to financial holding companies. The Act does
impose certain limitations on the transferability of unitary thrift holding
companies. See, "Supervision and Regulation--General".
The Act also contains certain consumer privacy provisions relating to the
use of customer information. These provisions will be implemented by final
regulations that are due on May 12, 2000. Under those regulations, financial
institutions will be required to establish privacy policies regarding the
kinds of customer information they collect and the way they use that
information and provide such information to customers on a regular basis. In
addition, financial institutions will be required to give customers the right
to block the sharing of this information with unaffiliated companies, subject
to certain exceptions. Lastly, financial institutions will be prohibited from
sharing account numbers or access codes with unaffiliated companies for
marketing purposes.
In addition, the Act permits a limited-purpose credit card bank such as the
Bank to establish one or more foreign banking subsidiaries that are not
subject to the business-line limitations credit card banks face domestically.
Therefore, such foreign banking subsidiaries could engage in non-credit-card
lending and could accept retail deposits overseas.
Legislation has also been introduced requiring additional credit card
disclosures and that could otherwise restrict practices of credit card
issuers. Additional proposals have sought to change existing federal
bankruptcy
9
<PAGE>
laws and to expand the privacy protections afforded to customers of financial
institutions. It is unclear at this time whether and in what form any such
legislation will be adopted or, if adopted, what its impact on the Bank, the
Savings Bank or the Corporation would be. Congress may in the future consider
other legislation that would materially affect the banking or credit card
industries.
Privacy
The Act also requires a financial institution to disclose its privacy
policy to customers and consumers, and requires that such customers and
consumers be given a choice (through an opt-out notice) to forbid the sharing
of their nonpublic personal information with nonaffiliated third persons. We
currently do this. We have a written Privacy Statement posted on our web site,
which we make available to all of our customers. Pursuant to that policy, we
protect the security of our customers' information, educate our employees
about the importance of protecting customer privacy and allow our customers to
remove their names from the solicitation lists we use and share with others.
We ask business partners with whom we share such information to abide by our
privacy policy. As our regulators establish further guidelines for addressing
customer privacy issues, we may need to amend our Privacy Statement and adapt
our internal procedures.
In addition to adopting federal requirements regarding privacy, the Act
also permits individual states to enact stricter laws relating to the use of
customer information. Many states are expected to consider such proposals
which may impose additional requirements or restrictions on us.
Investment in the Corporation, the Bank and the Savings Bank
Certain acquisitions of capital stock may be subject to regulatory approval
or notice under federal or Virginia law. Investors are responsible for
insuring that they do not, directly or indirectly, acquire shares of capital
stock of the Corporation in excess of the amount which can be acquired without
regulatory approval.
The Bank and the Savings Bank are each "insured depository institutions"
within the meaning of the Change in Bank Control Act. Consequently, federal
law and regulations prohibit any person or company from acquiring control of
the Company without, in most cases, prior written approval of the Federal
Reserve or the OTS, as applicable. Control is conclusively presumed if, among
other things, a person or company acquires more than 25% of any class of
voting stock of the Corporation. A rebuttable presumption of control arises if
a person or company acquires more than 10% of any class of voting stock and is
subject to any of a number of specified "control factors" as set forth in the
applicable regulations.
Although the Bank is not a "bank" within the meaning of Virginia's
reciprocal interstate banking legislation (Chapter 15 of Title 6.1 of the Code
of Virginia), it is a "bank" within the meaning of Chapter 13 of Title 6.1 of
the Code of Virginia governing the acquisition of interests in Virginia
financial institutions (the "Financial Institution Holding Company Act"). The
Financial Institution Holding Company Act prohibits any person or entity from
acquiring, or making any public offer to acquire, control of a Virginia
financial institution or its holding company without making application to,
and receiving prior approval from, the Bureau of Financial Institutions.
Interstate Taxation
Several states have passed legislation which attempts to tax the income
from interstate financial activities, including credit cards, derived from
accounts held by local state residents. Based on the volume of its business in
these states and the nature of the legislation passed to date, we currently
believe that this development will not materially affect our financial
condition. The states may also consider legislation to tax income derived from
transactions conducted through the Internet. We currently solicit accounts and
take account information via the Internet. It is unclear at this time,
however, whether and in what form any such legislation will be adopted or, if
adopted, what its impact on us would be.
10
<PAGE>
International Regulation
We also face regulation in the foreign jurisdictions where we currently,
and may in the future, operate. Those regulations may be similar to or
substantially different from the regulatory requirements we face in the United
States. In the United Kingdom, we are regulated by the Financial Services
Administration.
In the United Kingdom, we operate through a branch of the Bank (the "UK
Branch"). The UK Branch is regulated by the Financial Services Authority and
the Office of Fair Trading (the "OFT"). The UK Branch is an "authorized
deposit taker" under the Banking Act of 1987 and thus is able to take consumer
deposits in the UK. The UK Branch has also been granted full license by the
OFT to issue consumer credit under the Consumer Credit Act of 1974. Because
the UK Branch is part of the Bank, it is also regulated by the US regulatory
authorities and is subject to all of the regulations and operational
restrictions discussed above.
Risk Factors
This Annual Report on Form 10-K contains forward-looking statements. We
also may make written or oral forward-looking statements in our periodic
reports to the Securities and Exchange Commission on Forms 10-Q and 8-K, in
our annual report to shareholders, in our proxy statements, in our offering
circulars and prospectuses, in press releases and other written materials and
in oral statements made by our officers, directors or employees to third
parties. Statements that are not historical facts, including statements about
our beliefs and expectations, are forward-looking statements. Forward-looking
statements include information relating to growth in earnings per share,
return on equity, growth in managed loans outstanding and customer accounts,
net interest margins, funding costs, operations costs and employment growth,
marketing expense, delinquencies and charge-offs. Forward-looking statements
also include statements using words such as "expect," "anticipate," "intend,"
"plan," "believe," "estimate" or similar expressions. These statements are
based on current plans, estimates and projections, and therefore you should
not place undue reliance on them.
Although we have tried to discuss key factors, please be aware that other
risks may prove to be important in the future. New risks may emerge at any
time and we cannot predict such risks or estimate the extent to which they may
affect our financial performance.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions, including the risks discussed
below. Our future performance and actual results may differ materially from
those expressed in these forward-looking statements. Many of the factors that
will determine these results and values are beyond our ability to control or
predict. This section highlights specific risks that could affect us and our
business.
We Face Intense Competition in all of our Markets
We face intense competition from many other providers of credit cards and
other financial products and services. In particular, we compete with
international, national, regional and local bank card issuers, and with other
general purpose credit or charge card issuers. In addition, the recently
enacted Gramm-Leach-Bliley Financial Services Modernization Act of 1999, which
permits greater affiliations between banks, securities firms and insurance
companies may increase competition in the financial services industry,
including in the credit card business. Increased competition has resulted in,
and may continue to cause, a decrease in credit card response rates and
reduced productivity of marketing dollars invested in certain lines of
business. Other credit card companies may compete with us for customers by
offering lower interest rates and fees. Because customers generally choose
credit card issuers based on price (mostly interest rates and fees), credit
limit and other product features, customer loyalty is limited. We may lose
entire accounts, or may lose account balances, to competing card issuers.
In the past, we have faced intense competition primarily in the market for
our low introductory rate credit cards. Recently, however, the competition
with our other credit card products, such as our low fixed-rate cards, secured
cards and other customized cards, has also become more intense. The cost to
acquire new accounts varies along business lines and is expected to rise as we
move beyond the domestic card market. We expect that competition will continue
to grow more intense with respect to all of our products, including our
products in the United Kingdom and Canada.
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<PAGE>
Our Accounts and Loan Balances Will Fluctuate
Our accounts and loan balances and the rate at which they grow are affected
by a number of factors, including how we allocate our marketing investment
among different products and the rate at which customers transfer their
accounts and loan balances to competing card issuers. Accounts and loan
balances are also affected by general economic conditions, which may increase
or decrease the amount of spending by customers, their ability to repay their
loans, and other factors beyond our control.
Because we designed our IBS to take advantage of market opportunities, we
cannot forecast how we will spend our marketing funds and on which products.
Likewise, our account and loan balance growth is affected by many factors,
including the ones mentioned above. Our results, therefore, will vary as
marketing investments, accounts and loan balances fluctuate.
It is Difficult to Sustain and Manage Growth
Our growth strategy is threefold. First, we seek to continue to grow our
domestic credit card business. Second, we desire to grow our lending business
internationally, in the United Kingdom, Canada and beyond. Third, we hope to
identify and pursue new business opportunities, both financial and non-
financial. Our management believes that, through IBS, we achieve these
objectives. However, there are a number of factors that can affect our ability
to do so including:
. our ability to retain existing customers and to attract new customers;
. the growth of existing and new account balances;
. the delinquency and charge-off levels of accounts;
. the availability of funding on favorable terms;
. the amount of funds available for marketing to solicit new customers;
. general economic and other factors;
. the legal and regulatory environment;
. a favorable interest rate environment;
. our ability to build or acquire the necessary operational and
organizational infrastructure;
. the ability to manage expenses as we expand; and
. our ability to recruit experienced management and operations personnel.
Our expansion internationally is affected by additional factors such as
limited access to information, differences in cultural attitudes toward
credit, new regulatory and legislative environments and differences from the
historical experience of portfolio performance in the United States and other
countries.
Difficulties or delays in the development, production, testing and
marketing of new products or services will affect the success of such products
or services and can cause losses associated with the costs to develop
unsuccessful products and services. Such difficulties could include:
. failure to implement new product or service programs on time;
. failure of customers to accept these products or services;
. operational difficulties or delays;
. losses arising from the testing of new products or services; and
. legal and other difficulties.
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In addition, our new products and services may not achieve the same
financial results as we have achieved in the past from our credit card
business.
We May Experience Limited Availability of Financing and Variation in our
Funding Costs
Like most credit card companies, our primary source of funding is the
securitization of consumer loans. Securitization transactions involve the sale
of beneficial interests in consumer loan balances. Our ability to use
securitization funding depends on how difficult and expensive such funding is.
Until now, we have completed securitization transactions on terms that we
believe are acceptable. However, securitizations can be affected by many
factors. Economic, legal, regulatory, accounting and tax changes can make
securitization funding more difficult, more expensive or unavailable on any
terms both domestically and internationally, where the securitization of
consumer loans may be on terms more or less favorable than in the United
States. Securitizations may not always be an attractive source of funding for
us, and we may have to seek other more expensive funding sources in the
future.
In general, the amount, type and cost of our financing, including financing
from other financial institutions, the capital markets and deposits, affects
our financial results. A number of factors could make such financing more
difficult, more expensive or unavailable including, but not limited to,
changes within our organization, changes in the activities of our business
partners, changes affecting our investments, interest rate fluctuations and
regulatory changes. In addition, we compete for funding with other banks,
savings banks and similar companies. Some of these institutions are publicly
traded. Many of these institutions are substantially larger, have more capital
and other resources and have better financial ratings than we do. Competition
from these other borrowers may increase our cost of funds. Events that disrupt
capital markets and other factors beyond our control could also make our
funding sources more expensive or unavailable.
We May Experience Increased Delinquencies and Credit Losses
Like other consumer lenders, we face the risk that accounts become
uncollectible because accountholders will not repay their loans. Consumers who
miss payments on their loans often fail to repay them, and consumers who file
for protection under the bankruptcy laws generally do not repay their loans.
Therefore, the rate of missed payments, or "delinquencies," on our portfolio
of loans, and the rate at which consumers may be expected to file for
bankruptcy, can be used to predict the future rate at which we charge-off our
consumer loans. A high charge-off rate would hurt our financial performance,
the performance of our securitizations and our cost of funds.
Widespread increases in past-due payments and nonpayment are most likely to
occur if the country or a regional area encounters an economic downturn, such
as a recession, but they could also occur for other reasons. For example,
fraud can cause losses. In addition, the age and rate of growth, or
"seasoning," of a consumer loan portfolio also increases the rate of
nonpayment and past-due payments. If we make fewer loans than we have in the
past, the proportion of new loans in our portfolio will decrease and the
delinquency rate and charge-off rate may increase. Therefore, the seasoning of
accounts may require higher loan loss provisions and reserves. This would
reduce our earnings unless offset by other changes.
In addition, we market many of our products to underserved markets, which
may have less experience with credit risk and performance. These markets, in
some cases, also have higher delinquency and charge-off rates. Although we
believe that IBS can help us effectively price these products in relation to
their risk, we may not set high enough fees and rates for these accounts to
offset the higher delinquency and loss rates we may experience.
We Face Risk From Economic Downturns and Social Factors
Delinquencies and credit losses in the credit card industry generally
increase during periods of an economic downturn or recession. Likewise,
consumer demand may decline during an economic downturn or recession.
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Accordingly, an economic downturn or recession (either local or national) can
hurt our financial performance as accountholders default on their loans or
carry lower balances. As we increasingly market our cards internationally, an
economic downturn or recession outside the United States also could hurt our
financial performance. A variety of social factors also may cause changes in
credit card use, payment patterns and the rate of defaults by accountholders.
Social factors include changes in consumer confidence levels, the public's
perception of the use of credit cards and changing attitudes about incurring
debt and the stigma of personal bankruptcy. We believe that we can manage
these risks through our underwriting criteria and product design.
Nevertheless, underwriting criteria and design may not be enough to protect
our growth and profitability during a sustained period of economic downturn or
recession or a material shift in social attitudes.
We Face Risk of Interest Rate Fluctuations
Like other financial institutions, we borrow money from institutions and
depositors in order to lend money to customers. We earn interest on the
consumer loans we make, and pay interest on the deposits and borrowings we use
to fund those loans. The difference between these two interest rates affects
the value of our assets and liabilities. If the rate of interest we pay on our
borrowings increases more than the rate of interest we earn on our loans, our
earnings could fall. Our earnings could also be hurt if the rates on our
consumer loans fall more quickly than those on our borrowings.
We manage the risk of interest rate fluctuations through various financial
instruments and techniques, such as asset/liability matching, interest rate
swaps and similar financial instruments, hedging and other techniques. The
goal is to maintain an interest rate neutral or "matched" position, where
interest rates on loans and borrowings go up or down by the same amount and at
the same time. We cannot, however, always achieve this position at a
reasonable cost. Furthermore, if these techniques become unavailable or
impractical, our earnings could be hurt.
We also manage these risks partly by changing the interest rates we charge
on our customer accounts. The success of repricing accounts to match an
increase or decrease in our borrowing rates depends on the overall product mix
of such accounts, the actual amount of accounts repriced, the rate at which we
are originating new accounts and our ability to retain accounts (and the
related loan balances) after repricing. For example, if we increase the
interest rate we charge on our consumer loan accounts and the accountholders
close their accounts as a result, we won't be able to match our increased
borrowing costs as quickly if at all.
Regulation and Legislation Can Change
Federal and state laws and rules significantly limit the types of
activities in which we engage. For example, federal and state consumer
protection laws and rules limit the manner in which we may offer and extend
credit. From time to time, the United States Congress and the states consider
changing these laws and may enact new laws or amend existing laws to regulate
further the consumer lending industry. Such new laws or rules could limit the
amount of interest or fees we can charge, restrict our ability to collect on
account balances, or materially affect us or the banking or credit card
industries in some other manner. Additional federal and state consumer
protection legislation also could seek to expand the privacy protections
afforded to customers of financial institutions and restrict our ability to
share customer information.
The laws governing bankruptcy and debtor relief also could change, making
it more expensive or more difficult for us to collect from our customers.
Congress currently is considering legislation that would change the existing
federal bankruptcy laws. One intended purpose of this legislation is to
increase the collectibility of unsecured debt, however it is not clear whether
or in what form Congress may adopt this legislation and we cannot predict how
this legislation may affect us.
In addition, the existing laws and rules are complex. If we fail to comply
with them we might not be able to collect our loans in full, or we might be
required to pay damages or penalties to our customers. For these reasons, new
or changes in existing laws or rules could hurt our profits.
14
<PAGE>
Our Expenses and Other Costs Will Fluctuate
Our expenses and other costs, such as human resources and marketing
expenses, directly affect our earnings results. Many factors can influence the
amount of our expenses, as well has how quickly they grow. As our business
develops, changes or expands, additional expenses can arise from asset
purchases, structural reorganization or a reevaluation of business strategies.
Other factors that can affect expenses include legal and administrative cases
and proceedings, which can be expensive to pursue or defend. In addition,
accounting policies that change can significantly affect how we calculate
expenses and earnings.
Statistical Information
The statistical information required by Item 1 can be found in our Annual
Report, and is incorporated herein by reference, as follows:
<TABLE>
<CAPTION>
Page In The Company's Annual
Report To Its Stockholders For
Guide 3 Disclosure The Year Ended December 31, 1999
------------------ --------------------------------
<S> <C> <C>
I. Distribution of Assets, Liabilities
and Stockholders' Equity;
Interest Rates and Interest
Differential.......................... 30-35
II. Investment Portfolio.................. 55
III. Loan Portfolio........................ 29-30, 35-38, 41, 66
IV. Summary of Loan Loss Experience....... 36-38, 56
V. Deposits.............................. 33, 38-39
VI. Return on Equity and Assets........... 27
VII. Other Borrowings...................... 38-40
</TABLE>
Item 2. Properties
We lease our principal executive office at 2980 Fairview Park Drive, Suite
1300, Falls Church, Virginia. We lease our principal executive office at 2980
Fairview Park Drive, Suite 1300, Falls Church, Virginia, consisting of
approximately 43,400 square feet. The lease commenced January 1, 1995 and we
have exercised an option to extend the lease until February 28, 2005.
We own administrative offices and credit card facilities in Richmond,
Virginia, consisting of approximately 470,000 square feet, from which we
conduct our credit, collections, customer service and other operations. We
also lease additional facilities consisting of an aggregate of approximately
3,311,601 square feet (excluding the principal executive office) from which
credit, collections, customer service and other operations are conducted,
primarily in Virginia, Florida, Texas, Idaho, Washington and the United
Kingdom. We also own a facility in Tampa, Florida, consisting of approximately
118,624 square feet and another facility in Nottingham, Great Britain,
consisting of approximately 267,000 square feet. We expect to lease or
purchase additional facilities in Virginia, Washington and the United Kingdom
consisting of an aggregate of approximately 650,000 square feet in 2000.
Item 3. Legal Proceedings
The information required by Item 3 is included in the Annual Report on
pages 64-65 under the heading "Notes to Consolidated Financial Statements--
Note K--Commitments and Contingencies."
Item 4. Submission of Matters To a Vote of Security Holders
During the fourth quarter of our fiscal year ending December 31, 1999, no
matters were submitted to a vote of our stockholders.
15
<PAGE>
PART II
Item 5. Market For Company's Common Stock And Related Stockholder Matters.
The information required by Item 5 is included under "Supervision and
Regulation--Dividends and Transfers of Funds" herein and in the Annual Report
on pages 38-40 under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Funding" and "--Capital
Adequacy," on page 45 under the heading "Selected Quarterly Financial Data"
and on pages 64-65 in Note K to Consolidated Financial Statements, and is
incorporated herein by reference and filed as part of Exhibit 13.
Item 6. Selected Financial Data.
The information required by Item 6 is included in the Annual Report on page
27 under the heading "Selected Financial and Operating Data," and is
incorporated herein by reference and filed as part of Exhibit 13.
Item 7. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations.
The information required by Item 7 is included in the Annual Report on
pages 28-44 under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and is incorporated herein by
reference and filed as part of Exhibit 13.
Item 7A. Quantitative And Qualitative Disclosures About Market Risk.
The information required by Item 7A is included in the Annual Report on
page 41 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Interest Rate Sensitivity," and is
incorporated herein by reference and filed as part of Exhibit 13.
Item 8. Financial Statements And Supplementary Data.
The information required by Item 8 is included in the Annual Report on page
47 under the heading "Report of Independent Auditors," on pages 48-68 under
the headings "Consolidated Balance Sheets," "Consolidated Statements of
Income," "Consolidated Statements of Changes in Stockholders' Equity,"
"Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial
Statements" and on page 45 under the heading "Selected Quarterly Financial
Data," and is incorporated herein by reference and filed as part of
Exhibit 13.
Item 9. Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure.
Not applicable.
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PART III
Item 10. Directors And Executive Officers Of The Company.
The information required by Item 10 is included in the Company's 1999 Proxy
Statement (the "Proxy Statement") on pages 6-8 under the heading "Information
About Our Directors and Executive Officers" and on page 5 under the heading
"Information About Capital One's Common Stock Ownership--Section 16(a)
Beneficial Ownership Reporting Compliance," and is incorporated herein by
reference. The Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days of the end of the
Corporation's 1999 fiscal year.
Item 11. Executive Compensation.
The information required by Item 11 is included in the Proxy Statement on
page 9 under the heading "Information About Our Directors and Executive
Officers--Compensation of the Board," on pages 11-16 under the heading
"Compensation of Executive Officers" and on pages 18-22 under the heading
"Report on Executive Compensation of the Compensation Committee," and is
incorporated herein by reference.
Item 12. Security Ownership Of Certain Beneficial Owners And Management.
The information required by Item 12 is included in the Proxy Statement on
page 4 under the heading "Information About Capital One's Common Stock
Ownership," and is incorporated herein by reference.
Item 13. Certain Relationships And Related Transactions
The information required by Item 13 is included in the Proxy Statement on
page 10 under the heading "Information About Our Directors and Executive
Officers--Related Party Transactions with Directors," and is incorporated
herein by reference.
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PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
(a) (1) The following consolidated financial statements of Capital One
Financial Corporation, included in the Annual Report, are incorporated herein
by reference in Item 8:
Report of Independent Auditors, Ernst & Young LLP
Consolidated Balance Sheets--As of December 31, 1999 and 1998
Consolidated Statements of Income--Years ended December 31, 1999, 1998 and
1997
Consolidated Statements of Changes in Stockholders' Equity--Years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows--Years ended December 31, 1999, 1998
and 1997
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data--As of and for the years ended
December 31, 1999 and 1998
(2) All schedules are omitted since the required information is either not
applicable, not deemed material, or is shown in the respective financial
statements or in notes thereto.
(3) Exhibits:
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The following exhibits are incorporated by reference or filed herewith.
References to (i) the "1994 Form 10-K" are to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994; (ii) the "1995 Form 10-K" are
to the Company's Annual Report on Form 10-K for the year ended December 31,
1995; (iii) the "1996 Form 10-K" are to the Company's Annual Report on Form
10-K for the year ended December 31, 1996; (iv) the "1997 Form 10-K" are to
the Company's Annual Report on Form 10-K for the year ended December 31, 1997;
and (v) the "1998 Form 10-K" are to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Capital One Financial Corporation
(incorporated by reference to Exhibit 3.1 of the 1994 Form 10-K).
3.2 Amended and Restated Bylaws of Capital One Financial Corporation (as amended
November 18, 1999).
4.1 Specimen certificate representing the Common Stock (incorporated by reference to
Exhibit 4.1 of the 1997 Form 10-K).
4.2.1 Rights Agreement dated as of November 16, 1995 between Capital One Financial
Corporation and Mellon Bank, N.A. (incorporated by reference to Exhibit 4.1 of
the Company's Report on Form 8-K, filed November 16, 1995).
4.2.2 Amendment to Rights Agreement dated as of April 29, 1999 between Capital One
Financial Corporation and First Chicago Trust Company of New York, as successor
to Mellon Bank, N.A.
4.3 Amended and Restated Issuing and Paying Agency Agreement dated as of April 30,
1996 between Capital One Bank and Chemical Bank (including exhibits A-1, A-2, A-
3 and A-4 thereto) (incorporated by reference to Exhibit 4.1 of the Company's
quarterly report on Form 10-Q for the period ending June 30, 1996).
4.4 Issuing and Paying Agency Agreement dated as of April 30, 1996 between Capital
One Bank and Chemical Bank (including exhibits A-1 and A-2 thereto)
(incorporated by reference to Exhibit 4.2 of the Company's quarterly report on
Form 10-Q for the period ending June 30, 1996).
4.5.1 Senior Indenture and Form T-1 dated as of November 1, 1996 among Capital One
Financial Corporation and Harris Trust and Savings Bank (incorporated by
reference to Exhibit 4.1 of the Company's Report on Form 8-K, filed November 13,
1996).
4.5.2 Copy of 7.25% Notes Due 2003 (incorporated by reference to Exhibit 4.5.2 of the
1996 Form 10-K).
4.6.1 Declaration of Trust, dated as of January 28, 1997, between Capital One Bank and
The First National Bank of Chicago, as trustee (including the Certificate of
Trust executed by First Chicago Delaware Inc., as Delaware trustee)
(incorporated by reference to Exhibit 4.6.1 of the 1996 Form 10-K).
4.6.2 Copies of Certificates Evidencing Capital Securities (incorporated by reference
to Exhibit 4.6.2 of the 1996 Form 10-K).
4.6.3 Amended and Restated Declaration of Trust, dated as of January 31, 1997, by and
among Capital One Bank, The First National Bank of Chicago and First Chicago
Delaware Inc. (incorporated by reference To Exhibit 4.6.3 of the 1996 Form 10-
K).
4.7 Indenture, dated as of January 31, 1997, between Capital One Bank and The First
National Bank of Chicago (incorporated by reference to Exhibit 4.7 of the 1996
Form 10-K).
4.8 Copy of 7 1/8% Notes due 2008 (incorporated by reference to Exhibit 4.8 of the
1998 Form 10-K).
4.9 Issue and Paying Agency Agreement dated as of October 24, 1997 between Capital
One Bank, Morgan Guaranty Trust Company of New York, London Office, and the
Paying Agents named therein (incorporated by reference to Exhibit 4.9 of the
1998 Form 10-K).
4.10 Copy of 7% Notes due 2006.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.1.1 Amended and Restated Distribution Agreement dated April 30, 1996 among Capital
One Bank and the agents named therein (incorporated by reference to Exhibit 10.1
of the Company's quarterly Report on Form 10-Q for period ending June 30, 1996).
10.1.2 Amendment to Amended and Restated Distribution Agreement dated April 21, 1998
among Capital One Bank and the agents named therein (incorporated by reference
to Exhibit 10.1.1 of the 1998 Form 10-K).
10.1.3 Second Amendment to Amended and Restated Distribution Agreement dated April 30,
1999 among Capital One Bank and the agents named therein.
10.2.1 Distribution Agreement dated April 30, 1996, among Capital One Bank and the
agents named therein (incorporated by reference to Exhibit 10.2 of the Company's
quarterly report on Form 10-Q for period ending June 30, 1996).
10.2.2 Amendment to Distribution Agreement dated April 30, 1998, among Capital One Bank
and the Agents named therein (incorporated by reference to Exhibit 10.2.1 of the
1998 Form 10-K).
10.3* Form of Employment Agreement dated as of January 25, 2000 between Capital One
Financial Corporation and each of Richard D. Fairbank, Nigel W. Morris and John
G. Finneran Jr.
10.4* Capital One Financial Corporation 1999 Non-Employee Directors Stock Incentive
Plan (incorporated by reference to Registrant's Registration Statement on Form
S-8, Commission File No. 333-78635, filed May 17, 1999).
10.5 Intentionally left blank.
10.6* Capital One Financial Corporation 1999 Stock Incentive Plan (incorporated by
reference to Registrant's Registration Statement on Form S-8, Commission File
No. 333-78609, filed May 17, 1999).
10.7* Capital One Financial Corporation 1994 Stock Incentive Plan, as amended.
10.8 Intentionally left blank.
10.9* Form of Change of Control Agreement between Capital One Financial Corporation and
certain of its senior executives (incorporated by reference to Exhibit 10.9 of
the 1998 Form 10-K).
10.10.1* Form of Amendment to Change of Control Agreement between Capital One Financial
Corporation and certain of its senior executives (incorporated by reference to
Exhibit 10.10 of the 1998 Form 10-K).
10.10.2* Amended and Restated Employment Agreement dated as of January 25, 2000 between
Capital One Financial Corporation and certain of its senior executives.
10.11* Capital One Financial Corporation Excess Savings Plan, as amended (incorporated
by reference to Exhibit 10.20 of the 1995 Form 10-K).
10.12* Capital One Financial Corporation Excess Benefit Cash Balance Plan, as amended
(incorporated by Reference to Exhibit 10.21 of the 1995 Form 10-K).
10.13* Capital One Financial Corporation 1994 Deferred Compensation Plan, as amended
(incorporated by Reference to Exhibit 10.22 of the 1995 Form 10-K).
10.14* 1995 Non-Employee Directors Stock Incentive Plan (incorporated by reference to
Registrant's Registration Statement on Form S-8, Commission File No. 33-91790,
filed May 1, 1995).
10.15 Services Agreement dated as of April 1, 1999 by and between D'Arcy Masius Benton
& Bowles USA, Inc. and Capital One Financial Corporation.
10.16 Consulting Agreement dated as of April 5, 1995, by and between Capital One
Financial Corporation and American Management Systems, Inc. (incorporated by
reference to Exhibit 10.33 of the 1995 Form 10-K).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.17.1 Amended and Restated Lease Agreement dated as of October 14, 1998 between First
Security Bank of Utah, N.A., as owner trustee for the COB Real Estate Trust
1995-1, as lessor and Capital One Realty, Inc., as lessee (incorporated by
reference to Exhibit 10.17.1 of the 1998 Form 10-K).
10.17.2 Guaranty dated as of October 14, 1998 from Capital One Bank in favor of First
Security Bank, N.A., as owner trustee for the COB Real Estate Trust 1995-1,
First Union National Bank, as indenture trustee, Lawyers Title Realty Services,
Inc., as deed of trust trustee, and the Note Purchasers, Registered Owners and
LC Issuer referred to therein (incorporated by reference to Exhibit 10.17.2 of
the 1998 Form 10-K).
10.17.3 Amendment to Lease Documents dated as of October 1, 1999 between First Security
Bank of Utah, N.A., as owner trustee for COB Real Estate Trust 1995-1, as lessor
and Capital One Realty, Inc., as lessee.
10.17.4 Amendment to Guaranty dated as of April 1, 1999 between Capital One Bank and
First Security Bank, N.A., as owner trustee for the COB Real Estate Trust 1995-
1, First Union National Bank, as indenture trustee, Lawyers Title Realty
Services, Inc., as deed of trust trustee, and the Note Purchasers, Registered
Owners and LC Issuer referred to therein.
10.18.1 Second Amended and Restated Credit Agreement dated as of May 25, 1999 by and
among Capital One Financial Corporation, Capital One Bank and Capital One,
F.S.B, as original borrowers, and The Chase Manhattan Bank, as administrative
agent and lender and the other lenders named therein.
10.18.2 Amendment to Second Amended and Restated Credit Agreement dated as of December
21, 1999 among Capital One Financial Corporation, Capital One Bank and Capital
One, F.S.B., as original borrowers, and The Chase Manhattan Bank, as
administrative agent.
10.19.1 Revolving Credit Facility Agreement dated as of August 29, 1997 by and among
Capital One Finance Company and Capital One Inc., as original borrowers, Capital
One Financial Corporation, as original guarantor, and the agents and lenders
named therein (incorporated by reference to Exhibit 10.19 of the 1997 Form 10-
K).
10.19.2 Amendment to Revolving Credit Facility agreement dated as of December 21, 1999
between Capital One Finance Company and Capital One Inc., as original borrowers,
Capital One Financial Corporation, as original guarantor, and the agents and
lenders named therein.
10.20 Form of Intellectual Property Protection Agreement dated as of April 29,1999 by
and among Capital One Financial Corporation and certain of its senior
executives.
10.21 Credit Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as borrower, and Bank of America, N.A., as administrative agent.
10.22 Lease Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as lessor, and Capital One Realty, Inc. as lessee.
10.23 Participation Agreement (Capital One Realty, Inc.) dated as of September 3, 1999
among Capital One Realty, Inc., as construction agent and lessee, Capital One
Bank, as guarantor, First Security Bank, N.A. as owner trustee under the Capital
One Realty Trust 1998-1, and the holders and lenders named therein.
10.24 Credit Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N.A. as owner trustee for Capital One Realty Trust
1998-1 as borrower and Bank of America N.A. as administrative agent.
10.25 Lease Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N. A. as owner trustee for Capital One Realty Trust
1998-1 as lessor and Capital One Realty, Inc. as lessee.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.26 Participation Agreement (Capital One Services, Inc.) dated as of September 3,
1999 among Capital One Services, Inc. as construction agent as lessee, Capital
One Financial Corporation as guarantor, First Security Bank, N.A. as owner
trustee under the Capital One Realty Trust 1998-1 and the holders and lenders
named therein.
13 The portions of Capital One Financial Corporation's 1999 Annual Report to
Stockholders that are incorporated by reference herein.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
- --------
* Indicates a management contract or compensation plan or arrangement
required to be filed as an exhibit to this Annual Report on Form 10-K.
(b) Reports on Form 8-K
The Company filed on October 14, 1999 a Current Report on Form 8-K dated
October 14, 1999, Commission File No. 1-13300, enclosing its press release
dated October 14, 1999.
The Company filed on October 29, 1999 a Current Report on Form 8-K dated
October 27, 1999, Commission File No. 1-13300, enclosing its press release
dated October 27, 1999.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Capital One Financial Corporation
/s/ David M. Willey
By: _________________________________
David M. Willey
Senior Vice President, Corporate
Financial Management
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities indicated on the 21st day of March, 2000
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director, Chairman and March 21, 2000
/s/ Richard D. Fairbank Chief Executive Officer
___________________________________ (Principal Executive
Richard D. Fairbank Officer)
/s/ Nigel W. Morris Director, President and March 21, 2000
___________________________________ Chief Operating Officer
Nigel W. Morris
/s/ David M. Willey Senior Vice President, March 21, 2000
___________________________________ Corporate Financial
David M. Willey Management
(Principal Accounting
and Financial Officer)
/s/ W. Ronald Dietz Director March 21, 2000
___________________________________
W. Ronald Dietz
/s/ James A. Flick, Jr. Director March 21, 2000
___________________________________
James A. Flick, Jr.
/s/ Patrick W. Gross Director March 21, 2000
___________________________________
Patrick W. Gross
/s/ James V. Kimsey Director March 21, 2000
___________________________________
James V. Kimsey
/s/ Stanley I. Westreich Director March 21, 2000
___________________________________
Stanley I. Westreich
</TABLE>
23
<PAGE>
EXHIBITS TO CAPITAL ONE FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
DATED DECEMBER 31, 1999
Commission File No. 1-13300
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of Capital One Financial Corporation
(incorporated by reference To Exhibit 3.1 of the 1994 Form 10-K).
3.2 Amended and Restated Bylaws of Capital One Financial Corporation (as amended
November 18, 1999).
4.1 Specimen certificate representing the Common Stock (incorporated by reference to
Exhibit 4.1 of the 1997 Form 10-K).
4.2.1 Rights Agreement dated as of November 16, 1995 between Capital One Financial
Corporation and Mellon Bank, N.A. (incorporated by reference to Exhibit 4.1 of
the Company's Report on Form 8-K, filed November 16, 1995).
4.2.2 Amendment to Rights Agreement dated as of April 29, 1999 between Capital One
Financial Corporation and First Chicago Trust Company of New York, as successor
to Mellon Bank, N.A.
4.3 Amended and Restated Issuing and Paying Agency Agreement dated as of April 30,
1996 between Capital One Bank and Chemical Bank (including exhibits A-1, A-2, A-
3 and A-4 thereto) (incorporated by reference to Exhibit 4.1 of the Company's
quarterly report on Form 10-Q for the period ending June 30, 1996).
4.4 Issuing and Paying Agency Agreement dated as of April 30, 1996 between Capital
One Bank and Chemical Bank (including exhibits A-1 and A-2 thereto)
(incorporated by reference to Exhibit 4.2 of the Company's quarterly report on
Form 10-Q for the period ending June 30, 1996).
4.5.1 Senior Indenture and Form T-1 dated as of November 1, 1996 among Capital One
Financial Corporation and Harris Trust and Savings Bank (incorporated by
reference to Exhibit 4.1 of the Company's Report on Form 8-K, filed November 13,
1996).
4.5.2 Copy of 7.25% Notes Due 2003 (incorporated by reference to Exhibit 4.5.2 of the
1996 Form 10-K).
4.6.1 Declaration of Trust, dated as of January 28, 1997, between Capital One Bank and
The First National Bank of Chicago, as trustee (including the Certificate of
Trust executed by First Chicago Delaware Inc., as Delaware trustee)
(incorporated by reference to Exhibit 4.6.1 of the 1996 Form 10-K).
4.6.2 Copies of Certificates Evidencing Capital Securities (incorporated by reference
to Exhibit 4.6.2 of the 1996 Form 10-K).
4.6.3 Amended and Restated Declaration of Trust, dated as of January 31, 1997, by and
among Capital One Bank, The First National Bank of Chicago and First Chicago
Delaware Inc. (incorporated by reference To Exhibit 4.6.3 of the 1996 Form 10-
K).
4.7 Indenture, dated as of January 31, 1997, between Capital One Bank and The First
National Bank of Chicago (incorporated by reference to Exhibit 4.7 of the 1996
Form 10-K).
4.8 Copy of 7 1/8% Notes due 2008 (incorporated by reference to Exhibit 4.8.2 of the
1998 Form 10-K).
4.9 Issue and Paying Agency Agreement dated as of October 24, 1997 between Capital
One Bank, Morgan Guaranty Trust Company of New York, London Office, and the
Paying Agents named Therein (incorporated by reference to Exhibit 4.9 of the
1998 Form 10-K).
4.10 Copy of 7% Notes due 2006.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.1.1 Amended and Restated Distribution Agreement dated April 30, 1996 among Capital
One Bank and the agents named therein (incorporated by reference to Exhibit 10.1
of the Company's quarterly Report on Form 10-Q for period ending June 30, 1996).
10.1.2 Amendment to Amended and Restated Distribution Agreement dated April 21, 1998
among Capital One Bank and the agents named therein (incorporated by reference
to Exhibit 10.1.1 of the 1998 Form 10-K).
10.1.3 Second Amendment to Amended and Restated Distribution Agreement dated April 30,
1999 among Capital One Bank and the agents named therein.
10.2.1 Distribution Agreement dated April 30, 1996, among Capital One Bank and the
agents named therein (incorporated by reference to Exhibit 10.2 of the Company's
quarterly report on Form 10-Q for period ending June 30, 1996).
10.2.2 Amendment to Distribution Agreement dated April 30, 1998, among Capital One Bank
and the Agents named therein (incorporated by reference to Exhibit 10.2.1 of the
1998 Form 10-K).
10.3* Form of Change of Control Employment Agreement dated as of January 25, 2000
between Capital One Financial Corporation and each of Richard D. Fairbank, Nigel
W. Morris and John G. Finneran Jr.
10.4* Capital One Financial Corporation 1999 Non-Employee Directors Stock Incentive
Plan (incorporated by reference to Registrant's Registration Statement on Form
S-8, Commission File No. 333-78635, filed May 17, 1999).
10.5 Intentionally left blank.
10.6* Capital One Financial Corporation 1999 Stock Incentive Plan (incorporated by
reference to Registrant's Registration Statement on Form S-8, Commission File
No. 333-78609, filed May 17, 1999).
10.7* Capital One Financial Corporation 1994 Stock Incentive Plan, as amended.
10.8 Intentionally left blank.
10.9* Form of Change of Control Employment Agreement between Capital One Financial
Corporation and certain of its senior executives (incorporated by reference to
Exhibit 10.9 of the 1998 Form 10-K).
10.10.1* Form of Amendment to Change of Control Employment Agreement between Capital One
Financial Corporation and certain of its senior executives (incorporated by
reference to Exhibit 10.10 of the 1998 Form 10-K).
10.10.2* Amended and Restated Change of Control Employment Agreement dated as of January
25, 2000 between Capital One Financial Corporation and certain of its senior
executives.
10.11* Capital One Financial Corporation Excess Savings Plan, as amended (incorporated
by reference to Exhibit 10.20 of the 1995 Form 10-K).
10.12* Capital One Financial Corporation Excess Benefit Cash Balance Plan, as amended
(incorporated by Reference to Exhibit 10.21 of the 1995 Form 10-K).
10.13* Capital One Financial Corporation 1994 Deferred Compensation Plan, as amended
(incorporated by Reference to Exhibit 10.22 of the 1995 Form 10-K).
10.14* 1995 Non-Employee Directors Stock Incentive Plan (incorporated by reference to
Registrant's Registration Statement on Form S-8, Commission File No. 33-91790,
filed May 1, 1995).
10.15 Services Agreement dated as of April 1, 1999 by and between D'Arcy Masius Benton
& Bowles USA, Inc. and Capital One Financial Corporation.
10.16 Consulting Agreement dated as of April 5, 1995, by and between Capital One
Financial Corporation
and American Management Systems, Inc. (incorporated by reference to Exhibit
10.33 of the 1995
Form 10-K).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.17.1 Amended and Restated Lease Agreement dated as of October 14, 1998 between First
Security Bank of Utah, N.A., as owner trustee for the COB Real Estate Trust
1995-1, as lessor and Capital One Realty, Inc., as lessee (incorporated by
reference to Exhibit 10.17.1 of the 1998 Form 10-K).
10.17.2 Guaranty dated as of October 14, 1998 from Capital One Bank in favor of First
Security Bank, N.A., as owner trustee for the COB Real Estate Trust 1995-1,
First Union National Bank, as indenture trustee, Lawyers Title Realty Services,
Inc., as deed of trust trustee, and the Note Purchasers, Registered Owners and
LC Issuer referred to therein (incorporated by reference to Exhibit 10.17.2 of
the 1998 Form 10-K).
10.17.3 Amendment to Lease Documents dated as of October 1, 1999 between First Security
Bank, N.A., and Val T. Orton, as owner trustees for COB Real Estate Trust 1995-
1, Capital One Bank, Capital One Realty, Inc.and Lawyers Title Realty Services,
Inc.
10.17.4 Amendment to Guaranty dated as of April 1, 1999 between Capital One Bank and
First Security Bank, N.A., and Val T. Orton, as owner trustees for the COB Real
Estate Trust 1995-1.
10.18.1 Second Amended and Restated Credit Agreement dated as of May 25, 1999 by and
among Capital One Financial Corporation, Capital One Bank and Capital One,
F.S.B, as original borrowers, and The Chase Manhattan Bank, as administrative
agent and lender and the other lenders named therein.
10.18.2 Amendment to Second Amended and Restated Credit Agreement dated as of December
21, 1999 among Capital One Financial Corporation, Capital One Bank and Capital
One, F.S.B., as original borrowers, and The Chase Manhattan Bank, as
administrative agent.
10.19.1 Revolving Credit Facility Agreement dated as of August 29, 1997 by and among
Capital One Finance Company and Capital One Inc., as original borrowers, Capital
One Financial Corporation, as Original guarantor, and the agents and lenders
named therein (incorporated by reference to Exhibit 10.19 of the 1997 Form 10-
K).
10.19.2 Amendment to Revolving Credit Facility agreement dated as of December 21, 1999
between Capital One Finance Company. Capital One Inc., Capital One Financial
Corporation, and the agents and lenders named therein.
10.20 Form of Intellectual Property Protection Agreement dated as of April 29,1999 by
and among Capital One Financial Corporation and certain of its senior
executives.
10.21 Credit Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as borrower, the lenders party thereto and Bank of America, N.A., as
administrative agent.
10.22 Lease Agreement (Capital One Realty, Inc.) dated as of September 3, 1999 between
First Security Bank, N.A. as owner trustee for Capital One Realty Trust 1998-1,
as lessor, and Capital One Realty, Inc. as lessee.
10.23 Participation Agreement (Capital One Realty, Inc.) dated as of September 3, 1999
among Capital One Realty, Inc., as construction agent and lessee, Capital One
Bank, as guarantor, First Security Bank, N.A. as owner trustee under the Capital
One Realty Trust 1998-1, the holders and lenders named therein, and Bank of
America, N.A. as agent.
10.24 Credit Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N.A., as owner trustee for Capital One Realty Trust
1998-1, as borrower, the lenders party thereto and Bank of America N.A. as
administrative agent.
10.25 Lease Agreement (Capital One Services, Inc.) dated as of September 3, 1999
between First Security Bank, N. A., as owner trustee for Capital One Realty
Trust 1998-1, as lessor, and Capital One Services, Inc. as lessee.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.26 Participation Agreement (Capital One Services, Inc.) dated as of September 3,
1999 among Capital One Services, Inc. as construction agent and lessee, Capital
One Financial Corporation, as guarantor, First Security Bank, N.A., as owner
trustee under the Capital One Realty Trust 1998-1, the holders and lenders named
therein, and Bank of America, N.A., as agent.
13 The portions of Capital One Financial Corporation's 1999 Annual Report to
Stockholders that are incorporated by reference herein.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
- --------
* Indicates a management contract or compensation plan or arrangement
required to be filed as an exhibit to this Annual Report on Form 10-K.
27
<PAGE>
EXHIBIT 3.2
-----------
FORM OF
RESTATED BYLAWS
OF
CAPITAL ONE FINANCIAL CORPORATION
Incorporated under the Laws of the State of Delaware
ARTICLE I
OFFICES AND RECORDS
Section 1.1. Delaware Office. The principal office of Capital One
Financial Corporation (the "Corporation") in the State of Delaware shall be
located in the City of Wilmington, County of New Castle, and the name and
address of its registered agent is Corporation Service Company, 1013 Centre
Road, Wilmington, Delaware.
Section 1.2. Other Offices. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
from time to time designate or as the business of the Corporation may from time
to time require.
Section 1.3. Books and Records. The books and records of the Corporation
may be kept at the Corporation's headquarters in Falls Church, Virginia or at
such other locations outside the State of Delaware as may from time to time be
designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meeting. The annual meetings of stockholders of the
Corporation shall be held at such place, either within or without the State of
Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting. If the Board of
Directors fails so to determine the time, date and place of meeting, the annual
meeting of stockholders shall be held at the registered office of the
Corporation on the first Tuesday in May. If the date of the annual meeting shall
fall upon a legal holiday, the meeting shall be held on the next succeeding
business day. At each annual meeting, the stockholders entitled to vote shall
elect a Board of Directors and they may transact such other corporate business
as shall be stated in the notice of the meeting.
Section 2.2. Special Meeting. Subject to the rights of the holders of any
series of preferred stock, par value $.01 per share, of the Corporation (the
"Preferred Stock") to
<PAGE>
elect additional directors under specified circumstances, special meetings of
the stockholders may be called only by the Chairman of the Board or by the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of directors which the Corporation would have if there were no vacancies (the
"Whole Board").
Section 2.3. Place of Meeting. The Board of Directors may designate the
place of meeting for any meeting of the stockholders. If no designation is made
by the Board of Directors, the place of meeting shall be the principal office of
the Corporation.
Section 2.4. Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be prepared and delivered by the Corporation not less
than ten days nor more than sixty days before the date of the meeting, either
personally, or by mail, or otherwise sent electronically as permitted by law,
including via electronic mail or the Internet to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail with postage thereon prepaid,
addressed to the stockholder at his address as it appears on the stock transfer
books of the Corporation. If sent electronically, such notice shall be deemed to
be delivered when sent in compliance with law and upon the stockholders'
instructions given to the Corporation or its representative. Such further notice
shall be given as may be required by law. Meetings may be held without notice if
all stockholders entitled to vote are present, or if notice is waived by those
not present. Any previously scheduled meeting of the stockholders may be
postponed by resolution of the Board of Directors upon public notice given prior
to the time previously scheduled for such meeting of stockholders.
Section 2.5. Quorum and Adjournment. Except as otherwise provided by law
or by the Certificate of Incorporation, the holders of a majority of the voting
power of the outstanding shares of the Corporation entitled to vote generally in
the election of directors (the "Voting Stock"), represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series voting as a class, the
holders of a majority of the voting power of the shares of such class or series
shall constitute a quorum for the transaction of such business. The chairman of
the meeting or a majority of the shares of Voting Stock so represented may
adjourn the meeting from time to time, whether or not there is such a quorum
(or, in the case of specified business to be voted on by a class or series, the
chairman or a majority of the shares of such class or series so represented may
adjourn the meeting with respect to such specified business). No notice of the
time and place of adjourned meetings need be given except as required by law.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 2.6. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or as may be permitted by
law, or by his duly authorized attorney-in-fact. Such proxy must be filed with
the Secretary of the Corporation or his representative at or before the time of
the meeting.
-2-
<PAGE>
Section 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders
(a) pursuant to the Corporation's notice of meeting delivered
pursuant to Section 2.4 of these Bylaws, (b) by or at the
direction of the Chairman or the Board of Directors or (c) by any
stockholder of the Corporation who is entitled to vote at the
meeting, who complied with the notice procedures set forth in
clauses (2) and (3) of this paragraph (A) and this Bylaw and who
was a stockholder of record at the time such notice is delivered
to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this Bylaw, the stockholder must have given
timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of
the Corporation not less than seventy days nor more than ninety
days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that (i) in the case of the
Corporation's first annual meeting in 1995 or (ii) in the event
that the date of an annual meeting is advanced by more than
thirty days, or delayed by more than seventy days, from the first
anniversary date of the previous year's annual meeting, notice by
the stockholder to be timely must be so delivered not earlier
than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the seventieth day
prior to such annual meeting or the tenth day following the day
on which public announcement of the date of such meeting is first
made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including such person's
written consent to being named in the proxy statement as a
nominee and to serving as a director if elected; (b) as to any
other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be
brought before the meeting, the reasons for
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conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (i) the name
and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the
class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the
number of directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement
naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least
eighty days prior to the first anniversary of the preceding
year's annual meeting (or, in the event of the Corporation's
first annual meeting in 1995, not later than the close of
business on the tenth day following the day on which public
announcement is made of the meeting and of the nominees proposed
to be nominated), a stockholder's notice required by this Bylaw
shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business
on the tenth day following the day on which such public
announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of
meeting pursuant to Section 2.4 of these Bylaws. Nominations of
persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with
the notice procedures set forth in this Bylaw and who is a stockholder
of record at the time such notice is delivered to the Secretary of the
Corporation. Nominations by stockholders of persons for election to
the Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by paragraph
(A)(2) of this Bylaw shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the
ninetieth day prior to such special meeting and not later than the
close of business on the later of the seventieth day prior to such
special meeting or the tenth day following the
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day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors
to be elected at such meeting.
(C) General.
(1) Only persons who are nominated in accordance with the procedures
set forth in this Bylaw shall be eligible to serve as director
and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Bylaw. Except as
otherwise provided by law, the Certificate of Incorporation or
these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to
declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2.8. Procedure for Election of Directors. Election of directors
at all meetings of stockholders at which directors are to be elected shall be by
written ballot, and, except as otherwise set forth in the Certificate of
Incorporation with respect to the right of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, a
plurality of the votes cast thereat shall elect. Except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws, all matters other than
the election of directors submitted to the stockholders at any meeting shall be
decided by a majority of the votes cast with respect thereto.
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Section 2.9. Inspectors of Elections; Opening and Closing the Polls.
(A) The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act at a meeting of stockholders, the chairman
of the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by the General Corporation Law of the State of Delaware.
(B) The chairman of the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at a meeting.
Section 2.10. No Stockholder Action by Written Consent. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specific circumstances, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders of the Corporation and may not be affected by
any consent in writing by such stockholders.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board of Directors may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by law or by the Certificate of
Incorporation or by these Bylaws required to be exercised or done by the
stockholders.
Section 3.2. Number, Tenure and Qualifications. Subject to the rights of
the holders of any series of Preferred Stock to elect directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively pursuant to a resolution adopted by a majority of the Whole Board
but shall consist of not more than seventeen nor less than three directors. The
directors, other than those who may be elected by the holders of any series of
Preferred Stock, shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, with the term of office of the first class to expire at the 1995
annual meeting of stockholders, the term of office of the second class to expire
at the 1996 annual
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meeting of stockholders and the term of office of the third class to expire at
the 1997 annual meeting of stockholders. Each director shall hold office until
his or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the 1996 annual meeting, (i) directors
elected to succeed those directors whose terms then expire shall be elected for
a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until his
or her successor shall have been duly elected and qualified, and (ii) if
authorized by a resolution of the Board of Directors, directors may be elected
to fill any vacancy on the Board of Directors, regardless of how such vacancy
shall have been created. In order to be qualified to serve as a director, a
person must (a) not have attained the age of seventy (70) years and (b) either
(i) be an officer or employee of the Corporation and not (A) have voluntarily
resigned from the position or office he held at the time of his election as a
director, (B) have retired or been retired pursuant to the requirements of a
pension, profit sharing, or similar plan or (C) have, at the time of his
election as a director, held a position or office in the Corporation which has
been changed, other than by an upward or expanded promotion or (ii) in the case
of any person who is not an officer or employee of the Corporation, not (A) have
retired from or severed his connection with the organization with which he was
affiliated at the time of his election as a director or (B) have held a position
or office with an organization with which he was affiliated at the time of his
election as a director which has been changed, other than by an upward or
expanded promotion and (C) not have a material conflict of interest with the
Corporation (i) as defined by applicable laws and regulations and (ii) the
existence and materiality of which as may be determined by a majority of the
remaining directors. Whenever any director shall cease to be qualified to serve
as a director his term shall expire, but such director shall continue to serve
until his successor is elected and qualified; provided, however, that no
director's term shall so expire if the Board of Directors shall have waived such
qualification.
Section 3.3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
Section 3.4. Special Meetings. Special meetings of the Board of Directors
shall be called at the request of the Chairman of the Board, the President or a
majority of the Board of Directors. The person or persons authorized to call
special meetings of the Board of Directors may fix the place and time of the
meetings.
Section 3.5. Notice. Notice of any special meeting shall be given to each
director at his business or residence in writing or by telegram or by telephone
communication. If mailed, such notice shall be deemed adequately delivered when
deposited in the United States mails so addressed, with postage thereon prepaid,
at least five days before such meeting. If by telegram, such notice shall be
deemed adequately delivered when the telegram is delivered to the telegraph
company at least twenty-four hours before such meeting. If by facsimile
transmission, such notice shall be transmitted
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at least twenty-four hours before such meeting. If by telephone, the notice
shall be given at least twelve hours prior to the time set for the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice of
such meeting, except for amendments to these Bylaws as provided under Section
7.1 of Article VII hereof. A meeting may be held at any time without notice if
all the directors are present or if those not present waive notice of the
meeting in writing, either before or after such meeting.
Section 3.6. Quorum. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of the
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. The directors present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough directors to leave less than a quorum.
Section 3.7. Vacancies. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the class to which they have been elected expires and until such
director's successor shall have been duly elected and qualified. No decrease in
the number of authorized directors constituting the Whole Board shall shorten
the term of any incumbent director.
Section 3.8. Committees. The Board of Directors may from time to time, by
resolution passed by a majority of the Whole Board, designate one or more
committees, each committee to consist of one or more directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it, except
as otherwise provided by law. Unless the resolution of the Board of Directors
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Any such committee may
adopt rules governing the method of calling and time and place of holding its
meetings. Unless otherwise provided by the Board of Directors, a majority of any
such committee may adopt rules governing the method of calling and time and
place of holding its meetings. Unless otherwise provided by the Board of
Directors, a majority of any such committee (or the member thereof, if only one)
shall constitute a quorum for the transaction of business, and the vote of a
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majority of the members of such committee present at a meeting at which a quorum
is present shall be the act of such committee. Each such committee shall keep a
record of its acts and proceedings and shall report thereon to the Board of
Directors whenever requested so to do. Any or all members of any such committee
may be removed, with or without cause, by resolution of the Board of Directors,
passed by a majority of the Whole Board.
Section 3.9. Removal. Subject to the rights of the holders of any series
of Preferred Stock to elect additional directors under specified circumstances,
any director, or the entire Board of Directors, may be removed from office at
any time, but only for cause and only by the affirmative vote of the holders of
at least 80 percent of the voting power of the then outstanding Voting Stock,
voting together as a single class.
ARTICLE IV
OFFICERS
Section 4.1. Elected Officers. The elected officers of the Corporation
shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and
such other officers as the Board of Directors from time to time may deem proper.
The Chairman of the Board shall be chosen from the directors. All officers
chosen by the Board of Directors shall each have such powers and duties as
generally pertain to their respective offices, subject to the specific
provisions of this Article IV. Such officers shall also have powers and duties
as from time to time may be conferred by the Board of Directors or by any
committee thereof.
Section 4.2. Election and Term of Office. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.7 of these Bylaws, each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign.
Section 4.3. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation and shall perform all duties incidental to his office
which may be required by law and all such other duties as are properly required
of him by the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board shall possess the same power as
the President to sign all certificates, contracts, and other instruments of the
Corporation which may be authorized by the Board of Directors. He shall make
reports to the Board of Directors and the stockholders, and shall perform all
such other duties as are properly required of him by the Board of Directors. He
shall see
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that all orders and resolutions of the Board of Directors and of any committee
thereof are carried into effect.
Section 4.4. President. The President shall act in a general executive
capacity and shall assist the Chairman of the Board in the administration and
operation of the Corporation's business and general supervision of its policies
and affairs. The President shall, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
The President may sign, alone or with the Secretary, or an Assistant Secretary,
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates, contracts, and other instruments of the Corporation as
authorized by the Board of Directors.
Section 4.5. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors and all other notices
required by law or by these Bylaws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman of the Board or the President, or by the Board of Directors,
upon whose request the meeting is called as provided in these Bylaws. The
Secretary shall record all the proceedings of the meetings of the Board of
Directors, any committees thereof and the stockholders of the Corporation in a
book to be kept for that purpose, and shall perform such other duties as may be
assigned to him by the Board of Directors, the Chairman of the Board or the
President. The Secretary shall have the custody of the seal of the Corporation
and shall affix the same to all instruments requiring it, when authorized by the
Board of Directors, the Chairman of the Board or the President, and attest to
the same.
Section 4.6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositaries as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, or the President,
taking proper vouchers for such disbursements. The Treasurer shall render to the
Chairman of the Board, the President and the Board of Directors, whenever
requested, an account of all his transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond for the faithful discharge of his
duties in such amount and with such surety as the Board of Directors shall
prescribe.
Section 4.7. Removal. Any officer elected by the Board of Directors may
be removed by a majority of the members of the Whole Board whenever, in their
judgment, the best interests of the Corporation would be served thereby. No
elected officer shall have any contractual rights against the Corporation for
compensation by virtue of such election beyond the date of the election of his
successor, his death, his resignation or his removal, whichever event shall
first occur, except as otherwise provided in an employment contract or an
employee plan.
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Section 4.8. Vacancies. A newly created office and a vacancy in any
office because of death, resignation, or removal may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1. Stock Certificates and Transfers.
(A) The interest of each stockholder of the Corporation shall be evidenced
by certificates for shares of stock in such form as the appropriate officers of
the Corporation may from time to time prescribe. The shares of the stock of the
Corporation shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution prescribe,
which resolution may permit all or any of the signatures on such certificates to
be in facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 6.2 Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by the law and its Certificate
of Incorporation.
Section 6.3. Seal. The corporate seal of the Corporation shall be
determined by resolution of the Board of Directors. Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise imprinted upon the subject document or paper.
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Section 6.4. Waiver of Notice. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Law of the State of Delaware, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at, nor the purpose of, any
annual or special meeting of the stockholders or of the Board of Directors need
be specified in any waiver of notice of such meeting.
Section 6.5. Audits. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be made annually.
Section 6.6. Resignations. Any director or any officer, whether elected
or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the President or the Secretary, and
such resignation shall be deemed to be effective as of the close of business on
the date said notice is received by the Chairman of the Board, the President, or
the Secretary or at such later date as is stated therein. No formal action shall
be required of the Board of Directors or the stockholders to make any such
resignation effective.
Section 6.7. Indemnification and Insurance.
(A) Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director, officer or employee of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of any other corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (B) of Section 6.7 of this Bylaw
with respect to proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person
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only if such proceeding (or part thereof) initiated by such person was
authorized by the Board of Directors of the Corporation.
(B) If a claim under paragraph (A) of this Bylaw is not paid in full by
the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
(C) Following any "change in control" of the Corporation of the type
required to be reported under Item 1 of Form 8-K promulgated under the Exchange
Act, any determination as to entitlement to indemnification shall be made by
independent legal counsel selected by the claimant which independent legal
counsel shall be retained by the Board of Directors on behalf of the
Corporation.
(D) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Bylaw shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
(E) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware.
(F) The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification, and rights to be paid by
the Corporation the expenses incurred in defending any proceeding in advance of
its final
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disposition, to any agent of the Corporation to the fullest extent of the
provisions of this Bylaw with respect to the indemnification and advancement of
expenses of directors, officers and employees of the Corporation.
(G) The right to indemnification conferred in this Bylaw shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the General Corporation Law of the State
of Delaware requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Bylaw or otherwise.
(H) Any amendment or repeal of this Article VI shall not adversely affect
any right or protection existing hereunder in respect of any act or omission
occurring prior to such amendment or repeal.
ARTICLE VII
AMENDMENTS
Section 7.1. Amendments. These Bylaws may be amended, added to, rescinded
or repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the meeting
and, in the case of a meeting of the Board of Directors, in a notice given no
less than twenty-four hours prior to the meeting; provided, however, that, in
the case of amendments by stockholders, notwithstanding any other provisions of
these Bylaws or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the stock required by law, the Certificate of
Incorporation or these Bylaws, the affirmative vote of the holders of at least
80 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required to alter, amend or repeal any
provision of these Bylaws.
-14-
<PAGE>
EXHIBIT 4.2.2
-------------
AMENDMENT NUMBER 1 TO RIGHTS AGREEMENT
--------------------------------------
Amendment Number 1 to Rights Agreement, dated as of April 29, 1999
("Amendment"), between Capital One Financial Corporation, a Delaware corporation
(the "Company"), and First Chicago Trust Company of New York, as successor to
Mellon Bank, N.A. (the "Rights Agent").
WITNESSETH:
WHEREAS, on November 16, 1995, the Board of Directors of the Company
authorized and declared a dividend of one Right for each share of Common Stock
outstanding at the close of business on November 29, 1995 (the "Record Date")
and authorized the issuance of one Right with respect to each share of Common
Stock that shall become outstanding between the Record Date and the earlier of
the Distribution Date and the Expiration Date;
WHEREAS, each Right entitles the holder to purchase one one-hundredth of a
Preferred Share upon the terms and subject to the conditions set forth in the
Rights Agreement, dated as of November 16, 1995 (the "Rights Agreement"),
between the Company and the Rights Agent; and
WHEREAS, on April 29, 1999, the Board of Directors of the Company resolved
to amend the Rights Agreement as hereinafter set forth in accordance with
Section 27 of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Certain Definitions. All capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Rights Agreement.
Section 2. Amendments. (a) The Rights Agreement is hereby amended as
follows:
(i) Section 7(b) of the Rights Agreement is amended and restated in its
entirety as follows: "(b) The purchase price for the exercise of a Right shall
be $600, shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof, and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below (the "Purchase
Price")."
(ii) Section 11(p) of the Rights Agreement is amended and restated in its
entirety as follows: "(p) Notwithstanding anything in this Agreement to the
contrary, in the event that the Company shall, at any time after the date of
this Agreement and prior to the Distribution Date, (i) declare any dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, (iii) combine or consolidate
the outstanding shares of Common Stock into a smaller number of shares, or (iv)
effect a reclassification of the outstanding shares of Common Stock, except as
<PAGE>
otherwise provided in Section 7(e), the number of one one-hundredths of
Preferred Shares so purchasable after such event upon proper exercise of each
Right and the Purchase Price per Right after such event shall be determined by
multiplying the number of one one-hundredths of Preferred Shares so purchasable
immediately prior to such event or the Purchase Price in effect immediately
prior to such event, as the case may be, by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately following such event. The
adjustments provided for in this Section 11(p) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected. If an event occurs which would require an
adjustment under Section 11(a)(ii) and this Section 11(p), the adjustments
provided for in this Section 11(p) shall be in addition and prior to any
adjustment required pursuant to Section 11(a)(ii)."
(b) Except as expressly set forth in Section 2(a) hereof, the Rights
Agreement shall remain in full force and effect without alteration or
modification.
Section 3. Governing Law. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such state applicable
to contracts to be made and performed entirely within such state.
Section 4. Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 5. Descriptive Headings. Descriptive headings of the several
Sections of this Amendment are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed in accordance with the Rights Agreement and their respective
corporate seals to be hereunto affixed and attested, all as of the date and the
year first above written.
CAPITAL ONE FINANCIAL CORPORATION
By /s/ John G. Finneran, Jr.
----------------------------------
Name: John G. Finneran, Jr.
Title: Senior Vice President, General Counsel
and Corporate Secretary
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By /s/ Frederick T. Meyers
----------------------------------
Name: Frederick T. Meyers
Title: Assistant Vice President
<PAGE>
EXHIBIT 4.10
------------
[Face of Note]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL
SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST COMPANY OR ANY SUCCESSOR DEPOSITARY
APPOINTED AS SUCH PURSUANT TO THE SENIOR INDENTURE (THE "DEPOSITARY") TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO
SUCH A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS
THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF THE DEPOSITARY OR
ITS NOMINEE OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY AND ANY PAYMENT IS MADE TO THE DEPOSITARY OR ITS NOMINEE, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF HAS AN INTEREST HEREIN.
CUSIP No. 14040HAE5
No. R-___ $225,000,000
CAPITAL ONE FINANCIAL CORPORATION
7 1/4% NOTES DUE 2006
Capital One Financial Corporation, a corporation duly organized and
existing under the laws of Delaware (the "Company"), for value received, hereby
promises to pay to Cede & Co. or registered assigns the principal sum of TWO
HUNDRED TWENTY-FIVE MILLION United States Dollars at the Company's office or
agency for said purpose in the Borough of Manhattan, The City of New York, on
May 1, 2006 in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts, and to pay interest semi-annually in arrears on May 1 and November 1 of
each year (each an "interest payment date"), commencing November 1, 1999, on
said principal sum in like coin or currency at the rate per annum set forth
above at said office or agency from April 28, 1999 or from the most recent May 1
or November 1, as the case may be, to which interest on the Securities has been
paid or duly provided for, until payment of said principal sum has been made or
duly provided for; provided that, unless this Security is a Security issued in
--------
global form (a "Global Security"), interest may be paid, at the option of the
company, by mailing a check therefor payable to the Holder entitled thereto at
his last address as it appears on the Security Register. The interest so
payable will be paid to the Person in whose name this Global Security (or one or
more Predecessor Securities) is registered at the close of business on the April
15 or
<PAGE>
October 15, as the case may be, next preceding such interest payment date,
unless the Company shall default in the payment of interest due on such interest
payment date after taking into account any applicable grace period, in which
case such defaulted interest shall be paid as set forth in the Senior Indenture.
Notwithstanding the foregoing, as long as this Security is a Global Security,
the Company shall pay or cause to be paid the principal of, and interest on,
this Security to the Holder hereof or a single nominee of the Holder, or, at the
option of the Company, to such other Persons as the Holder hereof may designate,
by wire transfer of immediately available funds on the date such payments are
due.
Reference is made to the further provisions set forth on the reverse
hereof. Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Security shall not be valid or obligatory until the certificate
of authentication hereon shall have been duly signed by the Trustee acting under
the Senior Indenture.
<PAGE>
3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: April 28, 1999
CAPITAL ONE FINANCIAL CORPORATION
By: /s/ Susanna K. Tisa
-----------------------------------
Name: Susanna K. Tisa
Title: Director of Capital Markets
[CORPORATE SEAL] Attest By: /s/ John G. Finneran, Jr.
-----------------------------
Name: John G. Finneran, Jr.
Title: Corporate Secretary
This is one of the Securities issued under the within-mentioned Senior
Indenture.
Dated: April 28, 1999
HARRIS TRUST AND SAVINGS BANK
By: /s/ D.G. Donovan
---------------------------
Authorized Officer
<PAGE>
[Reverse of Note]
Capital One Financial Corporation
7 1/4% Notes Due 2006
This Security is one of a duly authorized issue of debt securities of
the Company, of the series hereinafter specified, all issued or to be issued
under an Indenture, dated as of November 1, 1996 (the "Senior Indenture"), and
duly executed and delivered by the Company to Harris Trust and Savings Bank, as
trustee (hereinafter, the "Trustee"), to which reference to the Senior Indenture
is hereby made for a description of the respective rights and duties thereunder
of the Trustee, the Company and the Holders of the Securities. This Security is
one of a series designated as the "7 1/4% Notes due 2006" of the Company
(hereinafter called the "Notes"), issued under the Senior Indenture and limited
in aggregate principal amount to $225,000,000.
Neither the Senior Indenture nor the Notes limit or otherwise restrict
the amount of indebtedness which may be incurred or other securities which may
be issued by the Company. The Notes issued under the Senior Indenture will be
direct, unsecured obligations of the Company and will mature on May 1, 2006.
The Notes rank on parity with all other unsecured, unsubordinated indebtedness
of the Company.
The Notes will bear interest at the rate of 7 1/4% per annum.
The Notes are not redeemable prior to maturity.
The Notes are not entitled to any sinking fund.
In case an Event of Default shall have occurred and be continuing with
respect to the Notes, the principal hereof may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Senior Indenture. The Senior
Indenture provides that in certain circumstances such declaration and its
consequences may be waived by the Holders of a majority in aggregate principal
amount of the Notes then Outstanding. However, any such consent or waiver by
the Holder shall not affect any subsequent default or impair any right
consequent thereon.
The Senior Indenture permits the Company and the Trustee, without the
consent of the Holders of the Notes for certain situations and with the consent
of not less than two-thirds of the Holders in aggregate principal amount of the
Outstanding Notes in other situations, to execute supplemental indentures adding
to, modifying or changing various provisions to the Senior Indenture; provided
--------
that no such supplemental indenture, without the consent of the Holder of each
Outstanding Security affected thereby, shall (i) change the Stated Maturity of
the principal of, or any installment of interest on the Notes, or reduce the
principal amount thereof or
<PAGE>
2
the interest thereon, or change the place or currency of payment of principal
of, or interest on, the Notes, or impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity thereof, or change
the Company's obligation to pay additional amounts (except as otherwise
contemplated in the Senior Indenture); (ii) reduce the percentage in principal
amount of the Outstanding Notes, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of the Senior Indenture or
certain defaults hereunder and their consequence) provided for in the Senior
Indenture; or (iii) modify any of the provisions of Sections 902, 513 or 1008 of
the Senior Indenture, except to increase any such percentage or provide that
certain other provisions of the Senior Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected thereby.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 1005, 1006 or 1007 of the
Senior Indenture, if before the time for such compliance, the Holders of at
least a majority in principal amount of the Outstanding Notes, by act of such
Holders, either shall waive such compliance in such instance or generally shall
have waived compliance with such term, provision or condition, but no such
waiver shall extend to or affect such term, provision or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
No reference herein to the Senior Indenture and no provision of this
Note or of the Senior Indenture shall alter or impair the obligations of the
Company, which are absolute and unconditional, to pay the principal of, premium,
if any, and interest on this Note at the place, at the respective times, at the
rate and in the coin and currency herein prescribed.
The Notes are issuable in registered form without coupons in
denominations of $1,000 and any multiple thereof.
At the office or agency of the Company referred to on the face hereof
and in the manner and subject to the limitations provided in the Senior
Indenture, the Notes may be exchanged for a like aggregate principal amount of
Notes of other authorized denominations.
Upon due presentment for registration of transfer of the Notes at the
above-mentioned office or agency of the Company, a new Note or Notes of
authorized denominations, for a like aggregate principal amount, will be issued
to the transferee as provided in the Senior Indenture. No service charge shall
be made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
Prior to due presentation of this Note for registration of transfer,
the Company, the Trustee, and any authorized agent of the Company or the
Trustee, may deem and treat the Holder hereof as the absolute owner of the Note
(whether or not this Note shall be overdue and made by
<PAGE>
3
anyone other than the Company or the Trustee or any authorized agent of the
Company or the Trustee), for the purpose of receiving payment of, or on account
of, the principal hereof and, subject to the provisions on the face hereof,
interest hereon and for all other purposes, and neither the Company nor the
Trustee nor any authorized agent of the Company or the Trustee shall be affected
by any notice to the contrary.
No recourse shall be had for the payment of the principal of, or the
interest on, this Note, for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Senior Indenture or any indenture
supplemental thereto, against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
---------------------------------------------------------------------
STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH
- -----------------------------------------------------------------------------
THE LAWS OF SAID STATE, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW.
- ---------------------------------------------------------------------------
All terms used in this Note (and not otherwise defined in this Note)
that are defined in the Senior Indenture shall have the meanings assigned to
them in the Senior Indenture.
<PAGE>
EXHIBIT 10.1.3
--------------
Capital One Bank
Senior and Subordinated Bank Notes
Due From 30 Days to 30 Years From Date of Issue
SECOND AMENDMENT TO AMENDED AND RESTATED
DISTRIBUTION AGREEMENT DATED APRIL 30, 1996
April 30, 1999
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY INC.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center
North Tower, 11/th/ Floor
New York, New York 10281-1311
Ladies and Gentlemen:
Capital One Bank, a banking association chartered under the laws of the
Commonwealth of Virginia (the "Bank"), desires to amend the Amended and Restated
Distribution Agreement, dated April 30, 1996, as amended by the Amendment to the
Amended and Restated Distribution Agreement, dated April 21, 1998, entered into
with respect to the distribution of the Bank's Senior and Subordinated Bank
Notes due from 30 days to 30 years from date of issue (the "Notes"), and made
between the Bank and the Agents party thereto (which agreement, as amended from
time to time, is herein referred to as the "Distribution Agreement") in the
following manner:
Section 1. Amendments to the Distribution Agreement.
----------------------------------------
The Distribution Agreement is hereby amended as follows:
<PAGE>
(a) The words "or, otherwise make available through electronic media
(provided that Bank shall notify the Agents of such availability)"
shall be inserted after the words "as promptly as reasonably
practicable after such reports become publicly available" on line 6 of
clause (e) of Section 4 of the Distribution Agreement.
Section 2. Representations and Warranties.
------------------------------
The Bank hereby repeats and reaffirms the representations and warranties
contained in Section 2 of the Distribution Agreement, with the same force and
effect as though such representations and warranties had been made as of the
date hereof, provided that all references in such representations and warranties
to (i) the Distribution Agreement shall refer to the Distribution Agreement as
amended by this Amendment, (ii) the Offering Circular shall refer to the
Offering Circular dated April 30, 1999, (iii) the Letters of Representation
shall refer to the Short-Term and Medium-Term Letters of Representation dated
April 30, 1997, and (iv) the Call Reports shall refer to the Call Reports
beginning with and including the Call Report for the period ended December 31,
1996.
Section 3. Governing Law.
-------------
This Amendment shall be governed by and construed and interpreted in
accordance with the laws of the State of New York.
Section 4. Severability of Provisions.
--------------------------
Any provision of this Amendment which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 5. Captions.
--------
The captions in this Amendment are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
[Remainder of this page intentionally left blank]
2
<PAGE>
If the foregoing is agreeable to you, please sign and return to the Bank a
counterpart hereof, whereupon this instrument along with all counterparts will
become a binding agreement between each of the Agents and the Bank in accordance
with its terms.
Very truly yours,
CAPITAL ONE BANK
By: /s/ Susanna K. Tisa
---------------------------
Name: Susanna K. Tisa
Title: Director of Capital Markets
CONFIRMED AND ACCEPTED,
As of the date first written above:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: /s/
--------------------------------
Name:
Title:
CHASE SECURITIES INC.
By: /s/
--------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Julie A. Keogh
--------------------------------
Name: Julie A. Keogh
Title: Authorized Signatory
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: /s/
--------------------------------
Name:
Title:
3
<PAGE>
LEHMAN BROTHERS INC.
By: /s/ Kyle Miller
--------------------------------
Name: Kyle Miller
Title: Senior Vice President
J.P. MORGAN SECURITIES INC.
By: /s/
--------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/
--------------------------------
Name:
Title:
SALOMON SMITH BARNEY INC.
By: /s/ Martha D. Bailey
--------------------------------
Name: Martha D. Bailey
Title: First Vice President
4
<PAGE>
Exhibit 10.3
------------
Capital One Financial Corporation
---------------------------------
Amended and Restated Change of Control Employment Agreement
-------------------------------------
Each of the following executive officers of Capital One Financial Corporation
has entered into an Amended and Restated Change of Control Employment Agreement
in the form filed herewith:
Richard D. Fairbank
Nigel W. Morris
John G. Finneran, Jr.
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
---------------------------------
___________________
AMENDED AND RESTATED CHANGE OF CONTROL EMPLOYMENT AGREEMENT
-----------------------------------------------------------
AGREEMENT by and between CAPITAL ONE FINANCIAL CORPORATION, a Delaware
corporation (the "Company") and ___________________ (the "Executive"), dated as
of the 25/th/ day of January, 2000.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
-------------------
(a) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding,
if the Executive's employment with the Company is terminated or the terms
and conditions of the Executive's employment are adversely changed in a
manner which would constitute grounds for a termination of employment by
the Executive for Good Reason prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such termination of
employment or
-2-
<PAGE>
adverse change (i) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (ii) otherwise
arose within 12 months of and in connection with or anticipation of the
Change of Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination
of employment or adverse change.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof is hereinafter referred to as the "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate three
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% (or, if
such shares are purchased from the Company, 40%) or more of either (i) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Company Voting Securities"), provided,
--------
however, that any acquisition by (x) the Company or any of its
-------
subsidiaries, or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (y) any corporation
with respect to which, immediately following such acquisition, more than
60% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, in the
aggregate by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
-3-
<PAGE>
Common Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Company Common
Stock and Company Voting Securities, as the case may be, shall not
constitute a Change of Control; or
(b) Individuals who constitute the Board as of the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent
to the date hereof whose appointment to fill a vacancy or to fill a new
Board position or whose election or nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such Business
Combination do not in the aggregate, immediately following such Business
Combination, beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination in substantially the
same proportion as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be; or
(d) (i) a complete liquidation or dissolution of the Company or (ii)
sale or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, immediately
following such sale or disposition, more than 60% of, respectively, the
then outstanding shares of common stock and the
-4-
<PAGE>
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, in the aggregate by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Company Voting Securities
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of the Outstanding Company Common Stock and
Company Voting Securities, as the case may be, immediately prior to such
sale or disposition.
(e) Notwithstanding the foregoing, a Change of Control shall not
occur with respect to the Executive by reason of any event which would
otherwise constitute a Change of Control if, immediately after the
occurrence of such event, individuals including such Executive who were
executive officers of the Company immediately prior to the occurrence of
such event, own, directly or indirectly, on a fully diluted basis, (i) 15%
or more of the then outstanding shares of common stock of the Company or
any acquiror or successor to substantially all of the business of the
Company or (ii) 15% or more of the combined voting power of the then
outstanding voting securities of the Company or any acquiror or successor
to substantially all of the business of the Company entitled to vote
generally in the election of directors.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the third anniversary of such date (the "Employment Period").
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
-5-
<PAGE>
(ii) During the Employment Period, and excluding any periods of
vacation, sabbatical, and sick or similar leave to which the Executive
is entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of the
Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable
best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive
-----------
shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the
highest monthly base salary paid or payable, including by reason of
deferral and before any reduction for the amount of such annual base
salary which the Executive may have agreed to forgo in exchange for
the receipt of stock options from the Company, to the Executive by the
Company and its affiliated companies in respect of the twelve-month
period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be
reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in
base salary awarded in the ordinary course of business to other peer
executives of the Company and its affiliated
-6-
<PAGE>
companies. Any increase in Annual Base Salary shall not serve to limit
or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement shall refer
to Annual Base Salary as so increased. As used in this Agreement, the
term "affiliated companies" includes any company controlled by,
controlling or under common control with the Company. Any payments of
the Executive's Annual Base Salary made under this Section 4(b)(i) may
be reduced to the extent provided in an election made by the Executive
to forgo any or all base salary otherwise payable in exchange for the
receipt of stock options from the Company. The Company shall maintain
an account (the "Stock Option Purchase Account"), the balance of
which, as of any date, shall be equal to the aggregate dollar amount
of base salary and bonuses that the Executive has agreed to forgo in
exchange for the receipt of such stock options, less the amount of
such base salary or bonuses or other compensation (including amounts
payable upon termination of employment) actually forgone.
(ii) Annual Bonus. In addition to any Annual Base Salary payable
------------
as hereinabove provided, the Executive shall be awarded, for each
fiscal year beginning or ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the sum of
the target award under the Company's Executive Annual Cash Incentive
Plan and any other target awards under any other similar annual
incentive plans (or if no such target award is designated under the
Company's Executive Annual Cash Incentive Plan or any similar plan,
the midpoint between the high and low bonus payable to the Executive
under such plan); provided, however, that such target or midpoint, as
-------- -------
the case may be, shall not be less than such target or midpoint under
such plans in the year immediately preceding the Change of Control
(the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such Annual
Bonus. Any payments of the Executive's Annual Bonus made under this
Section 4(b)(ii) may be reduced to the extent provided in an election
made by the
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<PAGE>
Executive to forgo any or all bonus amounts otherwise payable in
exchange for the receipt of stock options from the Company.
(iii) Incentive, Savings and Retirement Plans. In addition to
---------------------------------------
any Annual Base Salary and Annual Bonus payable as hereinabove
provided, the Executive shall be entitled to participate during the
Employment Period in all incentive, profit-sharing, savings and
retirement plans, practices, policies and programs (including any
stock-based plans) applicable generally to other peer executives of
the Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with
incentive, savings and retirement benefit opportunities (including
under any stock-based plans), in each case, less favorable, in the
aggregate, except as required to comply with statutory requirements of
general application which limit the level of benefit opportunity, than
(A) the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices,
policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date or (B) if more
favorable to the Executive, those provided at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies; provided that no award shall be granted or
contributions made under any such plan, practice, policy or program to
the extent the Executive has made an election to forgo awards or
contributions under such plan, practice, policy or program of the
Company in exchange for the receipt of stock options from the Company;
and provided further that any effect on the Executive's participation
or benefit level resulting from the Executive's not receiving an
Annual Base Salary as a result of an election made by the Executive to
forgo any or all base salary otherwise payable in exchange for the
receipt of stock options from the Company shall be governed by the
terms of those plans, practices, policies and programs of general
applicability.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its affiliated
-8-
<PAGE>
companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life,
split-dollar life insurance, accidental death and travel accident
insurance plans and programs) to the extent generally applicable to
other peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the
aggregate, than (x) the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or (y) if
more favorable to the Executive, those provided at any time after the
Effective Date generally to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the Executive
--------
shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
---------------
Executive shall be entitled to fringe benefits in accordance with the
most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
------------------------
the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 90-day period
-9-
<PAGE>
immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(viii) Vacation and Other Paid Leave. During the Employment
-----------------------------
Period, the Executive shall be entitled to paid vacation and other
paid leave in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as
in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies; provided that
such vacation or other leave may not be paid vacation or paid leave to
the extent provided in an election made by the Executive to forgo any
or all base salary otherwise payable in exchange for the receipt of
stock options from the Company.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of the Executive
has occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" means (i) an
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<PAGE>
action taken by the Executive involving willful and wanton malfeasance
involving specifically a wholly wrongful and unlawful act, or (ii) the
Executive being convicted of a felony.
(c) Good Reason. The Executive's employment may be terminated during
-----------
the Employment Period by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means:
(i) The assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) Any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) The Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B)
hereof;
(iv) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Agreement, any good faith determination of Good
Reason made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause
---------------------
or by the Executive for Good Reason shall be communicated by Notice of
Termination to the
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<PAGE>
other party hereto given in accordance with Section 13(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen days after the giving of such
notice). In the case of a termination of the Executive's employment for
Cause, a Notice of Termination shall include a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to the Executive and reasonable
opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board prior to such vote), finding that in the good faith
opinion of the Board the Executive was guilty of conduct constituting
Cause. No purported termination of the Executive's employment for Cause
shall be effective without a Notice of Termination. The failure by the
Executive to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's rights
hereunder.
(e) Date of Termination. "Date of Termination" means the date of
-------------------
receipt of the Notice of Termination or any later date specified therein,
as the case may be; provided, however, that (i) if the Executive's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (ii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective Date, as
the case may be.
(f) Transition Period. "Transition Period" means the period
-----------------
commencing on the Date of Termination and ending on the thirty-six month
anniversary of the Date of Termination.
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<PAGE>
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than the following obligations:
(i) payment of the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) payment of the product
of (x) the greater of (A) the annual bonus paid or payable, including by
reason of deferral and before any reduction for the amount of such bonus
which the Executive may have agreed to forgo in exchange for the receipt of
stock options from the Company (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has
been employed for less than twelve full months), for the most recently
completed fiscal year and (B) the Recent Annual Bonus (such greater amount
hereafter referred to as the "Highest Annual Bonus") and (y) a fraction,
the numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365 and
(iii) payment of any bonus earned or accrued by the Executive for the most
recently completed fiscal year prior to the Date of Termination and not yet
paid by the Company, any payment of any compensation previously deferred by
the Executive (together with any accrued interest thereon) and not yet paid
by the Company and any pay for vacation and sabbatical earned but not yet
taken (the amounts described in paragraphs (i), (ii) and (iii) are
hereafter referred to as "Accrued Obligations"). The amount of the
Company's payment obligations under paragraphs (i), (ii) and (iii) of the
Accrued Obligations shall be reduced by the amount of any such Annual Base
Salary or Annual Bonus, respectively, that the Executive had elected to
forgo in exchange for the receipt of stock options from the Company (the
"Net Accrued Obligations"). All Net Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. In addition, the Executive's
estate or designated beneficiaries shall be entitled to receive the
Executive's Annual Base Salary for the balance of the Employment Period;
provided that such payments of Annual Base Salary shall be reduced to the
extent provided in an election made by the Executive to forgo any or all
base salary otherwise payable in exchange for the receipt of stock options
from the Company; and provided
-13-
<PAGE>
further that such payments of Annual Base Salary shall be reduced by any
survivor benefits paid to the Executive's estate or designated beneficiary
under the Company's Cash Balance Pension Plan (the "Pension Plan").
Anything in this Agreement to the contrary notwithstanding, the Executive's
estate and family shall be entitled to receive benefits at least equal to
the most favorable benefits provided generally by the Company and any of
its affiliated companies to the estates and surviving families of peer
executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect generally with respect to other peer executives and their estates
and families at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of the Executive's death
generally with respect to other peer executives of the Company and its
affiliated companies and their families; provided that this sentence shall
not apply to benefits under any incentive, profit-sharing, savings and
retirement plans, practices, policies and programs (including any stock-
based plans) to the extent the Executive has made an election to forgo
awards or contributions under such plan, practice, policy or program of the
Company in exchange for the receipt of stock options from the Company.
(b) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive,
other than for Net Accrued Obligations. All Net Accrued Obligations shall
be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination. In addition, the Executive shall be entitled to receive the
Executive's Annual Base Salary for the balance of the Employment Period;
provided that such payments of Annual Base Salary shall be reduced to the
extent provided in an election made by the Executive to forgo any or all
base salary otherwise payable in exchange for the receipt of stock options
from the Company; and provided further that such payments of Annual Base
Salary shall be reduced by any benefits paid to the Executive under the
Company's disability plans. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the Disability
Effective Date to receive disability and other benefits at least equal to
the most favorable of those generally provided by the Company and its
affiliated companies to disabled executives
-14-
<PAGE>
and/or their families in accordance with such plans, programs, practices
and policies relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time during the
90-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families; provided that this
sentence shall not apply to benefits under any incentive, profit-sharing,
savings and retirement plans, practices, policies and programs (including
any stock-based plans) to the extent the Executive has made an election to
forgo awards or contributions under such plan, practice, policy or program
of the Company in exchange for the receipt of stock options from the
Company.
(c) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive Annual Base Salary through the Date of
Termination, plus the amount of any bonus earned or accrued by the
Executive for the most recently completed fiscal year prior to the Date of
Termination and any compensation previously deferred by the Executive, in
each case to the extent theretofore unpaid. The amount of the Company's
payment of such Annual Base Salary shall be reduced by the amount of any
such Annual Base Salary that the Executive has elected to forgo in exchange
for the receipt of stock options from the Company. If the Executive
terminates employment during the Employment Period other than for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Net Accrued Obligations. All applicable amounts
due to the Executive pursuant to this Section 6(c) shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability. If, during the
-----------------------------------------------
Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason:
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<PAGE>
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) All Net Accrued Obligations; and
(B) The product of (x) three and (y) the sum of (i) Annual
Base Salary and (ii) the Highest Annual Bonus; and
(C) an amount equal to any unvested account balance in any
defined contribution plan, and any supplemental and excess
retirement plans with respect thereto, that would have vested had
the Executive's employment with the Company continued for the
duration of the Transition Period; and
(D) an amount equal to the contributions and accrued
earnings that would have been made under any defined contribution
plan, and any supplemental and excess retirement plans with
respect thereto, had the Executive's employment with the Company
continued for the duration of the Transition Period and had the
Executive contributed to such plans at the highest rate permitted
by such plans, calculated assuming that the terms of such plans
are no less favorable than those in effect during the 90-day
period immediately prior to the Effective Date, or if more
favorable to the Executive, those in effect generally at any time
thereafter with respect to such plans for other peer executives
of the Company and its affiliated companies; and
(ii) For the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated in accordance with the
most favorable plans, practices, programs or policies of the Company
and its affiliated companies applicable generally to other peer
executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable
-16-
<PAGE>
to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies and their families. For purposes of determining eligibility
of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to
have remained employed for the duration of the Employment Period and
to have retired on the last day of such period. In lieu of the
benefits provided for in this Section 6(d)(ii), the Executive may
elect within 60 days of the Date of Termination to be paid an amount
in cash equal to the present value of such benefits on an after-tax
basis. In determining present value, a discount rate equal to the
federal mid-term rate under Section 1274(d) of the Internal Revenue
Code of 1986, as amended (the "Code") shall be utilized. The right to
continued benefits granted to the Executive and/or his family pursuant
to this Section 6(d)(ii) shall be in addition to any right of
continued coverage under any of the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement which the
Executive and/or his family may be entitled to under the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") upon any loss of
coverage under such plans, programs, practices and policies.
The amount payable by the Company to the Executive pursuant to Section
6(d)(i)(B) above will be reduced by any remaining balance in the Stock Option
Purchase Account; provided that such reduction will not be made to the extent
that the remaining balance is paid to the Company pursuant to any other
repayment provision in any other agreement.
7. Non-exclusivity of Rights. Except as otherwise specifically provided
-------------------------
in this Agreement, nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices, provided by the Company or any
of its affiliated companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other agreements with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program except as
explicitly modified by this Agreement.
-17-
<PAGE>
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of, and no amounts
earned by the Executive at such other employment or otherwise shall reduce, the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to Section 9
of this Agreement), plus in each case interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code.
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions not specified herein to be used in arriving at such
determinations, shall be made by the Company's certified public accounting
firm immediately prior to the Effective Date (the "Accounting Firm"). Such
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<PAGE>
determination shall be made within fifteen business days after request
therefor by notice from the Executive or the Company to such firm and to
the other party hereto. In making such determination with respect to any
matter which is uncertain, the Accounting Firm shall adopt the position
which it believes more likely than not would be adopted by the Internal
Revenue Service. The Accounting Firm shall provide detailed supporting
calculations with respect to its determination both to the Company and the
Executive within such fifteen business day period. All fees and expenses of
the Accounting Firm under this Section 9(b) shall be borne solely by the
Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 9(b), shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with a written opinion that failure to
report the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be final, binding
and conclusive upon the Company and the Executive, except as provided in
the following sentences of this Section 9(b). As a result of uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have been
made ("Underpayment") or that Gross-Up Payments which have been made by the
Company should not have been made ("Excess Gross-Up Payment"), consistent
with the calculations required to be made hereunder. Either party hereto
can request a redetermination by the Accounting Firm. An Underpayment can
result from a claim by the Internal Revenue Service or from a determination
by the Accounting Firm. In the event that the Internal Revenue Service
makes a claim and the Company exhausts its remedies pursuant to Section
9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall promptly determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive. In the event
that the Accounting Firm determines that an Underpayment has occurred, the
Accounting Firm shall promptly determine the amount of the Underpayment,
which shall be promptly paid by the Company to or for the benefit of the
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<PAGE>
Executive. An Excess Gross-Up Payment can result from a determination by
the Internal Revenue Service or the Accounting Firm. If the Accounting Firm
makes an Excess Gross-Up Payment determination, it must furnish the
Executive with a written opinion that the basis for its determination would
be accepted by the Internal Revenue Service and that the Executive has a
right to a refund of taxes or credit against taxes with respect to the
Excess Gross-Up Payment. The Executive shall promptly repay to the Company
an amount equal to the reduction in aggregate taxes due by the Executive
resulting from such determination by the Internal Revenue Service or the
Accounting Firm, provided that the Executive shall only be required to
repay any portion of such amount that had been paid to the Internal Revenue
Service to the extent that and when the Executive receives a refund from
the Internal Revenue Service (or is entitled and able to utilize such
amount as a credit against other taxes due).
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such notice
to the Company (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) Give the Company any information reasonably requested by
the Company relating to such claim,
(ii) Take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) Cooperate with the Company in good faith in order
effectively to contest such claim, and
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(iv) Permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any taxes, including, without limitation, any Excise Tax or
income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any taxes, including, without limitation, any Excise Tax
or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly
pay to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto).
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<PAGE>
If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 9(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
11. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business
and/or
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<PAGE>
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Funding. This Agreement constitutes an unfunded, unsecured obligation
-------
of the Company and any payments made hereunder shall be made from the general
assets of the Company. However, the Company has established a trust pursuant to
a trust agreement and shall make contributions to such trust in accordance with
the terms and conditions of such trust agreement for the purpose of assisting
the Company in meeting its payment obligations under this Agreement.
13. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
-------------------
To the address shown on the Company's records for tax reporting
purposes.
If to the Company:
-----------------
Capital One Financial Corporation
2980 Fairview Park Drive
Falls Church, Virginia 22042
Attention: Officer-in-Charge,
Human Resources Division
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
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<PAGE>
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof or the failure to assert any right the Executive may have
hereunder, including, without limitation, the right to terminate employment
for Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be
a waiver of such provision or right or any other provision or right
thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof and supercedes
in its entirety any prior Change of Control Agreement by and between the
Company and the Executive. Until the Effective Date, subject to the terms
of any other employment agreement between the Executive and the Company,
the Executive shall continue to be an "employee at will".
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<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
_____________________________________
CAPITAL ONE FINANCIAL CORPORATION
By __________________________________
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<PAGE>
Exhibit 10.7
------------
CAPITAL ONE FINANCIAL CORPORATION
1994 STOCK INCENTIVE PLAN
(As Amended November 18, 1999)
1. Purpose. The purpose of the Capital One Financial Corporation 1994
Stock Incentive Plan (the "Plan") is to further the long term stability and
financial success of Capital One Financial Corporation (the "Company") by
attracting and retaining key employees of the Company through the use of stock
incentives. It is believed that ownership of Company Stock will stimulate the
efforts of those employees of the Company upon whose judgment and interest the
Company is and will be largely dependent for the successful conduct of its
business. It is also believed that Awards granted to such employees under this
Plan will strengthen their desire to remain with the Company and will further
the identification of those employees' interests with those of the Company's
shareholders. The Plan was adopted by the Board of Directors and approved by the
Company's sole shareholder on October 28, 1994.
The Plan is intended to satisfy the requirements of Securities and Exchange
Commission Rule 16b-3 ("Rule 16b-3").
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Award" means, collectively, the award of an Option, Stock
Appreciation Right, Restricted Stock or Incentive Stock under the Plan.
(b) "Board" means the board of directors of the Company.
<PAGE>
(c) "Change of Control" means:
(i) The acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% (or, if such shares are purchased from the Company, 40%) or
more of either (A) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Company
Voting Securities"), provided, however, that any acquisition by (x)
-------- -------
the Company or any of its subsidiaries, or any employee benefit plan
(or related trust) sponsored or maintained by the Company or any of
its subsidiaries or (y) any corporation with respect to which,
immediately following such acquisition, more than 60% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities
immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition,
of the
2
<PAGE>
Outstanding Company Common Stock and Company Voting Securities, as the
case may be, shall not constitute a Change of Control; or
(ii) Individuals who constitute the Board as of September 1,
1995 (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any individual becoming a
director subsequent to September 1, 1995 whose appointment to fill a
vacancy or to fill a new Board position or whose nomination for
election by the Company's shareholders was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors
of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all of the
individuals and entities who were the respective beneficial owners of
the Outstanding Company Common Stock and Company Voting Securities
immediately prior to such Business Combination do not in the
aggregate, immediately following such Business Combination,
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
3
<PAGE>
as the case may be, of the corporation resulting from such Business
Combination in substantially the same proportion as their ownership
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Company Voting Securities, as the case may
be; or
(iv) (A) a complete liquidation or dissolution of the Company or
(B) sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, immediately following such sale or disposition, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, in the aggregate by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of
the Outstanding Company Common Stock and Company Voting Securities, as
the case may be, immediately prior to such sale or disposition.
(v) Neither the sale of Company common stock in an initial
public offering, nor the distribution of Company common stock by
Capital One Financial Corporation's parent corporation to its
shareholders in a transaction to which Section 355 of the Internal
Revenue Code applies, nor any restructuring of the
4
<PAGE>
Company or its Board of Directors in contemplation of or as the result
of either of such events, shall constitute a Change of Control.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Company" means Capital One Financial Corporation, a Delaware
corporation.
(f) "Company Stock" means Common Stock of the Company. If the par
value of the Company Stock is changed, or in the event of a change in the
capital structure of the Company (as provided in Section 15), the shares
resulting from such a change shall be deemed to be Company Stock within the
meaning of the Plan.
(g) "Date of Grant" means the date on which an Award is granted by
the Committee or such later date specified by the Committee as the date as
of which the Award is to be effective.
(h) "Disability" or "Disabled" means, as to an Incentive Stock
Option, a Disability within the meaning of Code section 22(e)(3). As to all
other Awards, the Committee shall determine whether a Disability exists and
such determination shall be conclusive.
(i) "Distribution" means the distribution of the Company's common
stock to shareholders of the Company's parent corporation in a transaction
to which Code Section 355 applies.
(j) "Distribution Date" means the date on which the Distribution
occurs.
(k) "Fair Market Value" means, on the date shares of the Company
Stock are offered in an initial public offering, the offering price, and on
any given date thereafter,
5
<PAGE>
the average of the high and low price on such date as reported on The New
York Stock Exchange-Composite Transactions Tape. In the absence of any such
sale, fair market value means the average of the highest bid and lowest
asked prices of a share of Company Stock on such date as reported by such
source. In the absence of such average or if shares of Company Stock are no
longer traded on The New York Stock Exchange, the fair market value shall
be determined by the Committee using any reasonable method in good faith.
(l) "Incentive Stock" means Company Stock awarded when performance
goals are achieved pursuant to an incentive plan as provided in Section 9.
(m) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable Federal income tax treatment
under, Code section 422.
(n) "Insider" means a person subject to Section 16(b) of the
Securities Exchange Act of 1934.
(o) "Nonstatutory Stock Option" means an Option, which does not meet
the requirements of Code section 422, or even if meeting the requirements
of Code section 422, is not intended to be an Incentive Stock Option and is
so designated.
(p) "Option" means a right to purchase Company Stock granted under
the Plan, at a price determined in accordance with the Plan.
(q) "Parent" means, with respect to any corporation, a "parent
corporation" of that corporation within the meaning of Code section 424(e).
(r) "Participant" means any employee who receives an Award under the
Plan.
6
<PAGE>
(s) "Reload Feature" means a feature of an Option described in an
employee's stock option agreement that provides for the automatic grant of
a Reload Option in accordance with the provisions described in Section
10(d).
(t) "Reload Option" means an Option granted to an employee equal to
the number of shares of already owned Company Stock delivered by the
employee to exercise an Option described in Section 10(d).
(u) "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in Section 8.
(v) "Restricted Stock Award" means an award of Restricted Stock
granted under the Plan.
(w) "Rule 16b-3" means Rule 16b-3 of the Securities Exchange Act of
1934. A reference in the Plan to Rule 16b-3 shall include a reference to
any corresponding rule (or number redesignation) of any amendments to Rule
16b-3 enacted after the effective date of the Plan's adoption.
(x) "Stock Appreciation Right" means a right granted under the Plan
to receive from the Company amounts in cash or shares of Company Stock upon
the surrender of an Option.
(y) "Stock Option Committee" or "Committee" means the committee
appointed by the Board as described under Section 16.
(z) "Subsidiary" means, with respect to any corporation, a
"subsidiary corporation" of that corporation within the meaning of Code
section 424(f).
7
<PAGE>
(aa) "10% Shareholder" means a person who owns, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary of
the Company. Indirect ownership of stock shall be determined in accordance
with Code section 424(d).
3. General. The following types of Awards may be granted under the Plan:
Options, Stock Appreciation Rights, Restricted Stock or Incentive Stock. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options.
4. Stock. Subject to Section 15 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of 43,112,640 shares of Company Stock, of
which 41,612,640 shares (the "Existing Reserve") may be used for the grant of
any Award and 1,500,000 shares (the "New Reserve") may be used for the grant of
any Award except Incentive Stock Options, which shall be authorized, but
unissued shares. Shares granted under the Plan that expire or otherwise
terminate unexercised and shares forfeited pursuant to restrictions on
Restricted Stock or Incentive Stock may again be subjected to an Award under the
Plan. The Committee is expressly authorized to make an Award to a Participant
conditioned upon the surrender for cancellation of an existing Award. For
purposes of determining the number of shares that are available for Awards under
the Plan, such number shall include the number of shares surrendered by an
optionee or retained by the Company in payment of federal and state income tax
withholding liabilities upon exercise of a Nonstatutory Stock Option or a Stock
Appreciation Right.
5. Eligibility.
(a) Any employee of the Company (or Parent or Subsidiary of the
Company) who, in the judgment of the Committee has contributed or can be
expected to contribute to the
8
<PAGE>
profits or growth of the Company (or Parent or Subsidiary) shall be eligible to
receive Awards under the Plan. Directors of the Company who are employees and
are not members of the Committee are eligible to participate in the Plan. The
Committee shall have the power and complete discretion, as provided in Section
16, to select eligible employees to receive Awards and to determine for each
employee the terms and conditions, the nature of the award and the number of
shares to be allocated to each employee as part of each Award.
(b) The grant of an Award shall not obligate the Company or any
Parent or Subsidiary of the Company to pay an employee any particular amount of
remuneration, to continue the employment of the employee after the grant or to
make further grants to the employee at any time thereafter.
6. Stock Options.
(a) Whenever the Committee deems it appropriate to grant Options,
notice shall be given to the eligible employee stating the number of shares for
which Options are granted, the Option price per share, whether the Options are
Incentive Stock Options or Nonstatutory Stock Options, the extent to which Stock
Appreciation Rights are granted (as provided in Section 7), and the conditions
to which the grant and exercise of the Options are subject. This notice shall
constitute the stock option agreement between the Company and the eligible
employee.
(b) The exercise price of shares of Company Stock covered by an
Option shall be not less than 100% of the Fair Market Value of such shares on
the Date of Grant. If the employee is a 10% Shareholder and the Option is an
Incentive Stock Option, the exercise price shall be not less than 110% of the
Fair Market Value of such shares on the Date of Grant.
9
<PAGE>
(c) Options may be exercised in whole or in part at such times as may
be specified by the Committee in the employee's stock option agreement; provided
that the exercise provisions for Incentive Stock Options shall in all events not
be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first
to occur of (x) ten years (or, in the case of an Incentive Stock
Option granted to a 10% Shareholder, five years) from the Date of
Grant, (y) three months from the employee's retirement or termination
of employment with the Company and its Parent and Subsidiary
corporations for reasons other than Disability or death, or (z) one
year from the employee's termination of employment on account of
Disability or death.
(ii) Except as otherwise provided in this paragraph, no Incentive
Stock Option may be exercised unless the employee is employed by the
Company or a Parent or Subsidiary of the Company at the time of the
exercise (or was so employed not more than three months before the
time of the exercise) and has been employed by the Company or a Parent
or Subsidiary of the Company at all times since the Date of Grant. If
an employee's employment is
10
<PAGE>
terminated other than by reason of his Disability or death at a time
when the employee holds an Incentive Stock Option that is exercisable
(in whole or in part), the employee may exercise any or all of the
exercisable portion of the Incentive Stock Option (to the extent
exercisable on the date of termination) within three months after the
employee's termination of employment. If an employee's employment is
terminated by reason of his Disability at a time when the employee
holds an Incentive Stock Option that is exercisable (in whole or in
part), the employee may exercise any or all of the exercisable portion
of the Incentive Stock Option (to the extent exercisable on the date
of Disability) within one year after the employee's termination of
employment. If an employee's employment is terminated by reason of his
death at a time when the employee holds an Incentive Stock Option that
is exercisable (in whole or in part), the Incentive Stock Option may
be exercised (to the extent exercisable on the date of death) within
one year after the employee's death by the person to whom the
employee's rights under the Incentive Stock Option shall have passed
by will or by the laws of descent and distribution.
(iii) An Incentive Stock Option by its terms, shall be
exercisable in any calendar year only to the extent that the aggregate
Fair Market Value (determined at the Date of Grant) of the Company
Stock with respect to which incentive stock options are exercisable
for the first time during the calendar year does not exceed $100,000
(the "Limitation Amount"). Incentive Stock Options granted under the
Plan and similar incentive options granted after 1986 under all other
plans of the Company and any Parent or Subsidiary of the Company shall
be aggregated for purposes of determining whether the Limitation
Amount has been exceeded. The Board may impose such conditions as it
deems appropriate on an Incentive Stock Option to ensure that the
foregoing requirement is met. If Incentive Stock Options that first
become exercisable in a calendar year exceed the Limitation
11
<PAGE>
Amount, the excess Options will be treated as Nonstatutory Stock
Options to the extent permitted by law.
(d) The Committee may, in its discretion, grant Options which by
their terms become fully exercisable upon a Change of Control, notwithstanding
other conditions on exercisability in the stock option agreement.
(e) The maximum number of shares with respect to which Nonstatutory
Options or Stock Appreciation Rights may be granted in any calendar year to an
employee eligible to participate in the Plan is as follows: the Chief Executive
Officer, 1,500,000; each of the next four most highly compensated employees,
1,000,000; each other eligible employee, 500,000.
(f) The Committee may, in its discretion, grant Options containing or
amend Options previously granted to provide for a Reload Feature subject to the
limitations of Section 10(d).
(g) Notwithstanding paragraph (c) above, the Committee may, in its
discretion, amend a previously granted Incentive Stock Option to provide for
more liberal exercise provisions; provided however if the Incentive Stock Option
as amended no longer meets the requirements of Code section 422, and as a result
such Option no longer qualifies for favorable Federal income tax treatment under
Code section 422, the amendments shall not become effective without the written
consent of the Participant and provided further that no Incentive Stock Option
may be exercised after ten (10) years (or, in the case of an Incentive Stock
Option granted to a 10% Shareholder, five (5) years) from the Date of Grant.
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<PAGE>
7. Stock Appreciation Rights.
(a) Whenever the Committee deems it appropriate, Stock Appreciation
Rights may be granted in connection with all or any part of an Incentive Stock
Option. At the discretion of the Committee, Stock Appreciation Rights may also
be granted in connection with all or any part of a Nonstatutory Stock Option,
either concurrently with the grant of the Nonstatutory Stock Option or at any
time thereafter during the term of the Nonstatutory Stock Option. The following
provisions apply to all Stock Appreciation Rights that are granted in connection
with Options:
(i) Stock Appreciation Rights shall entitle the employee, upon
exercise of all or any part of the Stock Appreciation Rights, to
surrender to the Company unexercised that portion of the underlying
Option relating to the same number of shares of Company Stock as is
covered by the Stock Appreciation Rights (or the portion of the Stock
Appreciation Rights so exercised) and to receive in exchange from the
Company an amount in cash or shares of Company Stock (as provided in
the Stock Appreciation Right) equal to the excess of (x) the Fair
Market Value on the date of exercise of the Company Stock covered by
the surrendered portion of the underlying Option over (y) the exercise
price of the Company Stock covered by the surrendered portion of the
underlying Option. The Committee may limit the amount that the
employee will be entitled to receive upon exercise of the Stock
Appreciation Right.
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<PAGE>
(ii) Upon the exercise of a Stock Appreciation Right and
surrender of the related portion of the underlying Option, the Option,
to the extent surrendered, shall not thereafter be exercisable.
(iii) Subject to any further conditions upon exercise imposed by
the Committee, a Stock Appreciation Right issued in tandem with an
Option shall be exercisable only to the extent that the related Option
is exercisable and shall expire no later than the date on which the
related Option expires.
(iv) A Stock Appreciation Right may only be exercised at a time
when the Fair Market Value of the Company Stock covered by the Stock
Appreciation Right exceeds the exercise price of the Company Stock
covered by the underlying Option.
(b) The manner in which the Company's obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be determined by the
Committee and shall be set forth in the employee's Option or the related Stock
Appreciation Rights agreement. The Committee may provide for payment in Company
Stock or cash, or a fixed combination of Company Stock or cash, or the Committee
may reserve the right to determine the manner of payment at the time the Stock
Appreciation Right is exercised. Shares of Company Stock issued upon the
exercise of a Stock Appreciation Right shall be valued at their Fair Market
Value on the date of exercise.
8. Restricted Stock Awards.
(a) Whenever the Committee deems it appropriate to grant a Restricted
Stock Award, notice shall be given to the Participant stating the number of
shares of Restricted Stock
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<PAGE>
for which the Restricted Stock Award is granted and the terms and conditions to
which the Restricted Stock Award is subject. This notice, when accepted in
writing by the Participant shall become an award agreement between the Company
and the Participant and certificates representing the shares shall be issued and
delivered to the Participant. A Restricted Stock Award may be made by the
Committee in its discretion without cash consideration.
(b) Restricted Stock issued pursuant to the Plan shall be subject to
the following restrictions:
(i) Unless otherwise provided by the Committee, Restricted
Stock may not be sold, assigned, transferred or disposed of within a
six-month period beginning on the Date of Grant.
(ii) None of such shares may be sold, assigned, transferred,
pledged, hypothecated, or otherwise encumbered or disposed of until
the restrictions on such shares shall have lapsed or shall have been
removed pursuant to paragraph (d) or (e) below.
(iii) If a Participant ceases to be employed by the Company or a
Parent or Subsidiary of the Company, the Participant shall forfeit to
the Company any shares of Restricted Stock, the restrictions on which
shall not have lapsed or shall not have been removed pursuant to
paragraph (d) or (e) below, on the date such Participant ceases to be
so employed.
(c) Upon the acceptance by a Participant of a Restricted Stock Award,
such Participant shall, subject to the restrictions set forth in paragraph
(b) above, have all the rights of a shareholder with respect to the shares
of Restricted Stock
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<PAGE>
Award, including, but not limited to, the right to vote such shares of
Restricted Stock and the right to receive all dividends and other distributions
paid thereon. Certificates representing Restricted Stock shall bear a legend
referring to the restrictions set forth in the Plan and the Participant's award
agreement.
(d) The Committee shall establish as to each Restricted Stock Award
the terms and conditions upon which the restrictions set forth in paragraph (b)
above shall lapse. Such terms and conditions may include, without limitation,
the passage of time, the meeting of performance goals, the lapsing of such
restrictions as a result of the Disability, death or retirement of the
Participant, or the occurrence of a Change of Control.
(e) Notwithstanding the forfeiture provisions of paragraph (b)(iii)
above, the Committee may at any time, in its sole discretion, accelerate the
time at which any or all restrictions will lapse or remove any and all such
restrictions.
(f) Each Participant shall agree at the time his Restricted Stock
Award is granted, and as a condition thereof, to pay to the Company, or make
arrangements satisfactory to the Company regarding the payment to the Company
of, the aggregate amount of any Federal, state or local taxes of any kind
required by law to be withheld with respect to the shares of Restricted Stock
subject to the Restricted Stock Award. Until such amount has been paid or
arrangements satisfactory to the Company have been made, no stock certificate
free of a legend reflecting the restrictions set forth in paragraph (b) above
shall be issued to such Participant.
(g) The Company may place on any certificate representing Company
Stock issued in connection with an Incentive Award any legend deemed desirable
by the Company's
16
<PAGE>
counsel to comply with Federal or state securities laws, and the Company may
require a customary written indication of the Participant's investment intent.
9. Incentive Stock Awards.
(a) Incentive Stock may be issued pursuant to the Plan in connection with
incentive programs established from time to time by the Committee when
performance criteria established by the Committee as part of the incentive
program have been achieved. If the objectives established by the Committee as a
prerequisite to the receipt of Incentive Stock have not been achieved, no stock
will be issued, except as provided in (c). A Participant eligible for the
receipt or issuance of incentive shares will have no rights as a stockholder
before actual receipt of the Incentive Stock.
(b) Whenever the Committee deems it appropriate, the Committee may
establish an incentive program and notify Participants of their participation in
and the terms of the incentive program. More than one incentive program may be
established by the Committee and they may operate concurrently or for varied
periods of time and a Participant may be permitted to participate in more than
one incentive program at the same time. Incentive Stock will be issued only
subject to the incentive program and the Plan and consistent with meeting the
performance goals set by the Committee. Incentive Stock may be issued without
cash consideration.
(c) The Committee may provide in the incentive program, or subsequently,
that Incentive Stock will be issued if a Change of Control occurs even though
the performance goals set by the Committee have not been met.
17
<PAGE>
(d) A Participant's interest in an incentive program may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(e) Each Participant shall agree as a condition of his participation in
an incentive program and the receipt of Incentive Stock, to pay to the Company,
or make arrangements satisfactory to the Company regarding the payment to the
Company of, the aggregate amount of any Federal, state or local taxes of any
kind required by law to be withheld with respect to the shares of Incentive
Stock received. Until such amount has been paid or arrangements satisfactory to
the Company have been made, no stock certificate free of a legend reflecting the
restrictions set forth in paragraph (b) above shall be issued to such
Participant.
(f) The Company may place on any certificate representing Company Stock
issued in connection with an Incentive Award any legend deemed desirable by the
Company's counsel to comply with Federal or state securities laws, and the
Company may require a customary written indication of the Participant's
investment intent.
10. Method of Exercise of Options and Stock Appreciation Rights.
(a) Options and Stock Appreciation Rights may be exercised by the
employee giving written notice of the exercise to the Company, stating the
number of shares the employee has elected to purchase under the Option or the
number of Stock Appreciation Rights he has elected to exercise. In the case of
the purchase of shares under an Option, such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that if the terms of
an Option so permit, the employee may (i) deliver Company Stock that the
Participant has owned for at least six (6) months (valued at Fair Market Value
on the date of exercise) in satisfaction of all or any part of the exercise
price, (ii) deliver a properly executed exercise notice together with
18
<PAGE>
irrevocable instructions to a broker to promptly deliver to the Company the
amount of the sale or loan proceeds to pay the exercise price, or (iii) deliver
an interest bearing promissory note, payable to the Company, in payment of all
or part of the exercise price together with such collateral as may be required
by the Committee at the time of exercise. The interest rate under any such
promissory note shall be equal to the minimum interest rate required at the time
to avoid imputed interest to the Participant under the Code.
(b) Options and Stock Appreciation Rights may also be exercised by the
employee in accordance with any other method or methods of exercise as may be
approved from time to time by the Committee;
(c) The Company may place on any certificate representing Company Stock
issued upon the exercise of an Option or Stock Appreciation Right any legend
deemed desirable by the Company's counsel to comply with Federal or state
securities laws, and the Company may require of the employee a customary written
indication of his investment intent. Until the employee has made any required
payment, including any applicable Federal, state and local withholding taxes,
and has had issued to him a certificate for the shares of Company Stock
acquired, he shall possess no shareholder rights with respect to the shares.
(d) If an employee exercises an Option that has a Reload Feature by
delivering already owned shares of Company Stock, the employee shall
automatically be granted a Reload Option. The Reload Option shall be subject to
the following provisions:
(i) The Reload Option shall cover the number of shares of Company
Stock delivered by the employee to the Company to exercise the Option with
the Reload Feature;
19
<PAGE>
(ii) The Reload Option will not have a Reload Feature;
(iii) The exercise price of shares of Company Stock covered by a
Reload Option shall be 100% of the Fair Market Value of such shares on
the date the employee delivers shares of Company Stock to the Company to
exercise the Option that has a Reload Feature;
(iv) The Reload Option shall be subject to the same restrictions on
exercisability as those imposed on the underlying Option (possessing the
Reload Feature);
(v) The Reload Option shall not be exercisable until the expiration
of any retention holding period imposed on the disposition of any shares
of Company Stock covered by the underlying Option (possessing the Reload
Feature).
The Committee may, in its discretion, cause the Company to place on any
certificate representing Company Stock issued to a Participant upon the exercise
of an underlying Option (possessing a Reload Feature as evidenced by the stock
option agreement for such Option) delivered pursuant to this subsection (d), a
legend restricting the sale or other disposition of such Company Stock.
(e) Notwithstanding anything herein to the contrary, Awards shall always
be granted and exercised in such a manner as to conform to the provisions of
Rule 16b-3, or any replacement rule adopted, as the same now exists or may, from
time to time, be amended.
11. Applicable Withholding Taxes. As an alternative to making a cash payment
to the Company to satisfy tax withholding obligations, the Committee may
establish procedures permitting the Participant to elect to (a) deliver shares
of already owned Company Stock or (b)
20
<PAGE>
have the Company retain that number of shares of Company Stock that would
satisfy all or a specified portion of the Federal, state and local tax
liabilities of the Participant arising in the year the Award becomes subject to
tax. Any such election shall be made only in accordance with procedures
established by the Committee.
12. Transferability of Awards and Options. To the extent required by the
Code, Awards, by their terms, shall not be transferable by the Participant
except by will or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the Participant or by
his guardian or legal representative. The Committee is expressly authorized, in
its discretion, to provide that all or a portion of a Nonstatutory Stock Option
or Stock Appreciation Right may be granted to a Participant upon terms that
permit transfer of the Nonstatutory Stock Option or Stock Appreciation Right in
a form and manner determined by the Committee.
13. Effective Date of the Plan. This Plan having been adopted by the
Company's Board and approved by the Company's sole shareholder shall be
effective on October 28, 1994. Until the requirements of any applicable federal
and state securities laws have been met, no Option or Stock Appreciation Right
shall be exercisable and no award of Restricted Stock or Incentive Stock shall
be made.
14. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on October 27, 2004.
No Awards shall be made under the Plan after its termination. The Board may
terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided, that, if and to the extent required by the Code, no change
shall be made that materially increases the total number of shares of Company
Stock
21
<PAGE>
reserved for issuance pursuant to Awards granted under the Plan (except pursuant
to Section 15), materially expands the class of persons eligible to receive
Awards, or materially increases the benefits accruing to Participants under the
Plan, unless such change is authorized by the shareholders of the Company.
Notwithstanding the foregoing, the Board may amend the Plan and unilaterally
amend Awards as it deems appropriate to ensure compliance with Rule 16b-3 and to
cause Incentive Stock Options to meet the requirements of the Code and
regulations thereunder. Except as provided in the preceding sentence, a
termination or amendment of the Plan shall not, without the consent of the
Participant, detrimentally affect a Participant's rights under an Award
previously granted to him.
15. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or combination of
shares, spin-off, recapitalization or merger in which the Company is the
surviving corporation or other change in the Company's capital stock (including,
but not limited to, the creation or issuance to shareholders generally of
rights, options or warrants for the purchase of common stock or preferred stock
of the Company), the number and kind of shares of stock or securities of the
Company to be subject to the Plan and to Awards then outstanding or to be
granted under the Plan, the maximum number of shares or securities which may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons. If the adjustment would produce fractional shares with respect
to any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.
22
<PAGE>
(b) If the Company is a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Committee may take such actions with respect to outstanding
Incentive Awards as the Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the Committee
may take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes.
16. Administration of the Plan. The Plan shall be administered by the
Committee consisting solely of two or more nonemployee directors of the Company
(within the meaning of Rule 16b-3), who shall be appointed by the Board. The
Committee shall have general authority to impose any limitation or condition
upon an Award the Committee deems appropriate to achieve the objectives of the
Award and the Plan and, in addition, and without limitation and in addition to
powers set forth elsewhere in the Plan, shall have the following specific
authority:
(a) The Committee shall have the power and complete discretion to
determine (i) which eligible employees shall receive an Award and the nature
of the Award, (ii) the number of shares of Company Stock to be covered by each
Award, (iii) whether Options shall be Incentive Stock Options or Nonstatutory
Stock Options, (iv) when, whether and to what extent Stock Appreciation Rights
shall be granted in connection with Options, (v) whether to include a Reload
Feature in an Option and to impose limitations on the use of shares acquired
through the exercise of a Reload Option to exercise Options, (vi) the fair
market value of Company Stock, (vii) the time or times when an Award shall be
granted,
23
<PAGE>
(viii) whether an Award shall become vested over a period of time and when
it shall be fully vested, (ix) conditions relating to the length of time
before disposition of Company Stock received in connection with an Award is
permitted, (x) the terms and conditions on which restrictions upon
Restricted Stock shall lapse, (xi) whether to accelerate the time of
receipt of Incentive Stock or the time when any or all restrictions with
respect to Restricted Stock will lapse or be removed, (xii) the terms of
incentive programs, performance criteria and other factors relevant to the
issuance of Incentive Stock or the lapse of restrictions on Restricted
Stock, (xiii) when Options and Stock Appreciation Rights may be exercised,
(xiv) whether a Disability exists, (xv) the manner in which payment will be
made upon the exercise of Options or Stock Appreciation Rights, (xvi)
whether to approve a Participant's election (x) to deliver shares of
already owned Company Stock to satisfy tax liabilities arising upon the
exercise of a Nonstatutory Stock Option or Stock Appreciation Right or (y)
to have the Company withhold from the shares to be issued upon the exercise
or receipt of an Award that number of shares necessary to satisfy tax
liabilities arising from such exercise or receipt, (xvii) notice provisions
relating to the sale of Company Stock acquired under the Plan, and (xviii)
any additional requirements relating to Awards that the Committee deems
appropriate. Notwithstanding the foregoing, no "tandem stock options"
(where two stock options are issued together and the exercise of one option
affects the right to exercise the other option) may be issued in connection
with Incentive Stock Options. The Committee shall also have the power to
amend the terms of previously granted Awards so long as the terms as
amended are consistent with the terms of the Plan and provided that the
consent of the Participant is
24
<PAGE>
obtained with respect to any amendment that would be detrimental to him,
except that such consent will not be required if such amendment is for the
purpose of complying with Rule 16b-3 or any requirement of the Code
applicable to the Award.
(b) The Committee may adopt rules and regulations for carrying out the
Plan. The interpretation and construction of any provision of the Plan by
the Committee shall be final and conclusive. The Committee may consult with
counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.
(c) A majority of the members of the Committee shall constitute a
quorum, and all actions of the Committee shall be taken by a majority of
the members present. Any action may be taken by a written instrument signed
by all of the members, and any action so taken shall be fully effective as
if it had been taken at a meeting.
(d) The Board of Directors from time to time may appoint members
previously appointed and may fill vacancies, however caused, in the
Committee.
17. Notice. All notices and other communications required or permitted to
be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered as follows: (a) if to the Company - delivery shall be
made personally or by first class mail, postage prepaid at its principal
business address to the attention of the Company's Director of Human Resources;
and (b) if to any Participant - personally, including by delivery through the
Company's internal electronic system with a return receipt requested or
interoffice mail system, or by first class mail, postage prepaid, at the last
known address of the Participant known to the sender at the time the notice or
other communication is sent.
25
<PAGE>
18. Interpretation. The terms of this Plan are subject to all present and
future regulations and rulings of the Secretary of the Treasury or his delegate
relating to the qualification of Incentive Stock Options under the Code. If any
provision of the Plan conflicts with any such regulation or ruling, then that
provision of the Plan shall be void and of no effect.
19. Foreign Equity Incentive Plans. The Committee may authorize any
foreign Subsidiary or any foreign unincorporated division of the Company or of a
Subsidiary to adopt a plan for granting Awards (a "Foreign Equity Incentive
Plan"). All Awards granted under a Foreign Equity Incentive Plan shall be
treated as grants under this Plan. A Foreign Equity Incentive Plan shall have
such terms as the Committee permits; provided that such terms are not
inconsistent with the provisions of this Plan; and provided further that such
terms may be more restrictive than those in this Plan. Awards granted under a
Foreign Equity Incentive Plan shall be governed by the terms of this Plan except
to the extent that the terms of the Foreign Equity Incentive Plan are more
restrictive than the terms of this Plan, in which case such terms of the Foreign
Equity Incentive Plan shall control.
20. Substitute Award. The Committee may make a grant of an Award to an
employee of another corporation who becomes an employee of the Company (or
Parent or Subsidiary of the Company) by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization, liquidation or
similar transaction involving the Company (or Parent or Subsidiary of the
Company) in substitution for any award made by such corporation. The terms and
conditions of the substitute Award may vary from the terms and conditions
required by the Plan and from those of the substituted award. The Committee
shall prescribe the provisions of the substitute Award.
26
<PAGE>
21. Provisions Applicable to French Employees. Notwithstanding any other
provision of the Plan to the contrary, the following provisions shall apply to
Options granted to any employee who is employed by a French company or who works
primarily in France (hereinafter collectively referred to as a "French
Employee").
(a) Notwithstanding anything to the contrary herein, whether a
Disability exists for a French Employee shall be determined in accordance with
French law.
(b) Notwithstanding the provisions of Section 3 herein, only Options
may be granted to French Employees to the exclusion of any other type of Awards.
Moreover, Options granted under the Plan to French Employees may be Nonstatutory
Stock Options only.
(c) Notwithstanding anything to the contrary herein, no Option shall
be granted to any French Employee who holds more than ten percent of the
Company's capital as of the Date of Grant.
(d) Notwithstanding the provisions of Section 4 herein, (i) at no time
shall the number of shares underlying Options granted to French Employees but
not exercised exceed one-third of the total number of shares of Company Stock
issued and outstanding, and (ii) the Committee shall not make an Award to any
French Employee conditioned upon the surrender for cancellation of an existing
Award.
(e) Notwithstanding the provisions of Section 6(b) herein, all Options
granted to French Employees shall be granted at an exercise price per share
equal to the greater of (i) the Fair Market Value per share of Company Stock as
of the Date of Grant and (ii) 80% of the average Fair Market Value per share of
Company Stock for the 20 trading days preceding the Date of Grant.
27
<PAGE>
(f) Notwithstanding anything to the contrary herein, in respect of a
Participant who is a French Employee, upon such French Employee's death, the
vested portion of such Participant's Option shall remain exercisable for a six-
month period after the date of his death and shall be exercisable by his heirs,
provided his heirs agree to comply with and be bound by the Plan and the
employee's stock option agreement, if applicable.
(g) Notwithstanding anything to the contrary herein, in respect of a
Participant who is a French Employee, the method of exercise shall comply with
applicable French law.
(h) Notwithstanding the provisions of Section 12 herein, no Option
granted to a French Employee shall be transferable except as provided in
paragraph (f) above.
(i) Notwithstanding the provisions of Section 14 herein, no Options
shall be granted to any French Employee under the Plan five years after the
later of (i) the date the Company's shareholders initially approved the Plan or
(ii) the date on which the Plan has been subsequently re-authorized, in its
original form or as amended from time to time by the Board, by the Company's
shareholders.
(j) Notwithstanding anything to the contrary herein, no portion of any
Option granted to a French Employee shall become exercisable before the second
anniversary of the Date of Grant. Moreover, notwithstanding anything to the
contrary herein, no share of the Company Stock received pursuant to the exercise
of an Option by a French Employee may be sold for a three-year period after the
date the Option is exercised, unless (i) such sale occurs on or after the fifth
anniversary of the Option's Date of Grant; (ii) the Optionee is dismissed or
retired from the Company (to the extent that the Optionee has exercised Options
at least three months prior to notice of such dismissal or retirement); (iii)
the Optionee's dies or terminates due to
28
<PAGE>
disability. The stock option agreements with respect to French Employees shall
reflect these restrictions and may provide that if the Optionee sells shares in
breach of the foregoing restrictions, he or she shall be responsible for his or
her share of any taxes or social charges arising from such sale.
(k) Notwithstanding anything to the contrary herein, the Company shall
not amend or terminate all or a portion of an Option granted to any French
Employee without the consent of such French Employee.
(l) Notwithstanding the provisions of Section 15 herein, any
adjustment made to any Option granted to a French Employee shall comply with
applicable French law.
29
<PAGE>
EXHIBIT 10.10.2
---------------
Capital One Financial Corporation
---------------------------------
Amended and Restated Change of Control Employment Agreement
--------------------------------------
Each of the following executive officers of Capital One Financial Corporation
has entered into an Amended and Restated Change of Control Employment Agreement
in the form filed herewith:
Marjorie M. Connelly
Matthew J. Cooper
Dennis H. Liberson
William J. McDonald
Peter Schnall
Michael Shrader
David M. Willey
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
---------------------------------
[ ]
___________________
AMENDED AND RESTATED CHANGE OF CONTROL EMPLOYMENT AGREEMENT
-----------------------------------------------------------
AGREEMENT by and between CAPITAL ONE FINANCIAL CORPORATION, a Delaware
corporation (the "Company"), and ________________(the "Executive"), dated as of
the 25/th/ day of January, 2000.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
-------------------
(a) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding,
if the Executive's employment with the Company is terminated or the terms
and conditions of the Executive's employment are adversely changed in a
manner which would constitute grounds for a termination of
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<PAGE>
employment by the Executive for Good Reason prior to the date on which a
Change of Control occurs, and it is reasonably demonstrated that such
termination of employment or adverse change (i) was at the request of a
third party who has taken steps reasonably calculated to effect the Change
of Control or (ii) otherwise arose within 12 months of and in connection
with or anticipation of the Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior
to the date of such termination of employment or adverse change.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof is hereinafter referred to as the "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate three
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% (or, if
such shares are purchased from the Company, 40%) or more of either (i) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Company Voting Securities"), provided,
--------
however, that any acquisition by (x) the Company or any of its
-------
subsidiaries, or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries
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<PAGE>
or (y) any corporation with respect to which, immediately following such
acquisition, more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, in the aggregate by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Company Voting Securities
immediately prior to such acquisition in substantially the same proportion
as their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Company Voting Securities, as the case
may be, shall not constitute a Change of Control; or
(b) Individuals who constitute the Board as of the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent
to the date hereof whose appointment to fill a vacancy or to fill a new
Board position or whose election or nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such Business
Combination do not in the aggregate, immediately following such Business
Combination, beneficially own, directly or indirectly, more than
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<PAGE>
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination in substantially the
same proportion as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be; or
(d) (i) a complete liquidation or dissolution of the Company or (ii)
sale or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, immediately
following such sale or disposition, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly,
in the aggregate by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to
such sale or disposition in substantially the same proportion as their
ownership of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, immediately prior to such sale or
disposition.
(e) Notwithstanding the foregoing, a Change of Control shall not occur
with respect to the Executive by reason of any event which would otherwise
constitute a Change of Control if, immediately after the occurrence of such
event, individuals including such Executive who were executive officers of
the Company immediately prior to the occurrence of such event, own,
directly or indirectly, on a fully diluted basis, (i) 15% or more of the
then outstanding shares of common stock of the Company or any acquiror or
successor to substantially all of the business of the Company or (ii) 15%
or more of the combined voting power of the then outstanding voting
securities of the Company or any acquiror or successor to substantially all
of the business of the Company entitled to vote generally in the election
of directors.
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<PAGE>
3. Employment Period. The Company hereby agrees to continue the Executive
-----------------
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the Effective Date and ending on the
second anniversary of such date (the "Employment Period").
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation, sabbatical and sick or similar leave to which the Executive
is entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of the
Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable
best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such
-6-
<PAGE>
activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive
-----------
shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the
highest monthly base salary paid or payable, including by reason of
deferral and before any reduction for the amount of such annual base
salary which the Executive may have agreed to forgo in exchange for
the receipt of stock options from the Company, to the Executive by the
Company and its affiliated companies in respect of the twelve-month
period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be
reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in
base salary awarded in the ordinary course of business to other peer
executives of the Company and its affiliated companies. Any increase
in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary
shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" includes any company controlled by, controlling or under
common control with the Company. Any payments of the Executive's
Annual Base Salary made under this Section 4(b)(i) may be reduced to
the extent provided in an election made by the Executive to forgo any
or all base salary otherwise payable in exchange for the receipt of
stock
-7-
<PAGE>
options from the Company. The Company shall maintain an account (the
"Stock Option Purchase Account"), the balance of which, as of any
date, shall be equal to the aggregate dollar amount of base salary and
bonuses that the Executive has agreed to forgo in exchange for the
receipt of such stock options, less the amount of such base salary or
bonuses or other compensation (including amounts payable upon
termination of employment) actually forgone.
(ii) Annual Bonus. In addition to any Annual Base Salary payable
------------
as hereinabove provided, the Executive shall be awarded, for each
fiscal year beginning or ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the sum of
the target award under the Company's Executive Annual Cash Incentive
Plan and any other target awards under any other similar annual
incentive plans (or, if no such target award is designated under the
Company's Executive Annual Cash Incentive Plan or any similar plan,
the midpoint between the high and low bonus payable to the Executive
under such plan); provided, however, that such target or midpoint, as
-------- -------
the case may be, shall not be less than such target or midpoint under
such plans in the year immediately preceding the Change of Control
(the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such Annual
Bonus. Any payments of the Executive's Annual Bonus made under this
Section 4(b)(ii) may be reduced to the extent provided in an election
made by the Executive to forgo any or all bonus amounts otherwise
payable in exchange for the receipt of stock options from the Company.
(iii) Incentive, Savings and Retirement Plans. In addition to
---------------------------------------
any Annual Base Salary and Annual Bonus payable as hereinabove
provided, the Executive shall be entitled to participate during the
Employment Period in all
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<PAGE>
incentive, profit-sharing, savings and retirement plans, practices,
policies and programs (including any stock-based plans) applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and
programs provide the Executive with incentive, savings and retirement
benefit opportunities (including under any stock-based plans), in each
case, less favorable, in the aggregate, except as required to comply
with statutory requirements of general application which limit the
level of benefit opportunity, than (A) the most favorable of those
provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any
time during the 90-day period immediately preceding the Effective Date
or (B) if more favorable to the Executive, those provided at any time
after the Effective Date to other peer executives of the Company and
its affiliated companies; provided that no award shall be granted or
contributions made under any such plan, practice, policy or program to
the extent the Executive has made an election to forgo awards or
contributions under such plan, practice, policy or program of the
Company in exchange for the receipt of stock options from the Company;
and provided further that any effect on the Executive's participation
or benefit level resulting from the Executive's not receiving an
Annual Base Salary as a result of an election made by the Executive to
forgo any or all base salary otherwise payable in exchange for the
receipt of stock options from the Company shall be governed by the
terms of those plans, practices, policies and programs of general
applicability.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability,
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<PAGE>
salary continuance, employee life, group life, split-dollar life
insurance, accidental death and travel accident insurance plans and
programs) to the extent generally applicable to other peer executives
of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than (x) the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or (y) if more favorable to
the Executive, those provided at any time after the Effective Date
generally to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
---------------
Executive shall be entitled to fringe benefits in accordance with the
most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
------------------------
the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to personal secretarial
and other assistance, at least
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<PAGE>
equal to the most favorable of the foregoing provided to the Executive
by the Company and its affiliated companies at any time during the 90-
day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(viii) Vacation and Other Paid Leave. During the Employment
-----------------------------
Period, the Executive shall be entitled to paid vacation and other
paid leave in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as
in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies; provided that
such vacation or other leave may not be paid vacation or paid leave to
the extent provided in an election made by the Executive to forgo any
or all base salary otherwise payable in exchange for the receipt of
stock options from the Company.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of the Executive
has occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means the absence of the Executive
from the Executive's duties with the Company on a
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<PAGE>
full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" means (i) an action taken by the Executive involving willful and
wanton malfeasance involving specifically a wholly wrongful and unlawful
act, or (ii) the Executive being convicted of a felony.
(c) Good Reason. The Executive's employment may be terminated during
-----------
the Employment Period by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means:
(i) The assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) Any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) The Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B)
hereof;
(iv) Any purported termination by the Company of the Executive's
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<PAGE>
employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause
---------------------
or by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
13(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen days after
the giving of such notice). In the case of a termination of the
Executive's employment for Cause, a Notice of Termination shall include a
copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to the Executive
and reasonable opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board prior to such vote), finding that in
the good faith opinion of the Board the Executive was guilty of conduct
constituting Cause. No purported termination of the Executive's employment
for Cause shall be effective without a Notice of Termination. The failure
by the Executive to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's rights
hereunder.
(e) Date of Termination. "Date of Termination" means the date of
-------------------
receipt of the Notice of Termination or any later date specified therein,
as the case may be; provided, however, that (i) if the Executive's
employment is terminated by the Company
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<PAGE>
other than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such termination and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
(f) Transition Period. "Transition Period" means the period
-----------------
commencing on the Date of Termination and ending on the twenty-four month
anniversary of the Date of Termination.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than the following obligations:
(i) payment of the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) payment of the product
of (x) the greater of (A) the annual bonus paid or payable, including by
reason of deferral and before any reduction for the amount of such bonus
which the Executive may have agreed to forgo in exchange for the receipt of
stock options from the Company (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has
been employed for less than twelve full months), for the most recently
completed fiscal year and (B) the Recent Annual Bonus (such greater amount
hereafter referred to as the "Highest Annual Bonus") and (y) a fraction,
the numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365 and
(iii) payment of any bonus earned or accrued by the Executive for the most
recently completed fiscal year prior to the Date of Termination and not yet
paid by the Company, any payment of any compensation previously deferred by
the Executive (together with any accrued interest thereon) and not yet paid
by the Company and any pay for vacation and sabbatical earned but not yet
taken (the amounts described in paragraphs (i), (ii) and (iii) are
hereafter referred to as "Accrued
-14-
<PAGE>
Obligations"). The amount of the Company's payment obligations under
paragraphs (i), (ii) and (iii) of the Accrued Obligations shall be reduced
by the amount of any such Annual Base Salary or Annual Bonus, respectively,
that the Executive had elected to forgo in exchange for the receipt of
stock options from the Company (the "Net Accrued Obligations"). All Net
Accrued Obligations shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding,
the Executive's estate and family shall be entitled to receive benefits at
least equal to the most favorable benefits provided generally by the
Company and any of its affiliated companies to the estates and surviving
families of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death
benefits, if any, as in effect generally with respect to other peer
executives and their estates and families at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in effect on the date of
the Executive's death generally with respect to other peer executives of
the Company and its affiliated companies and their families; provided that
this sentence shall not apply to benefits under any incentive, profit-
sharing, savings and retirement plans, practices, policies and programs
(including any stock-based plans) to the extent the Executive has made an
election to forgo awards or contributions under such plan, practice, policy
or program of the Company in exchange for the receipt of stock options from
the Company.
(b) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than
for Net Accrued Obligations. All Net Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding,
the Executive shall be entitled after the Disability Effective Date to
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<PAGE>
receive disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families
at any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the Executive's family,
as in effect at any time thereafter generally with respect to other peer
executives of the Company and its affiliated companies and their families;
provided that this sentence shall not apply to benefits under any
incentive, profit-sharing, savings and retirement plans, practices,
policies and programs (including any stock-based plans) to the extent the
Executive has made an election to forgo awards or contributions under such
plan, practice, policy or program of the Company in exchange for the
receipt of stock options from the Company.
(c) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive Annual Base Salary through the Date of
Termination plus the amount of any bonus earned or accrued by the Executive
for the most recently completed fiscal year prior to the Date of
Termination and any compensation previously deferred by the Executive, in
each case to the extent theretofore unpaid. The amount of the Company's
payment of such Annual Base Salary shall be reduced by the amount of any
such Annual Base Salary that the Executive has elected to forgo in exchange
for the receipt of stock options from the Company. If the Executive
terminates employment during the Employment Period other than for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Net Accrued Obligations. All applicable amounts
due to the Executive pursuant to this Section 6(c) shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability. If, during the
-----------------------------------------------
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<PAGE>
Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) All Net Accrued Obligations; and
(B) The product of (x) two and (y) the sum of (i) Annual
Base Salary and (ii) the Highest Annual Bonus; and
(C) an amount equal to any unvested account balance in any
defined contribution plan, and any supplemental and excess
retirement plans with respect thereto, that would have vested had
the Executive's employment with the Company continued for the
duration of the Transition Period;
(D) an amount equal to the contributions and accrued
earnings that would have been made under any defined contribution
plan, and any supplemental and excess retirement plans with
respect thereto, had the Executive's employment with the Company
continued for the duration of the Transition Period and had the
Executive contributed to such plans at the highest rate permitted
by such plans, calculated assuming that the terms of such plans
are no less favorable than those in effect during the 90-day
period immediately prior to the Effective Date, or if more
favorable to the Executive, those in effect generally at any time
thereafter with respect to such plans for other peer executives
of the Company and its affiliated companies; and
(ii) For the duration of the Transition Period, or such longer
period as any plan, program, practice or policy may provide, the
Company shall continue
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<PAGE>
benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated companies
applicable generally to other peer executives and their families
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies and their families. For purposes of
determining eligibility of the Executive for retiree benefits pursuant
to such plans, practices, programs and policies, the Executive shall
be considered to have remained employed for the duration of the
Transition Period and to have retired on the last day of such period.
In lieu of the benefits provided for in this Section 6(d)(ii), the
Executive may elect within 60 days of the Date of Termination to be
paid an amount in cash equal to the present value of such benefits on
an after-tax basis. In determining present value, a discount rate
equal to the federal mid-term rate under Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "Code") shall be
utilized. The right to continued benefits granted to the Executive
and/or his family pursuant to this Section 6(d)(ii) shall be in
addition to any right of continued coverage under any of the plans,
programs, practices and policies described in Section 4(b)(iv) of this
Agreement which the Executive and/or his family may be entitled to
under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") upon any loss of coverage under such plans, programs,
practices and policies; and
(iii) The Company shall provide the Executive with outplacement
services (including office support and secretarial services), from a
vendor determined by the Company, at a cost not to exceed $30,000.
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<PAGE>
The amount payable by the Company to the Executive pursuant to Section
6(d)(i)(B) above will be reduced by any remaining balance in the Stock
Option Purchase Account; provided that such reduction will not be made to
the extent that the remaining balance is paid to the Company pursuant to
any other repayment provision in any other agreement.
7. Non-exclusivity of Rights. Except as otherwise specifically provided
-------------------------
in this Agreement, nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices, provided by the Company or any
of its affiliated companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other agreements with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program except as
explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of, and no amounts
earned by the Executive at such other employment or otherwise shall reduce, the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur as a result of any contest
in which there is a reasonable basis for the claims or defenses asserted by the
Executive and such claims and defenses are asserted by the Executive in good
faith (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of
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<PAGE>
any payment pursuant to Section 9 of this Agreement), plus in each case interest
at the applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that the Company shall not be obligated to pay any such fees
and expenses, and the Executive shall be obligated to return any such fees and
expenses that were advanced, if a court of competent jurisdiction determines
that the Executive was terminated for Cause.
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions not specified herein to be used in arriving at such
determinations, shall be made by the Company's certified public accounting
firm immediately prior to the Effective Date (the "Accounting Firm"). Such
determination shall be made within fifteen business days after request
therefor by notice from the Executive or the Company to such firm and to
the other party hereto. In making such determination with respect to any
matter which is uncertain, the Accounting Firm shall adopt the position
which it believes more likely than not would be adopted by the
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<PAGE>
Internal Revenue Service. The Accounting Firm shall provide detailed
supporting calculations with respect to its determination both to the
Company and the Executive within such fifteen business day period. All fees
and expenses of the Accounting Firm under this Section 9(b) shall be borne
solely by the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 9(b), shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a written
opinion that failure to report the Excise Tax on the Executive's applicable
federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm
shall be final, binding and conclusive upon the Company and the Executive,
except as provided in the following sentences of this Section 9(b). As a
result of uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment") or that Gross-Up Payments
which have been made by the Company should not have been made ("Excess
Gross-Up Payment"), consistent with the calculations required to be made
hereunder. Either party hereto can request a redetermination by the
Accounting Firm. An Underpayment can result from a claim by the Internal
Revenue Service or from a determination by the Accounting Firm. In the
event that the Internal Revenue Service makes a claim and the Company
exhausts its remedies pursuant to Section 9(c) and the Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall
promptly determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive. In the event that the Accounting Firm determines
that an Underpayment has occurred, the Accounting Firm shall promptly
determine the amount of the Underpayment, which shall be promptly paid by
the Company to or for the benefit of the
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<PAGE>
Executive. An Excess Gross-Up Payment can result from a determination by
the Internal Revenue Service or the Accounting Firm. If the Accounting
Firm makes an Excess Gross-Up Payment determination, it must furnish the
Executive with a written opinion that the basis for its determination would
be accepted by the Internal Revenue Service and that the Executive has a
right to a refund of taxes or credit against taxes with respect to the
Excess Gross-Up Payment. The Executive shall promptly repay to the Company
an amount equal to the reduction in aggregate taxes due by the Executive
resulting from such determination by the Internal Revenue Service or the
Accounting Firm, provided that the Executive shall only be required to
repay any portion of such amount that had been paid to the Internal Revenue
Service to the extent that and when the Executive receives a refund from
the Internal Revenue Service (or is entitled and able to utilize such
amount as a credit against other taxes due).
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) Give the Company any information reasonably requested by the
Company relating to such claim,
(ii) Take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an
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attorney reasonably selected by the Company,
(iii) Cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) Permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any taxes, including, without
limitation, any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue
or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any taxes, including,
without limitation, any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or
with respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control
-23-
<PAGE>
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly
pay to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
(e) Payments or distributions by the Company to or for the benefit of
the Executive pursuant to any "incentive stock options" (within the meaning
of Section 422 of the Code) granted to the Executive which are vested as of
the date hereof shall be "Excluded Payments." In the event that Payments
which include Excluded Payments are subject to Excise Tax, the
determinations made pursuant to Section 9(b) above shall be calculated with
respect to all Payments (including any Excluded Payments), but any
resulting Gross-Up Payment required to be made by the Company shall be
reduced by the product of the Gross-Up Payment multiplied by a fraction the
numerator of which is the Excluded Payments and the denominator of which is
all Payments (including the Excluded Payments).
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the
-24-
<PAGE>
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement. The
obligations of this Section 10 are in addition to and do not supersede any other
confidentiality obligations of the Executive to the Company.
11. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
-25-
<PAGE>
12. Funding. This Agreement constitutes an unfunded, unsecured obligation
-------
of the Company and any payments made hereunder shall be made from the general
assets of the Company. However, the Company has established a trust pursuant to
a trust agreement and shall make contributions to such trust in accordance with
the terms and conditions of such trust agreement for the purpose of assisting
the Company in meeting its payment obligations under this Agreement.
13. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
--------------------
To the address shown on the Company's records for tax reporting
purposes.
If to the Company:
-----------------
Capital One Financial Corporation
2980 Fairview Park Drive
Falls Church, Virginia 22042
Attention: Officer-in-Charge,
Human Resources Division
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually
-26-
<PAGE>
received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof or the failure to assert any right the Executive may have
hereunder, including, without limitation, the right to terminate employment
for Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be
a waiver of such provision or right or any other provision or right
thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof and supercedes
in its entirety any prior Change of Control Agreement by and between the
Company and the Executive. Until the Effective Date, subject to the terms
of any other employment agreement between the Executive and the Company,
the Executive shall continue to be an "employee at will".
-27-
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
_________________________________
CAPITAL ONE FINANCIAL CORPORATION
By: ____________________________
-28-
<PAGE>
Exhibit 10.15
-------------
SERVICES AGREEMENT
DARCY MASIUS BENTON & BOWLES, INC.
& CAPITAL ONE FINANCIAL CORPORATION
AGREEMENT dated as of April 1, 1999 by and between D'Arcy Masius Benton &
Bowles USA, Inc. (DMB&B or Agency), a wholly owned subsidiary of The MacManus
Group, Inc. (TMG), with offices located at 1675 Broadway, New York, New York
10019, and Capital One Financial Corporation (Client), with offices located at
2980 Fairview Park Drive, Falls Church, Virginia 22042.
WHEREAS, Agency has been retained to provide services to Client on a non-
exclusive, worldwide basis; and
WHEREAS, the parties wish to enter into this Agreement setting forth the
terms of such relationship.
NOW, THEREFORE, the parties agree as follows:
1. SCOPE OF AGENCY SERVICES
------------------------
Agency will provide Client the basic services described on Schedule 1 to this
Agreement. It is understood that certain services hereunder may be provided by
other TMG operating companies specifically including without limitation, Clarion
Marketing & Communications, Inc., Blue Marble Advanced Communications, Inc.,
MediaVest Worldwide, Inc., and Bromley, Aguilar & Associates.
In addition to such basic services, Agency is prepared to provide a variety of
special services to Client through Agency's facilities or the facilities of
other companies within The MacManus Group organization, as further described
below. Compensation and other terms and conditions for such special services
will be agreed upon in advance by the parties per Appendix I. Such special
services may include but are not limited to items listed on Schedule 2 and/or
Appendix I to this Agreement.
It is further agreed that DMB&B and other TMG operating companies will be the
preferred/first choice advertising agency for the development of Global Brand
Advertising, Local Brand Advertising, and Local Recruitment Advertising by all
Capital One operating companies around the world, as defined in Appendix I.
2. TERM OF THIS AGREEMENT
----------------------
This Agreement shall be effective as of April 1, 1999, and shall continue
through March 31, 2000. This Agreement shall thereafter automatically renew for
successive periods of one year each, unless this Agreement is terminated under
Section 8 below.
3. AFFILIATED COMPANIES
--------------------
1
<PAGE>
Client recognizes that Agency has available to it the integrated resources of
other affiliated companies within The MacManus Group organization, and that it
may use such affiliated companies in the completion of certain production
projects and for other services. A partial list of such affiliated companies is
set forth in Schedule 3 to this Agreement. Client agrees to the involvement of
such companies so long as their prices and quality, which are the basis of any
charge to Client, are approved in advance by Client.
In the event such affiliated companies are used by Client, it is understood that
such services are incremental to the basic services (defined in Appendix I)
under this Agreement, and that compensation for such services will be based on
the scope of the assignment and in accordance with the prevailing compensation
practices as established by that organization and mutually agreed by all the
parties.
Except as set forth herein or otherwise disclosed to Client, Agency will have no
financial interest in any supplier of media services or advertising materials
which will be the basis of any charge to Client. In addition, Agency will
immediately disclose its ownership interest, if any, in any literary or artistic
properties, or radio or television programming which are the basis of any charge
to Client.
4. AGENCY COMPENSATION
-------------------
Agency's compensation for the basic services described above will be as set
forth in Appendix I to this Agreement.
5. BILLING AND PAYMENT POLICY
--------------------------
Agency's invoices will be rendered and shall be payable in accordance with
Agency's billing and payment policy, which is described in Appendix III to this
Agreement. Agency reserves the right to change such billing and payment terms in
the case of a delinquency in Client's payments or other circumstances which
Agency reasonably believes may affect Client's ability to pay Agency's
compensation and costs as they become due, provided that in the event Agency
does so change the billing and payment terms, Client shall have the right to
terminate this agreement upon 30 days written notice to Agency given within 30
days following such change.
6. RATE AND OTHER ADJUSTMENTS
--------------------------
(1) Discounts
---------
The exact amount of each cash discount allowed to Agency by media and
suppliers for prompt payment will be allowed to Client provided
payment is made to Agency in accordance with the cash discount terms
stated on Agency's invoices and provided that there is no overdue
indebtedness owing by Client to Agency at the time of payment.
(2) Short Rates
-----------
If Agency purchases media space or time for Client in a medium having
a schedule of graduated rates, and Client uses less space or time than
contracted, Client agrees to pay Agency the difference, if any,
between the rate billed and the rate actually earned, in accordance
with such rate payments Agency may be obligated to make.
(3) Lower Rates Earned
------------------
2
<PAGE>
If with respect to any such media purchases Client uses more space or
time than contracted, Agency shall refund any excess (plus
commissions, if any) Client may have paid in accordance with such
refunds made to Agency by media.
(4) Post Termination Rate Adjustments
---------------------------------
Upon termination of this Agreement, Agency will, after expiration of
the applicable termination notice period referred to below, receive
its share of commission, if any, on short-rate bills and will add back
its share of commission, if any, to refunds made by media by reason of
the earning of a lower rate.
7. INDEMNIFICATION
---------------
A. Client's Indemnity to Agency
----------------------------
Client shall be responsible for the accuracy, completeness and
propriety of information concerning its organization, products,
competitor's products and services which Client furnishes to Agency in
connection with the performance of this Agreement. Accordingly, Client
agrees to defend and indemnify Agency against any claim, damage, loss
or expense, including reasonable attorney's fees and costs, that
Agency may sustain as the result of any claim, suit or proceeding
brought or threatened against Agency (i) based on any advertising or
materials that Agency creates, produces or places for Client and which
Client approves before its publication, broadcast or distribution (but
excluding any claims covered by Agency's indemnity under paragraph
7.B. below); (ii) based on any information or materials supplied to
Agency by or through Client in connection with Agency's services
hereunder; (iii) arising out of the nature or use of Client's products
or services; or (iv) relating to risks which have been brought to
Client's attention by Agency where Client has elected to proceed.
Client also agrees to indemnify Agency against any loss Agency may
sustain resulting from any claim, suit or proceeding made or brought
against Agency for use of any Agency-produced commercials by Client's
representatives or by anyone else who obtained the materials from
Client when such claim, suit or proceeding arises out of Agency's
obligations under the applicable union codes or contracts relating to
the production of commercials.
B. Agency's Indemnity to Client
----------------------------
Agency shall defend and indemnify Client against any claim, damage,
loss or expense, including reasonable attorney's fees and costs Client
may sustain as the result of any claim, suit or proceeding brought or
threatened against Client arising out of advertising or materials
prepared by Agency hereunder and pertaining to libel, slander,
defamation, infringement of title, slogan, trademark, trade dress,
service mark or service name, copyright infringement, invasion of
privacy, piracy and/or plagiarism or misappropriation of ideas under
implied contract, except to the extent that such claims arise from
information or materials provided by or through Client.
C. Cooperation and Settlement
--------------------------
3
<PAGE>
Upon the assertion of any claim or the commencement of any suit or
proceeding against an indemnitee by any third party that may give rise
to liability of an indemnitor hereunder, the indemnitee shall promptly
notify the indemnitor of the existence of such claim and shall give
the indemnitor reasonable opportunity to defend and/or settle the
claim at its own expense and with counsel of its own selection.
Indemnitee shall at all times have the right to participate fully in
such defense at its own expense, and the indemnitee shall not be
obligated, without its consent, to participate in any settlement which
it reasonably believes would have an adverse effect on its business.
The indemnitee shall make available to the indemnitor all books and
records relating to the claim, and the parties agree to render to each
other such assistance as may reasonably be requested in order to
insure a proper and adequate defense. An indemnitee shall not make any
settlement of any claims which might give rise to liability of an
indemnitor hereunder without the prior written consent of the
indemnitor.
D. Survival of Indemnity
---------------------
The provisions of this paragraph 7 shall survive the termination of
this Agreement.
E. Third Party Subpoenas
---------------------
In the event either party becomes subject to third party subpoenas for
documents or testimony in connection with any lawsuit or investigation
involving the other party's business or affairs, which lawsuit or
investigation is not otherwise covered by the indemnification
provisions above, such other party will be responsible for reimbursing
the first party's reasonable out of pocket costs incurred in complying
with such subpoenas, including its reasonable attorneys fees and
expenses.
8. TERMINATION
-----------
A. Term
----
Either party at its sole election may terminate this Agreement for any
reason without penalty upon not less than 90 days written notice, but
in no event may this Agreement be terminated by Client or Agency prior
to March 31, 2000.
Notwithstanding the foregoing, in the event either party is in breach
or default of any material term of this Agreement, and said breach or
default continues unremedied for a period of twenty (20) days after
such party's receipt of written notice from the other party specifying
the grounds of such breach or default, then in addition to all other
rights and remedies at law or in equity, the other party will have the
right to terminate this Agreement immediately upon written notice to
the breaching/defaulting party.
In addition, either party may terminate this Agreement immediately
upon written notice to the other party in the event such other party
(1) makes an assignment for the benefit of creditors; or (2) admits in
writing its inability to pay its debts as such debts come due; or (3)
makes any voluntary filing for bankruptcy protection; or (4) becomes
subject to any involuntary bankruptcy proceedings, which proceedings
are acquiesced to or not dismissed within thirty (30) days.
4
<PAGE>
B. Responsibilities and Compensation through Termination
-----------------------------------------------------
Except as hereafter provided in this paragraph 8B., the rights, duties
and responsibilities of the parties shall continue throughout the
applicable termination notice period described in paragraph 8A. above,
including Agency's right to receive, as the case may be, (i) Agency's
fee compensation for each calendar month (or pro-rata portion thereof
for any partial calendar month) occurring during the first 60 days of
such notice period and thereafter on the basis of actual hours
rendered on Client's account and (ii) commission compensation for
advertisements in any print media whose closing dates fall within such
notice period, and in any TV, radio, internet or other broadcast media
whose date of broadcast or transmission falls within such notice
period.
In any case, promptly following its receipt of notice of termination
from Client, Agency will work with Client to wind down and transition
the servicing of Client's account. In connection therewith, Agency
will begin to make appropriate reductions in staffing provided that
Client will not be charged for the time of Agency staff incurred on
behalf of any other Client of Agency. Accordingly, while Agency will
continue to render such services as reasonably directed by Client,
Client recognizes that during the applicable termination notice period
the level of services to Client's account is likely to be reduced from
the level of services theretofore provided under this Agreement.
C. Non-Cancelable Contracts; Talent Contracts
------------------------------------------
Any non-cancelable contract or commitment made on Client's
authorization, and still existing at the expiration of this Agreement,
shall be carried to completion by Agency and paid for by Client unless
mutually agreed in writing to the contrary, in accordance with the
provisions of this Agreement. Any materials or services Agency has
committed to purchase for Client (or any uncompleted work previously
approved by Client either specifically or as part of a plan) shall be
paid for by Client and Agency shall receive applicable compensation.
Any contract Agency has entered into with talent to perform in
Client's advertising shall, simultaneously on the effective date of
such termination, be automatically assigned to Client and Client shall
assume all of the rights and obligations under the contract and Agency
shall be relieved of any further responsibility or liability. Client
shall indemnify Agency against any expense or loss that Agency may
incur as a result of a claim by talent or a third party arising after
the assignment of the contract.
D. Transfer and Ownership
----------------------
Upon the termination of this Agreement, Agency shall return, transfer,
assign and make available to Client, or its representative, all
property and materials in Agency's possession or control provided to
Agency by Client. Also upon termination of this Agreement, Agency
shall transfer, assign and make available to Client, or its
5
<PAGE>
representative, all property and materials in Agency's possession or
control created by Agency for Client, provided that Client has paid
for such property and materials.
Agency will also cooperate in transferring, with approval of third
parties in interest, all reservations, contracts and arrangements with
advertising media or others for advertising time or space or materials
yet to be used, and all related rights and claims, upon being duly
released from such obligations.
As between Client and Agency, Client shall own all rights including,
without limitation, all intellectual property rights, to any
advertising or materials which are produced for Client by Agency prior
to the effective termination of this Agreement. In this regard, Agency
shall proceed promptly upon Client's approval to complete production
of any such materials during the applicable termination notice period.
Agency agrees to take all steps and to execute such documents as may
be requested by Client from time to time, and at Client's expense to
protect or record Client's interests in such materials.
Agency agrees that Client shall retain all right, title and interest
in and to its intellectual property, including, without limitation,
its copyrightable material, trademarks, service marks and trade dress,
and that all use of such intellectual property shall inure to the
benefit of the Client.
As soon as the same is agreed upon by Agency and Client, an incentive
compensation arrangement for Agency will be added to this Agreement as
Appendix 1.
If this Agreement is terminated by either party, all references to
incentive compensation arrangements in Appendix 1 will be prorated by
the percentage of the applicable term of the Agreement elapsed at that
time.
9. GENERAL PROVISIONS
------------------
A. Protection of Client's Property
-------------------------------
Agency shall take the utmost care and appropriate precautions to
safeguard Client's property and information entrusted to Agency's
custody or control.
B. Right to Modify Plans
---------------------
Client reserves the right to modify, reject, cancel or stop any and
all plans, schedules, or work in process. In such event Agency shall
immediately take proper steps to carry out Client's instructions. In
turn, Client agrees to assume Agency's liability for all authorized
commitments; to reimburse Agency for all expenses incurred; to pay
Agency any related service charges in accordance with the provisions
of this Agreement; and to indemnify Agency for all claims and actions
by third parties for damages and expenses that result from carrying
out Client's instructions.
C. Failure of Media and Suppliers
------------------------------
6
<PAGE>
Agency shall endeavor to guard against any loss to Client as the
result of the failure of media or suppliers to properly execute their
commitments; but Agency will not be responsible for their failure.
D. Agent for Disclosed Principal; Media Purchases
----------------------------------------------
Agency shall act as Client's agent with regard to the purchase of
materials and production services hereunder, excluding the purchase of
media time or space. All media will be purchased by Agency as
principal.
E. Services to Client's Designees
------------------------------
Should Client request Agency to make purchases for or render services
to third parties (such as representatives and distributors), Client
and the third party shall be jointly and severally liable to Agency
even though Agency may render invoices to, or in the name of, the
third party.
F. Dealings With Third Parties
---------------------------
Agency will contract, as agent for Client, for third-party purchases
necessary for the preparation and production of Client's advertising
and promotion work only in the event Agency does not have the
personnel and/or facilities to perform such services and only upon the
prior approval of Client. Such service costs shall be clearly
identified on Agency estimate sheets and billing statements. Unless
authorization is obtained from Client, Agency shall not contract with
any third party.
G. Access
------
Agency's records specifically pertaining to the services provided
hereunder and rebilled to Client (excluding agency payroll and
administrative records) shall be available to inspection by Client's
authorized representative during normal business hours at those
locations where they are regularly maintained, following reasonable
advance written notice to Agency.
H. Notice
------
All notices which either party is required or may desire to give the
other party hereunder shall be sufficiently given if delivered in
person or sent by registered or certified mail, or by prepaid
overnight courier, addressed as follows:
If to Capital One:
Capital One Financial Corporation
2980 Fairview Park Drive
Falls Church, VA 22042
Attention: David Wurfel
If to DMB&B: D'Arcy Masius Benton & Bowles USA, Inc.
7
<PAGE>
1675 Broadway
New York, NY 10019
Attention: John F.P. Farrell
And a copy to:
The MacManus Group, Inc.
1675 Broadway
New York, NY 10019
Attention: Craig D. Brown
Or to such other address as shall be furnished in writing by any such
party and such notice shall be deemed to have been given when
delivered by hand or courier, or three days after being mailed.
I. Entire Agreement
----------------
This Agreement constitutes the entire agreement with respect to the
subject matter hereof, and may only be modified or amended in writing
signed by the party to be charged.
J. Confidentiality
---------------
See Appendix IV, hereby incorporated in this Agreement by this
reference. It is Agency's responsibility to ensure that all of its
affiliates doing work hereunder are made aware of Appendix IV.
K. International Advertising
-------------------------
It is the intent of both parties that the terms and understandings of
this Agreement apply to the relationship existing between the parties
in all countries throughout the world, subject to local law, custom
and practices; and that both parties agree to incorporate these
understandings to the extent possible and appropriate into individual,
local country agreements as and where required by law. It is also
agreed that this Agreement supercedes all prior agreements between the
parties; and that this Agreement takes preeminence in the event of a
dispute between local, non-U.S. practices and/or agreements.
L. Insurance
---------
Agency, at its own cost and expense, during the term of this
Agreement, will continuously maintain in force a standard advertising
liability policy (the "Policy") that provides coverage for Agency and
Client in a minimum amount of ten million ($10,000,000) dollars with a
deductible of not more than $5,000,000, for any loss resulting from
the conduct of Agency or from the creation or publication of
advertising pursuant to this Agreement.
M. Compliance with Laws Relating to Employers
------------------------------------------
8
<PAGE>
Agency will comply, during this Agreement and at Agency's own expense,
with all applicable federal, state and local laws, rules and
regulations governing the preparation and publication of advertising
and with all applicable provisions of the Workers' Compensations laws,
Unemployment Compensation laws, the Federal Social Security Law, the
Fair Labor Standard Act, and all other federal, state and local laws
and regulations which may be applicable to Agency as employer.
N. Severability
------------
Whenever possible, each provision of this Agreement will be
interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
deemed restated to reflect the original intentions of the parties as
nearly as possible in accordance with applicable law, and, if capable
of substantial performance, the remaining provisions of this Agreement
shall be enforced as if this Agreement was entered into without the
invalid provision.
O. Captions
--------
The captions used in this Agreement are for convenience and reference
only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of
the Agreement, and all provisions of this Agreement will be enforced
and construed as if no caption had been used in this Agreement.
P. Attorney's Fees
---------------
In the event that any action or proceeding is brought in connection
with this Agreement, the prevailing party shall be entitled to recover
its costs and reasonable attorney's fees.
Q. Applicable Law; Jurisdiction
----------------------------
This Agreement shall be governed in accordance with the laws of the
State of New York applicable to contracts made and performed entirely
in that state. Each party submits to the exclusive jurisdiction of
the federal and state courts located in the State of New York with
respect to any action or proceeding relating to this Agreement.
Accepted for: Accepted for:
Capital One Financial Corporation D'Arcy Masius Benton & Bowles USA, Inc.
And its operating companies
/s/ William J. McDonald /s/ John F.P. Farrell
- ---------------------------------- ----------------------------------------
SVP Brand Management John F.P. Farrell
9
<PAGE>
________________________________ ________________________________________
(Date) (Date)
10
<PAGE>
SCHEDULE 1
SCOPE OF SERVICES
-----------------
Overall
- -------
. DMB&B and other TMG operating companies will be the preferred/first choice
advertising and communications agency for those activities assigned to them
and will provide all of the services customarily performed by a full
service global advertising and communications agency as needed and
appropriate under the circumstances and compensation level, for such
designated products and services as may be assigned to it from time to time
and for which the Agency is compensated by Client. Agency will also assist
to Client in the formulation of marketing plans, including advertising
concepts.
Account Service
- ---------------
. All time spent by the account group, like:
- Provision of general advertising and marketing consultation, including
reasonable familiarization and constant updating of business, product
performance and distribution.
- Briefing, progress and presentation of advertising plans and concepts.
- Day-to-day liaison, contact reports, status reports, timetables,
estimates, advertising budget control.
- Liaison with and supervision of outside suppliers (PR, direct marketing,
promotion agencies, etc.)
- Management of the execution of approved advertising concepts and the
distribution of such advertisements to the media.
Account Planning
- ----------------
. All time spent by the planner, like:
- Analysis of marketing and advertising research data.
- Desk research on competitive advertising data (but not cost of
subscribing to this data).
- Competitive monitoring, media and creative.
- Development of advertising strategies (with Account Service).
- Design, commissioning and supervision of local research.
- Provision of information on local market developments in new product
launches, marketing and advertising issues.
Creative
- --------
. All time spent by the creative department, like:
- Development of all international/regional and local communication
concepts and associated materials, including copy and layouts.
- Adaptation of international creative work into local material for all
markets as appropriate for all media.
11
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- Creative input on extensions of the international concept, when
required, into trade communication below the line material, promotions,
p.o.s. material, etc. to ensure consistency with main advertising
message. (Execution of these specific materials is not included in this
Agreement.)
- Liaison and comments on all below-the-line work which needs to be
produced by outside suppliers, to ensure consistency with main
advertising messages.
. Creative development test and analysis of research results.
Media
- -----
. All time spent by the media department, like:
- Planning and preparation of all media, including overall strategy
estimated costs, media selection, spaces, spot lengths, timing,
circulation, viewership details and schedules performance.
Production/Traffic
- ------------------
. All time spent by Production/Traffic department, like:
- Obtaining government, broadcast, legal approvals.
- Progress and control of international adaptation work and preparation of
production materials for local use.
- Progress and control of creative development, origination and production
of locally prepared ads.
- Negotiation, purchase and supervision of photography, art and mechanical
work for print and broadcast.
- Preparation of production estimates per Client approval and maintaining
records of all costs.
12
<PAGE>
SCHEDULE 2
LIST OF SPECIAL SERVICES
------------------------
In addition to the Basic Services listed in Schedule 1, Agency is prepared to
provide a variety of special services to Client through Agency's own facilities
or those of other companies within TMG's organization. Compensation and other
material terms and conditions for these special services will be as described in
Appendix I. Such services may include without limitation:
A. Creation and/or production of sales, promotional and collateral materials
such as point-of-sale materials, leaflets, inserts, catalogues, brochures
and other similar material.
B. Direct marketing services, including the creation and production of direct
mail and direct response advertising, and the placement, insertion or
distribution of those materials.
C. Public relation services, including the preparation of publicity releases,
employee publications, news films, speeches, seminars, radio scripts, and
television programs.
D. Staging and conducting sales and other company meetings and designing and
preparing exhibits for trade and industry shows.
E. Designs of labels and packaging.
F. New product concept and development work; line extensions.
G. Creation, production and placement of yellow pages advertisements.
H. Recruitment advertising.
I. Interactive and electronic (on-line) media.
13
<PAGE>
SCHEDULE 3
LIST OF AFFILIATES
The following is a partial listing of companies that are subsidiaries,
affiliates, or operational divisions or departments of The MacManus Group, Inc.,
and may be used as a subcontractor for certain materials and services:
(i) Advista - multimedia advertising and marketing software
(ii) Dialogue Works - direct marketing
(iii) Ayer PR - public relations
(iv) Blue Marble Advanced Communications, Inc. - interactive and
electronic marketing
(v) Bromley, Aguilar & Associates - Hispanic advertising
(vi) Clarion - direct marketing, collateral, promotion and event
marketing
(vii) N.W. Ayer & Partners - full service advertising agency
(viii) DMB&B Yellow Pages - for placement of Yellow Page advertising and
listings
(ix) DMB&B Interactive - interactive marketing
(x) Highway One - full service advertising agency
(xi) Intergroup Marketing & Promotion, Inc. - promotion and business
communication services
(xii) Internal stat department - provide stats
(xiii) Manning, Selvage & Lee, Inc. - publicity and public relations
(xiv) MediaVest (including TeleVest) - media planning and purchasing,
network, syndication, cable buying
(xv) Medicus Group International, Inc. - health care advertising
(xvi) Plugged In Studios - art studio, audio-visual studio
(xvii) Sounds & Images - audio visual
(xviii) Talent Payment Service, Inc. - coordination of payments to
performing talent
14
<PAGE>
Where used as a subcontractor, partner, or on a direct basis it is understood
that such services, unless specified in this agreement to the contrary, are
incremental to the general agency agreement and that compensation for such
services will be based on the scope of the assignment and in accordance with the
prevailing compensation practices as established by that organization and
mutually agreed by all parties.
Except for the preceding, Agency has no financial interest in, nor is it the
subject of any financial interest of, any supplier of media services or
advertising materials which will be the basis of a charge to Client.
No officer, director, or employee of any supplier (which is not a subsidiary or
affiliated company of Agency) of media services or advertising materials which
is the basis of a charge to Client, has any financial interest in its Agency.
Agency will immediately disclose its ownership interest, if any, in any literary
or artistic properties, or radio or television programming which are the basis
of any charge to Client.
15
<PAGE>
APPENDIX I
Agency Compensation
A. DESCRIPTION
The Agency will be compensated via a combination of fees and commissions as
described below.
B. CLASSIFICATIONS
All TMG services provided to Capital One will be classified into one of the
following classifications for purposes of agency compensation:
1. Core Brand Strategic Services
2. Advertising & Communications Services
3. Marketing & Communications Services
4. Media Services
5. Interactive Services
6. Hispanic Services
7. United Kingdom Marketing & Communications Services
8. Public Relations
C. DEFINITIONS
1. Core Brand Strategic Services
. Senior, multi-disciplined consulting resources to partner with senior
Capital One executives.
. Strategic brand consulting, development and review of marketing
strategies across all consumer disciplines.
. A component of the base fee.
2. Advertising & Communications Services
. Centered in New York (Credit cards/ Cross sell/ New business) and St.
Louis (Telecommunications/New business).
. All inclusive fee, including production services. Levels of dedicated
resource and resultant ability to handle volumes of work differentiate
limited scope and full services proposals.
. Strategic work, planning and analysis, concept development and creative
supervision and execution for North America.
. A component of the base fee.
3. Marketing & Communications Services
. Retained service resource within Clarion (Direct Marketing) and Highway
One (Youth Marketing).
. Strategic planning and conceptual project development included in
retainer.
. A component of the base fee.
. Project execution outside of base core fee will be compensated on a
project fee basis.
. Production services compensated by commission mark-up on production
costs.
16
<PAGE>
4. Media Services
. Centered in New York ( MediaVest) and established as a dedicated full
time resource.
. Media planning and analysis compensated as a component of the base
fee.
. Media buying compensated by commission on gross media spending.
5. Interactive Services
. Led by Blue Marble.
. Fee for consulting on all aspects of interactive marketing - strategy
, media, concept development, sponsorship opportunities, etc.
. Execution/production services to be charged separately on a project by
project basis.
6. Hispanic Services
. Led by Bromley & Associates.
. Full service, integrated Hispanic marketing team.
. Specific scope of services and fee to be separately documented and
agreed.
7. United Kingdom Marketing & Communications Services
. Led by IMP London (supported by all specialists' disciplines within the
DMB&B UK Group).
. Specific scope of services and fee to be separately documented and
agreed.
8. Public Relations
. Led by MS&L.
. Project based remuneration.
. Specific scope of services and fee to be separately documented
agreed.
D. COMPENSATION Beginning May 1, 1999
1. Base Fee
. $7,697,000 per calendar year - calculated in accordance with Appendix
II.
. Invoiced in twelve (12) equal monthly installments beginning May 1,
1999.
. Fee to cover the following services provided in North America only:
- Core Brand Strategic Services
- Advertising & Communications Services
- Marketing & Communication Services
- Media Services
. Eight months after the date of this Agreement or four months before
the end of the current contract year and on the anniversary of same
thereafter, Agency will propose an estimated fee for the next account
year, according to the following formula:
a. Agency will estimate the amount of Agency direct staffing to be
expended in the next year in servicing Client's account based
upon Agency's past history of service to Client and upon review
of the upcoming advertising and marketing plans and programs
contemplated or approved by Client. In order to estimate the
staffing to be expended, Agency will provide a break down by
direct staffing person, time and total cost to be allocated to
Client's account.
17
<PAGE>
b. The proposed next year's fee is subject to Client's written
approval. In the event a fee is not agreed upon prior to the
beginning of the applicable date, a constructive fee in the amount
of 1/12 of the prior year's fee will be due the first month of such
year and each succeeding month, with retroactive adjustment when
the negotiated fee is finalized.
2. Project fees
. Specific scope of services and fee to be separately documented and
agreed, including:
- Interactive Services
- Hispanic Services
- United Kingdom Marketing & Communications Services
- Public Relations
. Invoiced in equal monthly installments until project completion.
. If Client asks Agency to begin work on project and later cancels
project, Client agrees to cover Agency labor costs incurred to
cancellation, as well as those costs required to wind-down work.
Additionally, Client will reimburse Agency for all expended out-of-
pocket costs associated with the project.
3. Media Commissions
. Network Television - 1.50% of net
. Network Radio - 1.75% of net
. Syndication/Cable - 2.00% of net
. Spot Television - 4.00% of net
. Spot Radio - 4.00% of net
. Out of Home - 5.00% of net
. Print - Newspaper and Trade - 2.50% of net
. Print - Consumer Magazines - 1.50% of net
. Direct Response Media - 5.00% of net
3. Production Commissions -- billed net
4. Incentive Compensation - See Appendix V (TBD)
E. BILLABLE THIRD PARTY COSTS
1. All third party costs are billable and managed accordingly by Agency.
. Agency will bill Client at Agency's cost (without markup or profit)
for reasonable expenditures incurred for artwork, engraving,
electrotyping, typography, translations and all other materials
involved in the mechanical production of advertising, radio and
television production and all their associated costs, talent, music,
photographs, testimonials and all other advertising adjuncts,
including expenditures in connection with acquiring authorization for
the use of the names or photographs of individuals.
. Comprehensive layouts and typesetting required by Client, finished
art, mechanical past-ups and tightly rendered storyboards shall be
approved by Client in advance and shall be billed to Client at
Agency's cost (without markup or profit). Notwithstanding the
foregoing, Agency shall not charge Client for rough/concept layouts
except for those specific third-party charges which Client shall have
approved in advance.
18
<PAGE>
2. Additional Considerations
. Production jobs estimated on a "Quote Basis" with a 10% contingency
arrangement Agency will not exceed estimated costs by more than 10%
without Client's written approval. Production costs for local
adaptations
a. Production costs for local adaptations of global work (including
translations, dubs, chromalins, talent, etc.) will be invoiced at
net cost to the Client locally.
. Billable travel
a. On creative production jobs, limited to three persons.
b. On research jobs, limited to one person.
c. Travel guidelines reasonably consistent with Client staff travel
policies - see Appendix VI. Agency will be responsible for ensuring
that all Agency affiliates servicing Client's account are aware of
Client's travel guidelines.
F. BILLING AND PAYMENT PROTOCOLS
1. See Appendix III
G. REPORTS
1. From time to time Client may request Agency to participate in , and Agency
will use its best efforts to participate in, a periodic Agency
performance evaluation with respect to (1) Agency's servicing of Client's
account, (2) Agency's economics in servicing Client's account, (3) the
working relationship between Agency and Client, and (4) the
implementation of this Agreement.
2. Within sixty (60) days after the end of the first one hundred and eighty
(180) days of operating under this Agreement, within sixty (60) days
after the end of each thereafter and promptly upon termination of this
Agreement, Agency will provide Client with a written monitoring report
setting forth the status of projects commenced, under preparation and
concluded, and Agency's direct staffing time devoted to Client's account.
Agency represents to Client that Agency collects actual direct staffing
time from its staff on a weekly basis.
3. At any reasonable time during the life of this Agreement and for one year
thereafter, and upon reasonable prior notice to Agency, Client may
examine and make reasonable copies of Agency's files and records
pertaining to Client's advertising ( not including individual
compensation information). The agency will provide Capital One with a
certification issued by the Agency's independent auditing firm at Capital
One's expense (not to exceed $10,000), verifying the accuracy of the
OverHead rate.
19
<PAGE>
APPENDIX II
- -----------
Capital One Fee Schedule: May 1999 - April 2000
-----------------------------------------------
Base/Core Fee:
May: $ 641,500
June: $ 641,500
July: $ 641,500
August: $ 641,500
September: $ 641,500
October: $ 641,500
November: $ 641,500
December: $ 641,500
January $ 641,500
February $ 641,500
March $ 641,500
April $ 641,500
Total for Contract Period: $7,698,000
Incremental Fees:
The following formulas will be followed for calculating fees that are
incremental to the Base/Core Fee:
For retainer work: Cost of staff plus 132% OverHead (includng benefits) plus
20% profit margin
For project work: Cost of staff plus 144% OverHead (including benefits) plus
20% profit margin
Incentive Compensation:
TBD
20
<PAGE>
APPENDIX III
- ------------
U.S. Billing/Payment Policy:
- ----------------------------
(All other country billing/payment practices per local custom and practice)
A. TMG billing and payment policy is intended to provide for receipt of Client
monies in sufficient time for the agency to pay third parties in accordance
with their payment terms.
<TABLE>
<CAPTION>
Category (if applicable) Billing Basis Billing Date(s) Due Date(s)
- ------------------------- ------------- --------------- -----------
<S> <C> <C> <C>
1. Network and Spot Contracted Schedule 25/th/ of month 24/th/ of following month
Radio-Television
2. Magazines Contracted Schedule 25/th/ of prior month 15/th/ of following month
of insertion
3. Newspaper Contracted Schedule 25/th/ of month 15/th/ of following month
4. Out-of-home Contracted Schedule 25/th/ of month 15/th/ of following month
5. All Other Media Contracted Schedule 25/th/ of month 15/th/ of following month
6. Advertising Production:
a. Pre-Funding 100% pre-billed Beg of month 15 days following
b. Talent Residuals Progress Billing 25/th/ of month 15/th/ of following month
c. Research 100% of Quote 25/th/ of month 15/th/ of following month
Exceptions and/or additions, if any, approved by Capital One will be as separately agreed.
7. Local Adaptation of Global Progress Billing 25/th/ of month 15/th/ of following month
Advertising Production
8. Advertising Service Fee Appendix II 1st of month 10 days following
9. Other Service Fees As agreed per project 25/th/ of month 15/th/ of following month
</TABLE>
21
<PAGE>
B. TMG reserves the right to charge interest at the rate of 5% per annum on
any monies owing more than 30 days from the invoice date, or to change its
billing and payment terms in the case of delinquency in Client payments to
TMG or other circumstances which TMG reasonably believes may affect
Client's ability to pay TMG compensation and costs as they become due,
including direct payment by Client to third parties, at TMG's discretion.
22
<PAGE>
EXHIBIT 10.17.3
---------------
Prepared By:
Hirschler, Fleischer, Weinberg, Cox & Allen
P.O. Box 500
Richmond, VA 23218-0500
FIRST AMENDMENT
TO
AMENDED AND RESTATED LEASE AGREEMENT, AMENDMENT TO LEASE AND LANDLORD'S
CONSENT AGREEMENT TO GROUND LEASE AND VIRGINIA LEASE SUPPLEMENT, MEMORANDUM
OF AMENDED AND RESTATED LEASE AGREEMENT AND REMEDIES
(the "Amendment to Lease Documents")
THIS AMENDMENT TO LEASE DOCUMENTS (hereinafter called the "Amendment") is made
as of the 1st day of October, 1999, by and among FIRST SECURITY BANK, N.A., not
-------------------------
individually, but solely in his capacity as Owner Trustee ("First Security")
under the COB Real Estate Trust 1995-1, as amended and restated by that certain
Amended and Restated Trust Agreement dated as of October 14, 1998, and Val T.
ORTON, not individually, but solely in his capacity as Owner Trustee (the
- -----
"Individual Trustee") under COB Real Estate Trust 1995-1, as amended and
restated by that certain Amended and Restated Trust Agreement dated as of
October 14, 1998 ("the Trust") [for purposes of indexing grantors]; CAPITAL ONE
-----------
BANK, a Virginia corporation ("Capital One") [for purposes of indexing a
- ----
grantor]; CAPITAL ONE REALTY, INC., a Delaware corporation ("Capital Realty")
------------------------
[for purposes of indexing a grantor]; and LAWYERS TITLE REALTY SERVICES, INC., a
-----------------------------------
Virginia corporation ("Lawyers Title") [for purposes of indexing a grantee].
W I T N E S S E T H:
RECITALS
- --------
A. Individual Trustee owns the fee simple estate in those two parcels
of land with improvements thereon located east of Cox Road and north of Nuckols
Road in Henrico County, Virginia, commonly known as the Knolls Office Building
containing 9.735 acres (the "Knolls Office Building Parcel") and the Operations
Center containing 17.9856 acres (the "Operations Center Parcel"), [together, the
"Trust Property"]
B. Individual Trustee is the ground lessee of that certain parcel of
land located east of Cox Road, north of Nuckols Road and adjacent to the Trust
Property in Henrico County, Virginia, consisting of Parcel A containing 16.8499
acres and Parcel B
<PAGE>
containing 0.0378 acres, commonly known as Knolls Two Phase Three (the "Capital
One Property"), pursuant to that certain Ground Lease dated June 21, 1996, (a
short form Memorandum of which was recorded in the Clerk's Office of the Circuit
Court of Henrico County, Virginia (the "Clerk's Office"), in Deed Book 2657, at
Page 1311), as amended by unrecorded Amendment to Lease and Landlord's Consent
Agreement to Ground Lease dated as of October 14, 1998, and by Amendment to
Ground Lease and Memorandum of Lease dated as of October 14, 1998, recorded in
the Clerk's Office in Deed Book 2865, at Page 21 (collectively, the "Ground
Lease"), between Capital One Bank, as lessor and the Individual Trustee, as
lessee.
The Trust Property and the Capital One Property are collectively referred to as
the "Property".
C. Capital Realty holds a leasehold interest in the Property pursuant
to that certain Amended and Restated Lease Agreement dated as of October 14,
1998, as supplemented by that certain Virginia Lease Supplement, Memorandum of
Amended and Restated Lease Agreement and Remedies dated as of October 14, 1998,
recorded in the Clerk's Office in Deed Book 2865, at Page 179 (collectively, the
"Lease Documents"), by which the Individual Trustee, as landlord, leased the
Property to Capital Realty, as tenant. As security for the performance by
Capital Realty of its obligations under the Lease, Capital One executed and
delivered to the Owner Trustees its Guaranty dated as of October 14, 1998 (the
"Guaranty");
D. Capital Realty is constructing an addition consisting of a kitchen
facility (the "Addition"), to the existing improvements located on the Knolls
Office Building Parcel. Capital Realty has filed an amended plan of development
for the Addition which plan provides for an adjustment to a portion of the
common boundary line of the Knolls Office Building Parcel and the Operations
Center Parcel. The adjustment of the common boundary line will result in an
increase of 0.087 acre to the Knolls Office Building Parcel and a decrease of
0.087 acre to the Operations Center Parcel. The 0.087 acre is more
particularly described in Exhibit A hereto and is hereinafter referred to as the
"Additional Adjustment Parcel".
E. The parties hereto now desire to amend the legal descriptions of the
Knolls Office Building Parcel and the Operations Center Parcel with respect to
the Additional Adjustment Parcel.
F. All capitalized terms not defined herein shall have the same
meanings as set forth in the Lease Documents.
<PAGE>
AMENDMENT
- ---------
FOR and in consideration of the foregoing of the foregoing premises, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. The legal description for the Knolls Office Building Parcel set forth
in Schedule A to each of the Lease Documents is deleted in its entirety and the
legal description set forth on Exhibit A hereto is substituted therefor.
2. The legal description for the Operations Center Parcel set forth in
Schedule A to each of the Lease Documents is deleted in its entirety and the
legal description set forth on Exhibit B hereto is substituted therefor
3. Except to the extent modified and amended hereby, each of the Lease
Documents remain valid, binding and in full force and effect, and each of the
parties hereto ratifies and confirms the same.
4. First Security, as an Owner Trustee under the Trust, joins herein for
the sole purpose of acknowledging and consenting to the amendment accomplished
herein.
5. Capital One, as guarantor under the Guaranty joins herein for sole
purpose of acknowledging the amendment accomplished herein.
6. Capital Realty, as lessor under the Lease, joins herein for the sole
purpose of acknowledging the amendment accomplished herein.
7. This Amendment may be executed in counterpart, each of which shall be
deemed an original but all of which shall constitute one and the same document.
[SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment on their respective behalves.
FIRST SECURITY BANK, N.A.,
not individually but solely in its capacity
as owner trustee under that certain Amended
and Restated Trust Agreement dated as of
October 14, 1998
By: /s/ Val T. Orton (SEAL)
-----------------------------------
Name: Val T. Orton
Title: Vice President
STATE OF ________________________
City/County of _____________________, to-wit:
The foregoing instrument was acknowledged before me this _____ day of
________________, 1999, by First Security Bank, N.A., a ________________, as
Owner Trustee under the COB Real Estate Trust 1995-1 as amended by that certain
Amended and Restated Trust Agreement dated as of October 14, 1998, on behalf of
said trust.
My commission expires:
/s/
----------------------------------
Notary Public
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment on their respective behalves.
/s/ Val T. Orton (SEAL)
--------------------------------
Val T. Orton, not individually, but solely
as Owner Trustee under the COB Real
Estate Trust 1995-1, as amended by that
certain Amended and Restated Trust
Agreement dated as of October 14, 1998
STATE OF UTAH
City/County of _____________________, to-wit:
The foregoing instrument was acknowledged before me this _____ day of
________________, 1999, by Val T. Orton, not individually, but solely as Owner
Trustee under the COB Real Estate Trust 1995-1 as amended by that certain
Amended and Restated Trust Agreement dated as of October 14, 1998, on behalf of
said trust.
My commission expires:
/s/
----------------------------------
Notary Public
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment on their respective behalves.
CAPITAL ONE BANK,
a Virginia corporation
By: /s/ Stephen Linehan (SEAL)
--------------------------------
Name: Stephen Linehan
Title: Manager, Corporate Funding
COMMONWEALTH OF VIRGINIA
City/County of ___________________, to-wit:
The foregoing instrument was acknowledged before me this _____ day of
____________________, 1999, by __________________________________, the duly
authorized ____________________________ of Capital One Bank, a Virginia
corporation, on behalf of said corporation.
My commission expires:
/s/
----------------------------------
Notary Public
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Amendment on their respective behalves.
CAPITAL ONE REALTY, INC.,
a Delaware corporation
By: /s/ Stephen Linehan (SEAL)
-----------------------------
Name: Stephen Linehan
Title: Manager, Corporate Funding
COMMONWEALTH OF VIRGINIA
City/County of ___________________, to-wit:
The foregoing instrument was acknowledged before me this _____ day of
____________________, 1999, by __________________________________, the duly
authorized ____________________________ of Capital One Realty, Inc., a Delaware
corporation, on behalf of said corporation.
My commission expires:
/s/
----------------------------------
Notary Public
<PAGE>
EXHIBIT A
---------
PARCEL 1
KNOLLS OFFICE BUILDING
LEGAL DESCRIPTION
Tract 1
- -------
ALL that certain lot, piece or parcel of land, together with all
improvements thereon and appurtenances thereunto belonging, situated, lying and
being in the Three Chopt District, Henrico County, Virginia, more particularly
described as follows:
Situated, lying, and being in the Three Chopt District of Henrico
County, Virginia, and being more particularly described as follows:
BEGINNING at a nail set on the east line of Cox Road, said point being
621.74 feet from the east line of North Park Drive;
Thence along a curve to the left having a radius of 730.00 feet and an
arc length of 129.55 feet, being subtended by a chord of North 19 53' 21" East
for a distance of 129.38 feet to a rod set;
Thence North 14 48' 18" East for a distance of 540.93 feet to a nail
set;
Thence along a curve to the right having a radius of 40.00 feet and an
arc length of 39.27 feet, being subtended by a chord of North 42 55' 50" East
for a distance of 37.71 feet to a rod set;
Thence along a curve to the left having a radius of 50.00 feet and an
arc length of 148.20 feet, being subtended by a chord of North 13 51' 31" West
for a distance of 99.61 feet to a brick nail found;
Thence North 14 48' 18" East for a distance of 38.09 feet to a brick
nail found;
Thence South 82 00' 00" East for a distance of 591.56 feet to a point;
Thence South 14 48' 18" West for a distance of 620.88 feet to a rod
set;
Thence South 82 18' 18" West for a distance of 195.14 feet to a rod
set;
Thence South 32 00' 21" West for a distance of 120.34 feet to a nail
set;
Thence South 82 18' 18" West for a distance of 268.63 feet to a rod
set;
Thence North 67 13' 29" West for a distance of 105.83 feet to a nail
set; and being the point of beginning.
Said property contains 9.735 acres more or less.
<PAGE>
Tract 2
- -------
ALL that certain lot, piece or parcel of land, together with all improvements
thereon and appurtenances thereto belonging, situated, lying and being in the
Three Chopt District, Henrico County, Virginia, containing 0.087 acre and being
more fully shown and described on that certain plat prepared by Foster & Miller,
P.C., dated July 14, 1999, entitled "COMPILED PLAT OF 0.087 ACRE LOCATED EAST OF
COX ROAD, THREE CHOPT DISTRICT, HENRICO COUNTY, VIRGINIA", a copy of which plat
is attached hereto and incorporated herein by reference.
<PAGE>
EXHIBIT B
---------
PARCEL 2
OPERATIONS CENTER
LEGAL DESCRIPTION
ALL that certain lot, piece or parcel of land, together with all
improvements thereon and appurtenances thereunto belonging, situated, lying and
being in the Three Chopt District, Henrico County, Virginia, more particularly
described as follows:
BEGINNING at a 1/2" rod set, said 1/2" rod being North 74 50' 33" West
153.65 feet from the western line of Fort McHenry Parkway; thence North 74 50'
33" West 704.14 feet to a 1/2" rod set; thence North 07 41' 23" West 54.36 feet
to a 1/2" rod set; thence North 22 04' 50" West 30.17 feet to a 1/2" rod set;
thence North 14 48' 18" East 1060.88 feet to 5/8" rod found; thence North 84 04'
51" East 547.01 feet to a nail found; thence South 04 57' 26" West 1353.08 feet
to the 1/2" rod set and point and place of beginning, containing 783,452.2
square feet or 17.9856 acres
LESS AND EXCEPT the tract of land containing 0.087 acre described as Tract 2 of
Parcel 1 in Schedule A hereto.
<PAGE>
EXHIBIT 10.17.4
---------------
AMENDMENT NO. 1 dated as of April 1, 1999 between:
CAPITAL ONE BANK, a Virginia banking corporation duly organized and validly
existing under the laws of the State of Virginia (the "Guarantor"); and
---------
FIRST SECURITY BANK, N.A., a national banking association having an address
at 79 South Main Street, Salt Lake City, Utah 84111, and Val T. Orton, not
individually but solely in their capacities as owner trustee (the "Owner
Trustee") of the Capital One Bank Real Estate Trust 1995-1 (the "Lessor").
The Guarantor has executed a Guaranty dated as of October 14, 1998 (the
"Guaranty") in favor of the Lessor and the Obligees defined therein.
The Guarantor has requested that the Lessor agree and the required Obligees
consent, and the Lessor and the required Obligees are willing, to amend Section
3.1(b) of the Guaranty, all on the terms and conditions of this Amendment.
Accordingly, in consideration of the premises and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. Terms used but not defined herein shall have the
-----------
respective meanings ascribed to such terms in the Guaranty.
Section 2. Amendment. Subject to the satisfaction of the conditions to
---------
effectiveness specified in Section 4 hereof, but with effect on and after the
date hereof, the Guaranty shall be amended as follows:
(a) Section 3.1(b) of the Guaranty shall be deleted in its entirety and the
following paragraph shall be substituted therefor:
"(b) Annual Statements - within 120 days after the end of each
-----------------
fiscal year of the Guarantor, copies of
(i) a consolidated report of condition of the Guarantor and
its Subsidiaries as at the end of such year,
(ii) consolidated reports of income and changes in equity
capital and cash flows of the Guarantor and its
Subsidiaries, for such year,
<PAGE>
(iii) a consolidated report of the condition of the Parent
and its Subsidiaries, which requirement may be
satisfied by providing the documents required by
Section 3(c), and
(iv) consolidated reports of income and changes in equity
capital and cash flows of the Parent and its
Subsidiaries, which requirement may be satisfied by
providing the documents required by Section 3(c),
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied, in the case of subparagraphs (iii) and
(iv) above,
(1) by an opinion thereon of independent public accountants
of recognized national standing, which opinion shall
state that such financial statements present fairly, in
all material respects, the financial position of the
companies being reported upon and their results of
operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such
accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances, and
(2) a certificate of such accountants stating that they
have reviewed this Guaranty and stating further
whether, in making their audit, they have become aware
of any condition or event that then constitutes a Lease
Default or a Lease Event of Default, and, if they are
aware that any such condition or event then exists,
specifying the nature and period of the existence
thereof (it being understood that such accountants
shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Lease Default or
Lease Event of Default unless such accountants should
have obtained knowledge thereof in making an audit in
accordance with generally accepted auditing standards
or did not make such an audit);"
Section 3. Representations and Warranties. The Guarantor represents and
------------------------------
warrants to the Lessor that (a) this Amendment has been duly and validly
executed and delivered by the Guarantor and constitutes the Guarantor's legal,
valid binding obligation, enforceable against the Guarantor in accordance with
its terms, and (b) no Lease Default or Lease Event of Default has occurred and
is continuing. It shall be a Lease Event of Default for all purposes of the
Guaranty, as amended hereby, if any representation, warranty or certification
made by the Guarantor in this Amendment shall
<PAGE>
prove to have been false or misleading as of the time made or furnished in any
material respect.
Section 4. Conditions To Effectiveness. The amendment to the Guaranty set
---------------------------
forth in Section 2 hereof shall become effective, as of the date hereof, upon
the receipt by the Guarantor and the Lessor of this Amendment, duly executed and
delivered by the parties hereto, and consented to by the Obligees as required by
Section 6.5 of the Guaranty.
Section 5. Documents Otherwise Unchanged. Except as herein provided, the
-----------------------------
Guaranty shall remain unchanged and in full force and effect, and each reference
to the Guaranty and words of similar import in the Guaranty, as amended hereby,
and in the other Operative Documents to which the Guarantor is a party shall be
a reference to the Guaranty as amended hereby and as the same may be further
amended, supplemented and otherwise modified and in effect from time to time.
Section 6. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be identical and all of which, when taken
together, shall constitute one and the same instrument, and any of the parties
hereto may execute this Amendment by signing any such counterpart manually or by
facsimile.
Section 7. Expenses. Without limiting its obligations under the Guaranty,
--------
the Guarantor agrees to pay, on demand, all reasonable out-of-pocket costs and
expenses of the Lessor and the Obligees (including legal fees and disbursements)
incurred in connection with the negotiation, preparation, execution and delivery
of this Amendment.
Section 8. Binding Effect. This Amendment shall be binding upon and inure
--------------
to the benefit of the parties hereto and their respective successors and
assigns.
Section 9. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
GUARANTOR
---------
CAPITAL ONE BANK
/s/ Stephen Linehan
By:-----------------------------------
Name: Stephen Linehan
Title: Manager, Corporate Funding
LESSOR
------
FIRST SECURITY BANK, N.A., as Owner Trustee
/s/ Val T. Orton
By:-----------------------------------
Name: Val T. Orton
Title: Vice President
/s/ Val T. Orton
--------------------------------------
Val T. Orton, as Owner Trustee
Consented hereto by:
OBLIGEES
--------
AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
ALL AMERICAN LIFE INSURANCE COMPANY
AMERICAN GENERAL LIFE INSURANCE
COMPANY OF NEW YORK
<PAGE>
AMERICAN GENERAL ASSURANCE COMPANY
/S/
By:____________________________
Name:
Title:
LIFE REASSURANCE CORPORATION OF
AMERICA
/S/
By:___________________________
Name:
Title:
SUNAMERICA LIFE INSURANCE COMPANY
/S/
By:___________________________
Name:
Title:
J. ROMEO & CO.
/S/
By:___________________________
Name:
Title:
GENERAL AMERICAN LIFE INSURANCE
COMPANY
/S/
By:___________________________
Name:
Title:
<PAGE>
AMERICAN INVESTORS LIFE INSURANCE
COMPANY
/S/
By:___________________________
Name:
Title:
RELIASTAR UNITED SERVICES LIFE
INSURANCE COMPANY
/S/
By:_____________________________
Name:
Title:
RELIASTAR LIFE INSURANCE COMPANY
/S/
By:___________________________
Name:
Title:
NORTHERN LIFE INSURANCE COMPANY
/S/
By:___________________________
Name:
Title:
COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
/S/
By:___________________________
Name:
Title:
<PAGE>
HARE & CO.
/S/
By:___________________________
Name:
Title:
AUSA LIFE INSURANCE COMPANY, INC.
/S/
By:___________________________
Name:
Title:
<PAGE>
Exhibit 10.18.1
---------------
[EXECUTION
COUNTERPART]
CAPITAL ONE FINANCIAL CORPORATION
CAPITAL ONE BANK
CAPITAL ONE, F.S.B.
-------
$1,200,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of May 25, 1999
(Originally dated as of November 17, 1995,
and amended and restated as of November 25, 1996)
-------
NATIONSBANK, N.A.
DEUTSCHE BANK AG
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Syndication Agents
CHASE SECURITIES INC.
as Book Manager and Lead Arranger
THE CHASE MANHATTAN BANK
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Definitions and Accounting Matters................................................................................ 1
1.01 Certain Defined Terms.............................................................................................. 1
1.02 Accounting Terms and Determinations................................................................................ 22
1.03 Tranches, Currencies and Types of Loans............................................................................ 23
1.04 EMU................................................................................................................ 23
SECTION 2. Commitments, Loans, and Prepayments............................................................................... 25
2.01 Syndicated Loans................................................................................................... 25
2.02 Borrowings of Syndicated Loans..................................................................................... 27
2.03 Money Market Loans................................................................................................. 27
2.04 Changes of Commitments............................................................................................. 32
2.05 Fees............................................................................................................... 33
2.06 Lending Offices.................................................................................................... 34
2.07 Several Obligations; Remedies Independent.......................................................................... 34
2.08 Evidence of Debt................................................................................................... 35
2.09 Prepayments........................................................................................................ 35
2.10 Extension of Commitment Termination Date........................................................................... 36
2.11 Increases in Commitments........................................................................................... 38
2.12 Undertaking of COB................................................................................................. 40
SECTION 3. Payments of Principal and Interest................................................................................ 41
3.01 Repayment of Loans................................................................................................. 42
3.02 Interest........................................................................................................... 42
SECTION 4. Payments; Pro Rata Treatment; Computations; Etc................................................................... 42
4.01 Payments........................................................................................................... 42
4.02 Pro Rata Treatment................................................................................................. 44
4.03 Computations....................................................................................................... 44
4.04 Minimum Amounts.................................................................................................... 44
4.05 Certain Notices.................................................................................................... 45
4.06 Non-Receipt of Funds by the Administrative Agent................................................................... 46
4.07 Sharing of Payments, Etc........................................................................................... 46
SECTION 5. Yield Protection, Etc............................................................................................. 48
5.01 Additional Costs................................................................................................... 48
5.02 Limitation on Types of Loans....................................................................................... 50
5.03 Illegality; Agreed Alternative Currencies.......................................................................... 50
5.04 Treatment of Affected Loans........................................................................................ 51
5.05 Compensation....................................................................................................... 51
5.06 U.S. Taxes......................................................................................................... 52
</TABLE>
Credit Agreement
----------------
<PAGE>
-ii-
<TABLE>
<S> <C>
5.07 Replacement of Lenders............................................................................................. 54
SECTION 6. Conditions Precedent.............................................................................................. 54
6.01 Conditions to Effectiveness........................................................................................ 54
6.02 Initial and Subsequent Loans....................................................................................... 56
SECTION 7. Representations and Warranties.................................................................................... 56
7.01 Corporate Existence................................................................................................ 56
7.02 Financial Condition................................................................................................ 57
7.03 Litigation......................................................................................................... 57
7.04 No Breach.......................................................................................................... 57
7.05 Action............................................................................................................. 57
7.06 Approvals.......................................................................................................... 58
7.07 Use of Credit...................................................................................................... 58
7.08 ERISA.............................................................................................................. 58
7.09 Taxes.............................................................................................................. 58
7.10 Investment Company Act............................................................................................. 58
7.11 Public Utility Holding Company Act................................................................................. 58
7.12 Environmental Matters.............................................................................................. 59
7.13 True and Complete Disclosure....................................................................................... 59
7.14 Year 2000.......................................................................................................... 59
SECTION 8. Covenants......................................................................................................... 60
8.01 Financial Statements Etc........................................................................................... 60
8.02 Litigation......................................................................................................... 64
8.03 Existence, Etc..................................................................................................... 64
8.04 Insurance.......................................................................................................... 65
8.05 Prohibition of Fundamental Changes................................................................................. 65
8.06 Limitation on Liens................................................................................................ 66
8.07 Financial Covenants................................................................................................ 67
8.08 Regulatory Capital................................................................................................. 68
8.09 Lines of Business.................................................................................................. 68
8.10 Use of Proceeds.................................................................................................... 68
SECTION 9. Events of Default................................................................................................. 69
SECTION 10. The Administrative Agent......................................................................................... 72
10.01 Appointment, Powers and Immunities................................................................................ 72
10.02 Reliance by Administrative Agent.................................................................................. 73
10.03 Defaults.......................................................................................................... 73
10.04 Rights as a Lender................................................................................................ 73
10.05 Indemnification................................................................................................... 74
10.06 Non-Reliance on Administrative Agent and Other Lenders............................................................ 74
10.07 Failure to Act.................................................................................................... 75
</TABLE>
Credit Agreement
----------------
<PAGE>
-iii-
<TABLE>
<S> <C>
10.08 Resignation or Removal of Administrative Agent.................................................................... 75
10.09 Co-Agents; Etc.................................................................................................... 75
SECTION 11. Miscellaneous.................................................................................................... 75
11.01 Waiver............................................................................................................ 75
11.02 Notices........................................................................................................... 75
11.03 Expenses, Etc..................................................................................................... 76
11.04 Amendments, Etc................................................................................................... 77
11.05 Successors and Assigns............................................................................................ 78
11.06 Assignments and Participations.................................................................................... 78
11.07 Survival.......................................................................................................... 80
11.08 Captions.......................................................................................................... 81
11.09 Counterparts...................................................................................................... 81
11.10 Governing Law; Submission to Jurisdiction......................................................................... 81
11.11 Waiver of Jury Trial.............................................................................................. 81
11.12 Treatment of Certain Information; Confidentiality................................................................. 81
</TABLE>
SCHEDULE 2.01 -- Commitments
SCHEDULE 7.03 -- Certain Litigation
EXHIBIT A-1 -- Form of Tranche A-($) Note
EXHIBIT A-2 -- Form of Tranche A-(MC) Note
EXHIBIT A-3 -- Form of Tranche B-($) Note
EXHIBIT A-4 -- Form of Tranche B-(MC) Note
EXHIBIT A-5 -- Form of Money Market Note
EXHIBIT B-1 -- Form of Opinion of McGuire, Woods, Battle & Boothe, special
counsel to the Borrowers
EXHIBIT B-2 -- Form of Opinion of John G. Finneran, Jr., Esq., counsel to the
Borrowers
EXHIBIT C -- Form of Opinion of Milbank, Tweed, Hadley & McCloy LLP,
special New York counsel to Chase
EXHIBIT D -- Form of Notice of Borrowing of Syndicated Loans
EXHIBIT E -- Form of Money Market Quote Request
EXHIBIT F -- Form of Money Market Quote
EXHIBIT G -- Form of Confidentiality Agreement
EXHIBIT H -- Form of Assignment and Acceptance
EXHIBIT I -- Form of Commitment Increase Letter
EXHIBIT J -- Form of Drawing Certificate
Credit Agreement
----------------
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 25, 1999
among:
CAPITAL ONE FINANCIAL CORPORATION, a corporation organized under the
laws of the State of Delaware ("COFC");
----
CAPITAL ONE BANK, a bank organized under the laws of the Commonwealth
of Virginia ("COB");
---
CAPITAL ONE, F.S.B., a Federal savings bank organized under the laws
of the United States of America ("FSB"; each of COFC, COB and FSB is herein
---
referred to as a "Borrower" and, collectively, as the "Borrowers");
-------- ---------
each lender that is a signatory hereto identified under the caption
"LENDERS" on the signature pages hereto and each lender that becomes a
"Lender" after the date hereof pursuant to Section 11.06(b) hereof
(individually, a "Lender" and, collectively, the "Lenders"); and
------ -------
THE CHASE MANHATTAN BANK, as agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
--------------------
COFC, COB, FSB, certain Lenders and the Administrative Agent are party
to an Amended and Restated Credit Agreement dated as of November 25, 1996 (as
modified and supplemented and in effect immediately prior to the Restatement
Effective Date referred to below, the "Existing Credit Agreement"). The
-------------------------
Borrowers have requested that the Lenders and the Administrative Agent agree to
amend and restate the Existing Credit Agreement, and the Lenders and the
Administrative Agent are willing to amend and restate the Existing Credit
Agreement, all as provided herein.
Accordingly, the parties hereto agree to amend and restate the
Existing Credit Agreement so that, as amended and restated, it reads in its
entirety as provided herein.
SECTION 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms. As used herein, the following terms shall
---------------------
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
---- -----
"Administrative Agent's Account" shall mean (a) in respect of (i)
------------------------------
Dollars, the account of the Administrative Agent most recently designated by the
Administrative Agent for such purpose by notice to the Lenders, (ii) Canadian
Dollars, account number 219-442-1 maintained by Chase with Royal Bank of Canada,
Toronto, Ontario, Canada, (iii) Pounds Sterling, Chase Manhattan International
Limited CHAPS sort code 40-52-06, (iv) French Francs, account number 6001600037
maintained by Chase with Chase Manhattan Bank AG, Frankfurt Branch, Frankfurt,
Germany, (v) Deutschemarks, account number 6001600037 maintained by Chase with
The Chase Manhattan Bank AG, Frankfurt
Credit Agreement
----------------
<PAGE>
-2-
Branch, Frankfurt Germany, (vi) Euros, account number 6001600037 maintained by
Chase with The Chase Manhattan Bank AG, Frankfurt Branch, Frankfurt Germany,
(vii) Japanese Yen, account number 3401211523550 maintained by Chase with The
Chase Manhattan Bank, Tokyo Branch, Tokyo, Japan and (viii) Swiss Francs,
account number PO 120487 maintained by Chase with Swiss Bank Corporation,
Zurich, Switzerland or (b) any other account in respect of any Alternative
Currency as the Administrative Agent shall designate in a notice to the
Borrowers and the Lenders.
"Administrative Questionnaire" shall mean an Administrative
----------------------------
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" shall mean, with respect to any specified Person, any
---------
other Person that directly or indirectly controls, or is under common control
with, or is controlled by, the specified Person. As used in this definition,
"control" (including, with its correlative meanings, "controlled by" and "under
------- ------------- -----
common control with") shall mean possession, directly or indirectly, of power to
- -------------------
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise). Notwithstanding the foregoing, (a) no individual shall be an
Affiliate of a specified Person solely by reason of his or her being a director,
officer or employee of such specified Person or any of its Subsidiaries and (b)
a Person and its Subsidiaries shall not be Affiliates of one another.
"Agreed Alternative Currency" shall mean at any time any of Canadian
---------------------------
Dollars, Euros, French Francs, Deutschemarks, Japanese Yen, Pounds Sterling and
Swiss Francs, so long as at such time, (a) such currency is dealt with in the
London interbank deposit market, (b) such currency is freely transferable and
convertible into Dollars in the London foreign exchange market and (c) no
central bank or other governmental authorization in the country of issue of such
currency is required to permit use of such currency by any Lender for making any
Loan hereunder and/or to permit the relevant Borrower to borrow and repay the
principal thereof and to pay the interest thereon, unless such authorization has
been obtained.
"Alternative Currency" shall mean at any time any Agreed Alternative
--------------------
Currency and any other currency (other than Dollars) so long as at such time,
(a) such currency is dealt with in the London interbank deposit market, (b) such
currency is freely transferable and convertible into Dollars in the London
foreign exchange market and (c) no central bank or other governmental
authorization in the country of issue of such currency is required to permit use
of such currency by any Lender for making any Loan hereunder and/or to permit
the relevant Borrower to borrow and repay the principal thereof and to pay the
interest thereon, unless such authorization has been obtained.
"Applicable Borrower" shall mean (a) with respect to any Commitment,
-------------------
Loan or Note relating to Tranche A-($) or Tranche A-(MC), COB or FSB and (b)
with respect to any Commitment, Loan or Note relating to Tranche B-($) or
Tranche B-(MC), COFC, COB or FSB.
Credit Agreement
----------------
<PAGE>
-3-
"Applicable Facility Fee Percentage", "Applicable Margin" with respect
---------------------------------- -----------------
to Eurocurrency Loans and "Applicable Utilization Fee Percentage" shall mean,
-------------------------------------
for any day, the respective rate per annum set forth in the table below opposite
the Rating Level prevailing on such day under the caption "Applicable Facility
Fee Percentage", "Applicable Margin" or "Applicable Utilization Fee Percentage",
as the case may be:
================================================================================
Applicable
Rating Level Applicable Facility Applicable Utilization Fee
Fee Percentage Margin Percentage
- --------------------------------------------------------------------------------
Rating Level 1 0.125% 0.225% 0.050%
- --------------------------------------------------------------------------------
Rating Level 2 0.150% 0.350% 0.100%
- --------------------------------------------------------------------------------
Rating Level 3 0.175% 0.450% 0.125%
- --------------------------------------------------------------------------------
Rating Level 4 0.250% 0.750% 0.250%
- --------------------------------------------------------------------------------
Rating Level 5 0.375% 1.125% 0.500%
================================================================================
Each change in the Applicable Facility Fee Percentage, Applicable Margin with
respect to Eurocurrency Loans and the Applicable Utilization Fee Percentage
resulting from a change in the Debt Rating shall become effective on the date of
announcement or publication by the respective Rating Agencies of a change in the
Debt Rating or, in the absence of such announcement or publication, on the
effective date of such change. The "Applicable Margin" with respect to Base
-----------------
Rate Loans shall mean, for any day, 0%.
With respect to any facility fee, utilization fee or interest payable
under Sections 2.05(a), 2.05(b) and 3.02 hereof:
(a) the Applicable Facility Fee Percentage, Applicable Margin and
Applicable Utilization Fee Percentage with respect to Tranche A-($) or
Tranche A-(MC) shall be computed solely by reference to the Rating Level of
COB;
(b) the Applicable Facility Fee Percentage with respect to Tranche B-
($) or Tranche B-(MC) on any date of determination shall be computed by
reference to the Rating Level of the Borrower that results in the accrual
on such day under Section 2.05(a) hereof of the greatest amount of facility
fee; and
(c) with respect to any utilization fee or interest payable by any
Borrower under Tranche B-($) or Tranche B-(MC), the Applicable Utilization
Fee Percentage and
Credit Agreement
----------------
<PAGE>
-4-
Applicable Margin shall be computed by reference to the Rating Level of
such Borrower.
"Applicable Lending Office" shall mean, for each Lender and for each
-------------------------
Type and Currency of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for such Type and Currency of Loan in its
Administrative Questionnaire or such other office of such Lender (or of an
affiliate of such Lender) as such Lender may from time to time specify to the
Administrative Agent and the Borrowers as the office by which its Loans of such
Type and Currency are to be made and maintained.
"Assignment and Acceptance" shall mean an assignment and acceptance
-------------------------
entered into by a Lender and an assignee (with the consent of any Person whose
consent is required by Section 11.06(b) hereof), and accepted by the
Administrative Agent, in the form of Exhibit H or any other form approved by the
Administrative Agent.
"Average", as used in Section 2.05 hereof with respect to the
-------
aggregate outstanding principal amount of any Loans or the aggregate amount of
any Commitments, shall mean, for any Computation Period, the average aggregate
outstanding principal amount of such Loans or the average aggregate amount of
such Commitments, as the case may be, over such Computation Period (excluding
the last day of such Computation Period).
"Bank Regulatory Authority" shall mean the Board of Governors of the
-------------------------
Federal Reserve System, the Comptroller of the Currency, the Federal Deposit
Insurance Corporation and all other relevant bank regulatory authorities
(including, without limitation, relevant state bank regulatory authorities).
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
---------------
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
----
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Syndicated Loans that bear interest at
---------------
rates based upon the Base Rate.
"Basic Documents" shall mean this Agreement and the Notes.
---------------
"Basle Accord" shall mean the proposals for risk-based capital
------------
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
"Business Day" shall mean any day (a) on which commercial banks are
------------
not
Credit Agreement
----------------
<PAGE>
-5-
authorized or required to close in New York City, (b) if such day relates to
the giving of notices or quotes in connection with a LIBOR Auction in respect of
a Loan denominated in Dollars or to a borrowing of, a payment or prepayment of
principal of or interest on, or the Interest Period for, a Eurocurrency Loan or
a LIBOR Market Loan denominated in Dollars or a notice by a Borrower with
respect to any such borrowing, payment, prepayment or Interest Period, that is
also a day on which dealings in Dollar deposits are carried out in the London
interbank market, (c) if such day relates to the giving of notices or quotes in
connection with a LIBOR Auction in respect of a Loan denominated in an
Alternative Currency other than the Euro or to a borrowing of, a payment or
prepayment of principal of or interest on, or the Interest Period for, a
Eurocurrency Loan or a LIBOR Market Loan denominated in an Alternative Currency
other than the Euro or a notice by a Borrower with respect to any such
borrowing, payment, prepayment or Interest Period, that is also a day on which
commercial banks and foreign exchange markets settle payments in the Principal
Financial Center for the Currency in which such Loan is denominated and (d) if
such day relates to the giving of notices or quotes in connection with a LIBOR
Auction in respect of a Loan denominated in Euros or to a borrowing of, a
payment or prepayment of principal of or interest on, or the Interest Period
for, a Eurocurrency Loan or a LIBOR Market Loan denominated in Euros, or a
notice by a Borrower with respect to any such borrowing, payment, prepayment or
Interest Period, that is also a TARGET Business Day on which commercial banks
are generally open for business in London, New York City and Frankfurt and in
any other Principal Financial Center as the Administrative Agent shall from time
to time determine for this purpose.
"Canadian Dollars" shall mean lawful money of Her Majesty in Right of
----------------
Canada.
"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Chase" shall mean The Chase Manhattan Bank, in its individual
-----
capacity and not in its capacity as Administrative Agent.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"COFC Cumulative Equity Proceeds" shall mean, as of any date of
-------------------------------
determination, the aggregate amount of all cash received on or prior to such
date of determination by COFC and its Subsidiaries in respect of any Equity
Issuance effected after March 31, 1999, net of reasonable expenses incurred by
COFC and its Subsidiaries in connection therewith.
"COFC Cumulative Net Income" shall mean, as of any date of
--------------------------
determination, the aggregate net operating income of COFC and its consolidated
Subsidiaries (determined on a
Credit Agreement
----------------
<PAGE>
-6-
consolidated basis without duplication in accordance with GAAP) for each fiscal
quarter of COFC (a) commencing with the fiscal quarter ended June 30, 1999 and
(b) ending with the fiscal quarter most recently ended on or prior to such date
of determination; provided that COFC Cumulative Net Income shall be determined
--------
exclusive of any fiscal quarter of COFC for which the net operating income of
COFC and its consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP) is less than zero.
"Commitment" shall mean a Tranche A-($) Commitment, Tranche A-(MC)
----------
Commitment, Tranche B-($) Commitment or Tranche B-(MC) Commitment.
"Commitment Increase Date" shall have the meaning assigned to such
------------------------
term in Section 2.11(b) hereof.
"Commitment Increase Letter" shall have the meaning assigned to such
--------------------------
term in Section 2.11(b) hereof.
"Commitment Termination Date" shall mean a Tranche A-($) Commitment
---------------------------
Termination Date, Tranche A-(MC) Commitment Termination Date, Tranche B-($)
Commitment Termination Date or Tranche B-(MC) Commitment Termination Date.
"Computation Period" shall mean, with respect to any utilization fee
------------------
payable under Section 2.05 hereof, (a) the period from and including the date
hereof to and including the first day on which such utilization fee is payable
under Section 2.05(c) hereof and (b) thereafter, each period from and including
the last day of the immediately preceding Computation Period to and including
the next succeeding day on which such utilization fee is payable under Section
2.05(c) hereof.
"Currency" shall mean Dollars or any Alternative Currency.
--------
"Debt Rating" shall mean, as of any date of determination thereof and
-----------
with respect to any Borrower, the ratings most recently published by the Rating
Agencies relating to the unsecured, unsupported senior long-term debt
obligations of such Borrower; provided that (a) the Debt Rating on any date of
--------
determination with respect to FSB shall be deemed to be the Debt Rating on such
date applicable to COB, (b) if a rating is not at any time assigned by a Rating
Agency to the unsecured, unsupported senior long-term debt obligations of COFC,
the rating assigned to such obligations by such Rating Agency shall be deemed to
be one rating subcategory below the rating assigned by such Rating Agency to the
unsecured, unsupported senior long-term debt obligations of COB and (c) if a
rating is not at any time assigned by at least two Rating Agencies to the
unsecured, unsupported senior long-term debt obligations of COB, the Debt Rating
of COB will be deemed to fall in Rating Level 5.
"Default" shall mean an Event of Default or an event that with notice
-------
or lapse of time or both would become an Event of Default.
"Defaulting Lender" shall have the meaning assigned to such term in
-----------------
Credit Agreement
----------------
<PAGE>
-7-
Section 11.04 hereof.
"Delinquency Ratio" shall mean, on any date and with respect to any
-----------------
Borrower, the ratio of (a) all Past Due Receivables with respect to such
Borrower on such date to (b) the aggregate amount of all Managed Receivables
with respect to such Borrower on such date; provided that "Delinquency Ratio"
--------
shall mean, on any date with respect to FSB, the ratio (computed with respect to
COB and FSB on a combined basis, but without any intercompany eliminations) of
(i) all Past Due Receivables of COB and FSB on such date to (ii) the aggregate
amount of all Managed Receivables of COB and FSB on such date.
"Deutschemarks" shall mean lawful money of the Federal Republic of
-------------
Germany.
"Dollar Equivalent" shall mean, with respect to any Loan denominated
-----------------
in an Alternative Currency, the amount of Dollars that would be required to
purchase the amount of the Alternative Currency of such Loan on the date such
Loan is requested (or, in the case of Money Market Loans, the date of the
related Money Market Quote Request) or (with respect to any determination made
under Section 2.01(f) hereof) on the date of any borrowing referred to in said
Section, based upon the arithmetic mean (rounded upwards, if necessary, to the
nearest 1/100 of 1%), as determined by the Administrative Agent, of the spot
selling rate at which the Reference Lenders offer to sell such Alternative
Currency for Dollars in the London foreign exchange market at approximately
11:00 a.m. London time for delivery two Business Days later (or, in the case of
any Loan denominated in Canadian Dollars, one Business Day later).
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"Double Leverage Ratio" shall mean, on any date, the ratio of (a) the
---------------------
sum of (i) Intangibles with respect to COFC on such date plus (ii) the aggregate
----
investment of COFC on such date in the capital stock of its Subsidiaries as
reported pursuant to Section 8.01(a) or 8.01(b) hereof (including COFC's
interest in undistributed earnings of its Subsidiaries), to (b) Net Worth on
--
such date.
"EMU" means Economic and Monetary Union as contemplated in the Treaty
---
on European Union, as amended and in effect from time to time.
"EMU Legislation" means legislative measures of the European Council
---------------
(including without limitation European Council regulations) for the introduction
of, changeover to or operation of a single or unified European currency (whether
known as the euro or otherwise), being in part the implementation of the third
stage of EMU.
"Environmental Laws" shall mean any and all present and future
------------------
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes into the indoor or outdoor environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling
Credit Agreement
----------------
<PAGE>
-8-
of pollutants, contaminants, chemicals or toxic or hazardous substances or
wastes.
"Equity Issuance" shall mean (a) any issuance or sale by COFC or any
---------------
of its Subsidiaries of (i) any of its capital stock, (ii) any warrants or
options exercisable in respect of its capital stock (other than any warrants or
options issued to directors, officers or employees of COFC or any of its
Subsidiaries pursuant to employee benefit plans established in the ordinary
course of business and any capital stock of COFC issued upon the exercise of
such warrants or options) or (iii) any other security or instrument representing
an equity interest (or the right to obtain any equity interest) in COFC or any
of its Subsidiaries or (b) the receipt by COFC or any of its Subsidiaries from
any Person not a shareholder of COFC of any capital contribution (whether or not
evidenced by any equity security issued by the recipient of such contribution);
provided that Equity Issuance shall not include (i) any such issuance or sale by
- --------
any Subsidiary of COFC to COFC or any Wholly Owned Subsidiary of COFC or (ii)
any capital contribution by COFC or any Wholly Owned Subsidiary of COFC to any
Subsidiary of COFC.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that
---------------
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which any Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which any
Borrower is a member.
"Euro" means the single currency of Participating Member States of the
----
European Union.
"Euro Unit" means the currency unit of the Euro.
---------
"Eurocurrency Loans" shall mean Syndicated Loans that bear interest at
------------------
rates based on rates referred to in the definition of "Fixed Base Rate" in this
Section 1.01.
"Eurocurrency Rate" shall mean, for any Eurocurrency Loan for the
-----------------
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Fixed Base Rate for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
----------------
Section 9 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
"Excluded Representations" shall mean the representations and
------------------------
warranties made
Credit Agreement
----------------
<PAGE>
-9-
in (a) the last sentence of Section 7.02 hereof and (b) Section 7.03 hereof (but
only insofar as the representation and warranty in Section 7.03 hereof relates
to proceedings that could have a Material Adverse Effect of the type referred to
clause (a) of the definition thereof in this Section 1.01, but not of the type
referred to in clause (b), (c), (d) or (e) of the definition thereof in this
Section 1.01).
"Existing Credit Agreement" shall have the meaning set forth in the
-------------------------
introduction hereto.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended from
----
time to time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"Final Maturity Date" shall mean May 24, 2003; provided that if such
------------------- --------
day is not a Business Day, the Final Maturity Date shall be the immediately
preceding Business Day.
"Fixed Base Rate" shall mean, with respect to any Fixed Rate Loan
---------------
denominated in any Currency for the Interest Period therefor, the rate for
deposits in such Currency for a period comparable to such Interest Period which
appears on Telerate Page 3740 (if such Currency is Australian Dollars, Canadian
Dollars, French Francs, Italian Lira or Spanish Pesetas) or on Telerate Page
3750 (otherwise) as of 11:00 a.m., London time, on the day that is two London
Banking Days preceding the first day of such Interest Period; provided that, if
--------
such rate does not appear on the relevant Telerate Page, the "Fixed Base Rate"
shall be the arithmetic mean (rounded upwards, if necessary, to the nearest 1/16
of 1%), as determined by the Administrative Agent, of the rates per annum quoted
by the respective Reference Lenders at approximately 11:00 a.m. London time (or
as soon thereafter as practicable) on the day that is two London Banking Days
prior to (or in the case of a Fixed Rate Loan denominated in Euros, on such
other date as is customary in the relevant interbank market) the first day of
such Interest Period for the offering by the respective Reference Lenders to
leading banks in the London interbank market of deposits denominated in such
Currency having a term comparable to such Interest Period and in an amount
comparable to the principal amount of such Fixed Rate Loan to be made by the
respective Reference Lenders. If any Reference Lender is not participating in
any Fixed Rate Loans during the Interest Period therefor, the Fixed Base Rate
for such Loans for such Interest Period shall be determined by reference to the
amount of such Loans that such
Credit Agreement
----------------
<PAGE>
-10-
Reference Lender would have made or had outstanding had it been participating in
such Loan; provided that in the case of any LIBOR Market Loan, the Fixed Base
--------
Rate for such Loan shall be determined with reference to deposits of $25,000,000
(or its equivalent in any Alternative Currency). If any Reference Lender does
not timely furnish such information for determination of any Fixed Base Rate,
the Administrative Agent shall determine such Fixed Base Rate on the basis of
the information timely furnished by the remaining Reference Lenders.
"Fixed Rate Loans" shall mean Eurocurrency Loans and, for the purposes
----------------
of the definition of "Fixed Base Rate" in this Section 1.01 and in Section 5
hereof, LIBOR Market Loans.
"Foreign Currency Equivalent" shall mean, with respect to any amount
---------------------------
in Dollars, the amount of any Alternative Currency that could be purchased with
such amount of Dollars using the reciprocal of the foreign exchange rate(s)
specified in the definition of the term "Dollar Equivalent", as determined by
the Administrative Agent.
"French Francs" shall mean lawful money of the Republic of France.
-------------
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America applied on a basis consistent with those that, in
accordance with the second sentence of Section 1.02(a) hereof, are to be used in
making the calculations for purposes of determining compliance with this
Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
--------- ----------
have a correlative meaning.
"Indebtedness" shall mean, for any Person: (a) obligations created,
------------
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the
Credit Agreement
----------------
<PAGE>
-11-
respective indebtedness so secured has been assumed by such Person; (d) non-
contingent obligations of such Person (and, for the purposes of Sections 8.06
and 9(b) hereof, all contingent obligations of such Person) in respect of
letters of credit, bankers' acceptances or similar instruments issued or
accepted by banks and other financial institutions for account of such Person;
(e) Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.
"Insured Subsidiary" shall mean any insured depositary institution (as
------------------
defined in 12 U.S.C. (S)1813(c) (or any successor provision), as amended, re-
enacted or redesignated from time to time), that is controlled (within the
meaning of 12 U.S.C. (S)1841 (or any successor provision), as amended, re-
enacted or redesignated from time to time) by a Borrower.
"Intangibles" shall mean, as at any date and with respect to any
-----------
Borrower, the aggregate amount (to the extent reflected in determining the
consolidated stockholders' equity of such Borrower and its consolidated
Subsidiaries) of (a) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of assets of a going concern business made
within 12 months after the acquisition of such business) subsequent to September
30, 1996 in the book value of any asset by such Borrower or any of its
consolidated Subsidiaries, (b) all Investments in unconsolidated Subsidiaries
and all equity investments in Persons that are not Subsidiaries and (c) all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, anticipated future benefit of
tax loss carry-forwards, copyrights, organization or developmental expenses and
other intangible assets.
"Interest Period" shall mean:
---------------
(a) with respect to any Eurocurrency Loan, each period commencing on
the date such Eurocurrency Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as a Borrower may select as provided in Section 4.05 hereof,
except that each Interest Period that commences on the last Business Day of
a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end
on the last Business Day of the appropriate subsequent calendar month;
(b) with respect to any Set Rate Loan, the period commencing on the
date such Set Rate Loan is made and ending on any Business Day not less
than seven days thereafter, as a Borrower may select as provided in Section
2.03(b) hereof;
(c) with respect to any LIBOR Market Loan, the period commencing on
the date such LIBOR Market Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as a Borrower may select as provided in Section 2.03(b) hereof,
except that each Interest Period that commences on the last Business Day of
a calendar month (or any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end
on the last Business Day of the appropriate subsequent calendar month; and
Credit Agreement
----------------
<PAGE>
-12-
(d) with respect to any Base Rate Loan, the period commencing on the
date such Base Rate Loan is made and ending on the earlier of the first
Quarterly Date thereafter and the Commitment Termination Date for the
Tranche under which such Loan is made.
Notwithstanding the foregoing: (i) if any Interest Period for any Loan would
otherwise end after the Commitment Termination Date for the Tranche under which
such Loan is made, such Interest Period shall end on such Commitment Termination
Date; (ii) each Interest Period that would otherwise end on a day that is not a
Business Day shall end on the next succeeding Business Day (or, in the case of
an Interest Period for a Eurocurrency Loan or a LIBOR Market Loan, if such next
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); (iii) except as provided in clause (v) below, no
Interest Period for any Loan (other than a Base Rate Loan or a Set Rate Loan)
shall have a duration of less than one month and, if the Interest Period for any
Eurocurrency or LIBOR Market Loan would otherwise be a shorter period, such Loan
shall not be available hereunder for such period; (iv) no Borrower may select an
Interest Period for a Loan in any Alternative Currency which would extend beyond
the date on which such Alternative Currency ceases to be legal tender in its
respective country; and (v) if each Lender shall have notified the
Administrative Agent that the requested Interest Period is available (but
subject to the foregoing clauses (i) and (ii)), a Eurocurrency Loan or LIBOR
Market Loan may be made available for a specified Interest Period of less than
one month or for an Interest Period of nine or 12 months; provided that no Loan
--------
shall be made to FSB with an Interest Period in excess of six months.
"Investment" shall mean, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
sale); (b) the making of any deposit with, or advance, loan or other extension
of credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person), but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days arising in connection
with the sale of inventory or supplies by such Person in the ordinary course of
business; or (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person.
"Japanese Yen" shall mean lawful money of Japan.
------------
"Leverage Ratio" shall mean, on any date and with respect to any
--------------
Borrower, the ratio of (a) the sum (determined for such Borrower and its
consolidated Subsidiaries on a consolidated basis without duplication in
accordance with GAAP) of (i) the aggregate amount of Indebtedness outstanding on
such date (not including non-brokered deposit liabilities incurred by FSB or COB
in the ordinary course of business) minus (ii) the aggregate amount of all on-
-----
Credit Agreement
----------------
<PAGE>
-13-
balance sheet loans held for securitization on such date to (b) Tangible Net
Worth with respect to such Borrower on such date.
"LIBO Margin" shall have the meaning assigned to such term in Section
-----------
2.03(c)(ii)(C) hereof.
"LIBOR Auction" shall mean a solicitation of Money Market Quotes
-------------
setting forth LIBO Margins based on the Eurocurrency Rate pursuant to Section
2.03 hereof.
"LIBOR Market Loans" shall mean Money Market Loans the interest rates
------------------
on which are determined on the basis of Eurocurrency Rates pursuant to a LIBOR
Auction.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"Loans" shall mean Syndicated Loans and Money Market Loans.
-----
"Local Time" shall mean, with respect to any Loan denominated in or
----------
any payment to be made in any Currency, the local time in the Principal
Financial Center for the Currency in which such Loan is denominated or such
payment is to be made.
"London Banking Day" shall mean any day on which commercial banks are
------------------
open for business (including dealings in foreign exchange and foreign currency
deposits) in London, England.
"Majority Lenders" shall mean, subject to the last paragraph of
----------------
Section 11.04 hereof, Lenders having more than 50% of the aggregate amount of
the Commitments or, if the Commitments shall have terminated, Lenders holding
more than 50% of the aggregate unpaid principal amount of the Loans.
"Majority Tranche Lenders" with respect to any Tranche shall mean,
------------------------
subject to the last paragraph of Section 11.04 hereof, Lenders having more than
50% of the aggregate amount of the Commitments under such Tranche or, if the
Commitments under such Tranche shall have terminated, Lenders holding more than
50% of the aggregate unpaid principal amount of the Loans under such Tranche.
"Majority Tranche B Lenders" shall mean the Majority Tranche Lenders
--------------------------
with respect to Tranche B-($) and Majority Tranche Lenders with respect to
Tranche B-(MC).
"Managed Receivables" shall mean, on any date and with respect to any
-------------------
Borrower, the sum for such Borrower and its consolidated Subsidiaries
(determined on a
Credit Agreement
----------------
<PAGE>
-14-
consolidated basis without duplication in accordance with GAAP) of (a) all on-
balance sheet credit card loans and other finance receivables plus (b) all on-
----
sheet credit card loans and other finance receivables held for securitization
plus (c) all securitized credit card loans and other finance provided that, as
- ---- --------
the term "Managed Receivables" is used in definition of "Tier 1 Capital to
Managed Receivables Ratio", clauses (a), (b) and (c) above shall be determined
exclusive of securitized non-revolving finance receivables.
"Margin Stock" shall mean "margin stock" within the meaning of
------------
Regulations T, U and X.
"Material Adverse Effect" shall mean, with respect to a Borrower, a
-----------------------
material adverse effect on (a) the Property, business, operations, financial
condition, prospects or capitalization of such Borrower and its Subsidiaries
taken as a whole, (b) the ability of such Borrower to perform its obligations
under the Basic Documents, (c) the validity or enforceability of the obligations
of such Borrower under the Basic Documents, (d) the rights and remedies of the
Lenders and the Administrative Agent against such Borrower under the Basic
Documents or (e) the timely payment of the principal of or interest on the Loans
or other amounts payable by such Borrower in connection therewith.
"Money Market Borrowing" shall have the meaning assigned to such term
----------------------
to such term in Section 2.03(b) hereof.
"Money Market Loan Limit" shall have the meaning assigned to such term
-----------------------
in Section 2.03(c)(ii) hereof.
"Money Market Loans" shall mean the loans provided for by Section
------------------
2.03 hereof.
"Money Market Notes" shall mean any promissory notes in substantially
------------------
the form of Exhibit A-5 hereto issued pursuant to Section 2.08(d) hereof, and
all promissory notes delivered in substitution or exchange therefor, in each
case as the same shall be modified and supplemented and in effect from time to
time.
"Money Market Quote" shall mean an offer in accordance with Section
------------------
2.03(c) hereof by a Lender to make a Money Market Loan with one single specified
interest rate.
"Money Market Quote Request" shall have the meaning assigned to such
--------------------------
term in Section 2.03(b) hereof.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions have been made by any Borrower
or any ERISA Affiliate and that is covered by Title IV of ERISA.
"National Currency Unit" means a fraction or multiple of one Euro Unit
----------------------
expressed in units of the former national currency of any Participating Member
State.
Credit Agreement
----------------
<PAGE>
-15-
"Net Worth" shall mean, on any date , the consolidated stockholders'
---------
equity of COFC and its consolidated Subsidiaries, all determined as of such date
on a consolidated basis without duplication in accordance with GAAP.
"Notes" shall mean the Syndicated Notes and the Money Market Notes.
-----
"Participating Member State" means each country so described in any
--------------------------
EMU Legislation.
"Past-Due Receivables" shall mean, on any date with respect to any
--------------------
Borrower, the sum (determined with respect to such Borrower and its Subsidiaries
on a consolidated basis without duplication in accordance with GAAP) of (a) all
Managed Receivables the minimum payments on which are at least 90 days overdue
on such date plus (b) all other non-performing assets; provided that, Managed
---- --------
Receivables that are credit card loans, whether or not at least 90 days overdue,
shall not constitute "Past-Due Receivables" to the extent of any cash balance of
the account debtor on such loan on deposit with the creditor (but only to the
extent such creditor is entitled under an agreement governing such credit card
loan to set-off such cash balances against the obligations of the account debtor
under such loan and to the extent such cash balances are not subject to any
other set-off or deduction by such creditor or any of its affiliates against a
matured obligation owing by such debtor).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
----
maintained by any Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum equal to 2% plus the
----------------- ----
Base Rate as in effect from time to time plus the Applicable Margin for Base
----
Rate Loans, provided that, with respect to principal of a Eurocurrency Loan or a
--------
Money Market Loan that shall become due (whether at stated maturity, by
acceleration, by optional or mandatory prepayment or otherwise) on a day other
than the last day of the Interest Period therefor, the "Post-Default Rate" shall
be, for the period from and including such due date to but excluding the last
day of such Interest Period, 2% plus the interest rate for such Loan as provided
----
in Section 3.02 hereof and, thereafter, the rate provided for above in this
definition.
"Pounds Sterling" shall mean lawful money of England.
---------------
"Prime Rate" shall mean the rate of interest from time to time
----------
announced by Chase at the Principal Office as its prime commercial lending rate.
Credit Agreement
----------------
<PAGE>
-16-
"Principal Financial Center" shall mean (a) in the case of each
--------------------------
Currency identified in Section 1.4(a)(i)(A) of the 1991 ISDA Definitions (as
amended and supplemented by the 1998 Supplement to the 1991 ISDA Definitions and
the 1998 ISDA Euro Definitions) published by the International Swaps and
Derivatives Association, Inc., the financial center identified in said Section
opposite such Currency and (b) in the case of any other Currency, the principal
financial center of the country that issues such Currency, as determined by the
Administrative Agent.
"Principal Office" shall mean the principal office of Chase, located
----------------
on the date hereof at 270 Park Avenue, New York, New York 10017.
"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the last Business Day of March, June,
---------------
September and December in each year, the first of which shall be the first such
day after the date hereof.
"Rating Agencies" shall mean Moody's Investors Service, Inc., Standard
---------------
& Poor's Ratings Services and Fitch Investors Service, L.P. or, in each case,
any successor nationally recognized statistical rating organization.
"Rating Levels" shall mean, on any date of determination, (a) Rating
-------------
Level 1 if the Debt Rating by at least two Rating Agencies is at least equal to
"Baa1" or higher or "BBB+" or higher, (b) Rating Level 2 if the Debt Rating by
at least two Rating Agencies is at least equal to "Baa2" or "BBB", but does not
fall within Rating Level 1, (c) Rating Level 3 if the Debt Rating by at least
two Rating Agencies is at least equal to "Baa3" or "BBB-", but does not fall
within Rating Level 1 or Rating Level 2, (d) Rating Level 4 if the Debt Rating
by at least two Rating Agencies is at least equal to "Ba1" or "BB+", but does
not fall within Rating Level 1, Rating Level 2 or Rating Level 3 and (e) Rating
Level 5 if none of the foregoing is applicable. If the Debt Rating of any Rating
Agency is below the Debt Rating of each of the two other Rating Agencies, the
"Rating Level" will be determined without regard to the Debt Rating of such
Rating Agency.
"Receivables" means, with respect to any Borrower, any amount owing,
-----------
from time to time, with respect to a credit card, consumer revolving or consumer
installment loan account, home equity line of credit or residential mortgage
loan account or other consumer receivable owned by such Borrower, including,
without limitation, amounts owing for payment of goods and services, cash
advances, convenience checks, annual membership fees, finance charges, late
charges, credit insurance premiums and cash advance fees and fees relating to
additional consumer products, and any other receivables arising out of financing
transactions by such Borrower; provided that the term "Receivables" shall not
--------
include any of the foregoing that is subject to a securitization effected in the
ordinary course of business.
"Reference Lenders" shall mean Chase, Morgan Guaranty Trust Company of
-----------------
New York and Nationsbank, N.A. (or their respective Applicable Lending Offices,
as the case may be).
Credit Agreement
----------------
<PAGE>
-17-
"Regulations A, D, T, U and X" shall mean, respectively, Regulations
----------------------------
A, D, T, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
-----------------
after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Requisite Lenders" shall mean Majority Tranche Lenders with respect
-----------------
to Tranche A-($), Majority Tranche Lenders with respect to Tranche A-(MC),
Majority Tranche Lenders with respect to Tranche B-($) and Majority Tranche
Lenders with respect to Tranche B-(MC).
"Reserve Requirement" shall mean, for the Interest Period for any
-------------------
Eurocurrency Loan or LIBOR Market Loan, the average maximum rate at which
reserves (including, without limitation, any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D by member banks of the Federal Reserve System in New York City with
deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as
such term is used in Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves required to
be maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by reference
to which the Fixed Base Rate for Eurocurrency Loans or LIBOR Market Loans (as
the case may be) is to be determined as provided in the definition of "Fixed
Base Rate" in this Section 1.01 or (ii) any category of extensions of credit or
other assets that includes Eurocurrency Loans or LIBOR Market Loans.
"Restatement Effective Date" shall mean the first date on which all
--------------------------
of the conditions set forth in Section 6.01 hereof shall have been satisfied or
waived by the Lenders and the Administrative Agent.
"Restricted Shares" means, with respect to any Borrower, shares of
-----------------
stock of or other ownership interests in such Borrower or any Subsidiary thereof
engaged primarily in the extension of consumer credit to third parties or
securitizations of receivables related to such extension of consumer credit,
excluding without limitation any such ownership interests of any Borrower in
America One Communications, Inc.
"Risk Adjusted Assets" shall mean, on any date and with respect to any
--------------------
Borrower, the amount, for such Borrower and its consolidated Subsidiaries
(determined on a consolidated basis) on such date, of "weighted risk assets",
within the meaning given to such term in the Capital Adequacy Guidelines for
State Member Banks published by the Board of Governors of
Credit Agreement
----------------
<PAGE>
-18-
the Federal Reserve System (12 C.F.R. Part 208, Appendix A, as amended, modified
and supplemented and in effect from time to time or any replacement thereof).
"SEC" shall mean the Securities and Exchange Commission, or any
---
successor agency charged with the administration and enforcement of the
Securities Act and the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
"Set Rate" shall have the meaning assigned to such term in Section
--------
2.03(c)(ii)(D) hereof.
"Set Rate Auction" shall mean a solicitation of Money Market Quotes
----------------
setting forth Set Rates pursuant to Section 2.03 hereof.
"Set Rate Loans" shall mean Money Market Loans the interest rates on
--------------
which are determined on the basis of Set Rates pursuant to a Set Rate Auction.
"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership or other entity of which at least a majority of the Voting
Securities issued by such corporation, partnership or other entity is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"Swap Agreement" shall have the meaning given to such term in Section
--------------
101(53B) of the Bankruptcy Code (as in effect on the date hereof).
"Swiss Francs" shall mean lawful money of Switzerland.
------------
"Syndicated Loans" shall mean the Tranche A-($) Loans, Tranche A-(MC)
----------------
Loans, Tranche B-($) Loans and Tranche B-(MC) Loans.
"Syndicated Notes" shall mean the Tranche A-($) Notes, Tranche A-(MC)
----------------
Notes, Tranche B-($) Notes and Tranche B-(MC) Notes.
"Tangible Net Worth" shall mean, on any date and with respect to any
------------------
Borrower, the consolidated stockholders' equity of such Borrower and its
consolidated Subsidiaries less Intangibles of such Borrower and its consolidated
Subsidiaries, all determined as of such date on a consolidated basis without
duplication in accordance with GAAP.
"TARGET Business Day" means any day that is not (i) a Saturday or
-------------------
Sunday, or (ii) any other day on which the Trans-European Real-time Gross
Settlement Operating System (or any successor settlement system) is not
operating (as determined by the Administrative Agent).
Credit Agreement
----------------
<PAGE>
-19-
"Tier 1 Capital" shall mean, on any date and with respect to any
--------------
Borrower, the amount, for such Borrower and its consolidated Subsidiaries
(determined on a consolidated basis) on such date, of "Tier 1 capital", within
the meaning given to such term in the Capital Adequacy Guidelines for State
Member Banks published by the Board of Governors of the Federal Reserve System
(12 C.F.R. Part 208, Appendix A, as amended, modified and supplemented and in
effect from time to time or any replacement thereof).
"Tier 1 Capital to Managed Receivables Ratio" shall mean, on any date
-------------------------------------------
and with respect to any Borrower, the ratio of (a) Tier 1 Capital (determined,
for the purposes of this definition, in accordance with GAAP) with respect to
such Borrower on such date to (b) Managed Receivables with respect to such
Borrower on such date.
"Tier 1 Capital to Risk Adjusted Assets Ratio" shall mean, on any date
--------------------------------------------
and with respect to COB or FSB, the ratio of (a) Tier 1 Capital with respect to
such Borrower on such date to (b) Risk Adjusted Assets with respect to such
Borrower on such date.
"Tier 1 Leverage Ratio" shall mean, on any date and with respect to
---------------------
COB or FSB, the ratio of (a) Tier 1 Capital with respect to such Borrower on
such date to (b) Total Assets with respect to such Borrower on such date.
"Total Assets" shall mean, on any date and with respect to any
------------
Borrower, the amount, for such Borrower and its consolidated Subsidiaries
(determined on a consolidated basis) on such date, of "average total
consolidated assets", within the meaning given to such term in the Capital
Adequacy Guidelines for State Member Banks published by the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 208, Appendix A, as amended,
modified and supplemented and in effect from time to time or any replacement
thereof).
"Total Capital" shall mean, on any date and with respect to any
-------------
Borrower, the amount, for such Borrower and its consolidated Subsidiaries
(determined on a consolidated basis) on such date, of "total capital", within
the meaning given to such term in the Capital Adequacy Guidelines for State
Member Banks published by the Board of Governors of the Federal Reserve System
(12 C.F.R. Part 208, Appendix A, as amended, modified and supplemented and in
effect from time to time or any replacement thereof).
"Total Capital to Risk Adjusted Assets Ratio" shall mean, on any date
-------------------------------------------
and with respect to COB or FSB, the ratio of (a) Total Capital with respect to
such Borrower on such date to (b) Risk Adjusted Assets with respect to such
Borrower on such date.
"Tranche" shall mean Tranche A-($), Tranche A-(MC), Tranche B-($) or
-------
Tranche B-(MC).
"Tranche A-($)" shall refer to a Tranche A-($) Commitment, Tranche A-
-------------
($) Commitment Termination Date, Tranche A-($) Lender, Tranche A-($) Loan or
Tranche A-($) Note or a Money Market Loan made by a Tranche A-($) Lender.
Credit Agreement
----------------
<PAGE>
-20-
"Tranche A-($) Commitment" shall mean, as to each Tranche A-($)
------------------------
Lender, the obligation of such Lender to make Syndicated Loans pursuant to
Section 2.01(a) hereof, as the same may be reduced or increased at any time or
from time to time pursuant to Section 2.04, 2.11 or 11.06 hereof. The initial
amount of each such Lender's Tranche A-($) Commitment is set forth on Schedule
2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed such Commitment, as applicable.
"Tranche A-($) Commitment Termination Date" shall mean May 24, 2003,
-----------------------------------------
subject to extension as provided in Section 2.10 hereof; provided that if any
--------
such day is not a Business Day, then the Tranche A-($) Commitment Termination
Date shall be the immediately preceding Business Day.
"Tranche A-($) Lender" shall mean a Lender having a Tranche A-($)
--------------------
Commitment or holding Tranche A-($) Loans.
"Tranche A-($) Loans" shall mean the loans provided for by Section
-------------------
2.01(a) hereof, which may be Base Rate Loans and/or Eurocurrency Loans.
"Tranche A-($) Notes" shall mean any promissory notes in substantially
-------------------
the form of Exhibit A-1 hereto issued pursuant to Section 2.08(d) hereof, and
all promissory notes delivered in substitution or exchange thereof, in each case
as the same shall be modified and supplemented and in effect from time to time.
"Tranche A-(MC)" shall refer to a Tranche A-(MC) Commitment, Tranche
--------------
A-(MC) Commitment Termination Date, Tranche A-(MC) Lender, Tranche A-(MC) Loan
or Tranche A-(MC) Note or a Money Market Loan made by a Tranche A-(MC) Lender.
"Tranche A-(MC) Commitment" shall mean, as to each Tranche A-(MC)
-------------------------
Lender, the obligation of such Lender to make Syndicated Loans pursuant to
Section 2.01(b) hereof, as the same may be reduced or increased at any time or
from time to time pursuant to Section 2.04, 2.11 or 11.06 hereof. The initial
amount of each such Lender's Tranche A-(MC) Commitment is set forth on Schedule
2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed such Commitment, as applicable.
"Tranche A-(MC) Commitment Termination Date" shall mean May 24, 2003,
------------------------------------------
subject to extension as provided in Section 2.10 hereof; provided that if any
--------
such day is not a Business Day, then the Tranche A-(MC) Commitment Termination
Date shall be the immediately preceding Business Day.
"Tranche A-(MC) Lender" shall mean a Lender having a Tranche A-(MC)
---------------------
Commitment or holding Tranche A-(MC) Loans.
"Tranche A-(MC) Loans" shall mean the loans provided for by Section
--------------------
2.01(b) hereof, which may be Base Rate Loans and/or Eurocurrency Loans.
Credit Agreement
----------------
<PAGE>
-21-
"Tranche A-(MC) Notes" shall mean any promissory notes in
--------------------
substantially the form of Exhibit A-2 hereto issued pursuant to Section 2.08(d)
hereof, and all promissory notes delivered in substitution or exchange thereof,
in each case as the same shall be modified and supplemented and in effect from
time to time.
"Tranche B-($)" shall refer to a Tranche B-($) Commitment, Tranche B-
-------------
($) Commitment Termination Date, Tranche B-($) Lender, Tranche B-($) Loan or
Tranche B-($) Note or a Money Market Loan made by a Tranche B-($) Lender.
"Tranche B-($) Commitment" shall mean, as to each Tranche B-($)
------------------------
Lender, the obligation of such Lender to make Syndicated Loans pursuant to
Section 2.01(c) hereof, as the same may be reduced or increased at any time or
from time to time pursuant to Section 2.04, 2.11 or 11.06 hereof. The initial
amount of each such Lender's Tranche B-($) Commitment is set forth on Schedule
2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed such Commitment, as applicable.
"Tranche B-($) Commitment Termination Date" shall mean May 24, 2003,
-----------------------------------------
subject to extension as provided in Section 2.10 hereof; provided that if any
--------
such day is not a Business Day, then the Tranche B-($) Commitment Termination
Date shall be the immediately preceding Business Day.
"Tranche B-($) Lender" shall mean a Lender having a Tranche B-($)
--------------------
Commitment or holding Tranche B-($) Loans.
"Tranche B-($) Loans" shall mean the loans provided for by Section
-------------------
2.01(c) hereof, which may be Base Rate Loans and/or Eurocurrency Loans.
"Tranche B-($) Notes" shall mean any promissory notes in substantially
-------------------
the form of Exhibit A-3 hereto issued pursuant to Section 2.08(d) hereof, and
all promissory notes delivered in substitution or exchange thereof, in each case
as the same shall be modified and supplemented and in effect from time to time.
"Tranche B-(MC)" shall refer to a Tranche B-(MC) Commitment, Tranche
--------------
B-(MC) Commitment Termination Date, Tranche B-(MC) Lender, Tranche B-(MC) Loan
or Tranche B-(MC) Note or a Money Market Loan made by a Tranche B-(MC) Lender.
"Tranche B-(MC) Commitment" shall mean, as to each Tranche B-(MC)
-------------------------
Lender, the obligation of such Lender to make Syndicated Loans pursuant to
Section 2.01(d) hereof, as the same may be reduced or increased at any time or
from time to time pursuant to Section 2.04, 2.11 or 11.06 hereof. The initial
amount of each such Lender's Tranche B-(MC) Commitment is set forth on Schedule
2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed such Commitment, as applicable.
"Tranche B-(MC) Commitment Termination Date" shall mean May 24, 2003,
------------------------------------------
subject to extension as provided in Section 2.10 hereof; provided that if any
--------
such day is not a
Credit Agreement
----------------
<PAGE>
-22-
Business Day, then the Tranche B-(MC) Commitment Termination Date shall be the
immediately preceding Business Day.
"Tranche B-(MC) Lender" shall mean a Lender having a Tranche B-(MC)
---------------------
Commitment or holding Tranche B-(MC) Loans.
"Tranche B-(MC) Loans" shall mean the loans provided for by Section
--------------------
2.01(d) hereof, which may be Base Rate Loans and/or Eurocurrency Loans.
"Tranche B-(MC) Notes" shall mean any promissionary notes in
--------------------
substantially the form of Exhibit A-4 hereto issued pursuant to Section 2.08(d)
hereof, and all promissory notes delivered in substitution or exchange thereof,
in each case as the same shall be modified and supplemented and in effect from
time to time.
"Type" shall have the meaning assigned to such term in Section 1.03
----
hereof.
"Voting Securities" shall mean, with respect to any Person, securities
-----------------
or other ownership interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions of such Person (irrespective of whether or not at the time
securities or other ownership interests of any other class or classes of such
Person shall have or might have voting power by reason of the happening of any
contingency).
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, partnership or other entity of which all of the Voting Securities
issued by such corporation, partnership or other entity (other than, in the case
of a corporation, directors' qualifying shares) are directly or indirectly owned
or controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
1.02 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles in the
United States of America applied on a basis consistent with those used in the
preparation of the latest financial statements furnished to the Lenders
hereunder (which, prior to the delivery of the first financial statements under
Section 8.01(a) or (b) hereof, shall mean the audited financial statements as at
December 31, 1998 referred to in Section 7.02 hereof). All calculations made for
the purposes of determining compliance with this Agreement shall (except as
otherwise expressly provided herein) be made by application of generally
accepted accounting principles in the United States of America applied on a
basis consistent with those used in the preparation of the latest annual or
quarterly financial statements furnished to the Lenders pursuant to
Credit Agreement
----------------
<PAGE>
-23-
Section 8.01 hereof (or, prior to the delivery of the first financial statements
under Section 8.01(a) or (b) hereof, used in the preparation of the audited
financial statements as at December 31, 1998 referred to in Section 7.02 hereof)
unless (i) any Borrower shall have objected to determining such compliance on
such basis at the time of delivery of such financial statements or (ii) the
Majority Lenders shall so object in writing within 30 days after delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made (which,
if objection is made in respect of the first financial statements delivered
under Section 8.01(a) or (b) hereof, shall mean the audited financial statements
referred to in Section 7.02 hereof). Notwithstanding the foregoing, the
accounting terms "Risk-Adjusted Assets", "Tier 1 Capital", "Total Assets" and
"Total Capital" defined in Section 1.01 hereof shall be interpreted by reference
to the statutes or regulations referred to in said definitions, as such statutes
or regulations are amended, modified, supplemented or replaced and in effect
from time to time.
(b) COFC shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles in the United States of America
employed in the preparation of such statement and the application of accounting
principles in the United States of America employed in the preparation of the
next preceding annual or quarterly financial statements as to which no objection
has been made in accordance with the last sentence of subsection (a) above and
(ii) reasonable estimates of the difference between such statements arising as a
consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, no Borrower will change the
last day of its fiscal year from December 31 of each year, or the last days of
the first three fiscal quarters in each of its fiscal years from March 31, June
30 and September 30 of each year, respectively.
1.03 Tranches, Currencies and Types of Loans. Loans hereunder are
---------------------------------------
distinguished by "Tranche", by "Currency" and by "Type". The "Tranche" of a Loan
refers to whether a Syndicated Loan is a Tranche A-($) Loan, Tranche A-(MC)
Loan, Tranche B-($) Loan or Tranche B-(MC) Loan. The "Currency" of a Loan refers
to the Currency in which such Loan is denominated. The "Type" of a Loan refers
to whether such Loan is a Base Rate Loan, a Eurocurrency Loan, a Set Rate Loan
or a LIBOR Market Loan, each of which constitutes a Type. Loans may be
identified by one or more of their Tranche, Currency and Type.
1.04 EMU.
---
(a) Redenomination of Alternative Currency Loans and other
------------------------------------------------------
Obligations into Euro Units.
- ---------------------------
(i) From and after January 1, 1999, each obligation under this
Agreement of a party to this Agreement which (1) was originally denominated
in the former national
Credit Agreement
----------------
<PAGE>
-24-
currency of a Participating Member State or (2) would otherwise have been
denominated in such former national currency prior to such date shall be
redenominated into the Euro Unit in accordance with EMU Legislation and
applicable state law, provided, that if and to the extent that any EMU
Legislation provides that amounts denominated either in the Euro or in the
National Currency Unit of a Participating Member State, that are payable by
crediting an account of the creditor within that country, may be paid by
the debtor in either Euro or National Currency Units, each party to this
Agreement shall be entitled to pay or repay any such amounts in either the
Euro Unit or such National Currency Unit.
(ii) Subject to any EMU Legislation, references in this Agreement to
a minimum amount (or an integral multiple thereof) in a National Currency
Unit to be paid to or by a party hereto shall be deemed to be a reference
to such reasonably comparable and convenient amount (or an integral
multiple thereof) in the Euro Unit as the Administrative Agent may from
time to time specify.
(b) Payments.
--------
(i) All payments by any Borrower or any Lender of amounts
denominated in the Euro or a National Currency Unit of a Participating
Member State shall be made in immediately available, freely transferable,
cleared funds to the account of the Administrative Agent in the principal
financial center in such Participating Member State or in London, England,
as from time to time designated by the Administrative Agent for such
purpose.
(ii) All amounts payable by the Administrative Agent to any party
under this Agreement in the National Currency Unit of a Participating
Member State shall instead be paid in the Euro.
(iii) The Administrative Agent shall not be liable to any party to
this Agreement in any way whatsoever for any delay, or the consequences of
any delay, in the crediting to any account of any amount denominated in the
Euro or a National Currency Unit of a Participating Member State.
(iv) All references herein to the London interbank or other national
market with respect to any National Currency Unit of a Participating Member
State shall be deemed a reference to the applicable markets and locations
referred to in the definition of "Business Day" in Section 1.01 hereof.
(c) Unavailability of Euro. If the Administrative Agent at any
----------------------
time determines that: (1) the Euro has ceased to be utilized as the basic
accounting unit of the European Community, (2) for reasons affecting the market
in Euros generally, Euros are not freely traded between banks internationally,
or (3) it is illegal, impossible or impracticable for payments to be made
hereunder in Euros, then the Administrative Agent may in its discretion declare
(such declaration to be binding on all the parties hereto) that any payment made
or to be made thereafter which, but for this provision, would have been payable
in Euros shall be made in
Credit Agreement
----------------
<PAGE>
-25-
a component currency of the Euro or Dollars (as selected by the Administrative
Agent (the "Selected Currency")) and the amount to be so paid shall be
-----------------
calculated on the basis of the equivalent of the Euro in the Selected Currency.
(d) Basis of Accrual. If the basis of accrual of interest or fees
----------------
expressed in this Agreement with respect to the Currency of any state that
becomes a Participating Member State shall be inconsistent with any convention
or practice in the relevant interbank market for the offering of deposits
denominated in such Currency for the basis of accrual of interest or fees in
respect of the Euro, such convention or practice shall replace such expressed
basis effective as of and from the date on which such state becomes a
Participating Member State, provided, that if any Loan in the Currency of such
state is outstanding immediately prior to such date, such replacement shall take
effect, with respect to such Advance, at the end of the then current Interest
Period.
(e) Additional Changes at Administrative Agent's Discretion. This
-------------------------------------------------------
Section and other provisions of this Agreement relating to Euros and the
National Currency Units of Participating Member States shall be subject to such
further changes as the Administrative Agent may from time to time in its
reasonable discretion specify to the other parties hereto as necessary or
appropriate to reflect the changeover to or operation of the Euro in
Participating Member States.
SECTION 2. Commitments, Loans, and Prepayments.
-----------------------------------
2.01 Syndicated Loans.
----------------
(a) Each Tranche A-($) Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to either Applicable Borrower in
Dollars during the period from and including the date hereof to but not
including the Tranche A-($) Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Tranche A-($) Commitment of such Tranche A-($) Lender as in effect from
time to time. Subject to the terms and conditions of this Agreement, during such
period either Applicable Borrower may borrow, repay and reborrow the amount of
the Tranche A-($) Commitments; provided that (i) no more than 10 separate
--------
Interest Periods in respect of Eurocurrency Loans that are Tranche A-($) Loans
may be outstanding at any one time and (ii) no more than 20 different Interest
Periods for both Syndicated Loans and Money Market Loans may be outstanding
under Tranche A-($) at the same time (for which purpose (x) Interest Periods
described in different lettered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they are
coterminous and (y) Loans denominated in different Currencies shall be deemed to
have different Interest Periods).
(b) Each Tranche A-(MC) Lender severally agrees, on the terms
and conditions of this Agreement, to make loans to either Applicable Borrower in
Dollars or any Agreed Alternative Currency during the period from and including
the date hereof to but not
Credit Agreement
----------------
<PAGE>
-26-
including the Tranche A-(MC) Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Tranche A-(MC) Commitment of such Tranche A-(MC) Lender as in effect from
time to time. Subject to the terms and conditions of this Agreement, during such
period either Applicable Borrower may borrow, repay and reborrow the amount of
the Tranche A-(MC) Commitments; provided that (i) no more than eight separate
--------
Interest Periods in respect of Eurocurrency Loans that are Tranche A-(MC) Loans
may be outstanding at any one time, (ii) no more than 20 different Interest
Periods for both Syndicated Loans and Money Market Loans may be outstanding
under Tranche A-(MC) at the same time (for which purpose (x) Interest Periods
described in different lettered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they are
coterminous and (y) Loans denominated in different Currencies shall be deemed to
have different Interest Periods), (iii) no Tranche A-(MC) Loan denominated in
Dollars shall be made on any date unless the aggregate principal amount of all
Loans outstanding on such date made by Tranche A-($) Lenders equals the
aggregate amount of all Tranche A-($) Commitments and (iv) no Tranche A-(MC)
Loan denominated in an Agreed Alternative Currency may be outstanding as a Base
Rate Loan.
(c) Each Tranche B-($) Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to any Applicable Borrower in
Dollars during the period from and including the date hereof to but not
including the Tranche B-($) Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Tranche B-($) Commitment of such Tranche B-($) Lender as in effect from
time to time. Subject to the terms and conditions of this Agreement, during such
period any Applicable Borrower may borrow, repay and reborrow the amount of the
Tranche B-($) Commitments; provided that (i) no more than eight separate
--------
Interest Periods in respect of Eurocurrency Loans that are Tranche B-($) Loans
may be outstanding at any one time and (ii) no more than 20 different Interest
Periods for both Syndicated Loans and Money Market Loans may be outstanding
under Tranche B-($) at the same time (for which purpose (x) Interest Periods
described in different lettered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they are
coterminous and (y) Loans denominated in different Currencies shall be deemed to
have different Interest Periods).
(d) Each Tranche B-(MC) Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to any Applicable Borrower in
Dollars or any Agreed Alternative Currency during the period from and including
the date hereof to but not including the Tranche B-(MC) Commitment Termination
Date in an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of the Tranche B-(MC) Commitment of such Tranche B-(MC)
Lender as in effect from time to time. Subject to the terms and conditions of
this Agreement, during such period any Applicable Borrower may borrow, repay and
reborrow the amount of the Tranche B-(MC) Commitments; provided that (i) no more
--------
than eight separate Interest Periods in respect of Eurocurrency Loans that are
Tranche B-(MC) Loans may be outstanding at any one time, (ii) no more than 20
different Interest Periods for both Syndicated Loans and Money Market Loans may
be outstanding under Tranche B-(MC) at the same time (for which purpose (x)
Interest Periods described in different
Credit Agreement
----------------
<PAGE>
-27-
lettered clauses of the definition of the term "Interest Period" shall be deemed
to be different Interest Periods even if they are coterminous and (y) Loans
denominated in different Currencies shall be deemed to have different Interest
Periods), (iii) no Tranche B-(MC) Loan denominated in Dollars shall be made on
any date unless the aggregate principal amount of all Loans outstanding on such
date made by Tranche B-($) Lenders equals the aggregate amount of all Tranche B-
($) Commitments and (iv) no Tranche B-(MC) Loan denominated in an Agreed
Alternative Currency may be outstanding as a Base Rate Loan.
(e) No Syndicated Loan shall be made under any Tranche if, after
giving effect to such Loan, the aggregate principal amount of all such
Syndicated Loans, together with the aggregate amount of Money Market Loans made
under such Tranche, would exceed the aggregate amount of Commitments then in
effect under such Tranche.
(f) For purposes of determining whether the amount of any borrowing
of Loans under any Tranche, together with all other Loans then outstanding under
such Tranche, would exceed the aggregate amount of Commitments under such
Tranche (including, without limitation, for the purposes of Sections 2.01(a),
2.01(b), 2.01(c), 2.01(d), 2.01(e) and 2.03(a) hereof), the amount of any Loan
outstanding under such Tranche that is denominated in an Alternative Currency
shall be deemed to be the Dollar Equivalent (determined as of the date of such
borrowing of Loans under such Tranche) of the amount in the Alternative Currency
of such Loan. For purposes of determining the unused portion of the Commitments
under any Tranche under Section 2.04(b) hereof, the amount of any Loan
outstanding under such Tranche that is denominated in an Alternative Currency
shall be deemed to be the Dollar Equivalent (determined as of the date of
determination of the unused portion of the Commitments under such Tranche) of
the amount in the Alternative Currency of such Loan. For purposes of calculating
the amount of any utilization fee payable under any Tranche under Section
2.05(b) hereof, the amount of any Loan outstanding on any date that is
denominated in an Alternative Currency shall be deemed to be the Dollar
Equivalent (determined as of the date of the most recent borrowing of Loans
under such Tranche) of the amount in the Alternative Currency of such Loan.
2.02 Borrowings of Syndicated Loans. The Applicable Borrower shall
------------------------------
give the Administrative Agent notice of each borrowing of Syndicated Loans as
provided in Section 4.05 hereof. Not later than 1:00 p.m. Local Time on the date
specified for each borrowing of Syndicated Loans, each Lender under the relevant
Tranche shall make available the amount of the Syndicated Loan or Loans under
such Tranche to be made by it on such date to the Administrative Agent, at the
Administrative Agent's Account for the Currency in which such Loan is
denominated, in immediately available funds, for account of the Applicable
Borrower. The amount so received by the Administrative Agent shall, subject to
the terms and conditions of this Agreement, be made available to the Applicable
Borrower by depositing the same, in immediately available funds, in an account
of the Applicable Borrower designated by the Applicable Borrower.
2.03 Money Market Loans.
------------------
Credit Agreemnt
---------------
<PAGE>
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(a) In addition to borrowings of Syndicated Loans under any Tranche,
at any time prior to the Commitment Termination Date for such Tranche an
Applicable Borrower may, as set forth in this Section 2.03, request the Lenders
under such Tranche to make offers to make Money Market Loans under such Tranche
to such Borrower in Dollars or in any Alternative Currency. The Lenders under
such Tranche may, but shall have no obligation to, make such offers and the
Applicable Borrower may, but shall have no obligation to, accept any such offers
in the manner set forth in this Section 2.03. Money Market Loans may be LIBOR
Market Loans or Set Rate Loans (each a "Type" of Money Market Loan), provided
--------
that:
(i) there may be no more than 20 different Interest Periods for both
Syndicated Loans and Money Market Loans outstanding under any Tranche at
the same time (for which purpose (x) Interest Periods described in
different lettered clauses of the definition of the term "Interest Period"
shall be deemed to be different Interest Periods even if they are
coterminous and (y) Loans denominated in different Currencies shall be
deemed to have different Interest Periods); and
(ii) the aggregate principal amount of all Money Market Loans under
such Tranche, together with the aggregate principal amount of all
Syndicated Loans under such Tranche, at any one time outstanding shall not
exceed the aggregate amount of the Commitments under such Tranche then in
effect.
(b) When the Applicable Borrower wishes to request offers to make
Money Market Loans, it shall give the Administrative Agent (which shall promptly
notify the Lenders) notice (a "Money Market Quote Request") so as to be received
--------------------------
no later than 11:00 a.m. New York time on (x) the fifth Business Day prior to
the date of borrowing proposed therein, in the case of a LIBOR Auction, (y) the
fourth Business Day prior to the date of borrowing proposed therein in the case
of a Set Rate Auction in respect of Money Market Loans denominated in an
Alternative Currency or (z) the Business Day next preceding the date of
borrowing proposed therein in the case of a Set Rate Auction in respect of Money
Market Loans denominated in Dollars. The Applicable Borrower may request offers
to make Money Market Loans for up to three different Interest Periods in a
single notice (for which purpose (x) Interest Periods in different lettered
clauses of the definition of the term "Interest Period" shall be deemed to be
different Interest Periods even if they are coterminous and (y) Money Market
Loans denominated in different Currencies shall be deemed to have different
Interest Periods); provided that the request for each separate Interest Period
--------
or Currency shall be deemed to be a separate Money Market Quote Request for a
separate borrowing (a "Money Market Borrowing"). Each such notice shall be
----------------------
substantially in the form of Exhibit E hereto and shall specify as to each Money
Market Borrowing:
(i) the name of the Borrower, the Tranche under which such Borrowing
is to be made, the Currency of such Borrowing and the proposed date of such
borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Money Market Borrowing, which shall
be
Credit Agreement
----------------
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an integral multiple of $1,000,000 and not less than $5,000,000 (or, in the
case of a Borrowing of Money Market Loans denominated in an Alternative
Currency, the Foreign Currency Equivalent thereof (rounded to the nearest
1,000 units of such Alternative Currency)) but shall not cause the limits
specified in Section 2.03(a) hereof to be violated;
(iii) the duration of the Interest Period applicable thereto;
(iv) whether the Money Market Quotes requested for a particular
Interest Period are seeking quotes for LIBOR Market Loans or Set Rate
Loans; and
(v) if the Money Market Quotes requested are seeking quotes for Set
Rate Loans denominated in Dollars, the date on which the Money Market
Quotes are to be submitted (the date on which such Money Market Quotes are
to be submitted is called the "Quotation Date").
--------------
Except as otherwise provided in this Section 2.03(b), no Money Market Quote
Request shall be given under any Tranche within five Business Days of any other
Money Market Quote Request under such Tranche.
(c) (i) Each Lender under the relevant Tranche may submit one or more
Money Market Quotes, each constituting an offer to make a Money Market Loan
under such Tranche in response to any Money Market Quote Request under such
Tranche; provided that, if the Applicable Borrower's request under Section
--------
2.03(b) hereof specified more than one Interest Period, such Lender may
make a single submission containing one or more Money Market Quotes for
each such Interest Period. Each Money Market Quote must be submitted to the
Administrative Agent not later than (x) 4:00 p.m. New York time on the
fifth Business Day prior to the proposed date of borrowing, in the case of
a LIBOR Auction, (y) 4:00 p.m. New York time on the fourth Business Day
prior to the date of borrowing proposed therein in the case of a Set Rate
Auction in respect of Money Market Loans denominated in an Alternative
Currency or (z) 10:00 a.m. New York time on the Quotation Date in the case
of a Set Rate Auction in respect of Money Market Loans denominated in
Dollars; provided that any Money Market Quote may be submitted by Chase (or
--------
its Applicable Lending Office) only if Chase (or such Applicable Lending
Office) notifies such Applicable Borrower of the terms of the offer
contained therein not later than (x) 3:45 p.m. New York time on the fifth
Business Day prior to the proposed date of borrowing, in the case of a
LIBOR Auction, (y) 3:45 p.m. New York time on the fourth Business Day prior
to the date of borrowing proposed therein in the case of a Set Rate Auction
in respect of Money Market Loans denominated in an Alternative Currency or
(z) 9:45 a.m. New York time on the Quotation Date in the case of a Set Rate
Auction in respect of Money Market Loans denominated in Dollars. Subject to
Sections 5.02(b), 5.03, 6.02 and 9 hereof, any Money Market Quote so made
shall be irrevocable except with the consent of the Administrative Agent
given on the instructions of such Applicable Borrower.
Credit Agreement
----------------
<PAGE>
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(ii) Each Money Market Quote shall be substantially in the
form of Exhibit F hereto and shall specify:
(A) the name of the Borrower, the Tranche under which
such Borrowing is to be made, the Currency of such Borrowing and the
proposed date of borrowing and the Interest Period therefor;
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount shall be
an integral multiple of $1,000,000 and not less than $5,000,000 (or,
in the case of a Borrowing of Money Market Loans denominated in an
Alternative Currency, the Foreign Currency Equivalent thereof (rounded
to the nearest 1,000 units of such Alternative Currency)); provided
--------
that the aggregate principal amount of all Money Market Loans for
which a Lender submits Money Market Quotes (x) may be greater or less
than the Commitment of such Lender under the Tranche under which such
Loans are to be made but (y) may not exceed the principal amount of
the Money Market Borrowing for a particular Interest Period for which
offers were requested;
(C) in the case of a LIBOR Auction, the margin above or
below the applicable Eurocurrency Rate (the "LIBO Margin") offered for
-----------
each such Money Market Loan, expressed as a percentage (rounded
upwards, if necessary, to the nearest 1/10,000th of 1%) to be added to
or subtracted from the applicable Eurocurrency Rate;
(D) in the case of a Set Rate Auction, the rate of
interest per annum (rounded upwards, if necessary, to the nearest
1/10,000th of 1%) offered for each such Money Market Loan (the "Set
---
Rate"); and
----
(E) the identity of the quoting Lender.
Unless otherwise agreed by the Administrative Agent and the Applicable
Borrower, no Money Market Quote shall contain qualifying, conditional or
similar language or propose terms other than or in addition to those set
forth in the applicable Money Market Quote Request and, in particular, no
Money Market Quote may be conditioned upon acceptance by the Applicable
Borrower of all (or some specified minimum) of the principal amount of the
Money Market Loan for which such Money Market Quote is being made, provided
--------
that the submission by any Lender containing more than one Money Market
Quote may be conditioned on the Applicable Borrower not accepting offers
contained in such submission that would result in such Lender making Money
Market Loans pursuant thereto in excess of a specified aggregate amount
(the "Money Market Loan Limit").
-----------------------
(d) The Administrative Agent shall (x) in the case of a LIBOR
Auction or a Set Rate Auction in respect of Money Market Loans denominated in an
Alternative Currency, by 5:00 p.m. New York time on the day a Money Market Quote
is submitted or (y) in the case of a
Credit Agreement
----------------
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Set Rate Auction in respect of Money Market Loans denominated in Dollars, as
promptly as practicable after the Money Market Quote is submitted (but in any
event not later than 10:15 a.m. New York time on the Quotation Date), notify the
Applicable Borrower of the terms (i) of any Money Market Quote submitted by a
Lender that is in accordance with Section 2.03(c) hereof and (ii) of any Money
Market Quote that amends, modifies or is otherwise inconsistent with a previous
Money Market Quote submitted by such Lender with respect to the same Money
Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Administrative Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the Applicable Borrower shall
specify (A) the aggregate principal amount of the Money Market Borrowing for
which offers have been received and (B) the respective principal amounts and
LIBO Margins or Set Rates, as the case may be, so offered by each Lender
(identifying the Lender that made each Money Market Quote).
(e) Not later than (x) 10:00 a.m. New York time on the fourth
Business Day prior to the proposed date of borrowing in the case of a LIBOR
Auction, (y) 10:00 a.m. New York time on the third Business Day prior to the
proposed date of borrowing in the case of a Set Rate Auction in respect of Money
Market Loans denominated in an Alternative Currency or (z) 11:00 a.m. New York
time on the Quotation Date in the case of a Set Rate Auction in respect of Money
Market Loans denominated in Dollars, the Applicable Borrower shall notify the
Administrative Agent of its acceptance or nonacceptance of the offers so
notified to it pursuant to Section 2.03(d) hereof (which notice shall specify
the aggregate principal amount of offers from each Lender for each Interest
Period that are accepted, it being understood that the failure of the Applicable
Borrower to give such notice by such time shall constitute nonacceptance) and
the Administrative Agent shall promptly notify each affected Lender. The notice
from the Administrative Agent shall also specify the aggregate principal amount
of offers for each Interest Period that were accepted and the lowest and highest
LIBO Margins and Set Rates that were accepted for each Interest Period. The
Applicable Borrower may accept any Money Market Quote in whole or in part;
provided that:
- --------
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the aggregate principal amount of each Money Market Borrowing
shall be an integral multiple of $1,000,000 and not less than $5,000,000
(or, in the case of a Borrowing of Money Market Loans denominated in an
Alternative Currency, the Foreign Currency Equivalent thereof (rounded to
the nearest 1,000 units of such Alternative Currency)) but shall not cause
the limits specified in Section 2.03(a) hereof to be violated;
(iii) acceptance of offers may, subject to clause (vi) below,
be made only in ascending order of LIBO Margins or Set Rates, as the case
may be, in each case beginning with the lowest rate so offered;
Credit Agreement
----------------
<PAGE>
-32-
(iv) any Money Market Quote accepted in part shall be an integral
multiple of $1,000,000 and not less than $5,000,000 (or, in the case of a
Borrowing of Money Market Loans denominated in an Alternative Currency, the
Foreign Currency Equivalent thereof (rounded to the nearest 1,000 units of
such Alternative Currency));
(v) the Applicable Borrower may not accept any offer where the
Administrative Agent has advised the Applicable Borrower that such offer
fails to comply with Section 2.03(c)(ii) hereof or otherwise fails to
comply with the requirements of this Agreement (including, without
limitation, Section 2.03(a) hereof); and
(vi) the aggregate principal amount of each Money Market Borrowing
from any Lender may not exceed any applicable Money Market Loan Limit of
such Lender.
If offers are made by two or more Lenders with the same LIBO Margins or Set
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which offers are permitted to be accepted for the related
Interest Period, the principal amount of Money Market Loans in respect of which
such offers are accepted shall be allocated by the Applicable Borrower among
such Lenders as nearly as possible (in an integral multiple of $1,000,000 and
not less than $5,000,000 (or, in the case of a Borrowing of Money Market Loans
denominated in an Alternative Currency, the Foreign Currency Equivalent thereof
(rounded to the nearest 1,000 units of such Alternative Currency)) in proportion
to the aggregate principal amount of such offers. Determinations by the
Applicable Borrower of the amounts of Money Market Loans shall be conclusive in
the absence of manifest error.
(f) Any Lender whose offer to make any Money Market Loan has been
accepted in accordance with the terms and conditions of this Section 2.03 shall,
not later than 11:00 a.m. Local Time (in the case of a LIBOR Auction or a Set
Rate Auction in respect of Money Market Loans denominated in an Alternative
Currency) or 1:00 p.m. New York time (in the case of a Set Rate Auction in
respect of Money Market Loans denominated in Dollars) on the date specified for
the making of such Loan, make the amount of such Loan available to the
Administrative Agent at the Administrative Agent's Account for the Currency in
which such Loan is denominated in immediately available funds, for account of
the Applicable Borrower. The amount so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to the Applicable Borrower on such date by depositing the same, in immediately
available funds, in an account of the Applicable Borrower designated by the
Applicable Borrower.
(g) Except for the purpose and to the extent expressly stated in
Section 2.04(b) hereof, the amount of any Money Market Loan made by any Lender
under any Tranche shall not constitute a utilization of such Lender's Commitment
under such Tranche.
(h) The Applicable Borrower shall pay to the Administrative Agent a
fee of $750 each time it gives a Money Market Quote Request to the
Administrative Agent.
2.04 Changes of Commitments.
----------------------
Credit Agreement
----------------
<PAGE>
-33-
(a) The aggregate amount of the Commitments under each Tranche shall
be automatically reduced to zero on the Commitment Termination Date for such
Tranche.
(b) The Applicable Borrowers, acting jointly, shall have the right
at any time or from time to time (i) to terminate the Commitments under any
Tranche so long as no Syndicated Loans or Money Market Loans are outstanding
under such Tranche and (ii) to reduce the aggregate unused amount of the
Commitments under any Tranche (for which purpose use of the Commitments under
such Tranche shall be deemed to include the aggregate principal amount of all
Money Market Loans under such Tranche); provided that (x) the Applicable
--------
Borrowers shall give notice of each such termination or reduction as provided in
Section 4.05 hereof, (y) each partial reduction under any Tranche shall
aggregate to an integral multiple of $1,000,000 and not less than $10,000,000
and (z) no such termination or reduction of any Tranche shall be effected unless
such notice shall have been given by each Applicable Borrower.
(c) Notwithstanding anything to the contrary in Section 4.02 hereof,
the Applicable Borrowers, acting jointly, shall have the right at any time or
from time to time, so long as no Default has occurred and is continuing, (i) to
terminate all Commitments of a Lender and (ii) to partially reduce the
Commitments of a Lender; provided that (w) the aggregate amount of Commitments
--------
terminated and partially reduced pursuant to this Section 2.04(c) shall not
exceed at any time $200,000,000, (x) immediately after giving effect to any such
termination or partial reduction, no Lender under any Tranche shall hold a
Commitment under such Tranche in an aggregate amount exceeding 25% of the
aggregate amount of Commitments under such Tranche, (y) each Applicable Borrower
shall give the Administrative Agent and the Lenders at least 30 days' prior
written notice of each such termination or partial reduction and (z) each such
partial reduction of a Lender's Commitments shall be made pro rata according to
the amounts of its Commitments under each Tranche in which such Lender is
participating, and shall aggregate to an integral multiple of $1,000,000 and not
less than $10,000,000 . On the effective date of such termination or partial
reduction, the Applicable Borrowers shall pay to the Administrative Agent, for
the account of such Lender, in immediately available funds, an amount equal to
(in the case of a termination) the outstanding principal of and interest on its
Loans, or (in the case of a partial reduction) the outstanding principal of and
interest on the reduced amount of its Loans, and any and all other amounts owing
to such Lender hereunder. Without prejudice to the survival of any of the
agreements of the Borrowers hereunder, the agreements of the Borrowers contained
in Sections 2.12, 5.01, 5.06, 11.03 and 11.13 hereof (without duplication of any
payments made to a Lender whose Commitments have been terminated by the
Borrowers pursuant to this Section 2.04(c)) shall survive for the benefit of
each Lender under this Section 2.04(c) with respect to the time prior to such
termination.
(d) The Commitments under any Tranche, once terminated or reduced,
may not be reinstated.
2.05 Fees.
----
(a) Facility Fee. With respect to each Tranche, the Applicable
------------
Borrowers
Credit Agreement
----------------
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shall pay to the Administrative Agent for account of each Lender under such
Tranche a facility fee on the daily average of such Lender's Commitment under
such Tranche (regardless of utilization thereof), for the period from and
including the date hereof to but not including the earlier of the date such
Commitment is terminated and the relevant Commitment Termination Date, at a rate
per annum equal to the Applicable Facility Fee Percentage. Any facility fee
accrued on any day in respect of Tranche B-($) or Tranche B-(MC) shall be
payable by COFC, except that, if any outstanding Loans under such Tranche are
owing by either COB or FSB on such day, the facility fee so accrued for such day
shall be payable by COB or FSB, as the case may be, to the extent a Lender's
Commitment under such Tranche is utilized by such Loans.
(b) Utilization Fee. With respect to each Tranche, the Applicable
---------------
Borrowers shall pay to the Administrative Agent for account of each Lender under
such Tranche a utilization fee, for each Computation Period occurring during the
period from and including the date hereof to but not including the earlier of
the date the Commitments under such Tranche are terminated and the Commitment
Termination Date for such Tranche, on the excess, if any, of (i) the Average of
the aggregate outstanding principal amount of all Loans (including Money Market
Loans) outstanding under such Tranche for such Computation Period over (ii) 50%
of the Average of the aggregate amount of all Commitments under such Tranche in
effect for such Computation Period at a rate per annum equal to the Applicable
Utilization Fee Percentage. Utilization fee payable under this Section 2.05(b)
with respect to any day under any Tranche shall be allocated between the
Applicable Borrowers pro rata according to the respective Average aggregate
outstanding principal amounts of Loans under such Tranche owing by the Borrowers
for such Computation Period.
(c) Payment. With respect to any Tranche, accrued facility fee and
-------
utilization fee shall be payable on each Quarterly Date and on the earlier of
the date the Commitments under such Tranche are terminated and the Commitment
Termination Date for such Tranche.
2.06 Lending Offices. The Loans of each Type and Currency made by each
---------------
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type and Currency.
2.07 Several Obligations; Remedies Independent. The failure of any
-----------------------------------------
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender, and
(except as otherwise provided in Section 4.06 hereof) no Lender shall have any
obligation to the Administrative Agent or any other Lender for the failure by
such Lender to make any Loan required to be made by such Lender. The amounts
payable by each Borrower at any time hereunder and under the Notes to each
Lender shall be a separate and independent debt, and each Lender shall be
entitled to protect and enforce its rights arising out of this Agreement and the
Notes, and it shall not be necessary for any other Lender or the Administrative
Agent to consent to, or be joined as an additional party in, any proceedings for
such purposes.
Credit Agreement
----------------
<PAGE>
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2.08 Evidence of Debt.
----------------
(a) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of each Borrower to such
Lender resulting from each Loan made by such Lender, including the date, amount,
Tranche, Currency, Type, interest rate and duration of Interest Period of each
Loan made by such Lender to a Borrower, and amounts of principal and interest
payable and paid to such Lender from time to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it
shall record (i) the name of the Applicable Borrower and amount of each Loan
made hereunder, the Tranche, Currency and Type thereof and the interest rate and
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from each Applicable Borrower to
each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent from any Applicable Borrower hereunder for the account of
the Lenders and each Lender's share thereof.
(c) The entries made in the accounts maintained pursuant to paragraph
(a) or (b) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of any Applicable Borrower
to repay its Loans in accordance with the terms of this Agreement.
(d) Any Lender may request through the Administrative Agent that
Loans made by it be evidenced by one or more promissory notes. In such event,
the Applicable Borrower(s) shall prepare, execute and deliver to such Lender a
promissory note payable to the order of such Lender in the form of Exhibit A-1
hereto (to evidence Tranche A-($) Loans), Exhibit A-2 hereto (to evidence
Tranche A-(MC) Loans), Exhibit A-3 hereto (to evidence Tranche B-($) Loans),
Exhibit A-4 hereto (to evidence Tranche B-(MC) Loans) or Exhibit A-5 hereto (to
evidence Money Market Loans), as such Lender may request. Each Syndicated Note
shall be dated the date hereof, duly executed by the Applicable Borrower and
payable to such Lender in a principal amount equal to the amount of its
Commitment for the applicable Tranche as originally in effect and otherwise duly
completed. Each Money Market Note shall be dated the date hereof, duly executed
by the Applicable Borrower and payable to such Lender and otherwise duly
completed.
(e) No Lender shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's Commitment, Loans and Notes pursuant to Section 11.06
hereof (and, if requested by any Lender, the Applicable Borrower agrees to so
exchange any Note).
2.09 Prepayments.
-----------
(a) Optional Prepayments. Subject to Section 4.04 hereof, each
--------------------
Borrower
Credit Agreement
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<PAGE>
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shall have the right to prepay Syndicated Loans made to such Borrower at any
time or from time to time, provided that: (i) such Borrower shall give the
--------
Administrative Agent notice of each such prepayment as provided in Section 4.05
hereof (and, upon the date specified in any such notice of prepayment, the
amount to be prepaid shall become due and payable hereunder) and (ii) any
prepayment of a Eurocurrency Loan on a day other than the last day of the
Interest Period for such Loan shall be subject to the payment of any
compensation payable under Section 5.05 hereof. Money Market Loans may not be
prepaid.
(b) Currency Valuation. In the event that any Applicable Borrower
------------------
selects an Interest Period of more than three months' duration for any borrowing
of Tranche A-(MC) Loans or any borrowing of Tranche B-(MC) Loans, on each
Currency Valuation Date (as defined below), the Administrative Agent shall
determine the sum of the aggregate outstanding principal amount of all Tranche
A-(MC) Loans and the aggregate principal amount of all Tranche B-(MC) Loans.
For purposes of this determination, the outstanding principal amount of any Loan
that is denominated in any Alternative Currency shall be deemed to be the Dollar
Equivalent of the amount in the Alternative Currency of such Loan, determined as
of such Currency Valuation Date. Upon making such determination, the
Administrative Agent shall promptly notify the Lenders and each Applicable
Borrower thereof. If, on the date of such determination, such sum of the
aggregate principal amount of all Tranche A-(MC) Loans exceeds 105% of the
aggregate of the Tranche A-(MC) Commitments as then in effect, the Applicable
Borrowers shall, if requested by the Majority Lenders (through the
Administrative Agent), prepay outstanding Tranche A-(MC) Loans (ratably in
accordance with the then outstanding aggregate principal amounts thereof) in
such amounts as shall be necessary so that after giving effect thereto the
aggregate outstanding principal amount of all Tranche A-(MC) Loans does not
exceed the aggregate Tranche A-(MC) Commitments. If, on the date of such
determination, the aggregate outstanding principal amount of all Tranche B-(MC)
Loans exceeds 105% of the aggregate of the Tranche B-(MC) Commitments as then in
effect, the Applicable Borrowers shall, if requested by the Majority Lenders
(through the Administrative Agent), prepay outstanding Tranche B-(MC) Loans
(ratably in accordance with the then outstanding aggregate principal amounts
thereof) in such amounts as shall be necessary so that after giving effect
thereto the aggregate outstanding principal amount of all Tranche B-(MC) Loans
does not exceed the aggregate Tranche B-(MC) Commitments. Any such payment
shall be accompanied by accrued interest thereon as provided in Section 3.02
hereof and by any amounts payable under Section 5.05 hereof.
For purposes of this Section 2.09(b), "Currency Valuation Date" shall
-----------------------
mean, with respect to each Interest Period having an initial duration of more
than three months for any borrowing of Tranche A-(MC) Loans or for any borrowing
of Tranche B-(MC) Loans, each date which occurs at intervals of three months
after the first day of such Interest Period (or, if any such date is not a
Business Day, the immediately preceding Business Day).
2.10 Extension of Commitment Termination Date.
----------------------------------------
(a) The Applicable Borrowers may, by notice to the Administrative
Agent (which shall promptly deliver a copy to each of the Lenders) given not
less than 60 days and not
Credit Agreement
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<PAGE>
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more than 90 days prior to any of the first, second and third anniversaries of
the date of this Agreement, request that the Lenders extend the Commitment
Termination Date then in effect for any Tranche (the "Existing Commitment
-------------------
Termination Date") to the date one year following the Existing Commitment
- ----------------
Termination Date; provided that in no event may (i) the Applicable Borrowers
--------
request more than three such extensions with respect to any Tranche, (ii) the
Applicable Borrowers request more than one extension for any Tranche with
respect to any such anniversary date and (iii) any such extension be effected
with respect to any Tranche unless such request shall be made by each Applicable
Borrower under such Tranche. Each Lender, acting in its sole discretion, shall,
by notice to the Applicable Borrowers and the Administrative Agent given not
later than the date 30 days prior to the relevant anniversary of the date of
this Agreement with respect to which such extension was requested (the "Consent
-------
Date"), advise the Applicable Borrowers whether or not such Lender agrees to
- ----
such extension; provided that (i) the election of any Lender to agree to such
--------
extension shall not obligate any other Lender to agree to such extension, (ii)
any such notice, once given, shall be revocable until the Consent Date and (iii)
any Lender under any Tranche that is a Non-Extending Lender (as defined below)
with respect to an extension request made under such Tranche with respect to any
anniversary of the date of this Agreement may not agree (other than with respect
to a Commitment acquired from another Lender after the Consent Date) to an
extension request made under such Tranche with respect to a subsequent
anniversary of the date of this Agreement.
(b) If, on the Consent Date, the Administrative Agent shall have
received from Lenders under the applicable Tranche holding Commitments under
such Tranche in an aggregate amount more than 50% of the aggregate amount of the
Commitments under such Tranche notices (which have not been revoked) agreeing to
extend the Existing Commitment Termination Date as provided in Section 2.10(a)
hereof, then, effective as of the Consent Date, the Existing Commitment
Termination Date shall be extended to the date one year following the Existing
Commitment Termination Date; provided that (i) if the Administrative Agent shall
--------
not have received such notices, the Existing Commitment Termination Date shall
remain unchanged and (ii) the Commitment of any Lender (a "Non-Extending
-------------
Lender") that notified the Administrative Agent that such Lender elected not to
agree to extend the Existing Commitment Termination Date as provided in Section
2.10(a) hereof or that failed to deliver a notice to the Administrative Agent
agreeing to such an extension (or that revoked any such notice of agreement
prior to the Consent Date and thereafter failed to deliver another such notice)
shall terminate on the Existing Commitment Termination Date.
(c) The Applicable Borrowers, acting jointly, shall have the right
at any time after the Consent Date but prior to the date as of which the
Commitment of a Non-Extending Lender terminates to replace such Non-Extending
Lender with one or more other banks or other lenders (which may include any
other Lender, each a "Replacement Lender") with the approval (in the case of a
------------------
Replacement Lender that is not already a Lender) of the Administrative Agent
(which approval shall not be unreasonably withheld or delayed), each of which
Replacement Lender(s) shall have entered into an agreement in form and substance
satisfactory to the Applicable Borrowers and the Administrative Agent pursuant
to which such Replacement Lender(s) shall (i) assume all or any portion of the
Commitment(s) of the Non-Extending Lender
Credit Agreement
----------------
<PAGE>
-38-
as if such Non-Extending Lender had agreed to any extension of the Commitment
Termination Date previously effected pursuant to Section 2.10(b) hereof (and, if
any such Replacement Lender is a Lender, its Commitment shall be in addition to
such Lender's Commitment hereunder on such date) and (ii) purchase all of such
Non-Extending Lender's Loans hereunder for consideration equal to the aggregate
outstanding principal amount of such Non-Extending Lender's Loans, together with
interest thereon to the date of such purchase, and satisfactory arrangements are
made for payment to such Non-Extending Lender of all other amounts payable
hereunder to such Non-Extending Lender on or prior to the date of such transfer
(including any fees accrued hereunder and any amounts that would be payable
under Section 5.05 hereof as if all of such Non-Extending Lender's Loans were
being prepaid in full on such date). Without prejudice to the survival of any
other agreement of the Borrowers hereunder, the agreements of the Borrowers
contained in Sections 2.12, 5.01, 5.06, 11.03 and 11.13 hereof (without
duplication of any payments made to such Non-Extending Lender by the Borrowers
or the Replacement Lender) shall survive for the benefit of such Non-Extending
Lender under this Section 2.10 with respect to the time prior to such
replacement. The right of the Applicable Borrowers to replace a Non-Extending
Lender with a Replacement Lender is subject to the requirement that, immediately
after giving effect to such replacement, no Lender under any Tranche shall hold
a Commitment under such Tranche in an aggregate amount exceeding 25% of the
aggregate amount of the Commitments under such Tranche.
(d) Any extension of the Existing Commitment Termination Date
pursuant to this Section 2.10 shall be effective only if:
(i) no Default shall have occurred and be continuing on the
date of the notice requesting such extension and the Consent Date; and
(ii) each of the representations and warranties made by COB in Section
7 hereof (other than the Excluded Representations, but, if such extension
relates to the Tranche B-($) Commitment Termination Date or the Tranche B-
(MC) Commitment Termination Date, including the representations and
warranties made by COFC in Section 7 hereof, other than the Excluded
Representations) shall be true and correct in all material respects on and
as of the date of the notice requesting such extension and the Consent Date
with the same force and effect as if made on and as of each such date (or,
if any such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date).
Each notice requesting an extension of the Existing Commitment Termination Date
pursuant to this Section 2.10 shall constitute a certification to the effect set
forth in the preceding sentence (both as of the date of such notice and the
Consent Date).
2.11 Increases in Commitments.
------------------------
(a) The Applicable Borrowers, acting jointly, shall have the right
at any time on or after the first anniversary of the date of this Agreement to
increase the aggregate amount of
Credit Agreement
----------------
<PAGE>
-39-
the Commitments hereunder to an amount not to exceed $1,500,000,000 by causing
one or more banks or other financial institutions, which may include any Lender
already party to this Agreement, to become a "Lender" party to this Agreement or
(in the case of any Lender already party to this Agreement) to increase the
amount of such Lender's Commitment; provided that (i) the addition of any bank
--------
or other financial institution to this Agreement that is not already a Lender
shall be subject to the consent of the Administrative Agent (which consent shall
not be unreasonably withheld or delayed) and (ii) the Commitment of any bank or
other financial institution becoming a "Lender" party to this Agreement, and any
increase in the amount of the Commitment of any Lender already party to this
Agreement, shall be in an amount equal to an integral multiple of $1,000,000 and
not less than $10,000,000.
(b) Any increase in the aggregate amount of the Commitments pursuant
to Section 2.11(a) hereof shall be effective only upon the execution and
delivery to the Applicable Borrowers and the Administrative Agent of a
commitment increase letter in substantially the form of Exhibit I hereto (a
"Commitment Increase Letter"), which Commitment Increase Letter shall be
--------------------------
delivered to the Administrative Agent not less than five Business Days prior to
the Commitment Increase Date and shall specify (i) the amount and Tranche of the
Commitment of any bank or other financial institution becoming a "Lender" party
to this Agreement or of any increase in the amount of the Commitment under any
Tranche of any Lender already party to this Agreement and (ii) the date such
increase is to become effective (the "Commitment Increase Date").
------------------------
(c) Any increase in the aggregate amount of the Commitments pursuant
to this Section 2.11 shall not be effective unless:
(i) no Default shall have occurred and be continuing on the
Commitment Increase Date;
(ii) each of the representations and warranties made by COB in
Section 7 hereof (other than the Excluded Representations, but, if such
increase relates to the aggregate amount of the Tranche B-($) Commitments
or the Tranche B-(MC) Commitments, including the representations and
warranties made by COFC in Section 7 hereof, other than the Excluded
Representations) shall be true and correct in all material respects on and
as of the Commitment Increase Date with the same force and effect as if
made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date);
(iii) no notice of borrowing of Syndicated Loans under any
Tranche affected by such increase in the aggregate amount of the
Commitments shall have been given, in each case, on and as of such
Commitment Increase Date;
(iv) such increase in the aggregate amount of the Commitments
does not cause any Lender under any Tranche to hold a Commitment under such
Tranche in an aggregate amount exceeding 25% of the aggregate amount of the
Commitments under
Credit Agreement
----------------
<PAGE>
-40-
such Tranche;
(v) immediately after giving effect to such increase, the aggregate
amount of Tranche A-($) Commitments plus Tranche A-(MC) Commitments shall
not exceed $900,000,000;
(vi) immediately after giving effect to such increase, the aggregate
amount of Tranche B-($) Commitments plus Tranche B-(MC) Commitments shall
not exceed $600,000,000; and
(vii) the Administrative Agent shall have received (with sufficient
copies for each of the Lenders) each of (x) a certificate of the corporate
secretary or assistant secretary of the Applicable Borrowers as to the
taking of any corporate action necessary in connection with such increase
and (y) an opinion or opinions of counsel to the Applicable Borrowers as to
their corporate power and authority to borrow hereunder after giving effect
to such increase.
Each notice requesting an increase in the aggregate amount of the Commitments
pursuant to this Section 2.11 shall constitute a certification to the effect set
forth in clauses (i) and (ii) of the preceding sentence.
(d) No Lender shall at any time be required to agree to a request of
a Borrower to increase its Commitment or obligations hereunder.
2.12 Undertaking of COB. COB hereby agrees with each Lender and the
------------------
Administrative Agent as follows:
(a) Undertaking to Pay. At the request of FSB, and for account of
------------------
FSB as provided in Section 2.12(d) hereof, COB hereby irrevocably undertakes in
favor of the Administrative Agent that COB will honor the Administrative Agent's
sight drafts drawn on COB and payable to the order of the Administrative Agent
upon presentation of such drafts to COB at the address to which notices are
deliverable to COB under Section 11.02 hereof accompanied by a written
certification referred to below (such undertaking to honor such drafts being
herein called, the "Undertaking"). Each draft must be accompanied by written
-----------
certification of the Administrative Agent in the form of Exhibit J to this
Agreement. Each draft drawn under and in compliance with the Undertaking will
be duly honored by COB forthwith upon presentation by paying the amount of such
draft to the Administrative Agent at the Administrative Agent's Account in the
manner specified in Section 4.01 hereof.
(b) Amount Available. The aggregate amount available to be drawn
----------------
under this Section 2.12 shall be equal to (i) the aggregate amount of
Commitments hereunder plus (ii) interest (computed on the basis of a year of 360
----
days) that would accrue on such aggregate amount for a period of 360 days at a
rate per annum equal to 12%. Partial and multiple drawings under this Section
2.12 are permitted. The Undertaking shall expire on the date 100 days following
the latest Commitment Termination Date, as the same may be extended from time to
Credit Agreement
----------------
<PAGE>
-41-
time.
(c) Certain Terms and Conditions. All charges and commissions
----------------------------
incurred by COB in connection with the issuance or administration of the
Undertaking (including any drawing in respect of the Undertaking) shall be for
account of FSB. This Section 2.12 sets forth in full the terms of the
Undertaking, and the Undertaking shall not in any way be amended, modified,
amplified or limited by reference to any other Section or provision of this
Agreement or any document, instrument or agreement referred to herein, and any
such reference shall not be deemed to incorporate in this Section 2.12 by
reference any document, instrument or agreement. The obligations of COB in
respect of the Undertaking are independent of any of the obligations of any
other party to this Agreement and of any obligations of COB under any other
Section or provision of this Agreement (and accordingly the Undertaking is
intended to be both a "credit" and a "letter of credit" within the meaning of
Article 5 of the New York Uniform Commercial Code), and the entitlement of the
Administrative Agent to draw under the Undertaking is subject only to compliance
by the Administrative Agent with the express conditions to drawing set forth in
this Section 2.12. The Undertaking may not be assigned or transferred other
than to a successor Administrative Agent appointed in accordance with Section
10.08 hereof.
(d) Reimbursement. FSB agrees to reimburse COB for any drawing by
-------------
the Administrative Agent under the Undertaking, without notice or demand of any
kind, not later than 1:00 p.m. (New York time) on the Business Day following
such drawing, in an amount equal to the amount of such drawing. COB hereby
agrees that until the payment and satisfaction in full of the principal of and
interest on the Loans made by the Lenders to, and any Notes held by each Lender
of, FSB and all other amounts from time to time owing to the Lenders or the
Administrative Agent by FSB hereunder and under any Notes and the expiration or
termination of the Commitments COB shall not exercise any right or remedy to
collect any amount owing by FSB to COB under this Section 2.12(d).
(e) UCP. The Undertaking is subject to the Uniform Customs and
---
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 (the "UCP"). In the event of any conflict between
---
the law of the State of New York (which, pursuant to Section 11.10 hereof,
governs this Agreement) and the UCP, the UCP shall control. Notwithstanding
Article 17 of the UCP, if the Undertaking expires during an interruption of
business as described in said Article 17, COB shall effect payment if the
Undertaking is drawn against within 30 days after the resumption of business.
(f) Distribution of Proceeds of Drawing. Each payment received by
-----------------------------------
the Administrative Agent in connection with any drawing under the Undertaking
shall be promptly applied by the Administrative Agent to the obligations of FSB
in respect of which such drawing was made.
SECTION 3. Payments of Principal and Interest.
----------------------------------
Credit Agreement
----------------
<PAGE>
-42-
3.01 Repayment of Loans. Each Borrower hereby promises to pay to the
------------------
Administrative Agent for account of each Lender the principal of each Loan made
by such Lender to such Borrower, and each such Loan shall mature, on the last
day of the Interest Period therefor.
3.02 Interest. Each Borrower hereby promises to pay to the
--------
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender to such Borrower for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) if such Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin;
----
(b) if such Loan is a Eurocurrency Loan, the Eurocurrency Rate for
such Loan for the Interest Period therefor plus the Applicable Margin;
----
(c) if such Loan is a LIBOR Market Loan, the Eurocurrency Rate for
such Loan for the Interest Period therefor plus (or minus) the LIBO
---- -----
Margin quoted by the Lender making such Loan in accordance with Section
2.03 hereof; and
(d) if such Loan is a Set Rate Loan, the Set Rate for such Loan for
the Interest Period therefor quoted by the Lender making such Loan in
accordance with Section 2.03 hereof.
Notwithstanding the foregoing, each Borrower hereby promises to pay to
the Administrative Agent for account of each relevant Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such Lender to
such Borrower, and on any other amount payable by such Borrower to or for
account of such Lender hereunder or under any Notes, that shall not be paid in
full when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), for the period from and including the due date thereof
to but excluding the date the same is paid in full. Accrued interest on each
Loan shall be payable (i) on the last day of the Interest Period therefor and,
if such Interest Period is longer than 90 days (in the case of a Set Rate Loan)
or three months (in the case of a Eurocurrency Loan or a LIBOR Market Loan), at
90-day or three-month intervals, respectively, following the first day of such
Interest Period, and (ii) in the case of any Loan, upon the payment or
prepayment thereof (but only on the principal amount so paid or prepaid), except
that interest payable at the Post-Default Rate shall be payable from time to
time on demand. Promptly after the determination of any interest rate provided
for herein or any change therein, the Administrative Agent shall give notice
thereof to the Lenders to which such interest is payable and to the Applicable
Borrower.
SECTION 4. Payments; Pro Rata Treatment; Computations; Etc.
-----------------------------------------------
4.01 Payments.
--------
Credit Agreement
----------------
<PAGE>
-43-
(a) Except to the extent otherwise provided herein, all payments of
principal of and interest on any Loan and of all other amounts to be made by a
Borrower under this Agreement and any Notes shall be made in the Currency in
which such Loan or other amount is denominated, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent at the
Administrative Agent's Account for the Currency in which such Loan or other
amount is denominated, not later than 1:00 p.m. Local Time on the date on which
such payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day),
provided that if a new Loan is to be made to a Borrower under any Tranche by any
- --------
Lender on a date on which such Borrower is to repay any principal of an
outstanding Loan of such Lender under such Tranche and in the same Currency,
such Lender shall apply the proceeds of such new Loan to the payment of the
principal to be repaid and only an amount equal to the difference between the
principal to be borrowed and the principal to be repaid shall be made available
by such Lender to the Administrative Agent as provided in Section 2.02 hereof or
paid by the Applicable Borrower to the Administrative Agent pursuant to this
Section 4.01, as the case may be. All amounts owing under this Agreement and
any Notes (other than principal of and interest on Loans denominated in an
Alternative Currency) are denominated and payable in Dollars.
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time to any ordinary deposit account of the Borrower obligated to
make such payment with such Lender (with notice to such Borrower and the
Administrative Agent), provided that such Lender's failure to give such notice
--------
shall not affect the validity thereof.
(c) Each Borrower shall, at the time of making each payment under
this Agreement or any Note for account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans or other amounts payable by such Borrower hereunder to which such
payment is to be applied (and in the event that such Borrower fails to so
specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Requisite Lenders (with respect to COB or FSB as
Borrower) or Majority Tranche B Lenders (with respect to COFC as Borrower),
subject to Section 4.02 hereof, may determine to be appropriate).
(d) Each payment received by the Administrative Agent under this
Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in like Currency and immediately
available funds, for account of such Lender's Applicable Lending Office for the
Loan or other obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
Credit Agreement
----------------
<PAGE>
-44-
4.02 Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein:
(a) each borrowing under Section 2.01 hereof of Syndicated Loans of a
particular Tranche from the Lenders holding Commitments under such Tranche
shall be made from such Lenders, each payment under Section 2.05(a) hereof
of facility fee to the Lenders under such Tranche (allocated between the
Borrowers in accordance with the last two sentences of Section 2.05(a)
hereof), and each termination or reduction under Section 2.04 hereof of the
Commitments under such Tranche shall be applied to the respective
Commitments of the Lenders under such Tranche, pro rata according to the
amounts of their respective Commitments under such Tranche;
(b) except as otherwise provided in Section 5.04 hereof, Eurocurrency
Loans under a particular Tranche having the same Interest Period shall be
allocated among the Lenders under such Tranche pro rata according to the
amounts of their respective Commitments under such Tranche;
(c) each payment or prepayment of principal of Syndicated Loans under
a Tranche, and each payment under Section 2.05 hereof of utilization fee to
the Lenders under such Tranche, shall be made by a Borrower (allocated
between the Borrowers in accordance with the last sentence of Section
2.05(b) hereof) for account of the Lenders under such Tranche pro rata
according to the respective unpaid principal amounts of the Syndicated
Loans of such Tranche owing by such Borrower held by such Lenders; and
(d) each payment of interest on Syndicated Loans under a Tranche
shall be made by a Borrower for account of the Lenders under such Tranche
pro rata according to the amounts of interest on such Loans then due and
payable by such Borrower to such Lenders.
4.03 Computations. Interest on Money Market Loans and Eurocurrency
------------
Loans and facility and utilization fee shall be computed on the basis of a year
of 360 days and actual days elapsed (including the first day but excluding the
last day) occurring in the period for which payable, and interest on Base Rate
Loans shall be computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable. Notwithstanding the foregoing,
(a) for each day that the Base Rate is calculated by reference to the Federal
Funds Rate, interest on Base Rate Loans shall be computed on the basis of a year
of 360 days and actual days elapsed and (b) interest on Eurocurrency Loans
denominated in Pounds Sterling shall be computed on the basis of a year of 365
or 366 days, as the case may be.
4.04 Minimum Amounts. Except for prepayments made pursuant to Section
---------------
5.04 hereof, each borrowing and partial prepayment of principal of Loans (other
than Money Market Loans) shall aggregate to an integral multiple of $1,000,000
and not less than $10,000,000 (borrowings or prepayments of Loans of different
Types or, in the case of Eurocurrency Loans, having different Interest Periods
at the same time hereunder to be deemed separate borrowings
Credit Agreement
----------------
<PAGE>
-45-
and prepayments for purposes of the foregoing, one for each Type or Interest
Period), provided that (a) the aggregate principal amount of Eurocurrency Loans
--------
under Tranche A-($) having the same Interest Period shall aggregate to an
integral multiple of $1,000,000 and not less than $20,000,000, (b) the aggregate
principal amount of Eurocurrency Loans under any of Tranche A-(MC), Tranche B-
($) and Tranche B-(MC) having the same Interest Period and denominated in the
same Currency shall aggregate to an integral multiple of $1,000,000 and not less
than $5,000,000 (or, in the case of Loans denominated in an Alternative
Currency, the Foreign Currency Equivalent thereof (rounded to the nearest 1,000
units of such Alternative Currency)) and (c) if any Eurocurrency Loans would
otherwise be in a lesser principal amount for any period, such Loans shall be
Base Rate Loans during such period.
4.05 Certain Notices. Except as otherwise provided in Section 2.03
---------------
hereof with respect to Money Market Loans, notices by a Borrower to the
Administrative Agent of terminations or reductions of the Commitments and of
borrowings and optional prepayments of Loans, of Tranches, Currencies and Types
of Loans and of the duration of Interest Periods shall be irrevocable and shall
be effective only if received by the Administrative Agent not later than 11:00
a.m. New York time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing or prepayment or the first day of
such Interest Period specified below:
Number of
Type Business Days Prior
---- -------------------
Termination or reduction of Commitments 3
Borrowing or prepayment of Base Rate Loans same day
Borrowing or prepayment of, or duration of 3
Interest Period for, Eurocurrency Loans
denominated in Dollars
Borrowing or prepayment of, or duration of 4
Interest Period for, Eurocurrency Loans
denominated in an Agreed Alternative Currency
Each such notice of termination or reduction shall specify the amount and
Tranche of the Commitments to be terminated or reduced. Each such notice of
borrowing or optional prepayment shall be in substantially the form of Exhibit D
hereto and shall specify the Loans to be borrowed or prepaid and the amount
(subject to Section 4.04 hereof), Tranche, Currency (in the case of Tranche A-
(MC) Loans or Tranche B-(MC) Loans) and Type of each Loan to be borrowed or
prepaid, the date of borrowing or optional prepayment (which shall be a Business
Day), the Interest Period of the Loans to be borrowed or prepaid and the
identity of the Applicable Borrower; provided that any notice of borrowing given
--------
by FSB shall also be signed by COB. The Administrative Agent shall promptly
notify the affected Lenders of the contents of
Credit Agreement
----------------
<PAGE>
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each such notice.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
------------------------------------------------
Administrative Agent shall have been notified by a Lender or a Borrower (the
"Payor") prior to the date on which the Payor is to make payment to the
-----
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of a Borrower) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
------------
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
--------
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by a
Borrower to the Lenders, such Borrower and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (without duplication of the
obligation of such Borrower under Section 3.02 hereof to pay interest on
the Required Payment at the Post-Default Rate), it being understood that
the return by the recipient(s) of the Required Payment to the
Administrative Agent shall not limit such obligation of such Borrower under
said Section 3.02 to pay interest at the Post-Default Rate in respect of
the Required Payment; and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to a Borrower, the Payor and such Borrower shall each
be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment pursuant to whichever of the rates specified in
Section 3.02 hereof is applicable to the Type of such Loan, it being
understood that the return by such Borrower of the Required Payment to the
Administrative Agent shall not limit any claim such Borrower may have
against the Payor in respect of such Required Payment.
4.07 Sharing of Payments, Etc.
------------------------
Credit Agreement
----------------
<PAGE>
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(a) Each Borrower agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness, held by it for the
credit or account of such Borrower at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such Lender's
Loans to such Borrower or any other amount payable by such Borrower to such
Lender hereunder, that is not paid when due (regardless of whether such deposit
or other indebtedness is then due to such Borrower), in which case it shall
promptly notify such Borrower and the Administrative Agent thereof, provided
--------
that such Lender's failure to give such notice shall not affect the validity
thereof.
(b) If any Lender shall obtain from a Borrower payment of any
principal of or interest on any Syndicated Loan under any Tranche owing to such
Lender or payment of any other amount owing under this Agreement (other than in
respect of Money Market Loans) through the exercise of any right of set-off,
banker's lien or counterclaim or similar right or otherwise (other than from the
Administrative Agent as provided herein), and, as a result of such payment, such
Lender shall have received a greater percentage of the principal of or interest
on the Syndicated Loans of such Tranche or such other amounts in respect of such
Tranche due hereunder from such Borrower to such Lender than the percentage
received by any other Lender under such Tranche, it shall promptly purchase from
such other Lenders participations in (or, if and to the extent specified by such
Lender, direct interests in) the Loans of such Tranche or such other amounts,
respectively, owing to such other Lenders (or in interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all the Lenders under such Tranche shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the Loans of such
Tranche or such other amounts, respectively, owing to each of the Lenders under
such Tranche. To such end all the Lenders under such Tranche shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored.
(c) The Borrower obligated in respect of such Loans or other amounts
agrees that any Lender so purchasing such a participation (or direct interest)
may exercise all rights of set-off, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of Loans or other amounts (as the case may be) owing to such
Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of a Borrower. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured
Credit Agreement
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claim.
SECTION 5. Yield Protection, Etc.
----------------------
5.01 Additional Costs.
----------------
(a) Each Borrower shall pay directly to each Lender from time to
time such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Fixed Rate Loans owing by such Borrower or its
obligation to make to such Borrower any Fixed Rate Loans hereunder, or any
reduction in any amount receivable by such Lender hereunder in respect of any of
such Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
----------------
Regulatory Change (including without limitation, the introduction of, changeover
to or operation of the Euro in a Participating Member State) that:
(i) shall subject any Lender (or its Applicable Lending Office for
any of such Loans) to any tax, duty or other charge in respect of such
Loans or (if any) its Notes or changes the basis of taxation of any amounts
payable to such Lender under this Agreement or (if any) its Notes in
respect of any of such Loans (excluding changes in the rate of tax on the
overall net income of such Lender or of such Applicable Lending Office by
the jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than, in the case of any Lender for any period as to
which a Borrower is required to pay any amount under Section 5.01(d)
hereof, the reserves against "Eurocurrency liabilities" under Regulation D
referred to therein) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of, such Lender (including,
without limitation, any of such Loans or any deposits referred to in the
definition of "Fixed Base Rate" in Section 1.01 hereof), or any commitment
of such Lender (including, without limitation, the Commitment(s) of such
Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or (if any)
its Notes (or any of such extensions of credit or liabilities) or its
Commitment(s).
If any Lender requests compensation from a Borrower under this Section 5.01(a),
such Borrower may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make Eurocurrency
Loans to such Borrower until the Regulatory Change giving rise to such request
ceases to be in effect (in which case the provisions of Section 5.04 hereof
shall be applicable), provided that such suspension shall not affect the right
--------
of such Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), if any Lender shall have determined that
any law or regulation or any
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interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority, (i) following any Regulatory Change, (ii) in
connection with the Euro becoming a currency in its own right in connection with
EMU or (iii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) hereafter issued by any government or governmental
or supervisory authority implementing at the national level the Basle Accord,
has or would have the effect of reducing the rate of return on assets or equity
of such Lender (or any Applicable Lending Office of such Lender or any bank
holding company of which such Lender is a subsidiary) as a consequence of such
Lender's Commitment to make or maintain Loans to a Borrower or Loans made to
such Borrower to a level below that which such Lender (or any Applicable Lending
Office or such bank holding company) could have achieved but for such law,
regulation, interpretation, directive or request, then such Borrower shall pay
directly to each Lender from time to time on request such amounts as such Lender
may determine to be necessary to compensate such Lender (or, without
duplication, such bank holding company) for such reduction.
(c) Each Lender shall notify the relevant Borrower of any event
occurring after the date hereof entitling such Lender to compensation from such
Borrower under paragraph (a) or (b) of this Section 5.01 as promptly as
practicable, but in any event within 45 days, after such Lender obtains actual
knowledge thereof; provided that (i) if any Lender fails to give such notice
--------
within 45 days after it obtains actual knowledge of such an event, such Lender
shall, with respect to compensation payable by such Borrower pursuant to this
Section 5.01 in respect of any costs resulting from such event, only be entitled
to payment under this Section 5.01 for costs incurred from and after the date 45
days prior to the date that such Lender does give such notice and (ii) each
Lender will designate a different Applicable Lending Office for the Loans of
such Lender affected by such event if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the sole opinion of
such Lender, be disadvantageous to such Lender, except that such Lender shall
have no obligation to designate an Applicable Lending Office located in the
United States of America. Each Lender will furnish to the relevant Borrower a
certificate setting forth the basis and amount of each request by such Lender
for compensation under paragraph (a) or (b) of this Section 5.01.
Determinations and allocations by any Lender for purposes of this Section 5.01
of the effect of any Regulatory Change pursuant to paragraph (a) of this Section
5.01, or of the effect of capital maintained pursuant to paragraph (b) of this
Section 5.01, on its costs or rate of return of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Lender under this Section 5.01,
shall be conclusive, provided that such determinations and allocations are made
--------
on a reasonable basis.
(d) Without limiting the effect of the foregoing, the Applicable
Borrower shall pay to each Lender on the last day of the Interest Period
therefor so long as such Lender is maintaining reserves against "Eurocurrency
liabilities" under Regulation D (or, unless the provisions of paragraph (b)
above are applicable, so long as such Lender is, by reason of any Regulatory
Change, maintaining reserves against any other category of liabilities that
includes
Credit Agreement
----------------
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deposits by reference to which the interest rate on Fixed Rate Loans is
determined as provided in this Agreement or against any category of extensions
of credit or other assets of such Lender that includes any Fixed Rate Loans) an
additional amount (determined by such Lender and notified to such Borrower
through the Administrative Agent) equal to the product of the following for each
Fixed Rate Loan for each day during such Interest Period:
(i) the principal amount of such Fixed Rate Loan outstanding on such
day; and
(ii) the remainder of (x) a fraction the numerator of which is the
rate (expressed as a decimal) at which interest accrues on such Fixed Rate
Loan for such Interest Period as provided in this Agreement (less the
Applicable Margin) and the denominator of which is one minus the effective
-----
rate (expressed as a decimal) at which such Reserve Requirements are
imposed on such Lender on such day minus (y) such numerator; and
-----
(iii) 1/360.
5.02 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, if, on or prior to the determination of any Fixed Base Rate for
any Interest Period:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Fixed Base Rate" in Section 1.01 hereof
are not being provided in the relevant amounts or Currencies or for the
relevant maturities for purposes of determining rates of interest for
either Type of Fixed Rate Loans as provided herein; or
(b) with respect to any Tranche, the Majority Tranche Lenders
under such Tranche determine (or any Lender that has outstanding a Money
Market Quote with respect to a LIBOR Market Loan determines), which
determination shall be conclusive, and notify (or notifies, as the case may
be) the Administrative Agent that the relevant rates of interest referred
to in the definition of "Fixed Base Rate" in Section 1.01 hereof upon the
basis of which the rate of interest for Eurocurrency Loans (or LIBOR Market
Loans, as the case may be) in any Currency for such Interest Period under
such Tranche is to be determined will not adequately and fairly reflect the
cost to such Lenders (or to such quoting Lender) of making or maintaining
Eurocurrency Loans (or LIBOR Market Loans, as the case may be) in such
Currency for such Interest Period;
then the Administrative Agent shall give each affected Borrower and Lender
prompt notice thereof and, so long as such condition remains in effect, the
Lenders (or such quoting Lender) shall be under no obligation to make additional
Eurocurrency Loans in such Currency, and such Lender shall no longer be
obligated to make any LIBOR Market Loan in such Currency that it has offered to
make.
5.03 Illegality; Agreed Alternative Currencies.
-----------------------------------------
Credit Agreement
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(a) Notwithstanding any other provision of this Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to honor its obligation to make or maintain Eurocurrency Loans or LIBOR Market
Loans in any Currency hereunder (and, in the sole opinion of such Lender, the
designation of a different Applicable Lending Office would either not avoid such
unlawfulness or would be disadvantageous to such Lender), then such Lender shall
promptly notify each affected Borrower thereof (with a copy to the
Administrative Agent) and such Lender's obligation to make Eurocurrency Loans in
such Currency shall be suspended until such time as such Lender may again make
and maintain Eurocurrency Loans in such Currency (in which case the provisions
of Section 5.04 hereof shall be applicable), and such Lender shall no longer be
obligated to make any LIBOR Market Loan in such Currency that it has offered to
make.
(b) Notwithstanding any other provision of this Agreement, if (i)
the Euro shall become a currency in its own right in connection with EMU and
(ii) with respect to either Tranche A-(MC) or Tranche B-(MC), the Majority
Tranche Lenders under such Tranche determine, which determination shall be
conclusive, and notify the Administrative Agent that such event shall require
one or more Lenders to perform obligations that have become incapable of
performance or the performance of which is fundamentally different in character
than the nature of performance contemplated at the time of the execution and
delivery of this Agreement, then no Lender under such Tranche shall thereafter
be obligated to make any Syndicated Loan available in an Agreed Alternative
Currency included in or converted into the Euro (and no Lender under such
Tranche shall be obligated to make a LIBOR Market Loan in such Currency that it
has offered to make).
5.04 Treatment of Affected Loans. If the obligation of any Lender to
---------------------------
make Eurocurrency Loans in Dollars shall be suspended pursuant to Section 5.01
or 5.03 hereof, then, unless and until such Lender gives notice as provided
below that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to such suspension no longer exist (which such Lender agrees to do promptly
upon such circumstances ceasing to exist), all Loans that would otherwise be
made by such Lender as Eurocurrency Loans in Dollars shall be made instead as
Base Rate Loans. If the obligation of any Lender to make Eurocurrency Loans
denominated in any Agreed Alternative Currency shall be suspended pursuant to
Section 5.01 or 5.03 hereof, then, unless and until such Lender gives notice as
provided below that the circumstances specified in Section 5.01 or 5.03 hereof
that gave rise to such suspension no longer exist (which such Lender agrees to
do promptly upon such circumstances ceasing to exist), all Loans that would
otherwise be made by such Lender as Eurocurrency Loans in such Agreed
Alternative Currency shall, except as provided in the immediately preceding
sentence, be made instead as Eurocurrency Loans denominated in Dollars.
5.05 Compensation. Each Borrower shall pay to the Administrative
------------
Agent for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate such Lender for any loss, cost
or expense that such Lender determines is attributable to:
Credit Agreement
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<PAGE>
-52-
(a) any payment or mandatory or optional prepayment of a Fixed Rate
Loan or a Set Rate Loan made by such Lender to such Borrower (which shall
not include the return by a Borrower pursuant to Section 4.06 hereof of any
Required Payment previously advanced to such Borrower by the Administrative
Agent on behalf of a Lender) for any reason (including, without limitation,
the acceleration of the Loans pursuant to Section 9 hereof) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by such Borrower for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Fixed Rate Loan or a Set Rate
Loan (with respect to which, in the case of a Money Market Loan, such
Borrower has accepted a Money Market Quote) from such Lender on the date
for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02 or 2.03(b) hereof.
Such compensation shall be equal to an amount equal to the excess, if any, of
(i) the amount of interest that otherwise would have accrued on the principal
amount so paid, prepaid or not borrowed for the period from the date of such
payment, prepayment or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the Eurocurrency Rate for such Loan for such Interest
Period over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market (if such Loan
is a Eurocurrency Loan or a LIBOR Market Loan) or the United States secondary
certificate of deposit market (if such Loan is a Set Rate Loan) for deposits
denominated in the relevant Currency of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender). Any Lender requesting compensation
pursuant to this Section 5.05 will furnish to the relevant Borrower a
certificate setting forth its computation of the amount of such compensation,
which certificate shall be conclusive as to the amount of such compensation
provided that the computations made therein are made on a reasonable basis.
5.06 U.S. Taxes.
----------
(a) Each Borrower agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due from such Borrower to such non-U.S. Person hereunder after
deduction for or withholding in respect of any U.S. Taxes imposed with respect
to such payment (or in lieu thereof, payment of such U.S. Taxes by such non-U.S.
Person), will not be less than the amount stated herein to be then due and
payable, provided that the foregoing obligation to pay such additional amounts
--------
shall not apply:
(i) to any payment to any Lender hereunder unless such Lender
is, on the date hereof (or on the date it becomes a Lender hereunder as
provided in Section 11.06(b)
Credit Agreement
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<PAGE>
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hereof) and on the date of any change in the Applicable Lending Office of
such Lender, either entitled to submit a Form 1001 (relating to such Lender
and entitling it to a complete exemption from withholding on all interest
to be received by it hereunder in respect of the Loans) or Form 4224
(relating to all interest to be received by such Lender hereunder in
respect of the Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by such
non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.06(a), (A) "U.S. Person" shall mean a
-----------
citizen, national or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under any laws of the
United States of America or any State thereof, or any estate or trust that is
subject to Federal income taxation regardless of the source of its income, (B)
"U.S. Taxes" shall mean any present or future tax, assessment or other charge or
----------
levy imposed by or on behalf of the United States of America or any taxing
authority thereof or therein, (C) "Form 1001" shall mean Form 1001 (Ownership,
---------
Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the
United States of America and (D) "Form 4224" shall mean Form 4224 (Exemption
---------
from Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States) of the Department of the Treasury of the
United States of America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant taxing
authorities of the United States of America to document a claim to which such
Form relates). Each of the Forms referred to in the foregoing clauses (C) and
(D) shall include such successor and related forms as may from time to time be
adopted by the relevant taxing authorities of the United States of America to
document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the relevant
Borrower shall deliver to the Administrative Agent for delivery to such non-U.S.
Person evidence satisfactory to such Person of such deduction, withholding or
payment (as the case may be).
(c) If a Lender or an affiliate with whom such Lender files a
consolidated tax return (or equivalent) subsequently receives the benefit in any
country of a tax credit or an allowance resulting from U.S. Taxes with respect
to which it has received a payment of an additional amount under this Section
5.07, such Lender will pay to the relevant Borrower such part of that benefit as
in the opinion of such Lender will leave it (after such payment) in a position
no more and no less favorable than it would have been in if no additional
payment had been required to be paid, provided always that (i) such Lender will
be the sole judge of the
Credit Agreement
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amount of any such benefit and of the date on which it is received, (ii) such
Lender will have the absolute discretion as to the order and manner in which it
employs or claims tax credits and allowances available to it and (iii) such
Lender will not be obliged to disclose to any Borrower any information regarding
its tax affairs or tax computations.
5.07 Replacement of Lenders. If any Lender requests compensation
----------------------
pursuant to Section 5.01 or 5.06 hereof, or any Lender's obligation to make
Loans of any Type or in any Currency shall be suspended pursuant to Section 5.01
or 5.03 hereof, or any Lender becomes a Defaulting Lender pursuant to Section
11.04 hereof (any such Lender requesting such compensation, or whose obligations
are so suspended, or that becomes and remains a Defaulting Lender, being herein
called a "Subject Lender"), the Borrowers, upon three Business Days notice, may
-------------
(jointly but not severally) require that such Subject Lender transfer all of its
right, title and interest under this Agreement and such Subject Lender's Notes
to any bank or other financial institution (a "Proposed Lender") identified by
---------------
the Borrowers that is satisfactory to the Administrative Agent (i) if such
Proposed Lender agrees to assume all of the obligations of such Subject Lender
hereunder, and to purchase all of such Subject Lender's Loans hereunder for
consideration equal to the aggregate outstanding principal amount of such
Subject Lender's Loans, together with interest thereon to the date of such
purchase, and satisfactory arrangements are made for payment to such Subject
Lender of all other amounts payable hereunder to such Subject Lender on or prior
to the date of such transfer (including any fees accrued hereunder and any
amounts that would be payable under Section 5.05 hereof as if all of such
Subject Lender's Loans were being prepaid in full on such date) and (ii) if such
Subject Lender has requested compensation pursuant to Section 5.01 or 5.06
hereof, such Proposed Lender's aggregate requested compensation, if any,
pursuant to said Section 5.01 or 5.06 with respect to such Subject Lender's
Loans is lower than that of the Subject Lender. Subject to the provisions of
Section 11.06(b) hereof, such Proposed Lender shall be a "Lender" for all
purposes hereunder. Without prejudice to the survival of any other agreement of
the Borrowers hereunder, the agreements of the Borrowers contained in Sections
2.12, 5.01, 5.06, 11.03 and 11.13 hereof (without duplication of any payments
made to such Subject Lender by the Borrowers or the Proposed Lender) shall
survive for the benefit of such Subject Lender under this Section 5.07 with
respect to the time prior to such replacement.
SECTION 6. Conditions Precedent.
--------------------
6.01 Conditions to Effectiveness. The effectiveness of the amendment
---------------------------
and restatement of the Existing Credit Agreement provided for hereby as of the
Restatement Effective Date is subject to the conditions precedent that the
Administrative Agent shall have received the following documents (with, in the
case of clauses (a), (b), (c), (d), (e) and (h) below, sufficient copies for
each Lender), each of which shall be satisfactory to the Administrative Agent
and special New York counsel to Chase in form and substance:
(a) Corporate Documents. Certified copies of the charter and
-------------------
by-laws (or equivalent documents) of each Borrower and of all corporate
authority for each Borrower
Credit Agreement
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(including, without limitation, board of director resolutions and evidence
of the incumbency, including specimen signatures, of officers) with respect
to the execution, delivery and performance of the Basic Documents and each
other document to be delivered by such Borrower from time to time in
connection herewith and the Loans hereunder (and the Administrative Agent
and each Lender may conclusively rely on such certificate until it receives
notice in writing from the relevant Borrower to the contrary).
(b) Officer's Certificate. A certificate of a senior officer
---------------------
of each Borrower, dated the Restatement Effective Date, to the effect that,
after giving effect to any borrowing of Loans to be made on the Restatement
Effective Date, (i) no Default shall have occurred and be continuing and
(ii) the representations and warranties made by the Borrowers in Section 7
hereof (including the last sentence of Section 7.02 hereof and in Section
7.03 hereof) shall be true and complete on and as of the Restatement
Effective Date with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date).
(c) Opinion of Counsel to the Borrowers. An opinion, dated the
-----------------------------------
Restatement Effective Date, of McGuire, Woods, Battle & Boothe, special
counsel to the Borrowers, substantially in the form of Exhibit B-1 hereto
and covering such other matters as the Administrative Agent may reasonably
request (and the Borrowers hereby instruct such counsel to deliver such
opinion to the Lenders and the Administrative Agent).
(d) Opinion of Counsel to the Borrowers. An opinion, dated the
-----------------------------------
Restatement Effective Date, of John G. Finneran, Jr., Esq., counsel to the
Borrowers, substantially in the form of Exhibit B-2 hereto and covering
such other matters as the Administrative Agent may reasonably request (and
the Borrowers hereby instruct such counsel to deliver such opinion to the
Lenders and the Administrative Agent).
(e) Opinion of Special New York Counsel to Chase. An opinion,
--------------------------------------------
dated the Restatement Effective Date, of Milbank, Tweed, Hadley & McCloy
LLP, special New York counsel to Chase, substantially in the form of
Exhibit C hereto (and Chase hereby instructs such counsel to deliver such
opinion to the Lenders).
(f) Notes. If applicable, any Notes, duly completed and executed
-----
for each Lender requesting such Notes.
(g) Other Documents. Such other documents as the Administrative
---------------
Agent or special New York counsel to Chase may reasonably request.
The effectiveness of the obligations of any Lender hereunder is also subject to
the payment by the Borrowers of such fees as the Borrowers shall have agreed to
pay or deliver to any Lender or the Administrative Agent in connection herewith,
including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy LLP, special New York counsel to Chase, in connection
with the negotiation, preparation, execution and delivery of this Agreement
Credit Agreement
----------------
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and any Notes (to the extent that statements for such fees and expenses have
been delivered to the Borrowers, and subject to the limitations referred to in
Section 11.03(a)(i) hereof).
6.02 Initial and Subsequent Loans. The obligation of any Lender to
----------------------------
make any Loan (including any Money Market Loan) to a Borrower upon the occasion
of each borrowing hereunder is subject to the further conditions precedent that:
(a) in the case of a Syndicated Loan, the Applicable Borrower shall
have given notice of such borrowing by delivery of a Notice of Borrowing in
substantially the form of Exhibit D hereto to the Administrative Agent;
(b) in the case of a Money Market Loan, the Applicable Borrower
shall have requested that the Lenders make offers to make Money Market
Loans by delivery of a Money Market Quote Request in substantially the form
of Exhibit E hereto to the Administrative Agent; and
(c) both immediately prior to the making of such Loan and also after
giving effect thereto and to the intended use thereof, but only if such
borrowing will increase the outstanding aggregate principal amount of the
Loans under any Tranche owing by such Borrower to any Lender hereunder:
(i) no Default shall have occurred and be continuing; and
(ii) the representations and warranties made by such Borrower
in Section 7 hereof (other than the Excluded Representations, but, if
such borrowing will increase the outstanding aggregate principal
amount of the Loans under any Tranche owing by COFC to any Lender
hereunder, including the representations and warranties made by each
Borrower in Section 7 hereof, other than the Excluded Representations)
shall be true and complete on and as of the date of the making of such
Loan with the same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date).
SECTION 7. Representations and Warranties. Each Borrower represents
------------------------------
and warrants to the Administrative Agent and the Lenders that:
7.01 Corporate Existence. Each of such Borrower and its Subsidiaries:
-------------------
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being conducted; and (c) is
qualified to do business and is in good standing in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify could (either individually or in the aggregate)
have a Material Adverse Effect. COB is a member in good
Credit Agreement
----------------
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standing with the Federal Reserve System, and COB's deposit accounts are insured
by the Federal Deposit Insurance Corporation, and no proceedings for the
termination or revocation of such insurance are pending or, to the knowledge of
any Borrower, threatened.
7.02 Financial Condition. COFC has heretofore furnished to each of
-------------------
the Lenders a consolidated balance sheet of COFC and its Subsidiaries as at
December 31, 1998 and the related consolidated statements of income, changes in
stockholders'/division equity and cash flows of COFC and its Subsidiaries for
the fiscal year ended on said date, with the opinion thereon of Ernst & Young
LLP, and the unaudited consolidated balance sheet of COFC and its Subsidiaries
as at March 31, 1999 and the related consolidated statements of income, changes
in stockholders'/division equity and cash flows of COFC and its Subsidiaries for
the three-month period ended on such date. All such financial statements present
fairly, in all material respects, the consolidated financial condition of COFC
and its Subsidiaries as at said dates and the consolidated results of their
operations and their cash flows for the fiscal year and three-month period,
respectively, ended on said dates (subject, in the case of such financial
statements as at March 31, 1999, to normal year-end audit adjustments), all in
accordance with generally accepted accounting principles in the United States of
America and practices applied on a consistent basis. Since December 31, 1998,
there has been no material adverse change in the Property, business, operations,
financial condition, prospects or capitalization of COFC and its Subsidiaries
taken as a whole from that set forth in said financial statements as at said
date.
7.03 Litigation. Except as identified in Schedule 7.03 hereto, there
----------
are no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the knowledge
of any Borrower) threatened against or affecting COFC or any of its Subsidiaries
as to which there is a reasonable possibility of an adverse determination that
could (either individually or in the aggregate) have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement
---------
and the Notes and the other Basic Documents, the consummation of the
transactions herein contemplated or compliance with the terms and provisions
hereof will conflict with or result in a breach of, or require any consent
under, the charter or by-laws of any Borrower, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which COFC
or any of its Subsidiaries is a party or by which any of them or any of their
Property is bound or to which any of them is subject, or constitute a default
under any such agreement or instrument, except for any such conflict, breach or
default that, or consent that if not obtained, could not (either individually or
in the aggregate) have a Material Adverse Effect and could not subject the
Administrative Agent or any Lender to liability.
7.05 Action. Each Borrower has all necessary corporate power,
------
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents to which it is a party and to consummate the
transactions contemplated thereby; the execution, delivery and performance by
each Borrower of each of the Basic Documents to which it is a
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party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary corporate action on its part (including,
without limitation, any required shareholder approvals); and this Agreement has
been duly and validly executed and delivered by each Borrower and constitutes,
and each of the other Basic Documents to which it is a party when executed and
delivered for value will constitute, its legal, valid and binding obligation,
enforceable against such Borrower in accordance with its terms, except as may be
limited by (a) bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) such enforceability may be limited
by the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Borrower of this Agreement or any of the other Basic
Documents to which any Borrower is a party or for the consummation of any the
transactions contemplated hereby or thereby or for the legality, validity or
enforceability hereof or thereof.
7.07 Use of Credit. No part of the proceeds of the Loans hereunder
-------------
will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of each Borrower, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and the Age Discrimination in Employment Act, as
amended, and no event or condition has occurred and is continuing as to which
any Borrower would be under an obligation to furnish a report to the Lenders
under Section 8.01(k) hereof.
7.09 Taxes. COFC and its Subsidiaries are members of an affiliated
-----
group of corporations filing consolidated returns for Federal income tax
purposes, of which COFC is the "common parent" (within the meaning of Section
1504 of the Code) of such group. COFC and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by COFC or any of its Subsidiaries. The
charges, accruals and reserves on the books of COFC and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of the
Borrowers, adequate. No Borrower has given or been requested to give a waiver of
the statute of limitations relating to the payment of any Federal, state, local
and foreign taxes or other impositions.
7.10 Investment Company Act. Neither COFC nor any of its Subsidiaries
----------------------
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
7.11 Public Utility Holding Company Act. Neither COFC nor any of its
----------------------------------
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Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7.12 Environmental Matters. Each of COFC and its Subsidiaries has
---------------------
obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect, and each of COFC and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect.
7.13 True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules furnished in writing by or on
behalf of any Borrower to the Administrative Agent or any Lender in connection
with the negotiation, preparation or delivery of this Agreement or included
herein or delivered pursuant hereto, when taken as a whole, do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished after
the date hereof by or on behalf of any Borrower to the Administrative Agent and
the Lenders in connection with this Agreement and the transactions contemplated
hereby will be true, complete and accurate in every material respect, or (in the
case of projections) based on reasonable estimates, on the date as of which such
information is stated or certified.
7.14 Year 2000. Each Borrower has (i) initiated a review and
---------
assessment of all areas within its and each of its Subsidiaries' business and
operations that would be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by such Borrower or any of its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to, in and following the year 2000),
(ii) developed a plan for addressing the Year 2000 Problem on a timely basis and
(iii) initiated implementation of that plan. Based on the foregoing, each
Borrower believes that any reprogramming or replacements required to permit the
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proper functioning in and following the year 2000 of its computer systems and
any necessary equipment of such Borrower containing embedded microchips and the
testing of all such systems and equipment as so reprogrammed or replaced will be
completed in a manner and to the extent that any failure by such Borrower to
complete any such reprogramming, replacement or testing will not result in a
Default or could not reasonably be expected to have a Material Adverse Effect.
Notwithstanding anything in this Section 7 to the contrary, neither COB nor FSB
makes any representations or warranties under any of Sections 7.01, 7.04, 7.05,
7.06, 7.10, 7.11 and 7.12 as to COFC or any of its Subsidiaries (other than with
respect to COB, FSB and/or any of their respective Subsidiaries).
SECTION 8. Covenants. Each Borrower covenants and agrees with the
---------
Lenders and the Administrative Agent that, so long as any Commitment or Loan is
outstanding and until payment in full of all amounts payable by each Borrower
hereunder:
8.01 Financial Statements Etc. Each Borrower shall deliver or cause
------------------------
to be delivered or otherwise made available through electronic media (provided
--------
that the Borrowers shall give prior written notice to each Lender of such
availability) to each of the Lenders:
(a) as soon as available and in any event within 60 days after
the end of each of the first three quarterly fiscal periods of each fiscal
year of COFC, consolidated statements of income, changes in
stockholders'/division equity and cash flows of COFC and its Subsidiaries
for such period and for the period from the beginning of the respective
fiscal year to the end of such period, and the related consolidated balance
sheet of COFC and its Subsidiaries as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated
figures for the corresponding periods in the preceding fiscal year (except
that, in the case of balance sheets, such comparison shall be to the last
day of the prior fiscal year), accompanied by a certificate of a senior
financial officer of COFC, which certificate shall state that said
financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations of COFC and its
Subsidiaries in accordance with generally accepted accounting principles in
the United States of America, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments) (or, in
lieu thereof, copies of COFC's Quarterly Report on Form 10-Q as filed with
the SEC containing such financial statements and information);
(b) as soon as available and in any event within 120 days after
the end of each fiscal year of COFC, consolidated statements of income,
changes in stockholders'/division equity and cash flows of COFC and its
Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of COFC and its Subsidiaries as at the end of
such fiscal year, setting forth in each case in comparative form the
corresponding consolidated figures as of the end of and for the preceding
fiscal
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year, and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
said financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations and cash flows
of COFC and its Subsidiaries as at the end of, and for, such fiscal year in
accordance with generally accepted accounting principles in the United
States of America (or, in lieu thereof, copies of COFC's Annual Report on
Form 10-K as filed with the SEC containing such financial statements and
information);
(c) as soon as available and in any event within 60 days after
the end of each of the first three quarterly fiscal periods of each fiscal
year of COB, consolidated statements of income, changes in stockholders'
equity and cash flows of COB and its Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated balance sheet of COB and its
Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the
corresponding periods in the preceding fiscal year (except that, in the
case of balance sheets, such comparison shall be to the last day of the
prior fiscal year), accompanied by a certificate of a senior financial
officer of COB, which certificate shall state that said financial
statements present fairly, in all material respects, the consolidated
financial condition and results of operations of COB and its Subsidiaries
in accordance with generally accepted accounting principles in the United
States of America, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);
(d) as soon as available and in any event within 120 days after
the end of each fiscal year of COB, consolidated statements of income,
changes in stockholders' equity and cash flows of COB and its Subsidiaries
for such fiscal year and the related consolidated and consolidating balance
sheets of COB and its Subsidiaries as at the end of such fiscal year,
setting forth in each case in comparative form the corresponding
consolidated figures as of the end of and for the preceding fiscal year,
accompanied by a certificate of a senior financial officer of COB, which
certificate shall state that said financial statements present fairly, in
all material respects, the consolidated financial condition and results of
operations and cash flows of COB and its Subsidiaries as at the end of, and
for, such fiscal year in accordance with generally accepted accounting
principles in the United States of America;
(e) as soon as available and in any event within 60 days after
the end of each of the first three quarterly fiscal periods of each fiscal
year of FSB, consolidated statements of income, changes in stockholders'
equity and cash flows of FSB and its Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated balance sheet of FSB and its
Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the
corresponding periods in the preceding fiscal year (except that, in the
case of balance sheets, such comparison shall be to the last day of the
prior fiscal year), accompanied by a certificate of a senior financial
officer of
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FSB, which certificate shall state that said financial statements present
fairly, in all material respects, the consolidated financial condition and
results of operations of FSB and its Subsidiaries in accordance with
generally accepted accounting principles in the United States of America,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(f) as soon as available and in any event within 120 days after
the end of each fiscal year of FSB, consolidated statements of income,
changes in stockholders' equity and cash flows of FSB and its Subsidiaries
for such fiscal year and the related consolidated and consolidating balance
sheets of FSB and its Subsidiaries as at the end of such fiscal year,
setting forth in each case in comparative form the corresponding
consolidated figures as of the end of and for the preceding fiscal year,
and accompanied by a certificate of a senior financial officer of FSB,
which certificate shall state that said financial statements present
fairly, in all material respects, the consolidated financial condition and
results of operations and cash flows of FSB and its Subsidiaries as at the
end of, and for, such fiscal year in accordance with generally accepted
accounting principles in the United States of America;
(g) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of COB, the
"Consolidated Reports of Condition and Income" for COB and its Insured
Subsidiaries, all prepared in accordance with regulatory accounting
principles prescribed by the Federal Financial Institutions Examination
Counsel;
(h) as soon as available and in any event within 60 days after
the end of each quarterly fiscal period of each fiscal year of FSB, the
"Consolidated Reports of Condition and Income" for FSB and its Insured
Subsidiaries, all prepared in accordance with regulatory accounting
principles prescribed by the Federal Financial Institutions Examination
Counsel;
(i) promptly upon their becoming available, copies of all
registration statements (excluding exhibits to such registration
statements, and other than registration statements filed on Form S-8 or any
successor form) and regular periodic reports filed on Form 10-K, Form 10-Q
or Form 8-K (or any successor form), if any, that any Borrower shall have
filed with the SEC or any national securities exchange;
(j) promptly upon the mailing thereof to the shareholders of
COFC generally, copies of all financial statements, reports and proxy
statements so mailed;
(k) as soon as possible, and in any event within ten days after
any Borrower knows or has reason to believe that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan
has occurred or exists, a statement signed by a senior financial officer of
such Borrower setting forth details respecting such event or condition and
the action, if any, that such Borrower or its ERISA Affiliate proposes to
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take with respect thereto (and a copy of any report or notice required to
be filed with or given to the PBGC by such Borrower or an ERISA Affiliate
with respect to such event or condition, except that a copy of any notice
required to be filed for an event described in subparagraph (i) below may
be provided at a later date (to be no later than the date such notice is
filed) if it has not been filed as of the date of the signed statement
described above):
(i) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which the requirement to provide 30 days' notice to the PBGC
under Section 4043(a) or Section 4043(b) of ERISA applies, other than
a reportable event for which the requirement to provide such notice
has been waived by regulation or for which the PBGC has announced in
Technical Update 95-3 (or any subsequent administrative guideline)
that it will not apply a penalty for failure to provide such notice
(provided that a failure to meet the minimum funding standard of
--------
Section 412 of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of
ERISA, shall be a reportable event regardless of the issuance of any
waivers in accordance with Section 412(d) of the Code); and any
request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of ERISA of a
notice of intent to terminate any Plan or any action taken by any
Borrower or an ERISA Affiliate to terminate any Plan under Section
4041(c) of ERISA;
(iii) the institution by the PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the receipt by any Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by any Borrower or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the
receipt by any Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or
has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
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(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if any Borrower or an ERISA Affiliate fails to timely provide
security to such Plan in accordance with the provisions of said
Sections;
(l) within five days after any executive officer of any
Borrower obtains knowledge of the occurrence of any Default, if such
Default is continuing, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Borrowers have taken or
propose to take with respect thereto;
(m) promptly after any Borrower knows that a change in the Debt
Rating assigned by any Rating Agency has occurred, a notice describing the
same;
(n) at the time any set of financial statements is furnished
pursuant to paragraph (a), (b), (c), (d), (e) or (f) above, a certificate
of a senior financial officer of each Borrower (i) to the effect that no
Default has occurred and is continuing (or, if any Default has occurred and
is continuing, describing the same in reasonable detail and describing the
action that the Borrowers have taken or propose to take with respect
thereto) and (ii) setting forth in reasonable detail (including, without
limitation, as to the component parts of relevant definitions of accounting
terms included in Section 1.01 hereof) the computations necessary to
determine whether such Borrower is in compliance with its obligations under
Sections 8.07 and 8.08 hereof as of the end of the respective quarterly
fiscal period or fiscal year; and
(o) from time to time such other information regarding the
financial condition, operations, business or prospects of COFC or any of
its Subsidiaries as any Lender or the Administrative Agent may reasonably
request.
8.02 Litigation. Each Borrower will promptly give to each Lender
----------
notice of all legal or arbitral proceedings, and of all investigations or
proceedings by or before any governmental or regulatory authority or agency, and
any material development in respect of such legal or other proceedings, against
or affecting such Borrower or any of its Subsidiaries, except investigations or
proceedings (a) as to which there is no reasonable possibility of an adverse
determination or (b) that, if adversely determined, would not (either
individually or in the aggregate) have a Material Adverse Effect.
8.03 Existence, Etc. Each Borrower will, and will cause each of its
--------------
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its rights,
privileges, licenses and franchises necessary or desirable in the normal
conduct of its business (provided that nothing in this Section 8.03 shall
--------
prohibit any transaction expressly permitted under Section 8.05 hereof);
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(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities
(including, without limitation, ERISA, all Environmental Laws and the FDIA
and all rules and regulations promulgated thereunder) if failure to comply
with such requirements could (either individually or in the aggregate) have
a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained in accordance with generally
accepted accounting principles in the United States of America;
(d) maintain all of its Properties used or useful in its business in
good working order and condition ordinary wear and tear excepted, except to
the extent that the failure to maintain any such Property in good working
order and condition would not (either individually or in the aggregate)
have a Material Adverse Effect and would not interfere in the ordinary
conduct of its business or operations;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles in the United States of America consistently applied; and
(f) permit representatives of any Lender or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect any of its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Administrative Agent (as the
case may be); provided that no Borrower shall be required to provide (i)
--------
the names of, or other information that could be used to identify, account
holders, (ii) any proprietary strategic insights or statistical models
concerning account holders or potential account holders, (iii) information
regarding the specific nature or application of any of the information-
based strategies employed by COFC and its Subsidiaries in the conduct of
their business or (iv) any proprietary plans or other proprietary
information relating to the development of the business of COFC and its
Subsidiaries.
8.04 Insurance. Each Borrower will, and will cause each of its
---------
Subsidiaries to, maintain (either in its own name or in the name of a Borrower)
with financially sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts and against at least such
risks (and with such risk retention) as are usually insured against in the same
general area by companies of established repute engaged in the same or a similar
business; and will furnish to the Lenders, upon request from the Administrative
Agent, information presented in reasonable detail as to the insurance so
carried.
8.05 Prohibition of Fundamental Changes. No Borrower will, nor will
----------------------------------
it permit
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any of its Subsidiaries to: (a) enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution); or (b) convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions (a
"Transfer"), all or substantially all of its business or Property; provided
-------- --------
that:
(i) any Subsidiary of COB may be merged or consolidated with or
into, or Transfer all or substantially all of its business or Property to,
(x) COB if COB is the continuing, surviving or transferee corporation or
(y) any other Subsidiary of COB;
(ii) any Subsidiary of FSB may be merged or consolidated with or
into, or Transfer all or substantially all of its business or Property to,
(x) FSB if FSB is the continuing, surviving or transferee corporation or
(y) any other Subsidiary of FSB;
(iii) the restriction set forth in clause (b) above shall apply, in
the case of COB, only to a Transfer of Managed Receivables;
(iv) any Subsidiary of COFC (other than COB, FSB or any of their
respective Subsidiaries) may be merged or consolidated with or into, or
Transfer all or substantially all of its business or Property to, (x) COFC
if COFC is the continuing, surviving or transferee corporation or (y) any
other Subsidiary of COFC;
(v) COFC or any of its Subsidiaries (other than COB) may be merged
or consolidated with or into, or Transfer all or substantially all of its
business or Property to, COB; or COFC or any of its Subsidiaries (other
than FSB) may be merged or consolidated with or into, or Transfer all or
substantially all of its business or Property to, FSB;
(vi) any Subsidiary of COFC (other than COB) may merge or
consolidate with or into, or Transfer all or substantially all of its
business or Property to, any Person (other than COFC or any of its
Subsidiaries) so long as (x) the continuing, surviving or transferee
corporation is a Subsidiary of COFC and (y) no Event of Default has
occurred and is continuing immediately prior to such merger, consolidation
or Transfer or would result therefrom; and
(vii) nothing in this Section 8.05 shall prohibit COFC or any of its
Subsidiaries from the sale of credit card loans and other finance
receivables pursuant to securitizations.
8.06 Limitation on Liens. No Borrower will, nor will it permit any of
-------------------
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
(1) Receivables of any Borrower or (2) Restricted Shares owned by it, in each
case whether now owned or hereafter acquired, except:
(a) Liens for taxes not yet due or Liens for taxes being contested
in good faith by appropriate proceedings for which adequate reserves (in
the good faith judgment of
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the management of the relevant Borrower) have been established; and
(b) Liens imposed by law (i) which are incurred in the ordinary
course of business and (x) which do not in the aggregate materially detract
from the value of such Receivables or Restricted Shares or materially
impair the use thereof in the operation of the business of COFC or any of
its Subsidiaries or (y) which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the Receivables or Restricted Shares subject to
such Lien or (ii) which do not relate to material liabilities of COFC and
its Subsidiaries and do not in the aggregate materially detract from the
value of the Receivables or Restricted Shares of COFC and its Subsidiaries
taken as a whole; provided that no Lien permitted under this clause (b) may
--------
secure any obligation in an amount exceeding $10,000,000.
8.07 Financial Covenants.
-------------------
(a) No Borrower will permit its Delinquency Ratio on the last day of
any calendar month to exceed 6.0% (with respect to FSB, subject to the proviso
to the definition of "Delinquency Ratio" in Section 1.01 hereof).
(b) No Borrower will permit its Tier 1 Capital to Managed
Receivables Ratio on any date to be less than 4.0%; provided that the Tier 1
--------
Capital to Managed Receivables Ratio of any Borrower may be less than 4.0%
during any period of 90 days so long as (i) on the last day of the fiscal
quarter ending on or immediately prior to such 90-day period, the Tier 1 Capital
to Managed Receivables Ratio of such Borrower was not less than 4.0% and (ii) at
no time during such 90-day period is the Tier 1 Capital to Managed Receivables
Ratio of such Borrower less than 3.5%.
(c) No Borrower will permit its Leverage Ratio on any date to exceed
10.0 to 1.
(d) COFC will not permit Tangible Net Worth with respect to COFC on
any date of determination to be less than the sum of (i) $875,000,000 plus (ii)
----
40% of COFC Cumulative Net Income as of the last day of the fiscal quarter of
COFC most recently ended plus (z) 40% of COFC Cumulative Equity Proceeds as of
----
such date of determination.
(e) COFC will not permit the Double Leverage Ratio on any date of
determination to exceed 1.25 to 1.
(f) Neither COB nor FSB will permit its Tier 1 Leverage Ratio on any
date to be less than 4.0%.
(g) Neither COB nor FSB will permit the Tier 1 Capital to Risk
Adjusted Assets Ratio on any date to be less than 5.0%.
(h) Neither COB nor FSB will permit its Total Capital to Risk
Adjusted
Credit Agreement
----------------
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-68-
Assets Ratio on any date to be less than 8.0%.
(i) COB will not permit its Tangible Net Worth on any date to be
less than $550,000,000. FSB will not permit its Tangible Net Worth on any date
to be less than $100,000,000.
8.08 Regulatory Capital. Each Borrower will cause each of its Insured
------------------
Subsidiaries to be (and each of COB and FSB so long as it is an Insured
Subsidiary will be) at all times "adequately capitalized" for purposes of 12
U.S.C. (S)1831o, as amended, re-enacted or redesignated from time to time, and
at all times to maintain (and each of COB and FSB so long as it is an Insured
Subsidiary will maintain) such amount of capital as may be prescribed from time
to time, whether by regulation, agreement or order, by each Bank Regulatory
Authority having jurisdiction over such Insured Subsidiary.
8.09 Lines of Business.
-----------------
(a) COB will not, nor will it permit any of its Subsidiaries to,
engage to any extent in any line or lines of business activity other than as
permitted by its charter and as necessary to conduct the business of a limited
purpose credit card bank.
(b) FSB will not, nor will it permit any of its Subsidiaries to,
engage to any extent in any line or lines of business activity other than as
permitted by its charter.
(c) COFC will not, nor will it permit any of its Subsidiaries to,
engage to any material extent in any line or lines of business activity other
than consumer-oriented or consumer-related business activities and database
marketing activities, and other business activities to the extent such other
business activities are direct applications of the information-based strategies
and related proprietary strategies used by COFC or its Subsidiaries in the
conduct of its business on the date of this Agreement.
8.10 Use of Proceeds. Each Borrower will use the proceeds of the
---------------
Loans made to such Borrower hereunder for general corporate purposes (in
compliance with all applicable legal and regulatory requirements, including,
without limitation, Regulations T, U and X and the Securities Act and the
Exchange Act and the regulations thereunder); provided that (a) neither the
Administrative Agent nor any Lender shall have any responsibility as to the use
of any of such proceeds and (b) no Borrower will use the proceeds of the Loans
made hereunder to acquire directly or indirectly a majority of the voting stock
issued by, or all or substantially all of the assets of, any Person except with
the prior written consent of the Board of Directors of such Person or any
controlling shareholder of such Person.
Notwithstanding anything in this Section 8 to the contrary, neither COB nor FSB
shall have any obligation (a) to cause COFC or any of its Subsidiaries (other
than with respect to COB, FSB and/or any of their respective Subsidiaries) to
take or refrain from taking any action or (b) to cause or prevent any event or
circumstance from occurring with respect to COFC or any of its Subsidiaries
(other than with respect to COB, FSB and/or any of their respective
Subsidiaries).
Credit Agreement
----------------
<PAGE>
-69-
SECTION 9. Events of Default. If one or more of the following events
-----------------
(herein called "Events of Default") shall occur and be continuing:
-----------------
(a) Any Borrower shall: (i) default in the payment of any principal
of any Loan when due (whether at stated maturity or at mandatory or
optional prepayment); or (ii) default in the payment of any interest on any
Loan, any fee or any other amount payable by it hereunder when due and such
default shall have continued unremedied for five or more days; or
(b) Any Borrower or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $50,000,000 (or its equivalent in any other
currency or currencies) or more; or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Indebtedness shall occur if the effect of such event is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity; or COFC or any of its
Subsidiaries shall default in the payment or delivery when due (whether
upon termination or liquidation or otherwise), under one or more Swap
Agreements, of amounts or property required to be paid or delivered having
an aggregate fair market value of $50,000,000 (or its equivalent in any
other currency or currencies) or more; or
(c) Any representation, warranty or certification made or deemed
made herein (or in any modification or supplement hereto) by any Borrower,
or any certificate furnished to any Lender or the Administrative Agent
pursuant to the provisions hereof, shall prove to have been false or
misleading as of the time made, deemed made or furnished in any material
respect; or
(d) Any Borrower shall default in the performance of any of its
obligations under any of Sections 8.01(l), 8.01(m), 8.05, 8.06, 8.07, 8.08,
8.09 and 8.10 hereof; or any Borrower shall default in the performance of
any of its other obligations in this Agreement and such default shall
continue unremedied for a period of 30 or more days after notice thereof to
such Borrower by the Administrative Agent or any Lender (through the
Administrative Agent); or
(e) Any Borrower or any of its Subsidiaries shall admit in
writing its inability to, or be generally unable to, pay its debts as such
debts become due; or
(f) Any Borrower or any of its Subsidiaries shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, conservator, custodian, trustee, examiner or liquidator of itself
or of all or a substantial part of its Property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
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----------------
<PAGE>
-70-
case under the Bankruptcy Code, (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of any Borrower or any of its Subsidiaries, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment
of its debts, (ii) the appointment of a receiver, conservator, custodian,
trustee, examiner, liquidator or the like of such Borrower or Subsidiary or
of all or any substantial part of its Property or (iii) similar relief in
respect of such Borrower or Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against any Borrower or
any of its Subsidiaries shall be entered in an involuntary case under the
Bankruptcy Code; or
(h) Any Insured Subsidiary shall cease accepting deposits or making
commercial loans on the instruction of any Bank Regulatory Authority with
authority to give such instruction other than pursuant to an instruction
generally applicable to banks organized under the jurisdiction of
organization of such Insured Subsidiary; or
(i) Any Insured Subsidiary shall cease to be an insured bank under
the FDIA and all rules and regulations promulgated thereunder; or
(j) Any Insured Subsidiary shall be required (whether or not the
time allowed by the appropriate Bank Regulatory Authority for the
submission of such plan has been established or elapsed) to submit a
capital restoration plan of the type referred to in 12 U.S.C.
(S)1831o(b)(2)(C), as amended, re-enacted or redesignated from time to
time; or
(k) COFC shall Guarantee in writing the capital of any Insured
Subsidiary as part of or in connection with any agreement or arrangement
with any Bank Regulatory Authority; or
(l) A final judgment or judgments for the payment of money of
$50,000,000 (or its equivalent in any other currency or currencies) or more
in the aggregate shall be rendered by one or more courts, administrative
tribunals or other bodies having jurisdiction against any Borrower or any
of its Subsidiaries and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof shall
not be procured, within 30 days from the date of entry thereof and the
relevant Borrower or Subsidiary shall not, within said period of 30 days,
or such longer
Credit Agreement
----------------
<PAGE>
period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal;
or
(m) An event or condition specified in Section 8.01(k) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan and, as
a result of such event or condition, together with all other such events or
conditions, any Borrower or any ERISA Affiliate shall incur or in the
opinion of the Majority Lenders shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or the PBGC (or any combination
of the foregoing) that, in the determination of the Majority Lenders, would
(either individually or in the aggregate) have a Material Adverse Effect;
or
(n) The expiration or termination of the Undertaking or the failing
or ceasing of the Undertaking to be in full force and effect (in either
case other than in accordance with its terms) prior to the expiration or
termination of all Commitments and the irrevocable payment in full of all
amounts owing by FSB under this Agreement; or COB shall disaffirm,
disclaim, repudiate or reject, in whole or in part, or challenge the
validity of, the Undertaking; or
(o) COFC shall at any time fail to own and control, beneficially and
of record (free and clear of all Liens and other encumbrances), at least
95% of the issued and outstanding shares of capital stock of each class of
Voting Securities issued by COB; or COFC shall at any time fail to own and
control, beneficially and of record (free and clear of all Liens and other
encumbrances), at least 95% of the issued and outstanding shares of capital
stock of each class of Voting Securities issued by FSB; or
(p) During any period of 25 consecutive calendar months, a majority
of the Board of Directors of COFC shall no longer be composed of
individuals (i) who were members of said Board on the first day of such
period, (ii) whose election or nomination to said Board was approved by
individuals referred to in clause (i) above constituting at the time of
such election or nomination at least a majority of said Board or (iii)
whose election or nomination to said Board was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of said Board; or
(q) Any person or group of persons (within the meaning of Section 13
or 14 of the Exchange Act, as amended) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the SEC under
the Exchange Act) of 20% or more of the issued and outstanding shares of
voting common stock issued by COFC;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to any Borrower, (A) upon
request of the Majority Tranche Lenders with respect to the relevant Tranche,
the Administrative Agent will, by notice to the Applicable Borrowers, terminate
the Commitments under such Tranche and they shall thereupon terminate, and (B)
upon request of Lenders holding more than 50% of the aggregate
Credit Agreement
----------------
<PAGE>
unpaid principal amount of the Loans owing by a Borrower, the Administrative
Agent will, by notice to such Borrower declare the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by such Borrower hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 hereof) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by such Borrower; and (2) in the case of the occurrence
of an Event of Default referred to in clause (f) or (g) of this Section 9 with
respect to any Borrower, the Commitments under each Tranche shall automatically
be terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrowers hereunder
and under the Notes (including, without limitation, any amounts payable under
Section 5.05 hereof) shall automatically become immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by each Borrower.
Notwithstanding the foregoing, no Event of Default under any of
paragraphs (a), (b), (c), (d) or (l) of this Section 9 solely with respect to
COFC or any of its Subsidiaries (other than COB, FSB and/or any of their
respective Subsidiaries) shall in and of itself permit the Administrative Agent
or the Lenders (a) to declare the principal amount then outstanding of, and the
accrued interest on, the Loans owing by COB or FSB or any other amounts payable
by COB or FSB hereunder or under the Notes to be forthwith due and payable or
(b) to terminate the Commitments (except with respect to a termination of the
Tranche B-($) Commitments or Tranche B-(MC) Commitments insofar as the same
relate to Tranche B-($) Loans or Tranche B-(MC) Loans made or to be made to
COFC).
SECTION 10. The Administrative Agent.
------------------------
10.01 Appointment, Powers and Immunities. Each Lender hereby appoints
----------------------------------
and authorizes the Administrative Agent to act as its agent hereunder with such
powers as are specifically delegated to the Administrative Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. The Administrative Agent (which term as used in this sentence and in
Section 10.05 and the first sentence of Section 10.06 hereof shall include
reference to its affiliates and its own and its affiliates' officers, directors,
employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement, and shall not by reason of this
Agreement be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties made by any other Person
contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them from any other
Person under, this Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or
Credit Agreement
----------------
<PAGE>
any other document referred to or provided for herein or for any failure by
any Borrower or any other Person to perform any of its obligations
hereunder or thereunder;
(c) shall not be required to initiate or conduct any litigation
or collection proceedings hereunder; and
(d) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred
to or provided for herein or in connection herewith, except for its own
gross negligence or willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or attorneys-
in-fact selected by it in good faith. The Administrative Agent may deem and
treat the payee of a Note as the holder thereof for all purposes hereof unless
and until a notice of the assignment or transfer thereof shall have been filed
with the Administrative Agent, together with the consent of the Applicable
Borrower to such assignment or transfer (to the extent required by Section
11.06(b) hereof).
10.02 Reliance by Administrative Agent. The Administrative Agent
--------------------------------
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably and in good faith believed by it to be genuine and correct and
to have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Administrative Agent. As to any matters not expressly
provided for by this Agreement, the Administrative Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder in accordance
with instructions given by the Majority Lenders, and such instructions of the
Majority Lenders and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed to have
--------
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or a Borrower specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Sections 10.07 and 11.04 hereof) take
such action with respect to such Default as shall be directed by the Majority
Lenders, provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of the
Majority Lenders, the Majority Tranche Lenders with respect to a particular
Tranche, the Majority Tranche B Lenders, the Requisite Lenders or all of the
Lenders.
10.04 Rights as a Lender. With respect to its Commitment and the
------------------
Loans made
Credit Agreement
----------------
<PAGE>
by it, Chase (and any successor acting as Administrative Agent) in its capacity
as a Lender hereunder shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include Chase (and any successor acting as
Administrative Agent) in its individual capacity. Chase (and any successor
acting as Administrative Agent) and its affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, make
investments in and generally engage in any kind of banking, trust or other
business with any Borrower (and any of its Subsidiaries or Affiliates) as if it
were not acting as the Administrative Agent, and Chase (and any such successor)
and its affiliates may accept fees and other consideration from any Borrower for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
10.05 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Borrowers under said Section 11.03)
ratably in accordance with their respective Commitments, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Administrative Agent (including
by any Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other documents contemplated
by or referred to herein or the transactions contemplated hereby (including,
without limitation, the costs and expenses that any Borrower is obligated to pay
under Section 11.03 hereof, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
of any such other documents, provided that no Lender shall be liable for any of
--------
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Administrative Agent.
10.06 Non-Reliance on Administrative Agent and Other Lenders. Each
------------------------------------------------------
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of each
Borrower and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Administrative Agent shall
not be required to keep itself informed as to the performance or observance by
any Borrower of this Agreement or any other document referred to or provided for
herein or to inspect the Properties or books of any Borrower or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of any Borrower or any of its Subsidiaries (or
any of their affiliates) that may come into the possession of the Administrative
Agent or any of its affiliates.
Credit Agreement
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<PAGE>
10.07 Failure to Act. Except for action expressly required of the
--------------
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall receive
further assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
10.08 Resignation or Removal of Administrative Agent. Subject to the
----------------------------------------------
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Borrowers, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, that shall be a bank with
a combined capital and surplus of at least $500,000,000 that has an office in
New York, New York. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
10.09 Co-Agents; Etc. None of the Documentation Agent, the
--------------
Syndication Agent, the Co-Agents and the Lead Manager shall have any obligations
under this Agreement except (a) in its capacity as a "Lender" hereunder and (b)
if and so long as such Person is the "Administrative Agent" hereunder, in its
capacity as Administrative Agent hereunder.
SECTION 11. Miscellaneous.
-------------
11.01 Waiver. No failure on the part of the Administrative Agent or
------
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
11.02 Notices. All notices, requests and other communications
-------
provided for
Credit Agreement
----------------
<PAGE>
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telecopy), or, with respect to notices given
pursuant to Section 2.03 hereof, by telephone, confirmed in writing by
telecopier by the close of business on the day the notice is given, delivered
(or telephoned, as the case may be):
(a) if to any Borrower, to it at 2980 Fairview Park Drive, Suite
1300, Falls Church, VA 22042-4525, Attention of the Director of Capital
Markets (Telephone No. 703-205-1000, Facsimile No. 703-205-1093);
(b) if to the Administrative Agent, to The Chase Manhattan Bank,
Agent Bank Services Group, 1 Chase Manhattan Plaza, 8th Floor, New York,
New York 10081, Attention of Ms. Laura Rebecca (Facsimile No. 212-552-
7253), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York,
New York 10017, Attention of Financial Services Group (Telephone No. 212-
270-0381, Facsimile No. 212-270-1789); and
(c) if to any Lender, to it at the address (or telecopy number) set
forth in its Administrative Questionnaire.
Any party hereto may change its address or other contact information for notices
and other communications hereunder by notice to the other parties hereto. Except
as otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telecopier or personally delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
11.03 Expenses, Etc. Each Borrower agrees to pay or reimburse each of
-------------
the Lenders and the Administrative Agent for: (a) all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including, without limitation,
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy LLP, special
New York counsel to Chase) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the making of the Loans hereunder
(subject to the limitations set forth in the commitment letter dated April 9,
1999 from Chase and Chase Securities Inc. addressed to the Borrowers) and (ii)
the negotiation or preparation of any modification, supplement or waiver of any
of the terms of this Agreement or any of the other Basic Documents (whether or
not consummated); (b) all reasonable out-of-pocket costs and expenses of the
Lenders and the Administrative Agent (including, without limitation, the
reasonable fees and expenses of legal counsel, including, if applicable, the
allocated costs of in-house counsel) in connection with (i) any Default and any
enforcement or collection proceedings resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 11.03; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or
Credit Agreement
----------------
<PAGE>
charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Basic Documents or any other document referred to
herein; provided that COB shall have no such payment or reimbursement obligation
--------
in connection with Loans made to COFC.
Each Borrower hereby agrees to indemnify the Administrative Agent and
the Lenders and their affiliates and the respective directors, officers,
employees, attorneys and agents thereof from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or expenses incurred
by any of them (including, without limitation, any and all losses, liabilities,
claims, damages or expenses incurred by the Administrative Agent to any Lender)
arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings, and whether or not the Administrative Agent or any Lender is a
party to such litigation or other proceedings) relating to this Agreement or the
Loans hereunder or any actual or proposed use by any Borrower or any of its
Subsidiaries of the proceeds of any of the Loans hereunder, including, without
limitation, the reasonable fees and disbursements of counsel, including, if
applicable, the allocated costs of in-house counsel, incurred in connection with
any such investigation or litigation or other proceedings (but excluding any
such losses, liabilities, claims, damages or expenses incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified);
provided that COB shall have no liability under the foregoing indemnity in
- --------
connection with events or circumstances relating solely to COFC or any of its
Subsidiaries (other than COB or any of its Subsidiaries).
11.04 Amendments, Etc. Except as otherwise expressly provided in this
---------------
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Borrowers and the Majority Lenders, or
by the Borrowers and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived only by an
instrument in writing signed by the Majority Lenders or by the Administrative
Agent acting with the consent of the Majority Lenders; provided that: (a) no
modification, supplement or waiver shall, unless by an instrument signed by all
of the Lenders under the relevant Tranche or by the Administrative Agent acting
with the consent of all of the Lenders under such Tranche: (i) increase, or
extend the term of the Commitments under such Tranche, or extend the time or
waive any requirement for the reduction or termination of the Commitments under
such Tranche, (ii) extend the date fixed for the payment of principal of or
interest on any Loan under such Tranche or any fee payable hereunder in respect
of such Tranche, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable on such principal or any such fee
is payable or (v) alter the rights or obligations of an Applicable Borrower to
prepay Loans under such Tranche; (b) no modification, supplement or waiver
shall, unless by an instrument signed by all of the Lenders or by the
Administrative Agent acting with the consent of all of the Lenders: (i) alter
the manner in which payments or prepayments of principal, interest or other
amounts hereunder shall be applied as between the Lenders under different
Tranches or as between Syndicated Loans or Money Market Loans, (ii) alter the
terms of this Section 11.04 or Section 2.12, 4.02, 4.07 or 10.09 hereof, (iii)
modify the definition of the term "Majority Lenders", "Majority Tranche
Lenders", "Majority Tranche B Lenders" or "Requisite Lenders" or modify in any
other manner the number or percentage of the Lenders required to make any
determinations or waive
Credit Agreement
----------------
<PAGE>
any rights hereunder or to modify any provision hereof, or (iv) waive any of the
conditions precedent set forth in Section 6.01 hereof; (c) notwithstanding the
foregoing, if default by COFC in the performance of any provision of this
Agreement, or any other event or circumstance, would constitute an Event of
Default under any of paragraphs (a), (b), (c), (d) or (l) of Section 9 hereof
solely with respect to COFC or any of its Subsidiaries (other than COB or any of
its Subsidiaries), then, except with respect to the matters relating to Tranche
B-($) or Tranche B-(MC) identified in the lettered subclauses of clause (a)
above (the modification, supplement or waiver of which shall require the consent
of all of the Tranche B-($) Lenders or Tranche B-(MC) Lenders, as the case may
be), such provision may be modified, supplemented or waived, and any such Event
of Default may be waived, by an instrument in writing signed by the Borrowers
and the Majority Tranche Lenders with respect to Tranche B-($) or Tranche B-
(MC), as the case may be, or by the Borrowers and the Administrative Agent
acting with the consent of the Majority Tranche Lenders with respect to Tranche
B-($) or Tranche B-(MC), as the case may be; and (d) any modification or
supplement of Section 10 hereof, or of any of the rights or duties of the
Administrative Agent hereunder, shall require the consent of the Administrative
Agent. For purposes of this Section 11.04 and Section 11.06(c) hereof, no
modification, supplement or waiver relating to any of Sections 7, 8 and 9 of
this Agreement shall be deemed to increase, or extend the term of, the
Commitments under any Tranche.
Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Section 6 hereof to any Loan
hereunder are, in the opinion of the Majority Lenders, satisfied, any Lender
shall fail to fulfill its obligations to make such Loan (any such Lender, a
"Defaulting Lender") then, for so long as such failure shall continue, the
-----------------
Defaulting Lender shall (unless the Borrowers and the Majority Lenders,
determined as if the Defaulting Lender were not a "Lender" hereunder, shall
otherwise consent in writing) be deemed for all purposes relating to amendments,
modifications, waivers or consents under this Agreement (including, without
limitation, under this Section 11.04) to have no Loans or Commitments, shall not
be treated as a "Lender" hereunder when performing the computation of Majority
Lenders, Majority Tranche Lenders with respect to any Tranche, Majority Tranche
B Lenders or Requisite Lenders, and shall have no rights under the preceding
paragraph of this Section 11.04; provided that any action taken by the other
Lenders pursuant to this paragraph with respect to the matters referred to in
clause (a) or (b) of the preceding paragraph shall not be effective as against
the Defaulting Lender.
11.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Assignments and Participations.
------------------------------
(a) No Borrower may assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent.
(b) Each Lender may (with the consent of the Administrative Agent
and the
Credit Agreement
----------------
<PAGE>
Applicable Borrowers) assign any of its Loans, Note(s) and Commitment(s);
provided that:
- --------
(i) no such consent by any Borrower or the Administrative Agent
shall be required in the case of any assignment to (x) a subsidiary or
other affiliate of such Lender or (y) another Lender;
(ii) except to the extent the Administrative Agent and the Applicable
Borrowers shall otherwise consent, any such partial assignment (other than
to another Lender) shall be in an amount at least equal to $10,000,000 (in
the case of Tranche A-($)) or $5,000,000 (in the case of Tranche A-(MC),
Tranche B-($) or Tranche B-(MC));
(iii) each such assignment by a Lender of its Syndicated Loans,
Note(s) or Commitment under any Tranche shall be made in such manner so
that the same portion of its Syndicated Loans, Note(s) and Commitment under
such Tranche is assigned to the respective assignee;
(iv) upon each such assignment, the assignor and assignee shall
deliver to the Administrative Agent an Assignment and Acceptance, together
with a processing and recordation fee in the amount of $3,500;
(v) upon each such assignment, if the assignee is not already a
Lender, the assignee shall deliver to the Administrative Agent an
Administrative Questionnaire (and the Administrative Agent shall thereafter
deliver a copy thereof to COB); and
(vi) no consent by a Borrower or the Administrative Agent to any such
assignment shall be unreasonably withheld or delayed (it being agreed that
it will not be unreasonable for the Applicable Borrower(s) to withhold
consent to an assignment to any assignee whose long-term debt obligations
are then rated below Baa3 by Moody's Investors Service, Inc. or below BBB-
by Standard & Poor's Ratings Services).
Upon acceptance by the Administrative Agent of such Assignment and Acceptance as
provided below, from and after the effective date specified in such Assignment
and Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto, subject to Section 11.07 hereof). Upon its receipt of a duly
completed Assignment and Acceptance executed by an assigning Lender and an
assignee, the assignee's completed Administrative Questionnaire (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in clause (iv) of this Section 11.06(b) and any consent of the
Borrowers to such assignment required by this Section, the Administrative Agent
shall accept such Assignment and Acceptance and record the effectiveness thereof
in the register maintained by it for such purpose. No assignment shall be
effective for purposes of this Agreement unless it
Credit Agreement
----------------
<PAGE>
has been accepted and so recorded in such register.
(c) A Lender may sell or agree to sell to one or more other Persons
(each a "Participant") a participation in all or any part of any Loans held by
-----------
it, or in its Commitment(s), provided that such Participant shall not have any
--------
rights or obligations under this Agreement or any Note (the Participant's rights
against such Lender in respect of such participation to be those set forth in
the agreements executed by such Lender in favor of the Participant). All
amounts payable by a Borrower to any Lender under Section 5 hereof in respect of
Loans held by it, and its Commitment(s), shall be determined as if such Lender
had not sold or agreed to sell any participations in such Loans and
Commitment(s), and as if such Lender were funding each of such Loan and
Commitment(s) in the same way that it is funding the portion of such Loan and
Commitment(s) in which no participations have been sold. In no event shall a
Lender that sells a participation under any Tranche agree with the Participant
to take or refrain from taking any action hereunder except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's
Commitment under such Tranche, (ii) extend the date fixed for the payment of
principal of or interest on the related Loan or Loans under such Tranche or any
portion of any fee hereunder payable to the Participant under such Tranche,
(iii) reduce the amount of any such payment of principal, (iv) reduce the rate
at which interest is payable on such principal, or any such fee hereunder
payable to the Participant, to a level below the rate at which the Participant
is entitled to receive such interest or fee or (v) consent to any modification,
supplement or waiver hereof to the extent that the same, under Section 11.04
hereof, requires the consent of each Lender under such Tranche or all of the
Lenders.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 11.06, any Lender may (without
notice to any Borrower, the Administrative Agent or any other Lender and without
payment of any fee) assign and pledge all or any portion of its Loans and its
Notes to any Federal Reserve Bank as collateral security pursuant to Regulation
A and any Operating Circular issued by such Federal Reserve Bank.
(e) A Lender may furnish any information concerning any Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan held by it
hereunder to any Borrower or any of its Affiliates or Subsidiaries, and none of
the Borrowers and their respective Affiliates and Subsidiaries shall acquire any
such assignment or participation, without the prior consent of each Lender.
11.07 Survival. The obligations of each Borrower under Sections 2.12,
--------
5.01, 5.05, 5.06, 11.03 and 11.13 hereof, and the obligations of the Lenders
under Section 10.05 hereof, shall survive the repayment of the Loans and the
termination of the Commitments and, in
Credit Agreement
----------------
<PAGE>
the case of any Lender that may assign any interest in its Commitment or Loans
hereunder, shall survive the making of such assignment, notwithstanding that
such assigning Lender may cease to be a "Lender" hereunder. In addition, each
representation and warranty made, or deemed to be made by a notice of any Loan,
herein or pursuant hereto shall survive the making of such representation and
warranty, and no Lender shall be deemed to have waived, by reason of making any
Loan, any Default that may arise by reason of such representation or warranty
proving to have been false or misleading, notwithstanding that such Lender or
the Administrative Agent may have had notice or knowledge or reason to believe
that such representation or warranty was false or misleading at the time such
Loan was made.
11.08 Captions. The table of contents and captions and section
--------
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement and
-----------------------------------------
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York without reference to choice of law doctrine. Each Borrower
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of the Supreme Court of the
State of New York sitting in New York County (including its Appellate Division),
and of any other appellate court in the State of New York, for the purposes of
all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Borrower hereby irrevocably waives, to
the fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE BORROWERS, THE ADMINISTRATIVE
--------------------
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) Each Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Borrower or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender, and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries
Credit Agreement
----------------
<PAGE>
pursuant to this Agreement, or in connection with the decision of such Lender to
enter into this Agreement, to any such subsidiary or affiliate, it being
understood that any such subsidiary or affiliate receiving such information
shall be bound by the provisions of paragraph (b) below as if it were a Lender
hereunder. Such authorization shall survive the repayment of the Loans and the
termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by any Borrower pursuant to this Agreement
that is identified by such Borrower as being confidential at the time the same
is delivered to the Lenders or the Administrative Agent, provided that nothing
--------
herein shall limit the disclosure of any such information (i) after such
information shall have become public (other than through a violation of this
Section 11.12), (ii) to the extent required by statute, rule, regulation or
judicial process, (iii) to counsel for any of the Lenders or the Administrative
Agent, (iv) to bank examiners (or any other regulatory authority having
jurisdiction over any Lender or the Administrative Agent), or to auditors or
accountants, (v) to the Administrative Agent or any other Lender, (vi) in
connection with any litigation to which any one or more of the Lenders or the
Administrative Agent is a party, or in connection with the enforcement of rights
or remedies hereunder, (vii) to a subsidiary or affiliate of such Lender as
provided in paragraph (a) above or (viii) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first executes and delivers to the
respective Lender a Confidentiality Agreement substantially in the form of
Exhibit G hereto (or executes and delivers to such Lender an acknowledgement to
the effect that it is bound by the provisions of this Section 11.12(b), which
acknowledgement may be included as part of the respective assignment or
participation agreement pursuant to which such assignee or participant acquires
an interest in the Loans hereunder); provided, further, that in no event shall
-------- -------
any Lender or the Administrative Agent be obligated or required to return any
materials furnished by any Borrower. The obligations of any assignee that has
executed a Confidentiality Agreement in the form of Exhibit G hereto shall be
superseded by this Section 11.12 upon the date upon which such assignee becomes
a Lender hereunder pursuant to Section 11.06(b) hereof.
11.13 Judgment Currency. This is an international loan transaction in
-----------------
which the specification of Dollars or an Alternative Currency, as the case may
be (the "Specified Currency"), and any payment in New York City or the country
------------------
of the Specified Currency, as the case may be (the "Specified Place"), is of the
---------------
essence, and the Specified Currency shall be the currency of account in all
events relating to Loans denominated in the Specified Currency. The payment
obligations of the Borrowers under this Agreement and the Notes shall not be
discharged by an amount paid in another currency or in another place, whether
pursuant to a judgment or otherwise, to the extent that the amount so paid on
conversion to the Specified Currency and transfer to the Specified Place under
normal banking procedures does not yield the amount of the Specified Currency at
the Specified Place due hereunder. If for the purpose of obtaining judgment in
any court it is necessary to convert a sum due hereunder in the Specified
Credit Agreement
----------------
<PAGE>
Currency into another currency (the "Second Currency"), the rate of exchange
---------------
which shall be applied shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the Specified Currency with
the Second Currency on the Business Day next preceding that on which such
judgment is rendered. The obligation of each Borrower in respect of any such sum
due from it to the Administrative Agent or any Lender hereunder shall,
notwithstanding the rate of exchange actually applied in rendering such
judgment, be discharged only to the extent that on the Business Day following
receipt by the Administrative Agent or such Lender, as the case may be, of any
sum adjudged to be due hereunder or under the Notes in the Second Currency to
the Administrative Agent or such Lender, as the case may be, may in accordance
with normal banking procedures purchase and transfer to the Specified Place the
Specified Currency with the amount of the Second Currency so adjudged to be due;
and each Borrower hereby, as a separate obligation and notwithstanding any such
judgment, agrees to indemnify the Administrative Agent or such Lender, as the
case may be, against, and to pay the Administrative Agent or such Lender, as the
case may be, on demand in the Specified Currency, any difference between the sum
originally due to the Administrative Agent or such Lender, as the case may be,
in the Specified Currency and the amount of the Specified Currency so purchased
and transferred.
Credit Agreement
----------------
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
BORROWERS
---------
CAPITAL ONE FINANCIAL CORPORATION
By /s/ Stephen Linehan
------------------------------------
Title: Manger, Corporate Finance
CAPITAL ONE BANK
By /s/ Stephen Linehan
------------------------------------
Title: Manger, Corporate Finance
CAPITAL ONE, F.S.B.
By /s/ Stephen Linehan
-----------------------------------
Title: Manger, Corporate Finance
Credit Agreement
----------------
<PAGE>
LENDERS
-------
THE CHASE MANHATTAN BANK
By /s/ Chirstine Herrick
-------------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
NATIONSBANK, N.A.
By /s/ Shelly K. Harper
------------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Gayma Z. Shivnarian
--------------------------------
Title: Director
By /s/ Ruth Leung
--------------------------------
Title: Director
Credit Agreement
----------------
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Maria H. Dell'Aquila
--------------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
BANK OF MONTREAL
By /s/ Kanu Modi
-----------------------------
Title: Director
Credit Agreement
----------------
<PAGE>
BARCLAYS BANK PLC
By /s/ Richard Herder
-----------------------------
Title: Director
Credit Agreement
----------------
<PAGE>
-91-
CITIBANK, N.A.
By /s/ Robert B. Goldstein
------------------------------
Title: Managing Director
Credit Agreement
----------------
<PAGE>
-92-
CREDIT SUISSE FIRST BOSTON
By /s/ Jay Chall
------------------------------
Title: Director
By /s/ Andrea E. Shkane
------------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
-93-
FIRST UNION NATIONAL BANK
By /s/ Carrie H. McAllister
------------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
-94-
FLEET NATIONAL BANK
By /s/ Julie A. Miller
------------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
-95-
SOCIETE GENERALE, NEW YORK BRANCH
By /s/
-----------------------------
Title: Managing Director
Credit Agreement
----------------
<PAGE>
-96-
THE BANK OF NEW YORK
By /s/
-----------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
-97-
THE FIRST NATIONAL BANK OF CHICAGO
By /s/
----------------------------------
Title: Corporate Banking Officer
Credit Agreement
----------------
<PAGE>
-98-
ABN AMRO BANK, N.V.
By /s/ Giovanni P. Fallone
---------------------------
Title: Group Vice President
By /s/ Parker H. Douglas
--------------------------
Title: Group Vice President
Credit Agreement
----------------
<PAGE>
-99-
MIDLAND BANK plc
By /s/
----------------------------------
Title:
Credit Agreement
----------------
<PAGE>
-100-
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Sebastian Rocco
-------------------------------
Title: Senior Vice President
Credit Agreement
----------------
<PAGE>
-101-
THE ROYAL BANK OF SCOTLAND plc
By /s/ Scott Barton
-----------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
-102-
KBC BANK N.V.
By /s/ Michael V. Curran
-----------------------------
Title: Vice President
By /s/ Patrick J. Owens
----------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
-103-
LLOYDS BANK PLC
By /s/ Windsor R. Davies
-------------------------------
Title: Director, Corporate Banking, USA
By /s/ Paul Briamonte
-------------------------------
Title: Director, Acquisition & Project Finance,
USA
Credit Agreement
----------------
<PAGE>
-104-
ADMINISTRATIVE AGENT
--------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Christine Herrick
----------------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
SCHEDULE 2.01
COMMITMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NAME OF LENDER TRANCHE A-($) TRANCHE A-(MC) TRANCHE B-($) TRANCHE B-(MC) TOTAL
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Chase Manhattan Bank $ 44,462,500 $ 20,000,000 $ 13,537,500 $ 17,500,000 $ 95,500,000
- ------------------------------------------------------------------------------------------------------------------------
Nationsbank, N.A. $ 40,750,000 $ 20,000,000 $ 14,250,000 $ 15,000,000 $ 90,000,000
- ------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, New York and/or $ 40,750,000 $ 20,000,000 $ 14,250,000 $ 15,000,000 $ 90,000,000
Cayman Islands Branches
- ------------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Company of New $ 40,750,000 $ 20,000,000 $ 14,250,000 $ 15,000,000 $ 90,000,000
York
- ------------------------------------------------------------------------------------------------------------------------
Bank of Montreal $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
Citibank, N.A. $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
First Union National Bank $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
Fleet National Bank $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
Societe Generale, New York Branch $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
The Bank of New York $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
The First National Bank of Chicago $ 33,587,500 $ 14,000,000 $ 15,412,500 $ 7,500,000 $ 70,500,000
- ------------------------------------------------------------------------------------------------------------------------
ABN AMRO Bank, N.V. $ 21,750,000 $ 12,000,000 $ 11,250,000 $ 5,000,000 $ 50,000,000
- ------------------------------------------------------------------------------------------------------------------------
Midland Bank plc $ 21,750,000 $ 12,000,000 $ 11,250,000 $ 5,000,000 $ 50,000,000
- ------------------------------------------------------------------------------------------------------------------------
Credit Lyonnais New York Branch $ 11,875,000 $ 5,000,000 $ 5,625,000 $ 2,500,000 $ 25,000,000
- ------------------------------------------------------------------------------------------------------------------------
The Royal Bank of Scotland plc $ 11,875,000 $ 5,000,000 $ 5,625,000 $ 2,500,000 $ 25,000,000
- ------------------------------------------------------------------------------------------------------------------------
KBC Bank N.V. $ 11,875,000 $ 5,000,000 $ 5,625,000 $ 2,500,000 $ 25,000,000
- ------------------------------------------------------------------------------------------------------------------------
Lloyds Bank plc $ 11,875,000 $ 5,000,000 $ 5,625,000 $ 2,500,000 $ 25,000,000
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL $560,000,000 $250,000,000 $240,000,000 $150,000,000 $1,200,000,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Credit Agreement
----------------
<PAGE>
SCHEDULE 7.03
CERTAIN LITIGATION
During 1995, a lawsuit was filed against COB on behalf of a putative class
of California debtors alleging that certain collection practices engaged in by
Signet Bank, a wholly-owned subsidiary of Signet Banking Corporation(1), and,
subsequently, by COB violated certain California state laws and constitutional
and common law duties. Specifically, plaintiffs allege that filing lawsuits in
Virginia against California debtors who had defaulted on their credit card
agreements, obtaining judgments in Virginia and enforcing those judgments using
Virginia garnishments proceedings was improper.
In early 1997, the Superior Court of California in the County of Almeda
entered judgment in favor of COB on all of the plaintiffs' claims. The
plaintiffs appealed the ruling to the California Court of Appeals. In early
1999, the California Court of Appeals affirmed the trial court's ruling in favor
of COB on six counts, but reversed the trial court's ruling on two counts of the
plaintiffs' complaint. COB has petitioned for further appellate review of the
California Court of Appeals ruling on the two remaining counts.
Because no specific measure of damages is demanded in the complaint of the
California case and the trial court entered judgment in favor of COB before the
parties completed any significant discovery, an informed assessment of the
ultimate outcome of this case cannot be made at this time. Management believes,
however, that there are meritorious defenses to this lawsuit and intends to
defend it vigorously.
COFC and its Subsidiaries are commonly subject to various other pending and
threatened legal actions arising from the conduct of their normal business
activities. In the opinion of management, the ultimate aggregate liability, if
any, arising out of any pending or threatened action will not have a material
adverse effect on the consolidated financial condition of COFC and its
Subsidiaries. At the present time, however, management is not in a position to
determine whether the resolution of any pending or threatened litigation will
have a material adverse effect on the consolidated results of operations of COFC
and its Subsidiaries in any future reporting period.
__________
(1) Signet Bank and Signet Banking Corporation were acquired by First Union
National Bank and First Union Corporation, respectively, as of November 30,
1997.
Credit Agreement
----------------
<PAGE>
EXHIBIT A-1
[Form of Tranche A-($) Note]
PROMISSORY NOTE
$_______________ May 25, 1999
New York, New York
FOR VALUE RECEIVED, [CAPITAL ONE BANK, a bank chartered under the laws
of the Commonwealth of Virginia][CAPITAL ONE, F.S.B., a Federal savings bank
chartered under the laws of the United States of America] (the "Borrower"),
--------
hereby promises to pay to the order of __________________ (the "Lender"), for
------
account of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
at 270 Park Avenue, New York, New York 10017, the principal sum of
_______________ Dollars (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche A-($) Loans made by the Lender to the
Borrower under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Tranche A-($) Loan, at such office, in like money
and funds, for the period commencing on the date of such Tranche A-($) Loan
until such Tranche A-($) Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate and duration of Interest Period
of each Tranche A-($) Loan made by the Lender to the Borrower, and each payment
made on account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Note, endorsed by the Lender on the
schedule attached hereto or any continuation thereof, provided that the failure
--------
of the Lender to make any such recordation (or any error in making any such
recordation) or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing under the Credit Agreement or
hereunder in respect of the Tranche A-($) Loans made by the Lender.
This Note is one of the Tranche A-($) Notes referred to in the Second
Amended and Restated Credit Agreement dated as of May 25, 1999 (as modified and
supplemented and in effect from time to time, the "Credit Agreement") among
----------------
Capital One Financial Corporation, Capital One Bank, Capital One, F.S.B., the
lenders party thereto (including the Lender) and The Chase Manhattan Bank, as
Administrative Agent, and evidences Tranche A-($) Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Tranche A-($) Note
------------------
<PAGE>
-2-
Except as permitted by Section 11.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York without reference to choice of law doctrine.
[CAPITAL ONE BANK]
[CAPITAL ONE, F.S.B.]
By_________________________
Title:
Tranche A-($) Note
------------------
<PAGE>
-3-
SCHEDULE OF TRANCHE A-($) LOANS
This Note evidences Tranche A-($) Loans made under the within-
described Credit Agreement to the Borrower, on the dates, in the principal
amounts, of the Types, bearing interest at the rates and having Interest Periods
of the durations set forth below, subject to the payments and prepayments of
principal set forth below:
<TABLE>
<CAPTION>
Principal Maturity Amount Unpaid
Amount Type of Interest Date of Paid or Principal Notation
of Loan Loan Rate Loan Prepaid Amount Made By
- ------- ---- ---- ---- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Tranche A-($) Note
------------------
<PAGE>
EXHIBIT A-2
[Form of Tranche A-(MC) Note]
PROMISSORY NOTE
$_______________ May 25, 1999
New York, New York
FOR VALUE RECEIVED, [CAPITAL ONE BANK, a bank chartered under the laws
of the Commonwealth of Virginia][CAPITAL ONE, F.S.B., a Federal savings bank
chartered under the laws of the United States of America] (the "Borrower"),
--------
hereby promises to pay to the order of __________________ (the "Lender"), for
------
account of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
at 270 Park Avenue, New York, New York 10017, the principal sum of
_______________ Dollars (or such other amount as shall equal the aggregate
unpaid principal amount of the Tranche A-(MC) Loans made by the Lender to the
Borrower under the Credit Agreement), in the respective Currencies in which such
Loans are denominated and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of each such Tranche A-(MC) Loan, at such office, in
like money and funds, for the period commencing on the date of such Tranche A-
(MC) Loan until such Tranche A-(MC) Loan shall be paid in full, at the rates per
annum and on the dates provided in the Credit Agreement.
The date, amount, Type, Currency, interest rate and duration of
Interest Period of each Tranche A-(MC) Loan made by the Lender to the Borrower,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
--------
that the failure of the Lender to make any such recordation (or any error in
making any such recordation) or endorsement shall not affect the obligations of
the Borrower to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the Tranche A-(MC) Loans made by the
Lender.
This Note is one of the Tranche A-(MC) Notes referred to in the Second
Amended and Restated Credit Agreement dated as of May 25, 1999 (as modified and
supplemented and in effect from time to time, the "Credit Agreement") among
----------------
Capital One Financial Corporation, Capital One Bank, Capital One, F.S.B., the
lenders party thereto (including the Lender) and The Chase Manhattan Bank, as
Administrative Agent, and evidences Tranche A-(MC) Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Tranche A-(MC) Note
-------------------
<PAGE>
-2-
Except as permitted by Section 11.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York without reference to choice of law doctrine.
[CAPITAL ONE BANK]
[CAPITAL ONE, F.S.B.]
By_________________________
Title:
Tranche A-(MC) Note
-------------------
<PAGE>
-3-
SCHEDULE OF TRANCHE A-(MC) LOANS
This Note evidences Tranche A-(MC) Loans made under the within-
described Credit Agreement to the Borrower, on the dates, in the principal
amounts, of the Types and Currencies, bearing interest at the rates and having
Interest Periods of the durations set forth below, subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
Principal Type and Maturity Amount Unpaid
Amount Currency Interest Date of Paid or Principal Notation
of Loan of Loan Rate Loan Prepaid Amount Made By
- ------- ------- ---- ---- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Tranche A-(MC) Note
-------------------
<PAGE>
EXHIBIT A-3
[Form of Tranche B-($) Note]
PROMISSORY NOTE
$______________ May 25, 1999
New York, New York
FOR VALUE RECEIVED, [CAPITAL ONE BANK, a bank chartered under the laws
of the Commonwealth of Virginia][CAPITAL ONE, F.S.B., a Federal savings bank
chartered under the laws of the United States of America][CAPITAL ONE FINANCIAL
CORPORATION, a corporation organized under the laws of the State of Delaware]
(the "Borrower"), hereby promises to pay to the order of __________________ (the
--------
"Lender"), for account of its respective Applicable Lending Offices provided for
------
by the Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank at 270 Park Avenue, New York, New York 10017, the principal sum
of _______________ Dollars (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche B-($) Loans made by the Lender to the
Borrower under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Tranche B-($) Loan, at such office, in like money
and funds, for the period commencing on the date of such Tranche B-($) Loan
until such Tranche B-($) Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate and duration of Interest Period
of each Tranche B-($) Loan made by the Lender to the Borrower, and each payment
made on account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Note, endorsed by the Lender on the
schedule attached hereto or any continuation thereof, provided that the failure
--------
of the Lender to make any such recordation (or any error in making any such
recordation) or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing under the Credit Agreement or
hereunder in respect of the Tranche B-($) Loans made by the Lender.
This Note is one of the Tranche B-($) Notes referred to in the Second
Amended and Restated Credit Agreement dated as of May 25, 1999 (as modified and
supplemented and in effect from time to time, the "Credit Agreement") among
----------------
Capital One Financial Corporation, Capital One Bank, Capital One, F.S.B., the
lenders party thereto (including the Lender) and The Chase Manhattan Bank, as
Administrative Agent, and evidences Tranche B-($) Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Tranche B-($) Note
------------------
<PAGE>
-2-
Except as permitted by Section 11.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York without reference to choice of law doctrine.
[CAPITAL ONE BANK]
[CAPITAL ONE, F.S.B.]
[CAPITAL ONE FINANCIAL CORPORATION]
By_________________________
Title:
Tranche B-($) Note
------------------
<PAGE>
-3-
SCHEDULE OF TRANCHE B-($) LOANS
This Note evidences Tranche B-($) Loans made under the within-
described Credit Agreement to the Borrower, on the dates, in the principal
amounts, of the Types, bearing interest at the rates and having Interest Periods
of the durations set forth below, subject to the payments and prepayments of
principal set forth below:
<TABLE>
<CAPTION>
Principal Maturity Amount Unpaid
Amount Type of Interest Date of Paid or Principal Notation
of Loan Loan Rate Loan Prepaid Amount Made By
- ------- ---- ---- ---- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Tranche B-($) Note
------------------
<PAGE>
EXHIBIT A-4
[Form of Tranche B-(MC) Note]
PROMISSORY NOTE
$_______________ May 25, 1999
New York, New York
FOR VALUE RECEIVED, [CAPITAL ONE BANK, a bank chartered under the laws
of the Commonwealth of Virginia][CAPITAL ONE, F.S.B., a Federal savings bank
chartered under the laws of the United States of America][CAPITAL ONE FINANCIAL
CORPORATION, a corporation organized under the laws of the State of Delaware]
(the "Borrower"), hereby promises to pay to the order of __________________ (the
--------
"Lender"), for account of its respective Applicable Lending Offices provided for
------
by the Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank at 270 Park Avenue, New York, New York 10017, the principal sum
of _______________ Dollars (or such other amount as shall equal the aggregate
unpaid principal amount of the Tranche B-(MC) Loans made by the Lender to the
Borrower under the Credit Agreement), in the respective Currencies in which such
Loans are denominated and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of each such Tranche B-(MC) Loan, at such office, in
like money and funds, for the period commencing on the date of such Tranche B-
(MC) Loan until such Tranche B-(MC) Loan shall be paid in full, at the rates per
annum and on the dates provided in the Credit Agreement.
The date, amount, Type, Currency, interest rate and duration of
Interest Period of each Tranche B-(MC) Loan made by the Lender to the Borrower,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
--------
that the failure of the Lender to make any such recordation (or any error in
making any such recordation) or endorsement shall not affect the obligations of
the Borrower to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the Tranche B-(MC) Loans made by the
Lender.
This Note is one of the Tranche B-(MC) Notes referred to in the Second
Amended and Restated Credit Agreement dated as of May 25, 1999 (as modified and
supplemented and in effect from time to time, the "Credit Agreement") among
----------------
Capital One Financial Corporation, Capital One Bank, Capital One, F.S.B., the
lenders party thereto (including the Lender) and The Chase Manhattan Bank, as
Administrative Agent, and evidences Tranche B-(MC) Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Tranche B-(MC) Note
-------------------
<PAGE>
-2-
Except as permitted by Section 11.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York without reference to choice of law doctrine.
[CAPITAL ONE BANK]
[CAPITAL ONE, F.S.B.]
[CAPITAL ONE FINANCIAL CORPORATION]
By_________________________
Title:
Tranche B-(MC) Note
-------------------
<PAGE>
-3-
SCHEDULE OF TRANCHE B-(MC) LOANS
This Note evidences Tranche B-(MC) Loans made under the within-
described Credit Agreement to the Borrower, on the dates, in the principal
amounts, of the Types and Currencies, bearing interest at the rates and having
Interest Periods of the durations set forth below, subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
Principal Type and Maturity Amount Unpaid
Amount Currency Interest Date of Paid or Principal Notation
of Loan of Loan Rate Loan Prepaid Amount Made By
- ------- ------- ---- ---- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Tranche B-(MC) Note
-------------------
<PAGE>
EXHIBIT A-5
[Form of Money Market Note]
PROMISSORY NOTE
May 25, 1999
New York, New York
FOR VALUE RECEIVED, [CAPITAL ONE BANK, a bank chartered under the laws
of the Commonwealth of Virginia][CAPITAL ONE, F.S.B., a Federal savings bank
chartered under the laws of the United States of America][CAPITAL ONE FINANCIAL
CORPORATION, a corporation organized under the laws of the State of Delaware]
(the "Borrower"), hereby promises to pay to the order of __________________ (the
--------
"Lender"), for account of its respective Applicable Lending Offices provided for
------
by the Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank at 270 Park Avenue, New York, New York 10017, the aggregate
unpaid principal amount of the Money Market Loans made by the Lender to the
Borrower under the Credit Agreement, in the respective Currencies in which such
Loans are denominated and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of each such Money Market Loan, at such office, in
like money and funds, for the period commencing on the date of such Money Market
Loan until such Money Market Loan shall be paid in full, at the rates per annum
and on the dates provided in the Credit Agreement.
The date, amount, Tranche, Type, Currency, interest rate and maturity
date of each Money Market Loan made by the Lender to the Borrower, and each
payment made on account of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
--------
that the failure of the Lender to make any such recordation (or any error in
making any such recordation) or endorsement shall not affect the obligations of
the Borrower to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the Money Market Loans made by the Lender.
This Note is one of the Money Market Notes referred to in the Second
Amended and Restated Credit Agreement dated as of May 25, 1999 (as modified and
supplemented and in effect from time to time, the "Credit Agreement") among
----------------
Capital One Financial Corporation, Capital One Bank, Capital One, F.S.B., the
lenders party thereto (including the Lender) and The Chase Manhattan Bank, as
Administrative Agent, and evidences Money Market Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective meanings
assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Money
Market Loans upon the terms and conditions specified therein.
Money Market Note
-----------------
<PAGE>
-2-
Except as permitted by Section 11.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York without reference to choice of law doctrine.
[CAPITAL ONE BANK]
[CAPITAL ONE, F.S.B.]
[CAPITAL ONE FINANCIAL CORPORATION]
By_________________________________
Title:
Money Market Note
-----------------
<PAGE>
-3-
SCHEDULE OF MONEY MARKET LOANS
This Note evidences Money Market Loans made under the within-described
Credit Agreement to the Borrower, on the dates, in the principal amounts, under
the Tranches and of the Types and Currencies, bearing interest at the rates and
maturing on the dates set forth below, subject to the payments and prepayments
of principal set forth below:
<TABLE>
<CAPTION>
Tranche,
Principal Type and Maturity Amount Unpaid
Amount of Currency Interest Date of Paid or Principal Notation
Loan of Loan Rate Loan Prepaid Amount Made By
- ---------- -------- -------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Money Market Note
-----------------
<PAGE>
EXHIBIT B-1
[Form of Opinion of Special Counsel to the Borrowers]
May 25, 1999
Each of the Lenders party
to the Credit Agreement
referred to below
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as special counsel to Capital One Financial Corporation
("COFC"), Capital One Bank ("COB"), Capital One, F.S.B. ("FSB" and, collectively
---- --- ---
with COFC and COB, the "Borrowers") in connection with (i) the Second Amended
---------
and Restated Credit Agreement (the "Credit Agreement") dated as of May 25, 1999
----------------
among the Borrowers, the Lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent, providing for loans to be made by the Lenders to the
Borrowers in an aggregate principal amount not exceeding $1,200,000,000 (or, to
the extent specified in the Credit Agreement, its equivalent in certain foreign
currencies and as such amount may be increased pursuant to Section 2.11 of the
Credit Agreement) and (ii) the various other agreements, instruments and other
documents referred to in the next following paragraph. Capitalized terms used
but not defined herein have the respective meanings given to such terms in the
Credit Agreement. This opinion is being delivered pursuant to Section 6.01(c) of
the Credit Agreement.
In rendering the opinions expressed below, we have examined the
following agreements, instruments and other documents:
(a) the Credit Agreement;
(b) the Notes; and
(c) such records of the Borrowers and such other documents as we have
deemed necessary as a basis for the opinions expressed below.
Opinion of Special Counsel to the Borrowers
-------------------------------------------
<PAGE>
-2-
The agreements, instruments and other documents referred to in clauses (a) and
(b) above are collectively referred to as the "Credit Documents".
----------------
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies. When relevant facts were not independently established, we have relied
upon statements of governmental officials and upon representations made in or
pursuant to the Credit Documents and certificates of appropriate representatives
of the Borrowers.
In rendering the opinions expressed below, we have assumed, with
respect to all of the documents referred to in this opinion letter, that
(except, to the extent set forth in the opinions expressed below, as to the
Borrowers):
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and constitute legal, valid, binding and enforceable
obligations of, all of the parties to such documents;
(ii) all signatories to such documents have been duly authorized;
and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate or other) to
execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. A Virginia court or a Federal court sitting in Virginia in a
diversity action should, under conflicts of law principles observed by the
courts of Virginia, if properly presented with the issue, give effect to those
provisions of the Credit Documents providing that such documents are to be
governed by and construed in accordance with the laws of the State of New York.
2. Each Borrower has all requisite corporate power to execute and
deliver, and to perform its obligations under, the Credit Documents to which it
is a party. Each Borrower has all requisite corporate power to borrow under the
Credit Agreement.
3. The execution, delivery and performance by each Borrower of each
Credit Document to which it is a party, and the borrowings by each Borrower
under the Credit Agreement, have been duly authorized by all necessary corporate
action on the part of such Borrower.
4. Each Credit Document constitutes the legal, valid and binding
obligation of each Borrower, enforceable against each Borrower in accordance
with its terms, except as may
Opinion of Special Counsel to the Borrowers
-------------------------------------------
<PAGE>
-3-
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors generally (as such
laws would apply in the event of the insolvency, receivership, conservatorship
or reorganization of, or other similar occurrence with respect to, COB or FSB)
and except as the enforceability of the Credit Documents is subject to the
application of general principles of equity (regardless of whether considered in
a proceeding in equity or at law), including, without limitation, (i) the
possible unavailability of specific performance, injunctive relief or any other
equitable remedy and (ii) concepts of materiality, reasonableness, good faith
and fair dealing.
5. No authorization, approval or consent of, and no filing or
registration with, any governmental or regulatory authority or agency of the
United States of America or the Commonwealth of Virginia is required on the part
of any Borrower for the execution, delivery or performance by any Borrower of
any of the Credit Documents to which such Borrower is a party or for the
borrowings by any Borrower under the Credit Agreement.
6. The execution, delivery and performance by each Borrower of, and
the consummation by each Borrower of the transactions contemplated by, the
Credit Documents to which such Borrower is a party do not and will not (i)
violate any provision of its charter or by-laws (or equivalent constitutional
documents) or (ii) violate any law, rule or regulation of the United States of
America or the Commonwealth of Virginia.
The foregoing opinions are subject to the following comments and
qualifications:
(a) The enforceability of Section 11.03 of the Credit Agreement may
be limited by (i) laws rendering unenforceable indemnification contrary to
Federal or state securities laws and the public policy underlying such laws and
(ii) laws limiting the enforceability of provisions exculpating or exempting a
party from, or requiring indemnification of a party for, liability for its own
action or inaction, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct.
(b) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be limited
under certain circumstances.
(c) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located (other than the State of New York)
that limit the interest, fees or other charges such Lender may impose, (ii)
Section 4.07(c) of the Credit Agreement, (iii) the second sentence of Section
11.10 of the Credit Agreement, insofar as such sentence relates to the subject
matter jurisdiction of the United States District Court for the Southern
District of New York to adjudicate any controversy related to any of the Credit
Documents and (iv) Section 11.13 of the Credit Agreement.
(d) We express no opinion in paragraph 6 above as to whether, by
reason of the assumption by COB of the Undertaking set forth in Section 2.12 of
the Credit Agreement, COFC would be required to licensed as a bank holding
company under the Bank Holding
Opinion of Special Counsel to the Borrowers
-------------------------------------------
<PAGE>
-4-
Company Act of 1956, as amended (the "BHCA"), by
----
reason of the failure of COB to fall within the exclusion from the definition of
the term "bank" contained in Section 2(c)(2)(F) of the BHCA.
The foregoing opinions are limited to matters involving the Federal
laws of the United States, the Delaware General Corporation Law and the laws of
the State of New York and the Commonwealth of Virginia, and we do not express
any opinion as to the laws of any other jurisdiction.
At the request of our clients, this opinion letter is, pursuant to
Section 6.01(c) of the Credit Agreement, provided to you by us in our capacity
as special counsel to the Borrowers and may not be relied upon by any Person for
any purpose other than in connection with the transactions contemplated by the
Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
Opinion of Special Counsel to the Borrowers
-------------------------------------------
<PAGE>
EXHIBIT B-2
[Form of Opinion of Counsel to the Borrowers]
May 25, 1999
Each of the Lenders party
to the Credit Agreement
referred to below
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
I have acted as counsel to Capital One Financial Corporation ("COFC"),
----
Capital One Bank ("COB"), Capital One, F.S.B. ("FSB" and, collectively with COFC
--- ---
and COB, the "Borrowers") in connection with (i) the Second Amended and Restated
---------
Credit Agreement (the "Credit Agreement") dated as of May 25, 1999 among the
----------------
Borrowers, the Lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent, providing for loans to be made by the Lenders to the
Borrowers in an aggregate principal amount not exceeding $1,200,000,000 (or, to
the extent specified in the Credit Agreement, its equivalent in certain foreign
currencies and as such amount may be increased pursuant to Section 2.11 of the
Credit Agreement) and (ii) the various other agreements, instruments and other
documents referred to in the next following paragraph. Capitalized terms used
but not defined herein have the respective meanings given to such terms in the
Credit Agreement. This opinion letter is being delivered pursuant to Section
6.01(d) of the Credit Agreement.
In rendering the opinions expressed below, I have examined the
following agreements, instruments and other documents:
(a) the Credit Agreement;
(b) the Notes; and
(c) such records of the Borrowers and such other documents as I have
deemed necessary as a basis for the opinions expressed below.
Opinion of Counsel to the Borrowers
-----------------------------------
<PAGE>
-2-
The agreements, instruments and other documents referred to in clauses (a) and
(b) above are collectively referred to as the "Credit Documents".
----------------
In my examination, I have assumed the genuineness of all signatures,
the authenticity of all documents submitted to me as originals and the
conformity with authentic original documents of all documents submitted to me as
copies. When relevant facts were not independently established, I have relied
upon statements of governmental officials and upon representations made in or
pursuant to the Credit Documents and certificates of appropriate representatives
of the Borrowers.
In rendering the opinions expressed below, I have assumed, with
respect to all of the documents referred to in this opinion letter, that
(except, to the extent set forth in the opinions expressed below, as to the
Borrowers):
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and constitute legal, valid, binding and enforceable
obligations of, all of the parties to such documents;
(ii) all signatories to such documents have been duly authorized;
and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate or other) to
execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject also to the
qualifications set forth below, and having considered such questions of law as I
have deemed necessary as a basis for the opinions expressed below, I am of the
opinion that:
1. COFC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. COB is a bank duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia. FSB is a savings bank duly organized, validly existing and in good
standing under the laws of the United States of America.
2. Each Borrower has all requisite corporate power to execute and
deliver, and to perform its obligations under, the Credit Documents to which it
is a party. Each Borrower has all requisite corporate power to borrow under the
Credit Agreement.
3. The execution, delivery and performance by each Borrower of each
Credit Document to which it is a party, and the borrowings by each Borrower
under the Credit Agreement, have been duly authorized by all necessary corporate
action on the part of such Borrower.
4. Each Credit Document has been duly executed and delivered by each
Borrower party thereto.
Opinion of Counsel to the Borrowers
-----------------------------------
<PAGE>
-3-
5. The execution, delivery and performance by each Borrower of, and
the consummation by each Borrower of the transactions contemplated by, the
Credit Documents to which such Borrower is a party do not and will not (a)
violate any provision of its charter or by-laws (or equivalent constitutional
documents), (b) violate any applicable law, rule or regulation, (c) violate any
order, writ, injunction or decree of any court or governmental authority or
agency or any arbitral award applicable to any Borrower or any of its
Subsidiaries of which I have knowledge (after due inquiry) or (d) result in a
breach of, constitute a default under, require any consent under, or result in
the acceleration or required prepayment of any indebtedness pursuant to the
terms of, any agreement or instrument of which I have knowledge (after due
inquiry) to which any Borrower or any of its Subsidiaries is a party or by which
any of them is bound or to which any of them is subject, or result in the
creation or imposition of any Lien upon any Property of any Borrower or any of
its Subsidiaries pursuant to the terms of any such agreement or instrument,
except for any such conflict, breach, violation, default or consent that if not
obtained, or Lien that if created, could not (either individually or in the
aggregate) have a Material Adverse Effect and could not subject the
Administrative Agent or any Lender to liability.
6. Except as set forth in Schedule 7.03 of the Credit Agreement, I
have no knowledge (after due inquiry) of any legal or arbitral proceedings, or
any proceedings by or before any governmental or regulatory authority or agency,
pending or threatened against or affecting any Borrower or any of its
Subsidiaries or any of their respective Properties, except proceedings that, if
adversely determined, would not have a Material Adverse Effect.
The foregoing opinions are limited to matters involving the Federal
laws of the United States, the Delaware General Corporation Law and the law of
the Commonwealth of Virginia, and I do not express any opinion as to the laws of
any other jurisdiction.
At the request of my clients, this opinion letter is, pursuant to
Section 6.01(d) of the Credit Agreement, provided to you by me in my capacity as
counsel to the Borrowers and may not be relied upon by any Person for any
purpose other than in connection with the transactions contemplated by the
Credit Agreement without, in each instance, my prior written consent.
Very truly yours,
Opinion of Counsel to the Borrowers
-----------------------------------
<PAGE>
EXHIBIT C
[Form of Opinion of Special New York Counsel to Chase]
May 25, 1999
Each of the Lenders party
to the Credit Agreement
referred to below
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as special New York counsel to The Chase Manhattan Bank
("Chase") in connection with (i) the Second Amended and Restated Credit
-----
Agreement dated as of May 25, 1999 (the "Credit Agreement") among Capital One
----------------
Financial Corporation ("COFC"), Capital One Bank ("COB"), Capital One, F.S.B
---- ---
("FSB" and, collectively with COFC and COB, the "Borrowers"), the Lenders party
- ----- ---------
thereto and Chase, as Administrative Agent, providing for loans to be made by
the Lenders to the Borrowers in an aggregate principal amount not exceeding
$1,200,000,000 (or, to the extent specified in the Credit Agreement, its
equivalent in certain foreign currencies and as such amount may be increased
pursuant to Section 2.11 of the Credit Agreement) and (ii) the various other
agreements, instruments and other documents referred to in the next following
paragraph. Capitalized terms used but not defined herein have the respective
meanings given to such terms in the Credit Agreement. This opinion letter is
being delivered pursuant to Section 6.01(e) of the Credit Agreement.
In rendering the opinions expressed below, we have examined the
following agreements, instruments and other documents:
(a) the Credit Agreement;
(b) the Notes; and
(c) such records of the Borrowers and such other documents as we have
deemed necessary as a basis for the opinions expressed below.
Opinion of Special New York Counsel to Chase
--------------------------------------------
<PAGE>
-2-
The agreements, instruments and other documents referred to in clauses (a) and
(b) above are collectively referred to as the "Credit Documents".
----------------
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies. When relevant facts were not independently established, we have relied
upon representations made in or pursuant to the Credit Documents.
In rendering the opinions expressed below, we have assumed, with
respect to all of the documents referred to in this opinion letter, that:
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and (except to the extent set forth in the opinions
below as to the Borrowers) constitute legal, valid, binding and enforceable
obligations of, all of the parties to such documents;
(ii) all signatories to such documents have been duly authorized;
and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate or other) to
execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that each of the Credit Documents
constitutes the legal, valid and binding obligation of each Borrower,
enforceable against each Borrower in accordance with its terms, except as may be
limited by bankruptcy, fraudulent conveyance or transfer, insolvency,
receivership, conservatorship, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally (as such laws would
apply in the event of the insolvency, receivership, conservatorship or
reorganization of, or other similar occurrence with respect to, COB or FSB) and
except as the enforceability of the Credit Documents is subject to the
application of general principles of equity (regardless of whether considered in
a proceeding in equity or at law), including, without limitation, (a) the
possible unavailability of specific performance, injunctive relief or any other
equitable remedy and (b) concepts of materiality, reasonableness, good faith and
fair dealing.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 11.03 of the Credit Agreement may
be limited by (i) laws rendering unenforceable indemnification contrary to
Federal or state securities laws and the public policy underlying such laws and
(ii) laws limiting the enforceability of provisions exculpating or exempting a
party from, or requiring indemnification of a party for, liability for its own
action or inaction, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct.
Opinion of Special New York Counsel to Chase
--------------------------------------------
<PAGE>
-3-
(B) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be limited
under certain circumstances.
(C) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located (other than the State of New York)
that limit the interest, fees or other charges such Lender may impose, (ii)
Section 4.07(c) of the Credit Agreement, (iii) the second sentence of Section
11.10 of the Credit Agreement, insofar as such sentence relates to the subject
matter jurisdiction of the United States District Court for the Southern
District of New York to adjudicate any controversy related to any of the Credit
Documents and (iv) Section 11.13 of the Credit Agreement.
(D) With respect to Section 2.12 of the Credit Agreement, we call
your attention to Wysko Investment Co. v. Great American Bank, 131 B.R. 146 (D.
-------------------------------------------
Ariz. 1991), which holds that a bankruptcy court in a case involving an account
party of a letter of credit may enjoin payment under a letter of credit pursuant
to Section 105 of the Bankruptcy Code in unusual circumstances. Id. at 147. In
--
that case, the unusual circumstance was the bankruptcy court's finding that the
injunction was necessary for the reorganization of the account party. Id. at
--
148. In addition, In re Delaware River Stevedores, Inc., 129 B.R. 38 (Bankr.
-------------------------------------
E.D. Pa. 1991), suggests that "an injunction prohibiting payment on a L/C could
conceivably be appropriate" if certain factors relating to issuing Section
105(a) injunctions "generally weighed in the debtor's [account party's] favor".
Id. at 42, citing In re Guy C. Long, Inc., 74 B.R. 939 (Bankr. E.D. Pa. 1987).
- -- -----------------------
To the extent that the rationale of Wysko Investment Co. or Delaware River
-------------------- --------------
Stevedores would support the issuance by a bankruptcy court in a case involving
- ----------
FSB of a permanent injunction against payment under the Undertaking, we are of
the opinion that those cases do not reflect a correct statement of the law in
respect of letters of credit and other undertakings to pay against the
presentation of specified documents and are not controlling precedent in any
court exercising bankruptcy jurisdiction outside of Arizona or the Eastern
District of Pennsylvania, as the case may be. In addition, if any Person
obligated to reimburse COB for payments made under the Undertaking is subject to
a proceeding under the Bankruptcy Code, we express no opinion as to whether a
court exercising bankruptcy jurisdiction in respect of such Person might issue a
temporary restraining order or other interim relief in order to preserve the
status quo concerning the Undertaking pending a review of the merits of any
- ------ ---
request to enjoin payment under the Undertaking.
The foregoing opinions are limited to matters involving the Federal
laws of the United States and the law of the State of New York, and we do not
express any opinion as to the laws of any other jurisdiction.
Opinion of Special New York Counsel to Chase
--------------------------------------------
<PAGE>
-4-
At the request of our client, this opinion letter is, pursuant to
Section 6.01(e) of the Credit Agreement, provided to you by us in our capacity
as special New York counsel to Chase and may not be relied upon by any Person
for any purpose other than in connection with the transactions contemplated by
the Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
WFC/PMM
Opinion of Special New York Counsel to Chase
--------------------------------------------
<PAGE>
EXHIBIT D
[Form of Notice of Borrowing of Syndicated Loans]
[Date]
To: The Chase Manhattan Bank,
as Administrative Agent
From: [Name of Borrower]
Re: Notice of Borrowing
Pursuant to Section 2.02 of the Second Amended and Restated Credit
Agreement dated as of May 25, 1999 (as modified and supplemented and in effect
from time to time, the "Credit Agreement") among Capital One Financial
----------------
Corporation, Capital One Bank, Capital One, F.S.B., the lenders party thereto
and The Chase Manhattan Bank, as Administrative Agent, the undersigned Borrower
hereby gives notice of a borrowing of Syndicated Loans described below:
Name of Borrower: __________________
Aggregate Principal
Amount of Loans to be borrowed: __________________
Tranche of Loans to be borrowed: __________________
Currency of Loans to be borrowed: __________________
Type of Loans to be borrowed: __________________
Business Day of borrowing: __________________
Interest Period to be applicable: __________________/1/
This notice of borrowing constitutes a certification by the undersigned
Borrower to the effect set forth in Section 6.02(c) of the Credit Agreement,
both as of the date of this notice of borrowing and, unless the undersigned
notifies the Administrative Agent prior to the date of such borrowing, as of the
date of such borrowing.
____________________
1/No Loan may be made to FSB with an Interest Period in excess of six months.
-
Notice of Borrowing
-------------------
<PAGE>
-2-
If the undersigned Borrower is FSB, then COB has signed this notice of
borrowing on the line provided below.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
[NAME OF BORROWER]
By_________________________
Title:
[COB hereby confirms its obligations under
Section 2.12 of the Credit Agreement
after giving effect to the borrowing
of Loans by FSB requested in this notice
of borrowing:
CAPITAL ONE BANK
By_________________________
Title:]/2/
__________________________
2/Insert if FSB is the Borrower.
-
Notice of Borrowing
-------------------
<PAGE>
EXHIBIT E
[Form of Money Market Quote Request]
[Date]
To: The Chase Manhattan Bank,
as Administrative Agent
From: [Name of Borrower]
Re: Money Market Quote Request
Pursuant to Section 2.03 of the Second Amended and Restated Credit
Agreement dated as of May 25, 1999 (as modified and supplemented and in effect
from time to time, the "Credit Agreement") among Capital One Financial
----------------
Corporation, Capital One Bank, Capital One, F.S.B., the lenders party thereto
and The Chase Manhattan Bank, as Administrative Agent, we hereby give notice
that we request Money Market Quotes from the Lenders under Tranche [A-($)][A-
(MC)][B-($)][B-(MC)] for the following proposed Money Market Borrowing(s) under
such Tranche:
Borrowing Quotation Amount [2] Type and Interest
Date Date[1] ---------- Currency[3] Period[4]
---- ------- ----------- ---------
If the undersigned Borrower is FSB, then COB has signed this Money Market
Quote Request on the line provided below.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
[NAME OF BORROWER]
By_________________________
Title:
__________________________
* All numbered footnotes appear on the last page of this Exhibit.
Money Market Quote Request
--------------------------
<PAGE>
-2-
[COB hereby confirms its obligations under
Section 2.12 of the Credit Agreement
after giving effect to the borrowing
of Loans by FSB requested in this
Money Market Quote Request:
CAPITAL ONE BANK
By_________________________
Title:]/3/
__________________________
[1] In the case of Set Rate Loans to be denominated in Dollars, for use if a
Set Rate in a Set Rate Auction is requested to be submitted before the Borrowing
Date.
[2] Each amount must be an integral multiple of $1,000,000 and at least
$5,000,000 (or, in the case of a Borrowing of Money Market Loans denominated in
an Alternative Currency, the Foreign Currency Equivalent thereof (rounded to the
nearest 1,000 units of such Alternative Currency)).
[3] Insert either "LIBO Margin" (in the case of LIBOR Market Loans) or "Set
Rate" (in the case of Set Rate Loans).
[4] One, two, three or six months, in the case of a LIBOR Market Loan or, in
the case of a Set Rate Loan, a period of not less than seven days after the
making of such Set Rate Loan and ending on a Business Day. No Loan may be made
to FSB with an Interest Period in excess of six months.
________________________
3/Insert if FSB is the Borrower.
- -
Money Market Quote Request
--------------------------
<PAGE>
EXHIBIT F
[Form of Money Market Quote]
To: The Chase Manhattan Bank,
as Administrative Agent
Attention: Agent Bank Services Group
Re: Money Market Quote to
[Name of Borrower] (the "Borrower")
--------
This Money Market Quote is given in accordance with Section 2.03(c)
of the Second Amended and Restated Credit Agreement dated as of May 25, 1999 (as
modified and supplemented and in effect from time to time, the "Credit
------
Agreement") among Capital One Financial Corporation, Capital One Bank, Capital
- ---------
One, F.S.B., the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent. Terms defined in the Credit Agreement are used herein as
defined therein.
In response to the Borrower's invitation dated __________, ____, we
hereby make the following Money Market Quote(s) on the following terms:
1. Quoting Lender:
2. Person to contact at Quoting Lender:
3. We hereby offer to make Money Market Loan(s) under Tranche [A-
($)][A-(MC)][B-($)][B-(MC)] in the following principal amount[s], for the
following Interest Period(s) and at the following rate(s):
<TABLE>
<CAPTION>
Borrowing Quotation Type and Interest
Date Date[1] Amount [2] Currency[3] Period[4] Rate[5]
- ---- ------- ---------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
provided that the Borrower may not accept offers that would result in the
- --------
undersigned making Money Market Loans pursuant hereto in excess of $___________
in the aggregate (the "Money Market Loan Limit").
-----------------------
__________________________
* All numbered footnotes appear on the last page of this Exhibit.
Money Market Quote
------------------
<PAGE>
-2-
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement,
irrevocably obligate[s] us to make the Money Market Loan(s) for which any
offer(s) (is/are) accepted, in whole or in part (subject to the third sentence
of Section 2.03(e) of the Credit Agreement and any Money Market Loan Limit
specified above).
Very truly yours,
[NAME OF LENDER]
By_________________________
Authorized Officer
Dated: __________, ____
_________________________
[1] As specified in the related Money Market Quote Request.
[2] The principal amount bid for each Interest Period may not exceed the
principal amount requested. Bids must be made for an integral multiple of
$1,000,000 and at least $5,000,000 (or, in the case of a Borrowing of Money
Market Loans denominated in an Alternative Currency, the Foreign Currency
Equivalent thereof (rounded to the nearest 1,000 units of such Alternative
Currency)).
[3] Indicate "LIBO Margin" (in the case of LIBOR Market Loans) or "Set Rate"
(in the case of Set Rate Loans).
[4] One, two, three or six months, in the case of a LIBOR Market Loan or, in
the case of a Set Rate Loan, a period of not less than seven days after the
making of such Set Rate Loan and ending on a Business Day, as specified in the
related Money Market Quote Request. No Loan may be made to FSB with an Interest
Period in excess of six months.
[5] For a LIBOR Market Loan, specify margin over or under the Eurocurrency Rate
determined for the applicable Interest Period. Specify percentage (rounded to
the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". For a Set
Rate Loan, specify rate of interest per annum (rounded to the nearest 1/10,000
of 1%).
Money Market Quote
------------------
<PAGE>
EXHIBIT G
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Second Amended and Restated Credit Agreement dated as of May 25, 1999
(as modified and supplemented and in effect from time to time, the
"Credit Agreement") among Capital One Financial Corporation, Capital
----------------
One Bank, Capital One, F.S.B., the lenders party thereto and The Chase
Manhattan Bank, as Administrative Agent.
Ladies and Gentlemen:
As a Lender party to the Credit Agreement, we have agreed with the
Borrowers pursuant to Section 11.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all non-
public information identified by the Borrowers as being confidential at the time
the same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you, as
a prospective [holder of a participation in the Loans (as defined in the Credit
Agreement)] [assignee Lender], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates, directors, officers, employees and
representatives and for the benefit of us and the Borrowers) that (A) such
information will not be used by you except in connection with the proposed
[participation][assignment] mentioned above and (B) you shall use reasonable
precautions, in accordance with your customary procedures for handling
confidential information and in accordance with safe and sound banking
practices, to keep such information confidential, provided that (x) nothing
--------
herein shall limit the disclosure of any such information (i) after such
information shall have become public (other than through a violation of Section
11.12 of the
Confidentiality Agreement
-------------------------
<PAGE>
-2-
Credit Agreement), (ii) to the extent required by statute, rule, regulation or
judicial process, (iii) to your counsel or to counsel for any of the Lenders or
the Administrative Agent, (iv) to bank examiners (or any other regulatory
authority having jurisdiction over any Lender or the Administrative Agent), or
to auditors or accountants, (v) to the Administrative Agent or any other Lender,
(vi) in connection with any litigation to which you or any one or more of the
Lenders or the Administrative Agent is a party, or in connection with the
enforcement of rights or remedies under the Credit Agreement, (vii) to a
subsidiary or affiliate of yours as provided in Section 11.12(a) of the Credit
Agreement or (viii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first executes and delivers to you a Confidentiality Agreement
substantially in the form hereof and (y) in no event shall you be obligated to
return any materials furnished to you pursuant to this Confidentiality
Agreement.
If you are a prospective assignee, your obligations under this
Confidentiality Agreement shall be superseded by Section 11.12 of the Credit
Agreement on the date upon which you become a Lender under the Credit Agreement
pursuant to Section 11.06(b) thereof. This Confidentiality Agreement shall be
governed by, and construed in accordance with, the law of the State of New York
without reference to choice of law doctrine.
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.
Very truly yours,
[INSERT NAME OF LENDER]
By_________________________
Title:
The foregoing is agreed to
as of the date of this letter:
- ------------------------------
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By_________________________
Title:
Confidentiality Agreement
-------------------------
<PAGE>
EXHIBIT H
[Form of Assignment and Acceptance]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Second Amended and Restated Credit Agreement
dated as of May 25, 1999 (as modified and supplemented and in effect from time
to time, the "Credit Agreement") among Capital One Financial Corporation,
----------------
Capital One Bank, Capital One, F.S.B., the lenders party thereto and The Chase
Manhattan Bank, as Administrative Agent. Terms defined in the Credit Agreement
are used herein as defined therein.
____________________ (the "Assignor") and ____________________ (the
--------
"Assignee") agreee as follows:
--------
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date as set forth in Schedule 1 hereto (the "Effective Date"), an
--------------
interest (the "Assigned Interest") in and to the Assignor's rights and
-----------------
obligations under the Credit Agreement in an amount and percentage as set forth
on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other Basic Document or
any other instrument or document furnished pursuant thereto, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Basic Document or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse claim
upon the interest being assigned by it hereunder and that such interest is free
and clear of any such adverse claim; (ii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower or any other obligation or the performance or observance by any
Borrower of any of their respective obligations under the Credit Agreement or
any other Basic Document or any other instrument or document furnished pursuant
hereto or thereto; [and (iii) attaches the Note(s) held by it evidencing (or to
evidence) its Loan and requests that the Administrative Agent exchange such
Note(s) for a new Note or Notes payable to the Assignor (if the Assignor has
retained any interest in its Loan) and a new Note or Notes payable to the
Assignee in the respective amounts which reflect the assignment being made
hereby (and after giving effect to any other assignments which have become
effective on the Effective Date)].
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements referred to in Section 7.02 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it will,
Assignment and Acceptance
-------------------------
<PAGE>
-2-
independently and without reliance upon the Assignor, the Administrative Agent
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, the other Basic Documents or any
other instrument or document furnished pursuant hereto or thereto; (iv) appoints
and authorizes the Administrative Agent to take such action as administrative
agent on its behalf and to exercise such powers and discretion under the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are incidental thereto;
and (v) agrees that it will be bound by the provisions of the Credit Agreement
and will perform in accordance with its terms all the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Lender.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Administrative Agent for acceptance by the Administrative
Agent pursuant to Section 11.06(b) of the Credit Agreement, effective as of the
Effective Date (which date shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days after the date of such
acceptance and recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee which accrue subsequent to the Effective Date.
6. From and after the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Basic Documents and shall be bound by the provisions thereof and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement except as provided in Section 11.07 of the Credit Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the law of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Assignment and
Acceptance by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
Assignment and Acceptance
-------------------------
<PAGE>
Schedule 1 to
Assignment and Acceptance
relating to the Second Amended and Restated Credit Agreement
dated as of May 25, 1999
among Capital One Financial Corporation,
Capital One Bank, Capital One, F.S.B.,
the lenders party thereto and
The Chase Manhattan Bank, as Administrative Agent
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Relevant Commitment Principal Amount Percentage
Tranche Amount Assigned of Loan Assigned Assigned
- ------- --------------- ---------------- --------
[ASSIGNEE] [ASSIGNOR]
By___________________________ By__________________________
Title: Title:
Consented to and Accepted:
-------------------------
THE CHASE MANHATTAN BANK, as
Administrative Agent
By_________________________
Title:
Consented to:
------------
CAPITAL ONE FINANCIAL
CORPORATION
Assignment and Acceptance
-------------------------
<PAGE>
-2-
By_________________________
Title:
CAPITAL ONE BANK
By_________________________
Title:
CAPITAL ONE, F.S.B.
By_________________________
Title:
Assignment and Acceptance
-------------------------
<PAGE>
EXHIBIT I
[Form of Commitment Increase Letter]
COMMITMENT INCREASE LETTER
[Date]
Capital One Bank
Capital One, F.S.B.
Capital One Financial Corporation
2980 Fairview Park Drive
Suite 1300
Falls Church, VA 22042-4525
The Chase Manhattan Bank,
as Administrative Agent
Agent Bank Services Group
1 Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Ms. Laura Rebecca
Ladies and Gentlemen:
Reference is made to the Second Amended and Restated Credit Agreement
dated as of May 25, 1999 (as modified and supplemented and in effect from time
to time, the "Credit Agreement") among Capital One Financial Corporation,
----------------
Capital One Bank, Capital One, F.S.B., the lenders party thereto and The Chase
Manhattan Bank, as Administrative Agent. Terms used but not defined herein have
the respective meanings given to such terms in the Credit Agreement.
This Commitment Increase Letter is delivered pursuant to Section 2.11
of the Credit Agreement.
If, prior to the execution and delivery of this Commitment Increase
Letter, the undersigned is a Lender already party to the Credit Agreement, then
the undersigned hereby
Commitment Increase Letter
--------------------------
<PAGE>
-2-
agrees that, effective as of the Commitment Increase Date set forth below, the
Commitment of such Lender under the Tranche set forth below is increased by an
amount equal to the "Commitment Increase Amount" set forth below.
If, prior to the execution and delivery of this Commitment Increase
Letter, the undersigned is not a Lender already party to the Credit Agreement,
then the undersigned hereby agrees that, effective as of the Commitment Increase
Date set forth below, the undersigned shall have a Commitment under the Tranche
set forth below in an amount equal to the "Commitment Increase Amount" set forth
below.
Commitment Increase Date: ____________, ____
Tranche: Tranche [A-($)][A-(MC)][B-($)][B-(MC)]
Commitment Increase Amount: $_________________
The undersigned agrees with the Borrowers and the Administrative Agent
that the undersigned will, from and after the Commitment Increase Date, be a
"Lender" under the Credit Agreement (if not already a "Lender" thereunder) and
perform all of the obligations of the undersigned as a "Lender" under the Credit
Agreement in respect of the Commitment Increase Amount (together with, if
already a "Lender" under the Credit Agreement, the Commitment(s) of the Lender
in effect immediately prior to the execution and delivery of this Commitment
Increase Letter).
This Commitment Increase Letter shall be governed by and construed in
accordance with the law of the State of New York without reference to choice of
law doctrine.
Very truly yours,
[INSERT NAME OF LENDER]
By_________________________
Title:
Commitment Increase Letter
--------------------------
<PAGE>
EXHIBIT J
[Form of Drawing Certificate]
DRAWING CERTIFICATE
Capital One Bank
__________________
__________________
Ladies and Gentlemen:
Reference is made to the Undertaking entered into by Capital One Bank
("COB") pursuant to Section 2.12 of the Second Amended and Restated Credit
---
Agreement dated as of May 25, 1999 (as modified and supplemented and in effect
from time to time, the "Credit Agreement") among Capital One Financial
----------------
Corporation, Capital One Bank, Capital One, F.S.B. ("FSB"), the lenders party
---
thereto and the Administrative Agent named therein. Terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
The undersigned, a duly authorized representative of the
Administrative Agent (the "Administrative Agent"), hereby certifies that:
--------------------
1. The Administrative Agent is the beneficiary of the Undertaking.
2. The Administrative Agent hereby requests payment in an amount
equal to the amount of the draft accompanying this Certificate (the "Draft"),
-----
which amount is not greater than the aggregate amount due and payable by FSB on
the date of this Certificate in respect of the principal of or interest on the
Loans made by the Lenders to, and the Notes held by each Lender of, FSB or any
other amount owing by FSB to any Lender or the Administrative Agent under the
Credit Agreement or any of the Notes.
3. The amount represented by the Draft has not been paid by FSB and
has not been the subject of and paid pursuant to a prior drawing by the
Administrative Agent under the Undertaking.
4. The date of the Draft is the date of this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
[insert date of draft accompanying this Certificate].
[NAME OF ADMINISTRATIVE AGENT],
as Administrative Agent
By____________________________
Drawing Certificate
-------------------
<PAGE>
-2-
Authorized Representative
Commitment Increase Letter
--------------------------
<PAGE>
EXHIBIT 10.18.2
---------------
EXECUTION COPY
AMENDMENT NO. 1
---------------
AMENDMENT NO. 1 dated as of December 21, 1999 among CAPITAL ONE
FINANCIAL CORPORATION, a corporation organized under the laws of the State of
Delaware ("COFC"); CAPITAL ONE BANK, a bank organized under the laws of the
------
Commonwealth of Virginia ("COB"); CAPITAL ONE, F.S.B., a Federal savings bank
---
organized under the laws of the United States of America ("FSB"; each of COFC,
---
COB and FSB is herein referred to as a "Borrower" and, collectively, as the
--------
"Borrowers"); and THE CHASE MANHATTAN BANK, as administrative agent (in such
---------
capacity, together with its successors in such capacity, the "Administrative
--------------
Agent").
- -----
The Borrowers, the Lenders party thereto and the Administrative Agent
are party to a Second Amended and Restated Credit Agreement dated as of May 25,
1999 (as modified and supplemented and in effect on the date hereof, the "Credit
------
Agreement"). The Borrowers have requested that the Lenders agree to amend the
- ---------
Credit Agreement as hereinafter provided. The Majority Lenders have consented to
such amendments on and subject to the terms and conditions hereof. Accordingly,
the Borrowers and the Administrative Agent, acting on behalf of the Majority
Lenders, agree as follows:
Section 1. Definitions. Except as otherwise defined in this Amendment
-----------
No. 1, terms defined in the Credit Agreement are used herein as defined therein.
Section 2. Amendments. Subject to Section 4, but effective as of the
----------
date hereof, the Credit Agreement shall be amended as follows:
2.1 References in the Credit Agreement to "this Agreement" (and
indirect references such as "hereunder", "hereby", "herein" and "hereof")
shall be deemed to be references to the Credit Agreement as amended hereby.
2.2 Section 8.06 of the Credit Agreement shall be amended by (i)
deleting "and" at the end of clause (a) thereof, (ii) substituting "; and"
for "." at the end of clause (b) thereof and (iii) adding a new clause (c)
at the end thereof which shall read as follows:
(c) any pledge of Receivables to a Federal Reserve Bank made in
the ordinary course of business to secure advances or other
transactions and manage the liquidity position of the Borrower.
Section 3. Representations and Warranties. Each Borrower represents
------------------------------
and warrants to the Administrative Agent and the Lenders that (i) the
representations and warranties
Amendment No. 1
---------------
<PAGE>
-2-
made by such Borrower in Section 7 of the Credit Agreement are true and complete
on and as of the date hereof with the same force and effect as if made on and as
of the date hereof (or, if any such representation and warranty is expressly
stated to have been made as of a specific date, as of such specific date) and as
if each reference in said Section 7 to "this Agreement" included referenced to
this Amendment No. 1 and (ii) no Default has occurred and is continuing.
Section 4. Effectiveness. The effectiveness of this Amendment No. 1
-------------
as of the date hereof is subject to the condition that the Administrative Agent
shall have received counterparts of this Amendment No. 1 executed by the
Borrowers.
Section 5. Miscellaneous. Except as herein provided, the Credit
-------------
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
thereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
Amendment No. 1
---------------
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to be duly executed by their respective authorized officers as of the day and
year first above written.
BORROWERS
---------
CAPITAL ONE FINANCIAL CORPORATION
By /s/ Stephen Linehan
-----------------------------------
Name: Stephen Linehan
Title: Director, Corporate Funding
CAPITAL ONE BANK
By /s/ Stephen Linehan
-----------------------------------
Name: Stephen Linehan
Title: Director, Corporate Funding
CAPITAL ONE, F.S.B.
By /s/ Stephen Linehan
-----------------------------------
Name: Stephen Linehan
Title: Director, Corporate Funding
ADMINISTRATIVE AGENT
--------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Christine Herrick
-------------------------------------
Name: Christine Herrick
Title: Vice President
/s/ Stephen Linehan
Amendment No. 1
---------------
<PAGE>
Exhibit 10.19.2
---------------
AMENDMENT NO. 1, dated as of 21 December 1999 (this "Amendment"),
to the Revolving Credit Facility Agreement, dated as of 29 August
1997 (the "Facility Agreement"), between Capital One Finance
Company and Capital One Inc. (the "Original Borrowers"), Capital
One Financial Corporation (the "Original Guarantor"), Bank of
Montreal, BZW, Chase Manhattan plc, and Deutsche Bank AG London
as Arrangers, Barclays Bank PLC as Facility Agent, Barclays Bank
PLC as Sterling Agent, Bank of Montreal as Canadian Dollar Agent
and the Banks.
RECITALS
WHEREAS, the Borrowers and the Guarantors wish to amend certain provisions
of the Facility Agreement, as provided herein in accordance with Section 44 of
the Facility Agreement;
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not otherwise
-----------
defined herein shall have the meanings specified in the Facility Agreement.
SECTION 2. Amendment of Section 1.1.
------------------------
(a) Section 1.1 of the Facility Agreement shall be amended by inserting
the following new definitions in the correct alphabetical locations:
(i) "Lien" shall mean, with respect to any property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in
respect of such property.
(ii) "Receivables" means, with respect to any Obligor, any amount
owing, from time to time, with respect to a credit card, consumer revolving
or consumer installment loan account, home equity line of credit or
residential mortgage loan account or other consumer receivable owned by
such Obligor, including, without limitation, amounts owing for payment of
goods and services, cash advances, convenience checks, annual membership
fees, finance charges, late charges, credit insurance premiums and cash
advance fees and fees relating to additional consumer products, and any
other receivables arising out of financing transactions by such Obligor;
provided that the term "Receivables" shall not include any of the
--------
foregoing that is subject to a securitization effected from time to time in
the ordinary course of business.
A-1
<PAGE>
(iii) "Restricted Shares" means with respect to any Obligor, shares
of stock of or other ownership interests in such Obligor or any Subsidiary
thereof engaged primarily in the extension of consumer credit to third
parties or securitizations of receivables related to such extension of
credit, excluding without limitation any such ownership interests of the
Obligors in America One Communications, Inc.
(b) (i) Section 1.1 (Definitions) of the Facility Agreement shall be
amended by deleting the definition "Permitted Encumbrances.";
(ii) the definition of "financial indebtedness" in Clause
1.2(interpretation) of the Facility Agreement shall be amended by
deleting, in paragraph(iv) of that definition, the words "the
definition of "Permitted Encumbrance" and"; and
(iii) Clause 44.1 (Amendments and Waivers) of the Facility Agreement
shall be amended by the deletion, in Clause 44.1(e), the words
"Permitted Encumbrance,".
SECTION 3. Amendment of Section 28.5. Section 28.5 of the Facility
-------------------------
Agreement shall be amended by deleting such section in its entirety and
replacing it with the following:
28.5 Limitation on Liens No Obligor will, nor will it permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
(1) any Receivables of any Obligor or (2) any Restricted Shares owned by
it, in each case whether now owned or hereafter acquired, except:
(a) Liens for taxes not yet due or Liens for taxes being contested
in good faith by appropriate proceedings for which adequate reserves (in
the good faith judgment of the management of the company, the assets of
which are subject to such Lien) have been established; and
(b) Liens imposed by law (i) which are incurred in the ordinary
course of business and (x) which do not in the aggregate materially detract
from the value of such Receivables or Restricted Shares or materially
impair the use thereof in the operation of the business of the Original
Guarantor or any of its Subsidiaries or (y) which are being contested in
good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Receivables or Restricted Shares
subject to such Lien or (ii) which do not relate to material liabilities of
the Original Guarantor and its Subsidiaries and do not in the aggregate
materially detract from the value of the Receivables or Restricted Shares
of the Original Guarantor and its Subsidiaries taken as a whole; provided
--------
that no Lien permitted under this clause (b) may secure any obligation in
an amount exceeding $10,000,000.
A-2
<PAGE>
(c) any pledge of Receivables to a Federal Reserve Bank made in the
ordinary course of business to secure advances or other transactions and
manage the liquidity position of the Group.
SECTION 4. Facility Agreement in Full Force and Effect as Amended. Except
------------------------------------------------------
as specifically amended hereby, all of the terms and conditions of the Facility
Agreement shall remain in full force and effect. All references to the Facility
Agreement in any other document or instrument shall be deemed to mean such
Facility Agreement as amended by this Amendment. This Amendment shall not
constitute a novation of the Facility Agreement, but shall constitute an
amendment thereof. The parties hereto agree to be bound by the terms and
obligations of the Facility Agreement, as amended by this Amendment, as though
the terms and obligations of the Facility Agreement were set forth herein.
SECTION 5. Counterparts. This Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts each of
which, when executed and delivered, shall constitute an original, but all the
counterparts shall together constitute but one and the same instrument.
SECTION 6. Law. This Amendment shall be governed by and shall be construed
---
in accordance with English law.
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first before written.
CAPITAL ONE FINANCIAL CORPORATION
By: /s/ Stephen Linehan
----------------------
Name: Stephen Linehan
Title: Manager, Corporate Finance
BARCLAYS BANK PLC
By: /s/ Richard Herder
----------------------
Name: Richard Herder
Title: Director
A-3
<PAGE>
Exhibit 10.20
-------------
Capital One Financial Corporation
---------------------------------
Intellectual Property Protection Agreement
--------------------------------------
Each of the following executive officers of Capital One Financial Corporation
has entered into an Intellectual Property Protection Agreement in the form filed
herewith:
Marjorie M. Connelly
Matthew J. Cooper
Dennis H. Liberson
William J. McDonald
Peter Schnall
Michael Shrader
David M. Willey
1
<PAGE>
INTELLECTUAL PROPERTY PROTECTION AGREEMENT
------------------------------------------
THIS INTELLECTUAL PROPERTY PROTECTION AGREEMENT ("Agreement") is made and
effective this 29th day of April, 1999, by and between Capital One Financial
Corporation/1/, a Delaware corporation, whose principal executive offices are
located at 2980 Fairview Park Drive, Falls Church, Virginia 22042-4525, and
__________________________________, an individual residing at
_______________________________________________________________ ("you"). In
consideration of your receipt of confidential information and/or specialized
training, in addition to your employment with Capital One, and other mutual
promises contained herein, which you acknowledge to be good and sufficient
consideration, it is agreed as follows:
1. Employment.
----------
a. Employment at Will. You and Capital One acknowledge that you are,
------------------
or will be, employed by Capital One to perform services related to one or more
of Capital One's lines of business. You are an "at will" employee who is free to
resign from employment with Capital One at any time and for any reason. Capital
One is free to terminate your employment with Capital One at any time and for
any reason. Notwithstanding any other provisions of this Agreement, this
Agreement is not intended to create, and shall not be construed to create, a
contract of employment or other modification of your employment "at will"
status.
b. Full Efforts. During your employment with Capital One, you will
------------
devote your full business time and efforts to the business of Capital One and
you will not accept employment with, or otherwise directly or indirectly perform
services for, any other person, corporation, partnership, firm, financial
institution or other business entity engaged in any business competitive with
Capital One's business in any country or geographical area in which Capital One
does business, as set forth in this Agreement.
c. Competitive Business. It is understood and agreed that Capital
--------------------
One engages, and intends to engage in the future, in its business, both directly
and indirectly, through Capital One Bank, Capital One, F.S.B., Capital One
Services, Inc., America One Communications, Inc., Summit Acceptance Corp. and
its other subsidiaries. You acknowledge that (a) Capital One engages in the
Competitive Businesses (as defined in Paragraph 3 below and set forth in Exhibit
A) and other businesses nationwide and outside of the United States, and (b)
with respect to such businesses, Capital One engages in active and substantial
competition with all businesses offering competing products and services in the
United States and in those geographical areas outside of the United States in
which Capital One is actively engaged in business.
______________________________
/1/ For the purposes of this Agreement, unless otherwise indicated, "Capital
-------
One" shall mean Capital One Financial Corporation together with its
- ---
subsidiaries.
2
<PAGE>
d. Continuing Application. This Agreement applies and controls
----------------------
during the entire time of your employment with Capital One and thereafter as
provided herein, regardless of changes in your job duties, such as promotions or
transfers. At its election, Capital One may ask you to execute a renewed or
revised version of this Agreement which shall be deemed to be a continuation of
the obligations of this Agreement, except where revised or changed.
2. Confidential Information.
------------------------
a. Access and Exposure to Confidential Information. Capital One
-----------------------------------------------
desires to protect its trade secrets, confidential and proprietary information
and business interests. Capital One agrees and you acknowledge that, during the
course of your employment with Capital One, you will have access and exposure to
trade secrets and confidential and proprietary information regarding Capital
One's business, which, if not maintained as confidential, would threaten the
continued viability of Capital One's business and cause immediate, substantial
and irreparable harm to Capital One's business interests. Capital One further
agrees and you acknowledge that Capital One will provide you with specialized
training, instruction, guidance and/or information regarding Capital One's
confidential and proprietary business operations, methods, plans and/or
strategies that would cause immediate, substantial and irreparable harm to
Capital One's business interests if not maintained as confidential. You
acknowledge that Capital One is giving you access and exposure to its
confidential and proprietary information and trade secrets expressly in exchange
for the confidentiality, non-competition and non-solicitation covenants
contained in this Agreement, which are ancillary to and for the purpose of
enforcing your promises to maintain as confidential Capital One's Confidential
Information.
b. Definition of Confidential Information. For the purposes of this
--------------------------------------
Agreement, "Confidential Information" means trade secrets, knowledge, data,
------------------------
specialized training, or other information of a secret or confidential nature or
otherwise not readily available to members of the general public which concern
the business or affairs of Capital One or Capital One's customers. Confidential
Information includes, but is not limited to, information relating to any
Competitive Business entered into by Capital One, such as business plans and
strategies, products, Work Product (as defined in Paragraph 8), test results,
discoveries, customer lists, databases, computer programs, frameworks, models,
credit policies and practices, collections, repossessions and recoveries
policies and practices, and marketing, selling and operating policies and
practices, including without limitation, policies and practices concerning the
identity, solicitation, acquisition, management, resale or cancellation of
unsecured or secured credit card accounts, wireless communication accounts,
automobile loan or lease accounts and other accounts relating to consumer
products and services.
c. Restrictions on the Disclosure of Confidential Information. Both
----------------------------------------------------------
during your employment with Capital One and at all times thereafter, you will
not use for your own benefit or for the benefit of others, or divulge to others,
in any manner whatsoever, any of Capital One's Confidential Information, except
as expressly authorized by Capital One during your employment and in connection
with the ordinary course of your employment, and except as may be required by
law or legal process. In the event you are requested by subpoena, court
3
<PAGE>
order, investigative demand, search warrant or other legal process to disclose
the Confidential Information of Capital One, you will immediately notify Capital
One of such request and will not disclose any Confidential Information unless
and until Capital One has expressly authorized you to do so in writing or has
had a full opportunity to object to such a request and to litigate the matter.
d. Return of Confidential Information. Upon the termination of your
----------------------------------
employment with Capital One (for whatever reason) or at any other time upon
Capital One's request, you agree to immediately deliver to Capital One the
originals and all copies of all memoranda, notes, documents, business plans,
customer lists, computer programs and any other records or property of any kind
received, possessed, used, reviewed, made or compiled by you during the course
of your employment with Capital One which contain or constitute Confidential
Information. You agree to provide Capital One with written certification that
you have complied with this Paragraph 2(d) upon request from Capital One within
ten (10) days of such request.
3. U.S. and International Covenant Not to Compete.
----------------------------------------------
a. Acknowledgments. You acknowledge that the Confidential
---------------
Information which you receive from Capital One is special and unique, and that
the receipt of it by you is of benefit and value to you and that it is necessary
to the performance of your duties and responsibilities. You acknowledge receipt
of such Confidential Information in conjunction with the execution of this
Agreement. You acknowledge that you are being given Confidential Information
expressly in consideration for your agreement to be bound by, among other
things, the Non-Competition Covenant set forth in Paragraph 3(f) of this
Agreement. You acknowledge that Capital One maintains the secrecy of its
Confidential Information and takes steps to protect it. You acknowledge that
Capital One is engaged in the Competitive Businesses in the geographical areas
as set forth in Exhibit A, that Capital One engages in active and substantial
competition with all persons and entities engaged in the Competitive Businesses
in the geographical areas as set forth in Exhibit A, and is exploring new
business opportunities within and outside of the United States and may engage in
additional Competitive Businesses within and outside of the United States. You
acknowledge and agree that all Capital One employees at Tier level 3 and above
in Capital One's Management Incentive Plan, because of their senior positions at
Capital One and their broad exposure to Capital One's Confidential Information,
perform services, and have access and are exposed to Confidential Information,
directly concerning all Competitive Businesses of Capital One in all of the
designated geographical areas as set forth in Exhibit A.
b. Definition of Competitive Business. For the purposes of this
----------------------------------
Agreement, "Competitive Business" means a line of business defined in Exhibit A
--------------------
in the geographical areas specified for such line of business as set forth in
Exhibit A, including any line of business or geographical area added to Exhibit
A as provided under Paragraph 3(g) below, and including without limitation all
activities and services that support the Competitive Business such as
management, operational, analytical, brand management, marketing,
infrastructure, information technology, human resources, treasury, accounting,
financial and other staff, support and
4
<PAGE>
administrative services and activities, and third-party consulting, credit
scoring, account acquisition, account management, collection, recovery and
processing services and activities.
c. Definition of Non-Competition Covenant. For the purposes of this
--------------------------------------
Agreement, the "Non-Competition Covenant" means the terms and promises set forth
------------------------
in Paragraph 3(f).
d. Definition of Non-Competition Period. For the purposes of this
------------------------------------
Agreement, "Non-Competition Period" means the two (2) year period beginning on
----------------------
your Termination Date and ending two (2) years after your Termination Date.
e. Definition of Termination Date. For the purposes of this
------------------------------
Agreement, "Termination Date" means the date on which your employment with
----------------
Capital One ends, whether voluntarily or involuntarily, by resignation,
discharge, layoff or any other reason.
f. Non-Competition Covenant. In order to protect Capital One's
------------------------
legitimate domestic and international business interests, you agree that, during
the Non-Competition Period, you shall not engage in a Competitive Business, in
any capacity (whether as a director, stockholder, investor, member, partner,
principal, proprietor, agent, consultant, officer, employee or otherwise) that
would directly concern that Competitive Business, if you performed services
directly concerning that Competitive Business for Capital One, or had access or
exposure to Confidential Information directly concerning that Competitive
Business, at any time during the two (2) year period before your Termination
Date. The restrictions of the Non-Competition Covenant apply throughout the
geographical areas specified for a Competitive Business as set forth in Exhibit
A regardless of the location from which you performed these services for Capital
One or from which you received this Confidential Information from Capital One.
The above notwithstanding, ownership for investment purposes of not more than
five percent (5%) of the total outstanding equity securities of a publicly-
traded company engaged in a Competitive Business does not constitute a breach of
the Non-Competition Covenant.
g. Addition of Future Competitive Businesses and Expanded
------------------------------------------------------
Geographical Areas for Existing Competitive Businesses. Capital One's senior
- ------------------------------------------------------
management may add to Exhibit A, at its sole election and at any time, either,
(i) one or more additional lines of business that shall constitute Competitive
Businesses in specified geographical areas in the United States or in another
country or geographical area; or (ii) one or more additional geographical areas
for a line of business already designated as a Competitive Business as set forth
in Exhibit A, if any one of the following five criteria is met with respect to
such additional lines of business in the specified geographical area or with
respect to such additional geographical areas for an existing Competitive
Business: (a) actual Marketing Expenses or Capital Investment for the past three
(3) months, or planned Marketing Expenses or Capital Investment for the next
three (3) months, for the line of business or the existing Competitive Business
in the additional geographical area exceed $5 million; (b) actual Marketing
Expenses or Capital Investment for the past twelve (12) months, or planned
Marketing Expenses or Capital Investment for the next twelve (12) months, for
the line of business or the existing Competitive
5
<PAGE>
Business in the additional geographical area exceed $20 million; (c) the line of
business or the existing Competitive Business in the additional geographical
area generated recorded, net, after-tax income, excluding Marketing Expenses and
Capital Investment, of $10 million during either of the past two (2) years; (d)
actual Revenues for the past twelve (12) months, or expected Revenues for the
next twelve (12) months, for the line of business or the existing Competitive
Business in the additional geographical area, exceed $50 million; (e) the line
of business or the existing Competitive Business in the additional geographical
area has a market value (a likely sales price), or Capital One has made a
cumulative Capital Investment in the line of business or the existing
Competitive Business in the additional geographical area, of more than $50
million; or (f) Capital One is a party to, or is actively examining, a joint
venture or merger with, or an acquisition of, an entity involved in the line of
business or the existing Competitive Business in the additional geographical
area, which joint venture, merger or acquisition results, or would result,
directly or indirectly (e.g., through a joint venture), in a line of business
engaged in by Capital One, or an additional geographical area for an existing
Competitive Business, which would meet or likely meet any of the preceding
criteria.
h. Definition of Capital Investment. For the purposes of this
-------------------
Agreement, "Capital Investment" means the direct contributions to a line of
------------------
business as capital or for further investment purposes, including but not
limited to acquisitions of tangible or intangible assets or goods or services
used in the ordinary course of business in that line of business.
i. Definition of Marketing Expenses. For the purposes of this
--------------------------------
Agreement, "Marketing Expenses" means the expenses relating to activities
------------------
performed by Capital One for advertising and solicitation of new accounts and
for advertising and solicitation relating to new products or services (whether
to new accounts or existing accounts). Marketing Expenses shall include only
those expenses which are not dependent on the successful solicitation of the
account, product or service. Examples of Marketing Expenses include, but may not
be limited to, advertising costs, media costs, print costs, postage costs, data
processing costs, credit bureau costs, list purchase costs and out-of-pocket and
third party telemarketing costs. Salaries, benefits, rent, depreciation and
other internal expenses associated with those employees preparing and managing
solicitations and advertising shall be excluded from Marketing Expenses.
j. Definition of Revenues. For the purposes of this Agreement,
----------------------
"Revenues" means (a) for any lending business, the sum of the net interest
--------
income and non-interest income with respect to that business as recorded on
Capital One's books and records and (b) for any non-lending business, the total
revenues with respect to that business as recorded on Capital One's books and
records.
k. Notice of Added Competitive Businesses and Geographies. To add a
------------------------------------------------------
Competitive Business or geographical area for an existing Competitive Business
to Exhibit A, Capital One will provide you with a written notice identifying and
defining the new Competitive Business and its applicable geographical scope or
identifying the new geographical scope for an existing Competitive Business.
The addition to Exhibit A of this new Competitive Business or
6
<PAGE>
new geographical area for an existing Competitive Business shall take effect
thirty (30) days after delivery of this notice to you by Capital One. The scope
of the Competitive Businesses and the geographical areas specified for those
Competitive Businesses as set forth in Exhibit A, which will apply to you under
the Non-Competition Covenant, shall be fixed as of your Termination Date.
l. Examples of Potential Competitive Businesses. The lines of
--------------------------------------------
business into which Capital One may enter in the United States and in other
countries or geographical areas include, but may not be limited to, the
origination of mortgage loans, servicing of mortgage loans, origination and
servicing of home equity loans and lines of credit, origination and servicing of
student loans, origination and servicing of installment loans, origination and
servicing of automobile loans and leases, origination and servicing of retail
deposits, discount brokerage services, leasing of office and business equipment,
marketing of wireline long-distance services or other wireline and wireless
telecommunications services, underwriting and/or marketing of automobile
insurance, underwriting and/or marketing of accidental death and dismemberment
insurance, development, marketing and sale of computer programming and software
products and services and the marketing or sales of consumer goods and services
over the internet or by other means of electronic commerce. The lines of
business into which Capital One may enter may be defined more broadly or more
narrowly than the examples set forth in the preceding sentence, depending on
such factors as the specific product(s) or market(s) in which Capital One
competes.
4. No Solicitation of Employees.
----------------------------
For a period of two (2) years following your Termination Date, you
shall not, directly or indirectly, on your own behalf or on behalf of any other
person, corporation, partnership, firm, financial institution or other business
entity, solicit or induce any employee of Capital One, or any individual
employed by Capital One during the prior six (6) month period, to leave or cease
their employment relationship with Capital One, for any reason whatsoever, or
hire or otherwise engage such current or former employees of Capital One. This
includes, but is not limited to:
a. identifying to any person or entity any such individual employed
by Capital One who has knowledge concerning Capital One's strategy, operations,
processes or other Confidential Information;
b. communicating to any person or entity about the quantity of work,
quality of work, skills or knowledge, or personal characteristics of any such
individual employed by Capital One;
c. soliciting or hiring any such individual employed by Capital One
through third parties, such as recruiters or other persons not a party to this
Agreement, including any corporation, partnership, firm, financial institution
or other business entity;
7
<PAGE>
d. inducing any such individual employed by Capital One to resign
employment with the express or implied promise of employment following the
employee's resignation; and
e. financing or obtaining financing for a third-party entity, not a
party to this Agreement, for the purpose, in whole or part, of soliciting or
hiring any such individual employed by Capital One.
All of your obligations under this Paragraph 4 automatically terminate
upon a Change of Control as that term is defined in Paragraph 6.
5. Waiver of Non-Competition Covenant.
----------------------------------
At its sole election, Capital One may waive all or a portion of the Non-
Competition Covenant. In the event Capital One elects to waive all or a portion
of the first year of the Non-Competition Covenant, Capital One will advise you
in writing within 30 days after your Termination Date whether it will waive all
or a portion of the first year of the Non-Competition Covenant. Any waiver of
all or a portion of the first year of the Non-Competition Covenant will
automatically include a waiver of all of the second year of the Non-Competition
Covenant. In the event that Capital One does not waive the first year of the
Non-Competition Covenant, but elects to waive all or a portion of the second
year of the Non-Competition Covenant, Capital One will advise you in writing
before the expiration of the first year of the Non-Competition Covenant whether
it will waive all or a portion of the second year of the Non-Competition
Covenant. The Non-Competition Covenant and the Non-Competition Period shall
remain in full force and effect to the extent not expressly waived in writing by
Capital One.
6. Payments during Non-Competition Period.
--------------------------------------
a. Incentive Payment. If your employment is terminated for a reason
-----------------
that is described in this Paragraph 6, you will receive an Incentive Payment
during the portion of the Non-Competition Period not waived by Capital One
pursuant to Paragraph 5 above as described in this Paragraph 6. Your receipt of
an Incentive Payment is expressly conditioned on your full compliance with all
of the terms of this Agreement. Notwithstanding any other provision in this
Agreement, you shall not receive any payments or other benefits under this
Agreement if, as determined by Capital One, you breach this Agreement. However,
all other obligations under this Agreement shall remain in full force and effect
as obligations independent of the Incentive Payment provisions, even in the
event that such Incentive Payment or other benefits are terminated due to your
breach of this Agreement.
b. First Year Payment Upon Involuntary Termination. During any
-----------------------------------------------
portion of the first year of the Non-Competition Period not waived in writing by
Capital One pursuant to Paragraph 5, you will receive an Incentive Payment only
----
if your employment is terminated by Capital One (a) for any reason other than
your death or Disability or for Cause; (b) for any reason (other than your
death) at any time within the first thirteen (13) months after a
8
<PAGE>
Change of Control; or (c) for any reason after a Change of Control giving rise
to an obligation by Capital One to compensate you pursuant to any applicable
Change of Control Employment Agreement or severance plan, arrangement or
agreement.
c. First Year Payment Upon Voluntary Termination. During any portion
---------------------------------------------
of the first year of the Non-Competition Period not waived in writing by Capital
One pursuant to Paragraph 5, you will receive an Incentive Payment only if you
----
voluntarily terminate your employment with Capital One (a) for any reason during
the approximately thirty (30) day period beginning twelve (12) months after a
Change of Control and ending thirteen (13) months after a Change of Control; (b)
at any time within a ninety (90) day period after your base salary is reduced by
Capital One by ten percent (10%) or more, or your Tier level in Capital One's
Management Incentive Plan is reduced; or (c) for any reason after a Change of
Control giving rise to an obligation by Capital One to compensate you pursuant
to any applicable Change of Control Employment Agreement or severance plan,
arrangement or agreement.
d. Payment During Second Year. During any portion of the second year
--------------------------
of the Non-Competition Period not waived in writing by Capital One pursuant to
Paragraph 5, you will receive an Incentive Payment unless your employment with
------
Capital One is terminated by Capital One by reason of your death or Disability
or for Cause.
e. Definition of Cause. For the purposes of this Agreement, "Cause"
------------------- -----
means (a) a material breach of any of the provisions of this Agreement; (b)
willful and serious misconduct in the performance of your duties including,
without limitation, theft, mistreatment of other employees, violence, drug or
alcohol abuse or unlawful discrimination or harassment; (c) a material violation
of any code of conduct or standard of ethics generally applicable to employees
of Capital One (including without limitation provisions relating to alcohol and
drug abuse in the workplace and serious acts of insubordination); (d) excessive
absenteeism as established under Capital One's employment policies and
practices, as those policies and practices may be amended from time to time; (e)
failure to substantially perform your duties as an employee of Capital One
(other than as a result of physical or mental illness or injury), and your
continued failure to substantially perform, as determined by Capital One, for at
least fifteen (15) days after written demand from Capital One for substantial
performance that specifically identified the manner in which Capital One
expected you to improve your performance; or (f) commission of a felony, or
other serious crime involving moral turpitude.
f. Definition of Change of Control. For the purposes of this
-------------------------------
Agreement, "Change of Control" means the same as it does in Capital One's 1994
-----------------
Stock Incentive Plan (or any successor plan), as such Plan may be amended from
time to time.
g. Definition of Disability. For the purposes of this Agreement,
------------------------
"Disability" means your inability to perform the essential functions of your
----------
position due to a medically determinable physical or mental impairment which
continues for a period of at least 6 consecutive months or for more than 120
days out of any consecutive 360 day period.
9
<PAGE>
h. Definition of Incentive Payment. For the purposes of this
-------------------------------
Agreement, "Incentive Payment" means the payment by Capital One to you, during
-----------------
the portion of the Non-Competition Period not waived in writing by Capital One
pursuant to Paragraph 5, of the higher of: (a) your base salary (at the rate of
pay in effect on your Termination Date) paid on regular payroll dates in
accordance with Capital One's usual payment practices; or (b) all amounts
payable to you pursuant to any Change of Control Employment Agreement that may
be entered into between Capital One and you or any other severance plan,
arrangement or agreement duly adopted by Capital One and applicable to you under
the circumstances surrounding your termination. In addition, the Incentive
Payment includes reimbursement by Capital One to you, during the portion of the
Non-Competition period not waived in writing by Capital One pursuant to
Paragraph 5, for the employer portion of your health care premium payments,
along with the 2% administrative fee, for continued health insurance coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), at the
level of coverage in effect at your Termination Date for a period not to exceed
eighteen (18) months from your Termination Date. You will not be eligible for
these health insurance premium payments if you fail to enroll in COBRA or if you
become eligible to receive, or begin receiving, health care coverage from
another employer or party. If, and to the extent that, you are entitled to
receive any of the payments or reimbursements described above under any separate
plan, arrangement or agreement that qualifies as an Incentive Payment under this
Agreement (such as a Change of Control Employment Agreement or a severance plan,
arrangement or agreement) then you shall not receive such Incentive Payments
under this Agreement.
7. Compliance Information and Compliance Review.
--------------------------------------------
a. Request for Compliance Information. The parties agree that, at
----------------------------------
any time during your employment with Capital One and at the time of the
termination of your employment with Capital One, you have a right to request
from Capital One an updated Exhibit A to this Agreement. Upon receiving such a
request from you in writing, pursuant to Paragraph 20 of this Agreement, Capital
One shall deliver to you an updated Exhibit A to this Agreement within thirty
(30) days from the date Capital One received the request.
b. Compliance Review. Within five (5) business days after receiving
-----------------
a request from Capital One, you will provide Capital One with such information
as Capital One may from time to time request to determine your compliance with
the terms of this Agreement. You authorize Capital One to contact your future
employers and other persons and entities with whom you engage in any business
relationship to determine your compliance with this Agreement or to communicate
the contents of this Agreement.
8. Ownership of Work Product.
-------------------------
a. Definition. For the purposes of this Agreement, "Work Product"
---------- ------------
means all inventions, creations, trade secrets, patents (utility or design) and
other intellectual property relating to any programming, documentation,
technology, material, product, service, idea, process, plan or strategy
concerning the business or interests of Capital One that you conceive,
10
<PAGE>
develop or deliver to Capital One, in whole or in part, at any time during your
employment with Capital One, including without limitation all rights to
Confidential Information, copyrights, inventions, discoveries and improvements,
trademarks, trade dress, designs and all other intellectual property rights.
b. Ownership. Capital One shall own all Work Product. All Work
---------
Product shall be considered work made for hire by you and owned by Capital One.
If any of the Work Product is not, by operation of law, considered a work made
for hire by you for Capital One, or if ownership of all right, title and
interest of any Work Product does not otherwise vest exclusively in Capital One,
you hereby assign to Capital One, in consideration of this Agreement and without
further consideration, the ownership of all Work Product. Capital One shall have
the right to own, obtain and hold in its own name all rights, registrations and
any other protection in or for the Work Product. You acknowledge and recognize
Capital One's exclusive right and title to, and ownership of, the Work Product.
You agree to perform, upon the request of Capital One, during or after your
employment, such acts as may be necessary or desirable to transfer, perfect and
defend Capital One's ownership and any resulting registrations of the Work
Product. You agree not to use or disclose any Work Product to any third party
either during or after your employment and agree to return to Capital One any
and all Work Product upon termination of employment.
c. Assignment. Notwithstanding anything in this Paragraph 8 to the
----------
contrary, your agreement to assign your rights in any invention to Capital One
does not apply to any invention for which no equipment, supplies, facility or
trade secret information of Capital One was used and which was developed
entirely on your own time, unless (a) the invention relates (i) directly to the
business of Capital One, or (ii) to Capital One's actual or demonstrably
anticipated research or development, or (b) the invention results from any work
performed by you for Capital One.
9. Reasonableness.
--------------
You acknowledge that the restrictions set forth in this Agreement are
necessary to prevent the use and disclosure of the Confidential Information and
to otherwise protect the legitimate business interests of Capital One. You
further acknowledge that all of the restrictions in this Agreement are
reasonable in all respects, including duration, territory and scope of activity.
You agree that the existence of any claim or cause of action by you against
Capital One, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Capital One of the covenants and
restrictions set forth in this Agreement. You agree that, in the event your
employment with Capital One terminates for any reason, you will be able to earn
a livelihood without violating this Agreement, including without limitation the
Non-Competition Covenant contained in Paragraph 3(f) above.
10. Irreparable Harm; Injunctive Relief.
-----------------------------------
11
<PAGE>
You acknowledge that your violation of any provision of this Agreement
will cause immediate, substantial and irreparable harm to Capital One which
cannot be adequately redressed by monetary damages alone. In the event of your
violation or threatened violation of any provision of this Agreement, you agree
that Capital One, without limiting any other legal or equitable remedies
available to it, shall be entitled to equitable relief, including without
limitation temporary, preliminary and permanent injunctive relief and specific
performance, from any court of competent jurisdiction. The Non-Competition
Period shall be tolled on a day-for-day basis for each day during which you
participate in any activity in violation of the Non-Competition Covenant so that
you are restricted from engaging in the activities prohibited by the Non-
Competition Covenant for the full two (2) year time period.
11. Attorneys' Fees and Costs.
-------------------------
If any party breaches any provision of this Agreement, then that party
shall pay to the non-breaching party all of the non-breaching party's costs and
expenses, including without limitation reasonable attorneys' fees, incurred in
successfully enforcing the terms of this Agreement.
12. Integration.
-----------
This Agreement represents the entire agreement between the parties
relating to the subject matter hereof. You acknowledge that, in entering into
this Agreement, you do not rely on any statements or representations not
contained in this Agreement. This Agreement supersedes any and all prior
agreements, arrangements and understandings, either oral or written, with
respect to the subject matter hereof, between Capital One and you; provided,
--------
however, that this Agreement does not supersede, but supplements, any written
policies of Capital One generally applicable to all employees of Capital One
respecting the treatment of Confidential Information and Work Product and any
Change of Control Employment Agreement or other severance plan, arrangement or
agreement applicable to you.
13. Modification.
------------
This Agreement may be modified only by a writing signed by both
parties.
14. No Waiver.
---------
Any failure of Capital One to demand rigid adherence to one or more of
this Agreement's provisions, on one or more occasions, shall not be construed as
a waiver nor deprive Capital One of the right to insist upon strict compliance
with the terms of this Agreement. Any waiver of this Agreement, in whole or in
part, must be in writing and signed by the party granting the waiver to be
effective.
12
<PAGE>
15. Severability.
------------
If any provision of this Agreement is held to be illegal, invalid, or
unenforceable, or is found to be against public policy for any reason, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never been
part of this Agreement, and the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision, or by its severance from this Agreement.
16. Court's Right to Modify Restriction.
-----------------------------------
The parties have attempted to limit your right to compete only to the
extent necessary to protect Capital One's legitimate business interests. It is
the intent of the parties that the provisions of this Agreement be enforced to
the fullest extent permissible under the applicable law. The parties agree that
if a court of competent jurisdiction adjudges any provision of this Agreement to
be void, invalid or unenforceable, including without limitation the Non-
Competition Covenant contained in Paragraph 3(f) above, such court shall modify
such provision so that it is enforceable to the fullest extent permitted by
applicable law.
17. Successors and Assigns.
----------------------
This Agreement and all promises made herein shall survive the
execution of this Agreement and shall be binding upon and inure to the benefit
of the parties and their respective successors, assigns, heirs, administrators,
representatives, and executors, as applicable. Capital One shall be entitled to
assign this Agreement to any person or entity acquiring all or substantially all
of the assets or the business of any of Capital One's Competitive Businesses in
any designated geographical area.
18. Choice of Law.
-------------
To ensure uniformity of the enforcement of this Agreement, and
irrespective of the fact that either of the parties now is, or may become, a
resident of a different state, this Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia without regard to
her principles of conflicts of law.
19. Forum Selection.
---------------
Capital One and you hereby submit to the personal jurisdiction and
venue of any state or federal court located within the Commonwealth of Virginia
for resolution of any and all claims, causes of action or disputes arising out
of or related to this Agreement and agree that service by registered mail to the
addresses set forth in Paragraph 20 of this Agreement shall constitute
sufficient service of process for any such action. Capital One and you further
agree that any claims, causes of action or disputes arising out of, relating to
or concerning this Agreement shall have jurisdiction and venue only in the state
or federal courts of the Commonwealth of Virginia.
13
<PAGE>
20. Notices.
-------
All requests, notices and other communications required or permitted
to be given under this Agreement shall be in writing and delivery thereof shall
be deemed to have been made when such notice shall have been either (a) duly
mailed by first-class mail, postage prepaid, return receipt requested, or any
comparable or superior postal or air courier service then in effect, or (b)
transmitted by hand delivery, telegram, telex, telecopier or facsimile
transmission, to the party entitled to receive the same at the address indicated
below or at such other address as such party shall have specified by written
notice to the other party hereto given in accordance herewith or, if you are
still employed by Capital One, at your interoffice address or electronic mail
address at Capital One:
If to you:
____________________________________________
____________________________________________
____________________________________________
If to Capital One:
Frank G. LaPrade, III, Esq.
Assistant General Counsel
Capital One Financial Corporation
11013 West Broad Street
Glen Allen, Virginia 23060
21. Headings.
--------
The headings in this Agreement are included for convenience only and
shall not constitute a part of the Agreement nor shall they affect its meaning,
construction or effect.
THE PARTIES have read this Agreement, understand it, and accept all of its
terms.
Employee Capital One Financial Corporation
__________________________ By:__________________________________
Title:_______________________________
14
<PAGE>
EXHIBIT A
---------
Competitive Businesses
----------------------
Geographical Business and Definition
------------ -----------------------
Area(s)
-------
Competitive Business United States Credit Card Business:
No. 1 United Kingdom
Canada The business of acquiring and/or
managing (including without
limitation collection and recovery
activities) unsecured and secured
credit card accounts, including
but not limited to those accounts
partially or wholly secured by any
deposits or other collateral and
those accounts, whether active or
inactive, that are partially or
wholly delinquent or charged off.
Competitive Business United States Wireless Communication Business:
No. 2
The business of acquiring and/or
managing end user customers in
wireless two-way voice
communications services, including
without limitation cellular,
personal communications services
(or "PCS") and enhanced
specialized mobile radio ("ESMR")
voice technologies. Capital One's
competitors in these businesses
include facilities-based carriers,
resellers and dealers/agents.
15
<PAGE>
________________________________________________________________________________
Exhibit 10.21
-------------
CREDIT AGREEMENT
(Capital One Realty, Inc.)
Dated as of September 3, 1999
Among
First Security Bank, National Association,
not individually, except as
expressly stated herein,
but solely as Owner Trustee
for Capital One Realty Trust 1998-1
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
and
BANK OF AMERICA, N.A.
as Administrative Agent
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS.................................................................. 1
1.1 Definitional Provisions........................................................ 1
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS.............................................. 2
2.1 Commitments.................................................................... 2
2.2 Notes.......................................................................... 2
2.3 Procedure for Borrowing........................................................ 2
2.4 Facility Fee................................................................... 3
2.5 Termination or Reduction of Commitments........................................ 4
2.6 Prepayments and Payments....................................................... 4
2.7 Conversion and Continuation Options............................................ 5
2.8 Interest Rates and Payment Dates............................................... 5
2.9 Computation of Interest........................................................ 6
2.10 Pro Rata Treatment and Payments............................................... 7
2.11 Increased Costs, Illegality, etc.............................................. 7
2.12 Funding Indemnity............................................................. 9
2.13 Taxes......................................................................... 10
2.14 Notice of Amounts Payable; Mandatory Assignment............................... 11
SECTION 3 REPRESENTATIONS AND WARRANTIES............................................... 12
3.1 Due Organization, etc.......................................................... 12
3.2 Authorization; No Conflict..................................................... 13
3.3 Enforceability, Etc............................................................ 13
3.4 Litigation..................................................................... 13
3.5 Lessor Liens................................................................... 14
3.6 Assignment..................................................................... 14
3.7 Defaults....................................................................... 14
3.8 Documentation.................................................................. 14
3.9 Use of Proceeds................................................................ 14
3.10 Securities Act................................................................ 14
3.11 Chief Place of Business....................................................... 15
3.12 Federal Reserve Regulations................................................... 15
3.13 Investment Company Act........................................................ 15
SECTION 4 CONDITIONS PRECEDENT......................................................... 15
4.1 Conditions to Effectiveness.................................................... 15
4.2 Conditions to Each Loan........................................................ 15
SECTION 5 COVENANTS.................................................................... 16
5.1 Other Activities............................................................... 16
5.2 Ownership of Properties, Indebtedness.......................................... 16
5.3 Disposition of Assets.......................................................... 16
</TABLE>
i
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<TABLE>
<S> <C>
5.4 Compliance with Operative Agreements........................................... 16
5.5 Further Assurances............................................................. 17
5.6 Notices........................................................................ 17
5.7 Discharge of Liens............................................................. 17
5.8 Trust Agreement................................................................ 17
SECTION 6 EVENTS OF DEFAULT............................................................ 17
SECTION 7 THE ADMINISTRATIVE AGENT..................................................... 20
7.1 Appointment.................................................................... 20
7.2 Delegation of Duties........................................................... 20
7.3 Exculpatory Provisions......................................................... 21
7.4 Reliance by Administrative Agent............................................... 21
7.5 Notice of Default.............................................................. 21
7.6 Non-Reliance on Administrative Agent and Other Lenders......................... 22
7.7 Indemnification................................................................ 22
7.8 Administrative Agent in Its Individual Capacity................................ 23
7.9 Successor Administrative Agent................................................. 23
7.10 Actions of Administrative Agent on Behalf of Holders.......................... 24
SECTION 8 MATTERS RELATING TO PAYMENT AND COLLATERAL................................... 24
8.1 Collection of Payments and Other Amounts....................................... 24
8.2 Certain Remedial Matters....................................................... 27
8.3 Release of Properties, etc..................................................... 27
8.4 Excepted Payments.............................................................. 28
SECTION 9 MISCELLANEOUS................................................................ 28
9.1 Amendments and Waivers......................................................... 28
9.2 Notices........................................................................ 29
9.3 No Waiver; Cumulative Remedies................................................. 30
9.4 Survival of Representations and Warranties..................................... 30
9.5 Payment of Expenses and Taxes.................................................. 31
9.6 Successors and Assigns; Participations and Assignments......................... 31
9.7 Participations................................................................. 31
9.8 Assignments.................................................................... 32
9.9 The Register; Disclosure; Pledges to Federal Reserve Banks..................... 34
9.10 Adjustments; Set-off.......................................................... 34
9.11 Counterparts.................................................................. 35
9.12 Severability.................................................................. 35
9.13 Integration................................................................... 36
9.14 GOVERNING LAW................................................................. 36
9.15 Submission To Jurisdiction; Waivers........................................... 36
9.16 Acknowledgments............................................................... 36
9.17 WAIVERS OF JURY TRIAL......................................................... 37
9.18 Nonrecourse................................................................... 37
</TABLE>
ii
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<TABLE>
<S> <C>
9.19 USURY SAVINGS PROVISION......................................... 38
</TABLE>
SCHEDULES
Schedule 1.1 Commitments and Addresses of Lenders
EXHIBITS
Exhibit A-1 Form of Tranche A Note
Exhibit A-2 Form of Tranche B Note
Exhibit B Form of Assignment and Acceptance
iii
<PAGE>
THIS CREDIT AGREEMENT, dated as of September 3, 1999, is among FIRST
SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly
stated herein, but solely as Owner Trustee for Capital One Realty Trust 1998-1
(the "Owner Trustee" or the "Borrower"), the several banks and other financial
------------- --------
institutions from time to time parties to this Agreement (the "Lenders") and
-------
BANK OF AMERICA, N.A., a national banking association, as a Lender and as
Administrative Agent.
The parties hereto hereby agree as follows:
SECTION 1 DEFINITIONS
1.1 Definitional Provisions.
------------------------
(a) Each capitalized term used in this Agreement and not otherwise
defined herein shall have the meaning ascribed thereto in Appendix A to that
certain Participation Agreement dated as of September 3, 1999 (the
"Participation Agreement") among Capital One Realty, Inc., as the Construction
-----------------------
Agent and the Lessee, Capital One Bank, as the Guarantor, First Security Bank,
National Association, not individually, except as expressly stated therein, but
solely as Owner Trustee under the Capital One Realty Trust 1998-1, the various
banks and other lending institutions parties thereto from time to time, as
Holders, the various banks and other lending institutions parties thereto from
time to time, as Lenders, and Bank of America, N.A., as Agent for the Lenders
and respecting the Security Documents, as Agent for the Lenders and the Holders
to the extent of their interests.
(b) Unless otherwise specified therein, all terms described in this
Agreement shall have the defined meanings when used in the other Credit
Documents or any certificate or other document made or delivered pursuant hereto
or thereto.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) All accounting terms used herein shall have the respective
meanings given to them in accordance with GAAP, unless otherwise provided
herein. All computations and determinations for purposes of determining
compliance with the financial requirements of this Agreement shall be made in
accordance with GAAP, unless otherwise provided herein.
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms or such terms.
<PAGE>
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments.
-----------
(a) Subject to the terms and conditions hereof, each of the Lenders
agrees to make the portion of the Tranche A Loans and the Tranche B Loans to the
Borrower from time to time during the Commitment Period as is set forth adjacent
to such Lender's name for the purpose of enabling the Borrower to purchase the
Properties and to pay Property Acquisition Costs, Property Costs and Transaction
Expenses provided that the aggregate principal amount at any one time
outstanding with respect to each of the Tranche A Loans and the Tranche B Loans
shall not exceed the amount of the Tranche A Commitments and the Tranche B
Commitments respectively. Any prepayments of the Loans, whether mandatory or at
Borrower's election, shall not be subject to reborrowing.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Administrative Agent in accordance with Section 2.3 and 2.7. In
the event the Borrower fails to provide notice pursuant to Section 2.3, the Loan
shall be an ABR Loan. Further, any Loan by any Lender in an amount less than
$100,000 shall be an ABR Loan, unless the remaining Available Commitment for
such Lender is less than $100,000, in which case, the Borrower may elect a
Eurodollar Loan for such remaining amount.
2.2 Notes.
-----
The Loans made by each Lender shall be evidenced by promissory notes
of the Borrower, substantially in the form of Exhibit A-1 in the case of the
-----------
Tranche A Loans (each, a "Tranche A Note") or Exhibit A-2 in the case of the
-----------
Tranche B Loans (each, a "Tranche B Note," and with the Tranche A Notes, the
"Notes"), with appropriate insertions as to payee, date and principal amount,
payable to the order of such Lender and in a principal amount equal to the
Tranche A Commitment or Tranche B Commitment, as the case may be, of such
Lender. Each Lender is hereby authorized to record the date, Type and amount of
each Loan made by such Lender, each continuation thereof, each conversion of all
or a portion thereof to another Type, and the date and amount of each payment or
prepayment of principal thereof on the schedule annexed to and constituting a
part of its Note, and any such recordation shall constitute prima facie evidence
----- -----
of the accuracy of the information so recorded, provided that the failure to
--------
make any such recordation or any error in such recordation shall not affect the
Borrower's obligations hereunder or under such Note. Each Note shall be dated
the Closing Date, be stated to mature on the Maturity Date and (iii) provide
for the payment of interest in accordance with Section 2.8.
2.3 Procedure for Borrowing.
-----------------------
(a) The Borrower may borrow under the Commitments during the
Commitment Period on any Business Day that an Advance may be requested pursuant
to the terms of Section 5.2 of the Participation Agreement, provided that the
--------
Borrower shall give the
2
<PAGE>
Administrative Agent irrevocable notice (which must be received by the
Administrative Agent (i) prior to 12:00 Noon, Dallas, Texas time, three Business
Days prior to the requested Borrowing Date if all or any part of the requested
Loans are to be Eurodollar Loans, or (ii) prior to 10:00 a.m. Dallas, Texas time
three Business Days prior to the requested Borrowing Date with respect to any
Loans that are to be ABR Loans) specifying (A) the amount to be borrowed (which
on any date shall not be in excess of the then Available Commitments), (B) the
requested Borrowing Date, (C) whether the borrowing is to be of Eurodollar
Loans, ABR Loans or a combination thereof, (D) if the borrowing is to be a
combination of Eurodollar Loans and ABR Loans, the respective amounts of each
Type of Loan and (E) the Interest Period applicable to any Eurodollar Loan;
provided, however, that during the Commitment Period (1) there shall be only one
Interest Period applicable for all amounts outstanding hereunder bearing
interest based on the Eurodollar Rate, (2) such Interest Period shall commence
on the date that the first Eurodollar Loan hereunder is extended and (3) any
amounts thereafter borrowed or converted hereunder during the Commitment Period
which are to bear interest based on the Eurodollar Rate may only be borrowed or
converted on the first day of the Interest Period applicable to Eurodollar
Loans. Pursuant to the terms of the Participation Agreement, the Borrower shall
be deemed to have delivered such notice upon the delivery of a notice by the
Construction Agent or the Lessee containing such required information. Upon
receipt of any such notice from the Borrower, the Administrative Agent shall
promptly notify each Lender thereof. Each Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
Section 9.2 prior to 12:00 Noon, Dallas, Texas time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent crediting an account designated, subject to Section 11.1 of
the Participation Agreement, by the Borrower on the books of such office with
the aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent. No amount of
any Loan which is repaid or prepaid by the Borrower may be reborrowed hereunder.
(b) Interest accruing on each Loan during the Construction Period
with respect to any Property shall, subject to the limitations set forth in
Section 5.1(b) of the Participation Agreement be added to the principal amount
of such Loan on the relevant Scheduled Interest Payment Date. On each such
Scheduled Interest Payment Date, the Loan Property Cost and Construction Loan
Property Cost shall be increased by the amount of interest added to the Loans.
2.4 Facility Fee.
------------
(a) Promptly after receipt of the payment of the Facility Fee payable
pursuant to Section 9.4 of the Participation Agreement, the Agent shall
distribute such payments to the Lenders and the Holders pro rata in accordance
with their respective Commitments and Holder Commitments.
(b) On each Facility Fee Payment Date during the Construction Period,
the Loan Property Cost and Construction Loan Property Cost of each Property
shall be increased by
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a pro rata share of any Facility Fees funded on such date with the proceeds of
Loans in accordance with the Operative Agreements.
2.5 Termination or Reduction of Commitments.
---------------------------------------
(a) The Borrower shall have the right, upon not less than five (5)
Business Days' written notice to the Administrative Agent, to terminate the
Commitments or, from time to time, to reduce the amount of the Commitments,
provided, that (i) after giving effect to such reduction, the aggregate
- --------
outstanding principal amount of the Loans shall not exceed the aggregate
Commitments and (ii) such notice shall be accompanied by a certificate of the
Construction Agent stating that the amount equal to 97% of aggregate remaining
Budgeted Total Loan Property Costs as of the date of such reduction does not
exceed the aggregate amount of Available Commitments as of such date after
giving effect to such reduction. Any such reduction shall be in an amount equal
to the lesser of (A) $10,000,000 (or such greater amount in multiples of
$1,000,000 as the Borrower shall elect) or (B) the remaining Available
Commitments, and shall reduce permanently the Commitments then in effect.
(b) On any date on which the Commitments shall automatically be
reduced to zero pursuant to Section 6, the Borrower shall prepay all outstanding
Loans, together with accrued unpaid interest thereon and all other amounts owing
thereunder.
2.6 Prepayments and Payments.
------------------------
(a) Subject to Sections 2.11, 2.12 and 2.13, the Borrower may at any
time and from time to time prepay the Loans, in whole or in part, without
premium or penalty, upon at least three (3) Business Days' irrevocable notice to
the Administrative Agent, specifying the date and amount of prepayment and
whether the prepayment is of Eurodollar Loans, ABR Loans or a combination
thereof, and, if a combination thereof, the amount allocable to each. Upon
receipt of any such notice the Administrative Agent shall promptly notify each
Lender thereof. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein. Amounts prepaid may not
be reborrowed.
(b) If on any date the Administrative Agent or the Lessor shall
receive any payment in respect of (i) any Casualty or Condemnation pursuant to
Section 15.1(a) or 15.1(g) of the Lease (excluding any payments in respect
thereof which are payable to Lessee in accordance with the Lease or held by
Lessor as security for performance of Lessee's obligations under the Lease), or
(ii) the Termination Value of any Property in connection with the delivery of a
Termination Notice pursuant to Article XVI of the Lease, or (iii) the
Termination Value of any Property in connection with the exercise of the
Purchase Option under Section 20.1 of the Lease or the exercise of the option of
the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (iv) any payment in an amount equal to the Termination Value for
any or all Construction Period Properties required to be made or elected to be
made by the Construction Agent to the Lessor pursuant to the terms of the Agency
Agreement, then in each case, such amounts shall be applied and allocated in the
manner contemplated by Section 8.1(b)(ii).
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(c) Each prepayment of the Loans pursuant to Section 2.6(b) shall be
allocated to reduce the Loan Property Cost of the applicable Property. Each
prepayment of the Loans pursuant to Section 2.6(a) shall be allocated to reduce
the respective Loan Property Costs of all Properties pro rata according to the
--- ----
Loan Property Costs of such Properties immediately before giving effect to such
prepayment. Any amounts applied to reduce the Loan Property Cost of any
Construction Period Property pursuant to this paragraph (c) shall also be
applied to reduce the Construction Loan Property Cost of such Property until
such Construction Loan Property Cost has been reduced to zero.
2.7 Conversion and Continuation Options.
------------------------------------
(a) The Borrower may elect from time to time to convert Eurodollar
Loans to ABR Loans by giving the Agent at least three Business Days' prior
irrevocable notice of such election, provided that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert ABR Loans
to Eurodollar Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election. Upon receipt of any such notice, the Agent
shall promptly notify each Lender thereof. All or any part of outstanding
Eurodollar Loans or ABR Loans may be converted as provided herein, provided that
(i) no ABR Loan may be converted into a Eurodollar Loan after the date that is
one month prior to the Maturity Date or when an Event of Default exists, (ii)
during the Commitment Period such conversion may only occur on the first day of
the single Interest Period for Eurodollar Loans permitted pursuant to the terms
of Section 2.3 hereof and (iii) after the Commitment Period such notice of
conversion shall contain an election by the Borrower of an Interest Period for
such Eurodollar Loan to be created by such conversion and such Interest Period
shall be in accordance with the terms of subparagraph (b) of the definition of
the term "Interest Period".
(b) Subject to the restrictions set forth in Section 2.3 hereof, any
Eurodollar Loan may be continued as such upon the expiration of the current
Interest Period with respect thereto by the Borrower giving irrevocable notice
to the Agent in accordance with the applicable provisions of the term "Interest
Period" of the length of the next Interest Period to be applicable to such
Loans, provided that no Eurodollar Loan may be continued as such after the date
that is one month prior to the Maturity Date or when an Event of Default exists
and provided, further, that if the Borrower shall fail to give any required
notice as described above or otherwise herein, or if such continuation is not
permitted pursuant to the proceeding proviso, such Loan shall automatically be
converted to an ABR Loan on the last day of such then expiring Interest Period.
2.8 Interest Rates and Payment Dates.
--------------------------------
(a) The Loans outstanding hereunder from time to time shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to either (i) the Eurodollar Rate determined for such day plus
the Applicable Percentage or (ii) the ABR, as selected by the Borrower in
accordance with the provisions hereof; provided, however, (A) upon delivery by
the Administrative Agent of the notice described in Section 2.9(c), the Loans of
each
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<PAGE>
of the Lenders shall bear interest at the ABR applicable from time to time from
and after the dates and during the periods specified in Section 2.9(c), (B) upon
the delivery by a Lender of the notice described in Section 2.11(d), the Loans
of such Lender shall bear interest at the ABR applicable from time to time from
and after the dates and during the periods specified in Section 2.11(d) and (C)
in such other circumstances as expressly provided herein, the Loans shall bear
interest at the ABR.
(b) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum which is
the lesser of (x) then current rate of interest respecting such payment plus 2%
and (y) the highest interest rate permitted by applicable law, in each case from
the date of such non-payment until such amount is paid in full (whether after or
before judgment).
(c) Interest shall be payable in arrears on the applicable Scheduled
Interest Payment Date (but for any Loan having an Interest Period of six (6)
months or longer, interest shall be payable in arrears on each applicable three
(3) month anniversary date of the commencement of such Loan), provided that (i)
--------
interest accruing pursuant to paragraph (b) of this Section 2.8 shall be payable
from time to time on demand and (ii) each prepayment of the Loans shall be
accompanied by accrued interest to the date of such prepayment on the amount
prepaid.
2.9 Computation of Interest.
-----------------------
(a) Whenever it is calculated on the basis of the Prime Lending Rate,
interest shall be calculated on the basis of a 365- (or 366-, as the case may
be) day year for the actual days elapsed; and, otherwise, interest shall be
calculated on the basis of a 360-day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve
Requirements shall become effective as of the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error.
(c) If the Eurodollar Rate cannot be determined by the Administrative
Agent in the manner specified in the definition of the term "Eurodollar Rate"
contained in Appendix A to the Participation Agreement, the Administrative Agent
shall give telecopy or telephonic notice thereof to the Borrower and the Lenders
as soon as practicable thereafter. Until such time as the Eurodollar Rate can
be determined by the Administrative Agent in the manner specified in the
definition of such term, no further Eurodollar Loans shall be made or shall be
continued as such
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<PAGE>
at the end of the then current Interest Period nor shall the Borrower have the
right to convert ABR Loans to Eurodollar Loans.
2.10 Pro Rata Treatment and Payments.
-------------------------------
(a) Each borrowing by the Borrower from the Lenders hereunder and
any reduction of the Commitments of the Lenders shall be made pro rata according
to their respective Commitments. Subject to the provisions of Section 8 hereof,
each payment (including each prepayment) by the Borrower on account of principal
of and interest on the Loans shall be made pro rata according to the respective
outstanding principal amounts on the Loans then held by the Lenders. All
payments (including prepayments) to be made by the Borrower hereunder and under
the Notes, whether on account of principal, interest or otherwise, shall be made
without setoff or counterclaim and shall be made prior to 12:00 Noon, Dallas,
Texas time, on the due date thereof to the Administrative Agent, for the account
of the Lenders, at the Administrative Agent's office specified in Section 9.2,
in Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day; provided, however, if such payment includes an amount of interest
calculated with reference to the Eurodollar Rate and the result of such
extension would be to extend such payment into another calendar month, then such
payment shall be made on the immediately preceding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate during
such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make its
share of such borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender is making such amount available
to the Administrative Agent, and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If such
amount is not made available to the Administrative Agent by the required time on
the Borrowing Date therefor, such Lender shall pay to the Administrative Agent,
on demand, such amount with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period until such Lender makes such
amount immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this Section 2.10(b) shall be conclusive in the absence of manifest error.
Nothing in this Section 2.10(b) or in any other provision in any Operative
Agreement shall require the Administrative Agent to make any borrowing available
to the Borrower unless such amounts have been made available to the
Administrative Agent by the Lenders.
2.11 Increased Costs, Illegality, etc.
---------------------------------
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request hereafter adopted, promulgated or made by any central bank
or other governmental authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of
7
<PAGE>
agreeing to make or making, funding or maintaining Loans, then the Borrower
shall from time to time, upon demand by such Lender (with a copy of such demand
to the Administrative Agent but subject to the terms of Section 2.14), pay (with
funds provided by the Lessee as Supplemental Rent pursuant to Section 3.3 of the
Lease after the Basic Term Commencement Date or pursuant to Article IX or
Section 13.6 of the Participation Agreement prior to the Basic Term Commencement
Date) to the Administrative Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to the Borrower
and the Administrative Agent by such Lender, shall be conclusive and binding for
all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law, but in each case
promulgated or made after the date hereof) affects or would affect the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type or upon the Loans, then, upon demand by such Lender
(with a copy of such demand to the Administrative Agent but subject to the terms
of Section 2.14), the Borrower shall pay (with funds provided by the Lessee as
Supplemental Rent pursuant to Section 3.3 of the Lease after the Basic Term
Commencement Date or pursuant to Article IX or Section 13.6 of the Participation
Agreement prior to the Basic Term Commencement Date) to the Administrative Agent
for the account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder or upon the Loans. A certificate as to
such amounts submitted to the Borrower and the Administrative Agent by such
Lender shall be conclusive and binding for all purposes, absent manifest error.
(c) Without limiting the effect of the foregoing, the Borrower shall
pay to each Lender on the last day of the Interest Period therefor so long as
such Lender is maintaining reserves against "Eurocurrency liabilities" under
Regulation D an additional amount (determined by such Lender and notified to the
Borrower through the Administrative Agent) equal to the product of the following
for each Eurodollar Loan for each day during such Interest Period:
(i) the principal amount of such Eurodollar Loan outstanding on such
day; and
(ii) the remainder of (x) a fraction the numerator of which is the
rate (expressed as a decimal) at which interest accrues on such Eurodollar
Loan for such Interest Period as provided in this Credit Agreement (less
the Applicable Percentage) and the denominator of which is one minus the
-----
effective rate (expressed as a decimal) at which such reserve requirements
are imposed on such Lender on such day minus (y) such numerator; and
(iii) 1/360.
8
<PAGE>
(d) Without affecting its rights under Section 2.11(a) or 2.11(b) or
any other provision of this Agreement, each Lender agrees that if there is any
increase in any cost to or reduction in any amount receivable by such Lender
with respect to which the Borrower would be obligated to compensate such Lender
pursuant to Sections 2.11(a) or 2.11(b), such Lender shall use reasonable
efforts to select an alternative lending office which would not result in any
such increase in any cost to or reduction in any amount receivable by such
Lender; provided, however, that no Lender shall be obligated to select an
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alternative lending office if such Lender determines that (i) as a result of
such selection such Lender would be in violation of any applicable law,
regulation, treaty, or guideline, or would incur additional costs or expenses or
(ii) such selection would be inadvisable for regulatory reasons or inconsistent
with the interests of such Lender.
(e) Notwithstanding any other provision of this Agreement, if any
Lender shall notify the Administrative Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for any Lender to perform its obligations hereunder to make or maintain
Eurodollar Loans, then (i) each Eurodollar Loan will automatically, at the
earlier of the end of the Interest Period for such Eurodollar Loan or the date
required by law, convert into an ABR Loan and (iii) the obligation of the
Lenders to make, convert or continue Eurodollar Loans shall be suspended until
the Administrative Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist.
2.12 Funding Indemnity.
-----------------
Subject to the provisions of Section 2.14(a), the Borrower agrees,
subject to and in accordance with the provisions of the Participation Agreement,
to indemnify each Lender and to hold each Lender harmless from any loss or
reasonable expense which such Lender may sustain or incur as a consequence of
default by the Borrower in making a borrowing of any Loan hereunder after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, default by the Borrower in making any prepayment
after the Borrower has given a notice thereof in accordance with the provisions
of this Agreement or the making of a voluntary or involuntary prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification shall be in an amount equal to the excess,
if any, of the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or continued for the period from the date
of such prepayment or of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable Eurodollar Rate for such Loan for such
Interest Period over the amount of interest (as determined by such Lender) which
would have accrued to such Lender on such amount by reemploying such funds in
loans of the same type and amount during the period from the date of prepayment
or failure to borrow to the last day of the then applicable Interest Period (or,
in the case of a failure to borrow, the Interest Period that would have
commenced on the date of such failure). This covenant shall
9
<PAGE>
survive the termination of this Agreement and the payment of all other amounts
payable hereunder.
2.13 Taxes.
-----
(a) All payments made by the Borrower to both U.S. and non-U.S.
Persons under this Agreement and the Notes shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes and franchise
taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent
or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or the
Notes). If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
------------------
from any amounts payable to the Administrative Agent or any Lender hereunder or
under the Notes, the amounts so payable to the Administrative Agent or such
Lender shall be increased to the extent necessary to yield to the Administrative
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement and the Notes, provided, however, that the foregoing obligations
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of the Borrower shall not apply:
(i) to any payment to any Lender hereunder unless such Lender is, on
the date hereof (or on the date it becomes a Lender hereunder as provided
in Section 9.8 hereof) and on the date of any change in the Lending Office
of such Lender, either entitled to submit a Form 1001 (relating to such
Lender and entitling it to a complete exemption from withholding on all
interest to be received by it hereunder in respect of the Loans) or Form
4224 (relating to all interest to be received by such Lender hereunder in
respect of the Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by a
non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 2.13(a), (A) "U.S. Person" shall mean a
-----------
citizen, national or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under any laws of the
United States of America or any State thereof, or any estate or trust that is
subject to Federal income taxation regardless of the source of its income, (B)
"U.S. Taxes" shall mean any present or future tax, assessment or other charge or
----------
levy imposed by or on behalf of the United States of America or any taxing
authority thereof or therein, (C)
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<PAGE>
"Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate
---------
Certificate) of the Department of the Treasury of the United States of America
and (D) "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on
---------
Income Effectively Connected with the Conduct of a Trade or Business in the
United States) of the Department of Treasury of the United States of America (or
in relation to either such Form such successor and related forms as may from
time to time be adopted by the relevant taxing authorities of the United States
of America to document a claim to which such Form relates). Each of the Forms
referred to in the foregoing clauses (C) and (D) shall include such successor
and related forms as may from time to time be adopted by the relevant taxing
authorities of the United States of America to document a claim to which such
Form relates.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing authority, the Borrower shall
deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
(c) If a Lender or an affiliate with whom such Lender files a
consolidated tax return (or equivalent) subsequently receives the benefit in any
country of a tax credit or an allowance resulting from U.S. Taxes with respect
to which it has received a payment of an additional amount under this Section
2.13, such Lender will pay to the Borrower such part of that benefit as in the
opinion of such Lender will leave it (after such payment) in a position no more
and no less favorable than it would have been in if no additional payment had
been required to be paid, provided always that (i) such Lender will be the sole
judge of the amount of any such benefit and of the date on which it is received,
(ii) such Lender will have the absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances available to it and (iii)
such Lender will not be obliged to disclose to the Borrower any information
regarding its tax affairs or tax computations other than the nature and amount
of any tax credit pursuant to this Section 2.13(c).
(d) Each non-U.S. Person that shall become a Participant pursuant to
Section 9.7 or a Lender pursuant to Section 9.8 shall, upon the effectiveness of
the related transfer, be required to provide all of the forms and statements
referenced under subsection 2.13(a)(i), provided that in the case of a
Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
2.14 Notice of Amounts Payable; Mandatory Assignment.
-----------------------------------------------
(a) Notice. In the event that any Lender becomes aware that any
------
amounts are or will be owed to it pursuant to Section 2.11, 2.12 or 2.13 or that
it is unable to make Eurodollar Loans, then it shall promptly notify the
Borrower and the Administrative Agent thereof and, as soon as possible
thereafter, such Lender shall submit to the Borrower (with a copy to the
Administrative Agent) a certificate indicating the amount owing to it and the
calculation thereof.
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<PAGE>
The amounts set forth in such certificate shall be prima facie evidence of the
obligations of the Borrower hereunder.
(b) Mandatory Assignment. In the event that any Lender delivers to
--------------------
the Borrower a certificate in accordance with Section 2.14(a) in connection with
amounts payable pursuant to Section 2.11, Section 2.12 or Section 2.13 or such
Lender is required to make Loans as ABR Loans in accordance with Section 2.11(d)
then, subject to Section 11.1 of the Participation Agreement, the Borrower may,
at its own expense and in its sole discretion, (i) require such Lender to
transfer or assign, in whole, without recourse (in accordance with Section 9.8),
all of its interests, rights (except for rights to be indemnified for actions
taken while a party hereunder) and obligations under this Agreement to a
replacement bank or institution if the Borrower (subject to Section 11.1 of the
Participation Agreement), with the full cooperation of such Lender, can identify
a Person who is ready, willing and able to be such replacement bank or
institution with respect thereto and such replacement bank or institution (which
may be another Lender) shall assume such assigned obligations, or (ii) during
such time as no Default or Event of Default has occurred and is continuing,
terminate the Commitment of such Lender and prepay all outstanding Loans and
such Lender; provided, however, that (x) subject to Section 11.1 of the
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Participation Agreement, the Borrower or such replacement bank or institution,
as the case may be, shall have paid to such Lender in immediately available
funds the principal of and interest accrued to the date of such payment on all
the Loans made by it hereunder and all other amounts owed to it hereunder (and,
if such Lender is also a Holder, all Holder Fundings and Holder Yield accrued
and unpaid thereon), (y) any termination of Commitments shall be subject to the
terms of Section 2.5(a) and (z) such assignment or termination of the Commitment
of such Lender and prepayment of Loans does not conflict with any law, rule or
regulation or order of any court or Governmental Authority.
SECTION 3 REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans, each of the Trust Company and the Owner Trustee
hereby represents and warrants to the Administrative Agent and each Lender as
follows (provided that the representations in Sections 3.8, 3.9. 3.10, 3.12 and
3.13 are made solely by the Owner Trustee in its capacity as such):
3.1 Due Organization, etc.
---------------------
It is a national banking association duly organized and validly existing
and in good standing under the laws of the United States of America and has the
power and authority to enter into and perform its obligations under the Trust
Agreement and (assuming due authorization, execution and delivery of the Trust
Agreement by the Holders) has the corporate and trust power and authority to act
as the Owner Trustee and to enter into and perform the obligations under each of
the other Operative Agreements to which the Trust Company or the Owner Trustee,
as the case may be, is or will be a party and each other agreement, instrument
and document to be executed and delivered by it on or before the date this
representation is made or deemed made in
12
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connection with or as contemplated by each such Operative Agreement to which the
Trust Company or the Owner Trustee, as the case may be, is or will be a party.
3.2 Authorization; No Conflict.
--------------------------
The execution, delivery and performance of each Operative Agreement to
which it is or will be a party, either in its individual capacity or (assuming
due authorization, execution and delivery of the Trust Agreement by the Holders)
as the Owner Trustee, as the case may be, has been duly authorized by all
necessary action on its part and neither the execution and delivery thereof, nor
the consummation of the transactions contemplated thereby, nor compliance by it
with any of the terms and provisions thereof does or will require any approval
or consent of any trustee or holders of any of its indebtedness or obligations,
does or will contravene any current law, governmental rule or regulation
relating to its banking or trust powers, does or will contravene or result in
any breach of or constitute any default under, or result in the creation of any
Lien upon any of its property under, its charter or by-laws, or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan
or credit agreement or other agreement or instrument to which it is a party or
by which it or its properties may be bound or affected (other than as
contemplated by the Operative Agreements) which contravention, breach, default
or Lien under clause (ii) would materially and adversely affect its ability, in
its individual capacity or as Owner Trustee, to perform its obligations under
the Operative Agreements to which it is a party or does or will require any
Governmental Action by any Governmental Authority regulating its banking or
trust powers.
3.3 Enforceability, Etc.
--------------------
The Trust Agreement and, assuming the Trust Agreement is the legal,
valid and binding obligation of the Holder, each other Operative Agreement to
which the Trust Company or the Owner Trustee, as the case may be, is or will be
party have been, or on or before the date this representation is made or deemed
made will be, duly executed and delivered by the Trust Company or the Owner
Trustee, as the case may be, and the Trust Agreement and each such other
Operative Agreement to which the Trust Company or the Owner Trustee, as the case
may be, is a party constitutes, or upon execution and delivery will constitute,
a legal, valid and binding obligation enforceable against the Trust Company or
the Owner Trustee, as the case may be, in accordance with the terms thereof.
3.4 Litigation.
-----------
There is no action or proceeding pending or, to its knowledge,
threatened to which it is or will be a party, either in its individual capacity
or as the Owner Trustee, before any Governmental Authority that concerns any
Property being purchased or leased or Construction Advance being funded on the
date this representation is made or deemed made or that, if adversely
determined, would materially and adversely affect its ability, in its individual
capacity or as Owner Trustee, to perform its obligations under the Operative
Agreements to which it is a party or would question the validity or
enforceability of any of the Operative Agreements to which it is or will become
a party.
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3.5 Lessor Liens.
-------------
Each Property is free and clear of all Lessor Liens attributable to it
in its individual capacity.
3.6 Assignment.
-----------
It has not assigned or transferred any of its right, title or interest
in or under the Lease, the Agency Agreement or its interest in any Property or
any portion thereof, except as provided in the Operative Agreements.
3.7 Defaults.
--------
No Default or Event of Default under any Operative Agreement
attributable to it has occurred and is continuing.
3.8 Documentation.
-------------
The Owner Trustee, in its trust capacity, is a party to no documents,
instruments or agreements other than the Operative Agreements (and any other
documents delivered in connection with the Operative Agreements).
3.9 Use of Proceeds.
---------------
The proceeds of the Loans shall be applied by the Owner Trustee solely
in accordance with the terms of the Operative Agreements.
3.10 Securities Act.
---------------
Neither the Owner Trustee nor any Person authorized by the Owner
Trustee to act on its behalf has offered or sold any interest in the CORI Trust
Estate or the Notes, or in any similar security relating to a Property, or in
any security the offering of which for the purposes of the Securities Act of
1933, as amended, would be deemed to be part of the same offering as the
offering of the aforementioned securities to, or solicited any offer to acquire
any of the same from, any Person other than in the case of the Notes, the
Lenders, and neither the Owner Trustee nor any Person authorized by the Owner
Trustee to act on its behalf will take any action which would subject, as a
direct result of such action alone, the issuance or sale of any interest in the
CORI Trust Estate or the Notes to the provisions of Section 5 of the Securities
Act of 1933, as amended, or require the qualification of any Operative Agreement
under the Trust Indenture Act of 1939, as amended.
14
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3.11 Chief Place of Business.
-----------------------
The Owner Trustee's chief place of business, chief executive office
and office where the documents, accounts and records relating to the
transactions contemplated by this Agreement and each other Operative Agreement
are kept are each located at 79 South Main Street, 3rd Floor, Salt Lake City,
Utah 84111.
3.12 Federal Reserve Regulations.
---------------------------
The Owner Trustee is not engaged principally in, and does not have as
one of its important activities, the business of extending credit for the
purpose of purchasing or carrying any margin stock (within the meaning of
Regulation U of the Board), and no part of the proceeds of the Loans will be
used by it to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock or for any
purpose that violates, or is inconsistent with, the provisions of Regulations T,
U or X of the Board.
3.13 Investment Company Act.
----------------------
The Owner Trustee is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness.
---------------------------
The effectiveness of this Agreement is subject to the satisfaction of
all conditions precedent set forth in Section 6 of the Participation Agreement
required by said Section to be satisfied on or prior to the Initial Closing
Date.
4.2 Conditions to Each Loan.
-----------------------
The agreement of each Lender to make any Loan requested to be made by
it on any date is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Borrower in or pursuant to the Operative Agreements shall
be true and correct in all material respects on and as of such date as if made
on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the Loans requested to
be made on such date.
(c) Participation Agreement Conditions. With respect to each
----------------------------------
Acquisition Loan and each Construction Loan, the applicable conditions
precedent to the Advance
15
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associated therewith specified in Section 5 of the Participation Agreement shall
have been satisfied.
(d) Holder Contribution. With respect to each Loan, the
-------------------
Administrative Agent shall be satisfied that the Lessor shall receive from the
Holders on the relevant Borrowing Date an amount equal to the Holder Fundings
associated with such Loan.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this Section 4.2 have been satisfied.
SECTION 5 COVENANTS
So long as any Loan or Note remains outstanding and unpaid or any
other amount is owing to any Lender or the Administrative Agent hereunder:
5.1 Other Activities.
----------------
The Borrower 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 Agreements and other activities incidental or
related to the foregoing.
5.2 Ownership of Properties, Indebtedness.
-------------------------------------
The Borrower shall not own, lease, manage or otherwise operate any
properties or assets other than in connection with the activities described in
Section 5.1, 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 Section 5.1 (including, without limitation, the Loans and other
obligations incurred by the Borrower hereunder).
5.3 Disposition of Assets.
----------------------
The Borrower 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 Agreements.
5.4 Compliance with Operative Agreements.
------------------------------------
The Borrower shall at all times observe and perform all of the
covenants, conditions and obligations required to be performed by it (whether in
its capacity as Lessor, Owner Trustee or otherwise) under each Operative
Agreement to which it is a party and (b) observe and perform, or cause to be
observed and performed, all of the covenants, conditions and
16
<PAGE>
obligations of the Lessor under the Lease, even in the event that the Lease is
terminated at stated expiration following a Lease Event of Default or otherwise.
5.5 Further Assurances.
------------------
At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Borrower, the Borrower will
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Administrative Agent or the Majority Lenders may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and the other Operative Agreements and of the rights and
powers herein or therein granted.
5.6 Notices.
-------
If on any date, a Responsible Officer of the Borrower shall obtain
actual knowledge of the occurrence of a Default or Event of Default, the
Borrower will give written notice thereof to the Administrative Agent within
five Business Days after such date.
5.7 Discharge of Liens.
------------------
Neither the Borrower nor the Trust Company will create or permit to
exist at any time, and will, at its own expense, promptly take such action as
may be necessary duly to discharge, or cause to be discharged, all Lessor Liens
attributable to it, provided, that the Borrower and the Trust Company shall not
--------
be required to discharge any Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as such
proceedings shall not involve any material danger of impairment of any of the
Liens contemplated by the Security Documents or of the sale, forfeiture or loss
of, and shall not materially interfere with the disposition of, any Property or
title thereto or any interest therein or the payment of Rent.
5.8 Trust Agreement.
---------------
Without prejudice to any right under the Trust Agreement of the Owner
Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII 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 Administrative Agent or the Lenders hereunder or under the other Operative
Agreements and (c) agrees to comply with all of the terms of the Trust
Agreement.
SECTION 6 EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
----------------
17
<PAGE>
(a) The Borrower shall (i) default in the payment when due of any
principal of the Loans or (ii) except as provided in paragraph (c), default, and
such default shall continue for three (3) or more days, in the payment when due
of any interest on the Loans; or
(b) Except as provided in paragraphs (a) and (c), the Borrower shall
default, and such default shall continue for ten (10) or more days, in the
payment of any amount owing under any Credit Document; or
(c) The Borrower shall default in the payment of any amount due on
the Maturity Date owing under any Credit Document; or
(d) The Borrower shall default in the due performance or observance
by it of any term, covenant or agreement contained in any Credit Document to
which it is a party (other than those referred to in paragraphs (a), (b) and (c)
above), provided, that in the case of any such default under Section 5.4, 5.5 or
--------
5.8(c), such default shall have continued unremedied for a period of at least
thirty (30) days after notice to the Borrower by the Administrative Agent or the
Majority Lenders; or
(e) Any representation, warranty or statement made or deemed made by
the Borrower herein or in any other Credit Document or by the Borrower or the
Lessee in the Participation Agreement or the Lease, or in any statement or
certificate delivered or required to be delivered pursuant hereto or thereto,
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or
(f) (i) Any Lease Event of Default shall have occurred and be
continuing, or (ii) the Owner Trustee shall default in the due performance or
observance by it of any term, covenant or agreement contained in the
Participation Agreement or in the Trust Agreement to or for the benefit of the
Administrative Agent or a Lender, provided, that in the case of this clause (ii)
--------
such default shall have continued unremedied for a period of at least thirty
(30) days after notice to the Owner Trustee by the Administrative Agent or the
Majority Lenders; or
(g) The Borrower shall commence a voluntary case concerning itself
under Title 11 of the U.S. Code entitled "Bankruptcy", as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
---------------
is commenced against the Borrower and the petition is not contravened within 10
days after commencement of the case or an involuntary case is commenced against
the Borrower and the petition is not dismissed within sixty (60) days after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower; or the Borrower commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrower, or there is commenced against the
Borrower any such proceeding which remains undismissed for a period of ninety
(90) days; or the Borrower is adjudicated insolvent or bankrupt, or any order of
relief or other order approving any such case or proceeding is entered; or the
Borrower suffers any appointment of any custodian or
18
<PAGE>
the like for it or any substantial part of its property to continue undischarged
or unstayed for a period of ninety (90) days; or the Borrower makes a general
assignment for the benefit of creditors; or any corporate or partnership action
is taken by the Borrower for the purpose of effecting any of the foregoing; or
(h) Any Security Document shall cease to be in full force and effect,
or shall cease to give the Administrative Agent the Liens, rights, powers and
privileges purported to be created thereby (including, without limitation, a
first priority perfected security interest in, and Lien on, all of the
Properties), in favor of the Administrative Agent on behalf of the Lenders,
superior to and prior to the rights of all third Persons and subject to no other
Liens (except in each case to the extent expressly permitted herein or in any
Operative Agreement); or
(i) The Lease shall cease to be enforceable against the Lessee; or
(j) One or more judgments or decrees shall be entered against the
Borrower involving a liability of $50,000 or more in the case of any one such
judgment or $100,000 or more in the aggregate for all such judgments and decrees
for the Borrower and any such judgments or decrees shall not have been
satisfied, vacated, discharged or stayed or bonded pending appeal within thirty
(30) days from the entry thereof.
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i)
with the consent of the Majority Lenders, the Administrative Agent may, or upon
the request of the Majority Lenders, the Administrative Agent shall, by notice
to the Borrower declare the Commitments to be terminated forthwith, whereupon
the Commitments shall immediately terminate; and (ii) with the consent of the
Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes to be due and payable
forthwith, whereupon the same shall immediately become due and payable (any of
the foregoing occurrences or actions referred to in clause (A) or (B) above, an
"Acceleration"). Except as expressly provided above in this Section 6,
------------
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Administrative Agent
shall, upon the written instructions of the Majority Lenders, exercise any or
all of the rights and powers and pursue any and all of the remedies available to
it hereunder and (subject to the terms thereof) under the other Credit
Documents, the Lease and the other Operative Agreements and shall have any and
all rights and remedies available under the Uniform Commercial Code or any
provision of law.
19
<PAGE>
Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Administrative Agent
may, and upon request of the Majority Lenders shall, proceed to protect and
enforce this Agreement, the Notes, the other Credit Documents and the Lease by
suit or suits or proceedings in equity, at law or in bankruptcy, and whether for
the specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted, or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Property or for the
recovery of judgment for the indebtedness secured thereby or for the enforcement
of any other proper, legal or equitable remedy available under applicable laws.
The Borrower shall be liable for any and all accrued and unpaid
amounts due hereunder before, after or during the exercise of any of the
foregoing remedies, including all reasonable legal fees and other reasonable
costs and expenses incurred by the Administrative Agent or any Lender by reason
of the occurrence of any Event of Default or the exercise of remedies with
respect thereto.
SECTION 7 THE ADMINISTRATIVE AGENT
7.1 Appointment.
-----------
Each Lender hereby irrevocably designates and appoints the
Administrative Agent as the agent of such Lender under this Agreement and the
other Operative Agreements, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to execute the Operative Agreements as
agent for and on behalf of such Lender, to take such action on behalf of such
Lender under the provisions of this Agreement and the other Operative Agreements
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and other Operative
Agreements, together with such other powers as are reasonably incidental
thereto. Without limiting the generality of the foregoing, each of the Lenders
hereby specifically acknowledges the terms and provisions of the Participation
Agreement and directs the Administrative Agent to exercise such powers, make
such decisions and otherwise perform such duties as are delegated to the
Administrative Agent thereunder without being required to obtain any specific
consent with respect thereto from any Lender. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Operative Agreement or otherwise exist against the
Administrative Agent.
7.2 Delegation of Duties.
--------------------
The Administrative Agent may execute any of its duties under this
Agreement and the other Operative Agreements by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Administrative Agent
20
<PAGE>
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
7.3 Exculpatory Provisions.
----------------------
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Operative Agreement (except for its
or such Person's own gross negligence or willful misconduct) or (b) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or the Lessee or any officer
thereof contained in this Agreement or any other Operative Agreement or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Operative Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Operative Agreement or for any failure of the Borrower or the Lessee
to perform its obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Operative Agreement, or to inspect
the properties, books or records of the Borrower or the Lessee.
7.4 Reliance by Administrative Agent.
--------------------------------
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Borrower or the Lessee), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Operative Agreement unless it shall first receive such advice or
concurrence of the Majority Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other
Operative Agreements in accordance with a request of the Majority Lenders, and
such and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
7.5 Notice of Default.
-----------------
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has
21
<PAGE>
received written notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Majority
Lenders; provided that unless and until the Administrative Agent
--------
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
7.6 Non-Reliance on Administrative Agent and Other Lenders.
------------------------------------------------------
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereinafter taken, including any review of the
affairs of the Borrower or the Lessee, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the
Lessee and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Operative Agreements, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower, the Lessee and the Guarantor. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower, the Lessee or the
Guarantor which may come into the possession of the Administrative Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
7.7 Indemnification.
---------------
The Lenders agree to indemnify the Administrative Agent, in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought under this Section 7.7 (or, if indemnification is sought after the
date upon which the Commitments shall have terminated and the Loans shall have
been paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages,
22
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penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes) be imposed on, incurred by or asserted
against any of them in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Operative Agreements or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any of them
under or in connection with any of the foregoing; provided that no Lender shall
--------
be liable for the payment or any portion of such liabilities, obligations,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the gross negligence or willful misconduct of the
Administrative Agent. The agreements in this Section 7.7 shall survive the
payment of the Notes and all other amounts payable hereunder.
7.8 Administrative Agent in Its Individual Capacity.
-----------------------------------------------
The Administrative Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower,
the Lessee or the Guarantor as though the Administrative Agent were not the
Administrative Agent hereunder and under the other Operative Agreements. With
respect to its Loans made or renewed by it and any Note issued to it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Operative Agreements as any Lender and may exercise the same as
though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
7.9 Successor Administrative Agent.
------------------------------
The Administrative Agent may resign as Administrative Agent upon
thirty days' notice to the Lenders, the Borrower, the Lessee and the Guarantor.
If the Administrative Agent shall resign as Administrative Agent under this
Agreement, the Majority Lenders shall appoint from among the Lenders a successor
Administrative Agent which successor Administrative Agent shall be subject to
the approval of the Borrower and, so long as no Lease Event of Default shall
have occurred and be continuing, the Lessee and the Guarantor, such approval not
to be unreasonably withheld or delayed. If no successor Administrative Agent is
appointed prior to the effective date of the resignation of the resigning
Administrative Agent, the Administrative Agent may appoint, after consulting
with the Lenders and subject to the approval of the Borrower and, so long as no
Lease Event of Default shall have occurred and be continuing, the Lessee and the
Guarantor, such approval not to be unreasonably withheld or delayed, a successor
Administrative Agent from among the Lenders. If no successor Administrative
Agent has accepted appointment as Administrative Agent by the date which is
thirty days following a retiring Administrative Agent's notice of resignation,
the retiring agent's notice of resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of Administrative
Agent until such time, if any, as the Majority Lenders appoint a successor
Administrative Agent, as provided for above. Upon the effective date of such
resignation, only the Lessor or such successor Administrative Agent shall
succeed to all the rights, powers and duties of the retiring Administrative
Agent and the term "Administrative Agent" shall mean such successor agent and
the retiring Administrative Agent's rights, powers and duties in such capacity
shall be
23
<PAGE>
terminated. After any retiring Administrative Agent resigns hereunder as
Administrative Agent, the provisions of this Article VII and Section 9.5 shall
inure to their respective benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement.
7.10 Actions of Administrative Agent on Behalf of Holders.
----------------------------------------------------
The parties hereto specifically acknowledge and consent to the Agent's
acting on behalf of the Holder as provided in the Participation Agreement, and,
in any such case, the Lenders acknowledge that the Holders shall be entitled to
vote as "Lenders" hereunder to the extent required or permitted by the Operative
Agreements (including specifically without limitation Section 10.6 of the
Participation Agreement).
SECTION 8 MATTERS RELATING TO PAYMENT AND COLLATERAL
8.1 Collection of Payments and Other Amounts.
----------------------------------------
(a) The Construction Agent and each Credit Party has agreed pursuant
to the terms of the Participation Agreement to pay to the Administrative Agent
any and all Rent and any and all other amounts of any kind or type owing by the
Lessee, the Guarantor or the Construction Agent to the Lessor or the Owner
Trustee under the Lease or any of the other Operative Agreements. Promptly
after receipt, the Administrative Agent shall apply, in accordance with the
terms of this Section 8, such amounts received by the Construction Agent or any
Credit Party and all other payments, receipts and other consideration of any
kind whatsoever received by the Administrative Agent pursuant to the Security
Agreement or otherwise received by the Administrative Agent or any of the
Lenders in connection with the Collateral, the Security Documents or any of the
other Operative Agreements.
(b) Payments and other amounts received by the Administrative Agent
from time to time in accordance with the terms of subparagraph (a) shall be
applied as follows (subject to all events to Section 8.1(c)):
(i) Any such payment or amount identified as or deemed to be Basic
Rent shall be applied and allocated by the Administrative Agent first,
-----
ratably to the Lenders and the Holders for application and allocation to
the payment of interest on the Loans and thereafter the principal of the
Loans which is due and payable on such date and to the payment of accrued
Holder Yield with respect to the Holder Fundings and thereafter the portion
of the Holder Fundings which is due on such date; and second, if no Default
------
or Event of Default is in effect, any excess shall be paid to such Person
or Persons as the Lessee may designate; provided, that if a Default or
--------
Event of Default is in effect, such excess (if any) shall instead be held
by the Administrative Agent until the earlier of (I) the first date
thereafter on which no Default or Event of Default shall be in effect (in
which case such payments or returns shall then be made to such other Person
or Persons as the Lessee may designate) and (II) the Maturity Date or the
Expiration Date, as the case may
24
<PAGE>
be (or, if earlier, the date of any Acceleration), in which case such
amounts shall be applied and allocated in the manner contemplated by
Section 8.1(b)(iv).
(ii) If on any date the Administrative Agent or the Lessor shall
receive any amount in respect of (A) any Casualty or Condemnation pursuant
to Sections 15.1(a) or 15.1(g) of the Lease (excluding any payments in
respect thereof which are payable to the Lessee in accordance with the
Lease or held by Lessor as security for performance of Lessee's obligations
under the Lease), or (B) the Termination Value in connection with the
delivery of a Termination Notice pursuant to Article XVI of the Lease, or
(C) the Termination Value in connection with the exercise of the Purchase
Option under Section 20.1 of the Lease or the exercise of the option of the
Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (D) any payment in an amount equal to the Termination Value
for any or all Construction Period Properties required to be made or
elected to be made by the Construction Agent to the Lessor pursuant to the
terms of the Agency Agreement, then in each case, the Lessor shall be
required to pay such amount received (1) if no Acceleration has occurred,
to prepay the principal balance of the Loans on such date in an amount
equal to ninety-seven percent (97%) of such payment and the remaining three
percent (3%) of such payment shall be applied pro rata to the principal
amount of outstanding Holder Fundings on such date until the Loans are paid
in full, and to Holder Fundings thereafter, (2) if an Acceleration has
occurred, to apply and allocate the proceeds respecting Sections
8.1(b)(ii)(A) through 8.1(b)(ii)(D) in accordance with Section 8.1(b)(iii)
hereof.
(iii) An amount equal to any payment identified as proceeds of the
sale or other disposition (or lease upon the exercise of remedies) of the
Properties or any portion thereof, whether pursuant to Article XXII of the
Lease or the exercise of remedies under the Security Documents, the Lease
or otherwise, and any payment in respect of excess wear and tear pursuant
to Section 22.3 of the Lease (whether such payment relates to a period
before or after the Construction Period Termination Date) shall be applied
and allocated by the Administrative Agent first, ratably to the payment of
-----
the principal and interest of the Tranche B Loans then outstanding, second,
------
to the extent such amount exceeds the maximum amount to be paid pursuant to
the foregoing provisions of this paragraph (iii), ratably to the payment of
the principal and interest of the Tranche A Loans then outstanding, third,
-----
to any and all other amounts owing under the Operative Agreements to the
Lenders under the Tranche B Loans, fourth, to any and all other amounts
------
owing under the Operative Agreements to the Lenders under the Tranche A
Loans, fifth, ratably to the payment to the Holders of the outstanding
-----
principal balance of all Holder Fundings plus all outstanding Holder Yield
with respect to such outstanding Holder Fundings, sixth, to any and all
-----
other amounts owing under the Operative Agreements to the Holders, and
seventh, to the extent moneys remain after application and allocation
-------
pursuant to clauses first through sixth above, to the Owner Trustee for
----- -----
application and allocation to any and all other amounts owing to the
Holders or the Owner Trustee and as the Holders shall determine; provided,
--------
further, where no Event of Default shall exist and be continuing and a
-------
prepayment is made for any reason with respect to less than the full amount
of the outstanding principal amount of the Loans and
25
<PAGE>
the outstanding Holder Fundings, the proceeds shall be applied and
allocated ratably among the Lenders and among the Holders.
(iv) An amount equal to (A) any such payment identified as a payment
of the Maximum Amount pursuant to the third paragraph of Section 2.1 of the
Agency Agreement or any payment pursuant to Section 22.1(b) of the Lease
(or otherwise) of the Maximum Residual Guarantee Amount (and any such
lesser amount as may be required by Section 22.1(b) of the Lease) in
respect of the Properties and (B) any other amount payable upon any
exercise of remedies after the occurrence of an Event of Default not
covered by Sections 8.1(b)(i) or 8.1(b)(iii) above (including without
limitation any amount received in connection with an Acceleration which
does not represent proceeds from the sale or liquidation of the Properties)
and (C) any other amount payable by the Guarantor pursuant to Section 6B
shall be applied and allocated by the Administrative Agent first, ratably,
-----
to the payment of the principal and interest balance of Tranche A Loans
then outstanding, second, ratably to the payment of the principal and
------
interest balance of the Tranche B Loans then outstanding, third, to the
-----
payment of any other amounts owing to the Lenders hereunder or under any of
the other Operative Agreements, fourth, ratably to the payment of the
------
principal balance of all Holder Fundings plus all outstanding Holder Yield
with respect to such outstanding Holder Fundings, and fifth, to the extent
-----
moneys remain after application and allocation pursuant to clauses first
-----
through fourth above, to the Owner Trustee for application and allocation
--------------
to Holder Fundings and Holder Yield and any other amounts owing to the
Holders or the Owner Trustee as the Holders shall determine.
(v) An amount equal to any such payment identified as Supplemental
Rent and any payment by the Construction Agent not otherwise covered under
Sections 8.1(b)(i)-(iv) hereof shall be applied and allocated by the
Administrative Agent to the payment of any amounts then owing to the
Administrative Agent, the Lenders, the Holders and the other parties to the
Operative Agreements (or any of them) (other than any such amounts payable
pursuant to the preceding provisions of this Section 8.1(b)) as shall be
determined by the Administrative Agent in its reasonable discretion;
provided, however, that Supplemental Rent received upon the exercise of
-------- -------
remedies after the occurrence and continuance of an Event of Default in
lieu of or in substitution of the Maximum Residual Guarantee Amount or as a
partial payment thereon shall be applied and allocated as set forth in
Section 8.1(b)(iv).
(vi) The Administrative Agent in its reasonable judgment shall
identify the nature of each payment or amount received by the
Administrative Agent and apply and allocate each such amount in the manner
specified above.
(c) Upon the payment in full of the Loans, the Holder Fundings and
all other amounts then due and owing by the Owner Trustee hereunder or under any
Credit Document and the payment in full of all other amounts then due and owing
to the Lenders, the Holders, the Administrative Agent, the Owner Trustee and the
other Financing Parties pursuant to the Operative Agreements, any moneys
remaining with the Administrative Agent shall be returned to
26
<PAGE>
the Lessee. In the event of an Acceleration it is agreed that, prior to the
application and allocation of amounts received by the Administrative Agent in
the order described in Section 8.1(b) above or any distribution of money to the
Lessee, any such amounts shall first be applied and allocated to the payment of
(i) any and all sums advanced by the Administrative Agent in order to preserve
the Collateral or to preserve its Lien thereon, (ii) the expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing or
realizing on the Collateral, or of any exercise by the Administrative Agent of
its rights under the Security Documents, together with reasonable attorneys'
fees and expenses and court costs and (iii) any and all other amounts reasonably
owed to the Administrative Agent under or in connection with the transactions
contemplated by the Operative Agreements (including without limitation any
accrued and unpaid administration fees).
8.2 Certain Remedial Matters.
------------------------
Notwithstanding any other provision of this Agreement or any other
Credit Document:
(a) the Borrower shall at all times retain all rights to Excepted
Payments payable to it and to demand, collect or commence an action at law to
obtain such payments and to enforce any judgment with respect thereto; and
(b) the Borrower and each Holder shall at all times retain the
right, but not to the exclusion of the Administrative Agent, (A) to receive from
the Lessee all notices, certificates and other documents and all information
that the Lessee is permitted or required to give or furnish to the "Borrower" or
the "Lessor" pursuant to the Lease, the Participation Agreement or any other
Operative Agreement, (B) to retain all rights with respect to insurance that
Article XIV of the Lease specifically confers upon the "Lessor", (C) to provide
such insurance as the Lessee shall have failed to maintain or as the Borrower or
any Holder may desire, and (D) to enforce compliance by the Lessee with the
provisions of Articles VIII, IX, X, XI, XIV and XVII of the Lease.
8.3 Release of Properties, etc.
---------------------------
If the Lessee shall at any time purchase any Property pursuant to the
terms of the Lease, or the Construction Agent shall purchase any Property
pursuant to the Agency Agreement, or if any Property shall be sold in accordance
with Article XXII of the Lease, then, upon satisfaction by the Borrower of its
obligation to prepay the Loans and Holder Fundings, the Administrative Agent is
hereby authorized and directed to release such Properties from the Liens created
by the Security Documents. In addition, upon the termination of the Commitments
and the payment in full of the Loans and all other amounts owing by the Borrower
hereunder or under any other Credit Document the Administrative Agent is hereby
authorized and directed to release all of the Properties from the Liens created
by the Security Documents. Upon request of the Borrower following any such
release, the Administrative Agent shall, at the sole cost and expense of the
Lessee, execute and deliver to the Borrower and the Lessee such documents as the
Borrower or the Lessee shall reasonably request to evidence such release.
27
<PAGE>
8.4 Excepted Payments.
-----------------
Notwithstanding any other provision of this Agreement or the Security
Documents, any Excepted Payment received at any time by the Administrative Agent
shall be distributed promptly to the Person entitled to receive such Excepted
Payment.
SECTION 9 MISCELLANEOUS
9.1 Amendments and Waivers.
----------------------
Neither this Agreement, any other Credit Document, nor any terms
hereof or thereof may be amended, supplemented or modified except in accordance
with the provisions of this Section 9.1. The Majority Lenders may, or, with the
written consent of the Majority Lenders, the Administrative Agent may, from time
to time, (a) with the consent of the Lessee and the Guarantor (so long as no
Default or Event of Default shall have occurred and be continuing and,
respecting an amendment, supplement or modification to Section 8.1 only, so long
as Lessee has rights in any Property under the Operative Agreements), enter into
with the Borrower written amendments, supplements or modifications to the Credit
Documents (including, without limitation, any amendment to Section 8.1 hereof)
for the purpose of adding any provisions to the Credit Documents or changing in
any manner the rights of the Administrative Agent, the Lenders or the Borrower
thereunder or (b) waive, on such terms and conditions as the Majority Lenders or
the Administrative Agent, as the case may be, may specify in such instrument,
any of the requirements of the Credit Documents or any Default or Event of
Default and its consequences. In addition, the Administrative Agent may from
time to time consent in writing to amendments, supplements, modifications or
waivers with respect to any Operative Agreement (other than the Credit
Documents), subject to receipt of the prior written consent of the Majority
Lenders and, so long as no Default or Event of Default shall have occurred and
be continuing, the Lessee and the Guarantor; provided, however, that so long as
-------- -------
the Administrative Agent has no actual knowledge of the existence of an Event of
Default the Administrative Agent may grant waivers and/or consents with respect
to the terms and requirements of the Participation Agreement without the prior
consent of the Lenders to the extent provided therein (as such authority of the
Administrative Agent is more specifically described in Section 7.1 hereof).
Notwithstanding the foregoing, no such amendment, supplement, modification or
waiver shall (i) reduce the amount or extend the scheduled date of maturity of
any Note, or reduce the stated rate of any interest payable hereunder (other
than as a result of waiving the applicability of any post-default increase in
interest rates) or any Facility Fees payable under the Participation Agreement
or extend the scheduled date of any payment of such interest or Commitment Fees
or increase the amount or extend the expiration date of any Lender's Commitment,
in each case without the consent of each Lender directly affected thereby, or
(ii) amend, modify or waive any provision of this Section 9.1 or the definition
of Majority Lenders, or reduce the percentage specified in the definition of
Majority Lenders, or consent to the assignment or transfer by the Borrower of
any of its rights and obligations under the Credit Documents or release a
material portion of the Collateral (except in accordance with Section 8.3) or
release the Lessee from its obligations under the Lease
28
<PAGE>
or otherwise alter any payment obligations of the Lessee to the Lessor under the
Operative Agreements, in each case without the written consent of all the
Lenders, or (iii) amend, modify or waive any provision of Section 7 without the
written consent of the then Administrative Agent or (iv) permit Advances for
Work in excess of the Construction Budget without the unanimous consent of the
Lenders and Holders, or (v) eliminate the automatic option (in the absence of
the unanimous election of the Lenders and the Holders) under Section 5.3(a) of
the Agency Agreement requiring that the Construction Agent pay certain
liquidated damages in exchange for the conveyance of a Property to the
Construction Agent or (vi) permit the extension of the Construction Period
Termination Date beyond the date that is three (3) years from the Initial
Closing Date without the unanimous consent of the Lenders and the Holders. Any
such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lessee, the Guarantor, the Lenders and the Administrative Agent and all future
holders of the Notes. In the case of any waiver, the Borrower, the Lessee, the
Guarantor, the Lenders and the Administrative Agent shall be restored to their
former position and rights under the Credit Documents, and any Default or Event
of Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extent to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Section 4.2 hereof to any Loan
hereunder are, in the opinion of the Majority Lenders, satisfied, any Lender
shall fail to fulfill its obligations to make such Loan (any such Lender, a
"Defaulting Lender") then, for so long as such failure shall continue, the
-----------------
Defaulting Lender shall (unless the Borrower and the Majority Lenders,
determined as if the Defaulting Lender were not a "Lender" hereunder, shall
otherwise consent in writing) be deemed for all purposes relating to amendments,
modifications, waivers or consents under this Agreement (including, without
limitation, under this Section 9.1) to have no Loans, shall not be treated as a
"Lender" hereunder when performing the computation of Majority Lenders, and
shall have no rights under the preceding paragraph of this Section 9.1; provided
that any action taken by the other Lenders pursuant to this paragraph with
respect to the matters referred to in clause (i) through (vi) of the preceding
paragraph shall not be effective as against the Defaulting Lender.
9.2 Notices.
-------
All notices, request and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered, or three Business Days after being deposited in the mail,
postage prepaid, or, in the case of telecopy notice, when received, addressed as
follows in the case of the Borrower and the Administrative Agent, and as set
forth in Schedule 1.1 in the case of the other parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto and any
future holders of the Notes:
29
<PAGE>
The Borrower:
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Mr. Val T. Orton
Corporate Trust Counsel
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
Bank of America, N.A., as Administrative Agent:
Bank of America, N.A.
901 Main Street
66th Floor
Dallas, TX 75202
Attention: Shelly K. Harper
Telephone: (214) 209-0567
Telecopy: (214) 209-0604
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders pursuant to Section 2.3, 2.5 2.6 or 2.7 shall not be effective
until received.
A copy of any notice delivered hereunder shall also be delivered to the
Lessee, the Guarantor and the Legal Department of the Guarantor at the addresses
for notices set forth in Section 14.3 of the Participation Agreement.
9.3 No Waiver; Cumulative Remedies.
------------------------------
No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Credit Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties.
------------------------------------------
All representations and warranties made hereunder, in the other Credit
Documents and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Notes and the making of the Loans hereunder.
30
<PAGE>
9.5 Payment of Expenses and Taxes.
-----------------------------
The Borrower agrees to: (a) pay all reasonable out-of-pocket costs and
expenses of (i) the Administrative Agent whether or not the transactions herein
contemplated are consummated, in connection with the negotiation, preparation,
execution and delivery of the Operative Agreements and the documents and
instruments referred to therein and any amendment, waiver or consent relating
thereto (including, without limitation, the reasonable fees and disbursements of
Moore & Van Allen, PLLC) and (ii) the Administrative Agent and each of the
Lenders in connection with the enforcement of the Operative Agreements and the
documents and instruments referred to therein (including, without limitation,
the reasonable fees and disbursements of counsel for the Administrative Agent
and for each of the Lenders) and (b) pay and hold each of the Lenders harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and save each of the Lenders harmless from
and against any all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Lender) to pay such
taxes.
9.6 Successors and Assigns; Participations and Assignments.
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent, all future holders of the Notes
and their respective permitted successors and assigns, except that the Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
9.7 Participations.
--------------
Any Lender may, in the ordinary course of its business and in accordance
with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
-----------
in any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender or any other interest of such Lender hereunder and under the
other Operative Agreements; provided that any such sale of a participating
--------
interest shall be in a principal amount of at least $2,000,000. In the event of
any such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement and the Notes, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the Notes. In no event shall any Participant have any right to approve any
amendment or waiver of any provision of this Agreement or any other Operative
Agreement, or any consent to any departure by the Borrower or any other Person
therefrom, except to the extent that such amendment, waiver or consent would (a)
reduce the principal of, or interest on, any Loan or Note, or postpone the date
of the final maturity of any Loan or Note, or reduce the amount of any Facility
Fee, in each case to the extent subject to such participation or (b) release all
or substantially all of the Collateral. The Borrower agrees that, while an
Event of Default shall have occurred and be continuing, if amounts outstanding
under this Agreement and the Notes are due or unpaid, or shall have
31
<PAGE>
become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interests in amounts
owing directly to it as a Lender under this Agreement or any Note, provided
--------
that, in purchasing such participating interest, such Participant shall be
deemed to have agreed to share with the Lenders the proceeds thereof as provided
in Section 9.10(a) as fully as if it were a Lender hereunder. The Borrower also
agrees that each Participant shall be entitled to the benefits of Sections 2.11,
2.12 and 2.13 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender; provided that, in the case
--------
of Section 2.13, such Participant shall have complied with the requirements of
said Section and provided, further, that no Participant shall be entitled to
-------- -------
receive any greater amount pursuant to any such Section than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
9.8 Assignments.
-----------
(a) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to time assign to any
Lender or any affiliate of any Lender or, with the consent, subject to Section
11.1 of the Participation Agreement, of the Borrower and the Administrative
Agent and, so long as no Default or Event of Default shall have occurred and be
continuing, the Lessee and the Guarantor (which in each case shall not be
unreasonably withheld or delayed), to an additional bank, financial institution
or other entity that is either organized under the laws of the United States or
any state thereof or is a foreign bank that operates a branch office in the
United States, (each, a "Purchasing Lender") all or any part of its rights and
-----------------
obligations under this Agreement and the other Operative Agreements pursuant to
an Assignment and Acceptance, substantially in the form of Exhibit B, executed
---------
by such Purchasing Lender, such assigning Lender (and, in the case of a
Purchasing Lender that is not a Lender or an affiliate thereof, subject to
Section 11.1 of the Participation Agreement, by the Borrower and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that no such assignment to a
--------
Purchasing Lender (other than any Lender or any affiliate thereof) shall be in
an aggregate principal amount less than $5,000,000 (other than in the case of an
assignment of all of a Lender's interests under this Agreement and the Notes).
Upon such execution, delivery, acceptance and recording, from and after the
effective date determined pursuant to such Assignment and Acceptance, (x) the
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto). Notwithstanding anything to the contrary in
this Agreement, the consent of the Borrower shall not be required, and, unless
requested by the relevant Purchasing Lender and/or assigning Lender, new Notes
shall not be required to be executed and delivered by the Borrower, for any
assignment which occurs at any time when any of the events described in Section
6(g) shall have occurred and be continuing.
32
<PAGE>
(b) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not a Lender or an affiliate thereof, by the Borrower and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $2,500 (which shall not be payable by the
Borrower or the Lessee, except as otherwise provided in connection with an
assignment requested in accordance with Section 2.14(b)), the Administrative
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) promptly
after the effective date determined pursuant thereto, record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower. On or prior to such effective
date, the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent new Notes (in exchange for the Notes of the assigning
Lender), each in an amount equal to the Commitment assumed or Loans purchased by
the relevant Purchasing Lender pursuant to such Assignment and Acceptance, and,
if the assigning Lender has retained a Commitment or any Loan hereunder, new
Notes to the order of the assigning Lender, each in an amount equal to the
Commitment or Loans retained by it hereunder. Such new Notes shall be dated the
Effective Date and shall otherwise be in the form of the Notes replaced thereby.
(c) Each Purchasing Lender (other than any Lender organized and
existing under the laws of the U.S. or any political subdivision in or of the
U.S.), by executing and delivering an Assignment and Acceptance,
(A) agrees to execute and deliver to the Administrative Agent, as
promptly as practicable, four signed copies (two for the Administrative
Agent and two for delivery by the Administrative Agent to the Borrower) of
Form 1001 or Form 4224 (or any successor form or comparable form) (it being
understood that if the applicable form is not so delivered, payments under
or in respect of this Agreement may be subject to withholding and
deduction);
(B) represents and warrants to the Borrower and the
Administrative Agent that the form so delivered is true and accurate and
that, as of the effective date of the applicable Assignment and Acceptance,
each of such Purchasing Lender's Lending Offices is entitled to receive
payments of principal and interest under or in respect of this Agreement
without withholding or deduction for or on account of any taxes imposed by
the U.S. Federal government;
(C) agrees to annually hereafter deliver to each of the Borrower
and the Administrative Agent not later than December 31 of the year
preceding the year to which it will apply, two further properly completed
signed copies of Form 1001 or Form 4224 (or any successor form or
comparable form), as appropriate, unless an event has occurred which
renders the relevant form inapplicable (it being understood that if the
applicable form is not so delivered, payments under or in respect of this
Agreement may be subject to withholding and deduction);
33
<PAGE>
(D) agrees to promptly notify the Borrower and the Administrative
Agent in writing if it ceases to be entitled to receive payments of
principal and interest under or in respect of this Agreement without
withholding or deduction for or on account of any taxes imposed by the U.S.
or any political subdivision in or of the U.S. (it being understood that
payments under or in respect of this Agreement may be subject to
withholding and deduction in such event);
(E) acknowledges that in the event it ceases to be exempt from
withholding and/or deduction of such taxes, the Administrative Agent may
withhold and/or deduct the applicable amount from any payments to which
such assignee Lender would otherwise be entitled, without any liability to
such assignee Lender therefor; and
(F) agrees to indemnify the Borrower and the Administrative Agent
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs or expenses that result from
such assignee Lender's breach of any such representation, warranty or
agreement.
(d) Any Lender party to this Agreement may, from time to time and
without the consent of the Borrower or any other Person, may pledge or assign
for security purposes any portion of its Loans or any other interests in this
Agreement and the other Credit Documents to any Federal Reserve Bank.
9.9 The Register; Disclosure; Pledges to Federal Reserve Banks.
----------------------------------------------------------
(a) The Administrative Agent shall maintain at its address referred to
in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
--------
Lenders, the Commitments of the Lenders, and the principal amount of the Loans
owing to each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of clearly demonstrable error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable notice.
(b) Nothing herein shall prohibit any Lender from pledging or assigning any
Note to any Federal Reserve Bank in accordance with applicable law.
9.10 Adjustments; Set-off.
--------------------
(a) Except as otherwise expressly provided in Section 8.1 hereof where, and
to the extent, one Lender is entitled to payments prior to other Lende rs, if
any Lender (a "Benefitted Lender") shall at any time receive any payment of all
-----------------
or part of its Loans, or interest thereon, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 6(g), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in
34
<PAGE>
respect of such other Lender's Loans, or interest thereon, such Benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided however, that if all or any portion of such excess payment or benefits
- -------- -------
is thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the event of such
recovery, but without interest.
(b) In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of an Event of Default, the Administrative Agent and each
Lender is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by the Administrative Agent or such
Lender (including, without limitation, by branches and agencies of the
Administrative Agent or such Lender wherever located) to or for the credit or
the account of the Borrower against and on account of the obligations and
liabilities of the Borrower to the Administrative Agent or such Lender under
this Agreement or under any of the other Operative Agreements, including,
without limitation, all interests in obligations of the Borrower purchased by
any such Lender pursuant to Section 9.10(a), and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Operative Agreement, irrespective or whether or not the Administrative Agent or
such Lender shall have made any demand and although said obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
9.11 Counterparts.
------------
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by telecopy), and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
9.12 Severability.
-------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
35
<PAGE>
9.13 Integration.
-----------
This Agreement and the other Credit Documents represent the agreement of
the Borrower, the Administrative Agent, and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Administrative Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other
Credit Documents.
9.14 GOVERNING LAW.
-------------
THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.
9.15 Submission To Jurisdiction; Waivers.
-----------------------------------
The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Credit Documents to which it is a
party, or for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the Courts of the Commonwealth of
Virginia, the courts of the United States of America for the Eastern District of
Virginia, and appellate courts from any thereof;
(b) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail) postage prepaid, to the Borrower at its
address set forth in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
(c) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(d) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section 9.15 any special, exemplary, punitive or consequential damages.
9.16 Acknowledgments.
---------------
Borrower hereby acknowledges that:
(a) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duly to the Borrower arising out of or in connection with
this Agreement or any of the other Credit Documents, and the relationship
between the Administrative Agent and
36
<PAGE>
the Lenders, on one hand, and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(b) no joint venture is created hereby or by the other Credit Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrower and the Lenders.
9.17 WAIVERS OF JURY TRIAL.
---------------------
THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
9.18 Nonrecourse.
-----------
Anything to the contrary contained in this Agreement or in any other
Operative Agreement notwithstanding, neither the Borrower nor any officer,
director or shareholder thereof, nor any of the Borrower's successors or assigns
(all such Persons being hereinafter referred to collectively as the "Exculpated
----------
Persons"), shall be personally liable in any respect for any liability or
- -------
obligation hereunder or under any other Operative Agreement including the
payment of the principal of, or interest on, the Notes, or for monetary damages
for the breach of performance of any of the covenants contained in this
Agreement, the Notes or any of the other Operative Agreements. The
Administrative Agent and the Lenders agree that, in the event any of them
pursues any remedies available to them under this Agreement, the Notes or any
other Operative Agreement, neither the Administrative Agent nor the Lenders
shall have any recourse against the Borrower, nor any other Exculpated Person,
for any deficiency, loss or claim for monetary damages or otherwise resulting
therefrom and recourse shall be had solely and exclusively against the CORI
Trust Estate and as permitted under the Operative Agreements; but nothing
contained herein shall be taken to prevent recourse against or the enforcement
of remedies against the CORI Trust Estate in respect of any and all liabilities,
obligations and undertakings contained in this Agreement, the Notes or any other
Operative Agreement. The Administrative Agent and the Lenders further agree
that the Borrower shall not be responsible for the payment of any amounts owing
hereunder (excluding principal and interest (other than Overdue Interest) in
respect of the Loans) (such non-excluded amounts, "Supplemental Amounts") except
--------------------
to the extent that payments of Supplemental Rent designated by the Lessee for
application to such Supplemental Amounts shall have been paid by the Lessee
pursuant to the Lease (it being understood that the failure by the Lessee for
any reason to pay any Supplemental Rent in respect of such Supplemental Amounts
shall nevertheless be deemed to constitute a default by the Borrower for the
purposes of Section 6(a)(ii)). Notwithstanding the foregoing provisions of this
Section 9.18, nothing in this Agreement or any other Operative Agreement shall
(a) constitute a waiver, release or discharge of any obligation evidenced or
secured by this Agreement or any other Credit Document, (b) limit the right of
the Administrative Agent or any Lender to name the Borrower as a party defendant
in any action or suit for judicial foreclosure and sale under any Security
Document, or (c) affect in any way the validity or enforceability of
37
<PAGE>
any guaranty (whether of payment and/or performance) given to the Lessor, the
Administrative Agent or the Lenders, or of any indemnity agreement given by the
Borrower, in connection with the Loans made hereunder.
9.19 USURY SAVINGS PROVISION.
-----------------------
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT
COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE EXTENT
ANY PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF COMPETENT
JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS SECTION
9.19 SHALL APPLY. ANY SUCH PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED
TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY
LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL
SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN
OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING, BUT NOT LIMITED
TO, PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY
INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS
AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER
APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE
AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE
PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL
BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH
DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM
NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF
EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE AGENT OR ANY
LENDER SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST
WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH
WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN
AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL,
WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED
TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO BORROWER OR
ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO
DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES
NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON
THE DATE OF SUCH DEMAND, AND NEITHER THE AGENT NOR ANY LENDER INTENDS TO CHARGE
OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID
OR AGREED TO BE PAID TO THE AGENT OR ANY
38
<PAGE>
LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED,
ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING ANY RENEWAL OR
EXTENSION) OF THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH
PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE
LAW.
[Signature pages follow]
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually except as expressly stated herein,
but solely as Owner Trustee for Capital One Realty
Trust 1998-1
By: /s/ DeAnn Madsen
----------------------------------------
Name: DeAnn Madsen
--------------------------------------
Title: Assistant Trust Officer
-------------------------------------
[Signatures Continue on Next Page]
<PAGE>
BANK OF AMERICA, N.A., as Administrative Agent,
and as a Lender
By: /s/ Shelly K. Harper
--------------------------------
Name: Shelly K. Harper
------------------------------
Title: Vice President
-----------------------------
[Signatures Continue on Next Page]
<PAGE>
FIRST NATIONAL BANK OF CHICAGO, as a Lender
By: /s/ Steven D. Franklin
----------------------------------
Name: Steven D. Franklin
--------------------------------
Title: Vice President
-------------------------------
[Signatures Continue on Next Page]
<PAGE>
BARCLAYS BANK PLC, as a Lender
By: /s/ Richard Herder
-----------------------------------
Name: Richard Herder
---------------------------------
Title: Director
--------------------------------
[Signatures Continue on Next Page]
<PAGE>
FIRST UNION NATIONAL BANK, as a Lender
By: /s/ Carrie H. McAllister
-------------------------------------
Name: Carrie H. Mcallister
-----------------------------------
Title: Vice President
----------------------------------
[Signatures Continue on Next Page]
<PAGE>
KBC BANK N.V., as a Lender
By: /s/ Robert Snauffer
--------------------------------
Name: Robert Snauffer
------------------------------
Title: First Vice President
-----------------------------
By: /s/ Robert N. Surdam, Jr.
-------------------------------
Name: Robert N. Surdam, Jr.
------------------------------
Title: Vice President
-----------------------------
[Signatures Continue on Next Page]
<PAGE>
CREDIT LYONNAIS - NY BRANCH, as a Lender
By: /s/ W. Jay Buckley
-----------------------------------
Name: W. Jay Buckley
---------------------------------
Title: Vice President
--------------------------------
[Signatures Continue on Next Page]
<PAGE>
BMO GLOBAL CAPITAL SOLUTIONS, INC., as a Lender
By: /s/ Joseph A. Bliss
-----------------------------------
Name: Joseph A. Bliss
---------------------------------
Title: Vice President
--------------------------------
[Signatures Continue on Next Page]
<PAGE>
BANK OF MONTREAL, as a Lender
By: /s/ Kanu Modi
-----------------------------------
Name: Kanu Modi
---------------------------------
Title: Director
--------------------------------
<PAGE>
Schedule 1.1
------------
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
------------------------- -------------------------
Name and Address of Lender Amount Percentage Amount Percentage
- -------------------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Bank of America, N.A. $15,344,476.74 20.0581% $1,824,273.26 18.1520%
901 Main Street, 66th Floor
Dallas, TX 75202
Attn: Shelly K. Harper, Vice President
Telephone: 214-209-0567
Facsimile: 214-209-0604
First National Bank of Chicago $ 9,562,500 12.5000% $ 1,256,250 12.5000%
1 First National Plaza, Suite 0155
Chicago, IL 60670
Attn: R. Eric Weidelman
Telephone: 312-732-5294
Facsimile: 312-732-6222
Barclays Bank PLC $ 9,562,500 12.5000% $ 1,256,250 12.5000%
222 Broadway
New York, NY 10038
Attn: Richard Herder
Telephone: 212-412-7660
Facsimile: 212-412-5610
First Union National Bank $ 9,562,500 12.5000% $ 1,256,250 12.5000%
7 N. 8th Street, VA 3246
Richmond, VA 23219
Attn: Carrie H. McAllister, Vice President
Telephone: 804-771-7294
Facsimile: 804-771-7577
KBC Bank, N.V. - Atlanta Rep. Office $ 9,859,011.63 12.8876% $1,390,988.37 13.8407%
1349 W. Peachtree St., Suite 1750
Atlanta, GA 30309
Attn: Jackie Brunetto, Vice President
Telephone: 404-876-2566
Facsimile: 404-876-3212
Credit Lyonnais - NY Branch $ 9,859,011.63 12.8876% $1,390,988.37 13.8407%
1301 6th Avenue
New York, NY 10019
Attn: Jay Buckley, Vice President
Telephone: 212-261-7430
Facsimile: 212-261-3401
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
------------------------- ---------------------------
Name and Address of Lender Amount Percentage Amount Percentage
- -------------------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Bank of Montreal $ 12,750,000 16.6667% $ 0.00 0.0000%
115 S. LaSalle St., 12th Floor
Chicago, IL 60603
Attn: Kanu Modi, Director
Telephone: 312-750-3891
Facsimile: 312-756-6057
BMO Global Capital Solutions, Inc. $ 0.00 0.0000% $1,674,999.99 16.6667%
115 So LaSalle St. 13th Floor
Chicago, IL 60603
Attn: Joe Bliss
Telephone:
Facsimile:
Total $ 76,500,000 100% $10,050,000 100%
</TABLE>
<PAGE>
Exhibit A-1
-----------
TRANCHE A NOTE
(Capital One Realty, Inc.)
$______________ _______________
_______________
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as Owner Trustee for the
Capital One Realty Trust 1998-1 (the "Borrower"), hereby unconditionally
--------
promises to pay to the order of [Lender] (the "Lender") at the office of
------
______________________ ______________________________________________
________________________ in lawful money of the United States of America and in
immediately available funds, on the Maturity Date, the principal amount of (a)
_________________________ ____________________________________ NO/100 DOLLARS
($_____________), or, if less, (b) the aggregate unpaid principal amount of all
Loans made by the Lender to the Borrower pursuant to Section 2.1 of the Credit
Agreement (as defined below). The Borrower further agrees to pay interest in
like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in Section 2.8 of such
Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each Loan
made pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof and each conversion
of all or a portion thereof to another Type. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
----- -----
The failure to make any such endorsement or any error in such endorsement shall
not affect the obligations of the Borrower in respect of such Loan.
This Note (a) is one of the Notes referred to in the Credit Agreement dated
September 3, 1999 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, the Lender, the other banks
----------------
and financial institutions from time to time parties thereto and Bank of
America, N.A., as Administrative Agent, (b) is subject to the provisions of the
Credit Agreement (including, without limitation, Section 9.18 thereof) and (c)
is subject to optional and mandatory prepayment in whole or in part as provided
in the Credit Agreement. Reference is hereby made to the Credit Documents for a
description of the properties and assets in which a security interest has been
granted, the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
<PAGE>
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee for
Capital One Realty Trust 1998-1
By:_____________________________________
Name:
Title:
<PAGE>
Exhibit A-2
-----------
TRANCHE B NOTE
(Capital One Realty, Inc.)
$______________ _______________
_______________
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as Owner Trustee for the
Capital One Realty Trust 1998-1 (the "Borrower"), hereby unconditionally
--------
promises to pay to the order of [Lender] (the "Lender") at the office of
------
_____________ _________________________________________________________________
in lawful money of the United States of America and in immediately available
funds, on the Maturity Date, the principal amount of (a) _______________________
____________________________________ NO/100 DOLLARS ($_____________), or, if
less, (b) the aggregate unpaid principal amount of all Loans made by the Lender
to the Borrower pursuant to Section 2.1 of the Credit Agreement (as defined
below). The Borrower further agrees to pay interest in like money at such office
on the unpaid principal amount hereof from time to time outstanding at the rates
and on the dates specified in Section 2.8 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each Loan
made pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof and each conversion
of all or a portion thereof to another Type. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
----- -----
The failure to make any such endorsement or any error in such endorsement shall
not affect the obligations of the Borrower in respect of such Loan.
This Note (a) is one of the Notes referred to in the Credit Agreement dated
September 3, 1999 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, the Lender, the other banks
----------------
and financial institutions from time to time parties thereto and Bank of
America, N.A., as Administrative Agent, (b) is subject to the provisions of the
Credit Agreement (including, without limitation, Section 9.18 thereof) and (c)
is subject to optional and mandatory prepayment in whole or in part as provided
in the Credit Agreement. Reference is hereby made to the Credit Documents for a
description of the properties and assets in which a security interest has been
granted, the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
<PAGE>
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee for
Capital One Realty Trust 1998-1
By:___________________________________
Name:
Title:
-5-
<PAGE>
Exhibit B
---------
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement (Capital One Realty, Inc.), dated
as of September 3, 1999 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among FIRST SECURITY BANK, NATIONAL
----------------
ASSOCIATION, not in its individual capacity, but solely as Owner Trustee for the
Capital One Realty Trust 1998-1 (the "Owner Trustee" or the "Borrower"), the
------------- --------
Lenders named therein and Bank of America, N.A., as Administrative Agent.
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
____________________ (the "Assignor") and _______________ (the "Assignee")
-------- --------
agree as follows:
The Assignor hereby irrevocably sells and assigns to the Assignee without
recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor without recourse to the Assignor, as of the Effective
Date (as defined below), a ___% interest (the "Assigned Interest") in and to the
-----------------
Assignor's rights and obligations under the Credit Agreement with respect to the
credit facility contained in the Credit Agreement as are set forth on Schedule 1
hereto (the "Assigned Facility"), in a principal amount for the Assigned
-----------------
Facility as set forth on Schedule 1.
The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Operative
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Operative Agreement or
any other instrument or document furnished pursuant thereto, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, or any other obligor or the
performance or observance by the Borrower, or any other obligor of any of their
respective obligations under the Credit Agreement or any other Operative
Agreement or any other instrument or document furnished pursuant hereto or
thereto; and (c) attaches the Note held by it evidencing the Assigned Facility
and requests that the Administrative Agent exchange such Note for a new Note
payable to the Assignee and (if the Assignor has retained any interest in the
Assigned Facility) a new Note payable to the Assignor in the respective amounts
which reflect the assignment being made hereby (and after giving effect to any
other assignments which have become effective on the Effective Date).
The Assignee (a) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (b) confirms that it has received
copies of the Operative Agreements, and such other documents and information as
it has deemed appropriate to make its
<PAGE>
own credit analysis and decision to enter into this Assignment and Acceptance;
(c) agrees that it will, independently and without reliance upon the Assignor,
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
other Operative Agreements or any other instrument or document furnished
pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent
to take such action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement, the other Operative Agreements or any
other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and the other Operative Agreements to which
Assignee is a party and will perform in accordance herewith all the obligations
which by the terms of the Credit Agreement and the other Operative Agreements to
which Assignee is a party are required to be performed by it as a Lender
including, if it is organized under the laws of a jurisdiction outside the U.S.,
its obligation pursuant to Section 2.13(b) of the Credit Agreement.
The effective date of this Assignment and Acceptance shall be ________,
19__ (the "Effective Date"). Following the execution of this Assignment and
--------------
Acceptance, it will be delivered to the Administrative Agent for acceptance by
it and recording by the Administrative Agent pursuant to Section 9.9 of the
Credit Agreement, effective as of the Effective Date (which shall not, unless
otherwise agreed to by the Administrative Agent, be earlier than five Business
Days after the date of such acceptance and recording by the Administrative
Agent).
Upon such acceptance and recording, from and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignee whether such amounts have accrued prior to the Effective Date or accrue
subsequent to the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.
From and after the Effective Date, (a) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Lender thereunder and under the other
Operative Agreements and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement and the other Operative Agreements.
This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
-7-
<PAGE>
[Name of Assignee] [Name of Assignee]
By:____________________________ By:__________________________
Name: Name:
Title: Title:
Consented To:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee for
Capital One Realty Trust 1998-1
By:____________________________________________
Name:
Title:
BANK OF AMERICA, N.A., as Administrative Agent
By:___________________________________________
Name:
Title:
[consents required only to the extent expressly
provided in Section 9.8 of the Credit Agreement]
-3-
<PAGE>
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT (CAPITAL ONE REALTY, INC.),
DATED AS OF AUGUST 31, 1999,
AMONG
FIRST SECURITY BANK, NATIONAL ASSOCIATION
NOT INDIVIDUALLY,
BUT SOLELY AS OWNER TRUSTEE,
THE LENDERS NAMED THEREIN
AND
BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT
FOR THE LENDERS (IN SUCH CAPACITY, THE "ADMINISTRATIVE AGENT")
--------------------
________________________________________________________________________________
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Principal Commitment
Facility Assigned Amount Assigned Percentage Assigned
----------------- --------------- -------------------
$____________ ____________%
[Name of Assignor] [Name of Assignee]
By:____________________________ By:__________________________
Name: Name:
Title: Title:
-2-
<PAGE>
-2-
<PAGE>
Exhibit 10.22
-------------
LEASE AGREEMENT
(Capital One Realty, Inc.)
(Tax Retention Operating Lease)
Dated as of September 3, 1999
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually,
but solely as Owner Trustee
under the Capital One Realty Trust 1998-1,
as Lessor
and
CAPITAL ONE REALTY, INC.,
as Lessee
- -------------------------------------------------------------------------------
This Lease Agreement is subject to a security interest in favor of Bank of
America, N.A., as Administrative Agent (the "Agent") under a Security Agreement
dated as of September 3, 1999, between First Security Bank, National
Association, not individually except as expressly stated therein, but solely as
Owner Trustee under the Capital One Realty Trust 1998-1 and the Agent, as
amended, modified, supplemented, restated and/or replaced from time to time.
This Lease Agreement has been executed in several counterparts. To the extent,
if any, that this Lease Agreement 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 Agreement may be created
through the transfer or possession of any counterpart other than the original
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I............................................................................ 1
1.1 Definitions................................................................. 1
1.2 Interpretation.............................................................. 2
ARTICLE II........................................................................... 2
2.1 Property.................................................................... 2
2.2 Lease Term.................................................................. 2
2.3 Title....................................................................... 2
2.4 Lease Supplements........................................................... 2
ARTICLE III.......................................................................... 3
3.1 Rent........................................................................ 3
3.2 Payment of Basic Rent....................................................... 3
3.3 Supplemental Rent........................................................... 3
3.4 Performance on a Non-Business Day........................................... 4
3.5 Rent Payment Provisions..................................................... 4
ARTICLE IV........................................................................... 4
4.1 Taxes; Utility Charges...................................................... 4
ARTICLE V............................................................................ 5
5.1 Quiet Enjoyment............................................................. 5
ARTICLE VI........................................................................... 5
6.1 Net Lease................................................................... 5
6.2 No Termination or Abatement................................................. 6
ARTICLE VII.......................................................................... 6
7.1 Ownership of the Property................................................... 6
ARTICLE VIII......................................................................... 7
8.1 Condition of the Property................................................... 7
8.2 Possession and Use of the Property.......................................... 8
ARTICLE IX........................................................................... 9
9.1 Compliance With Legal Requirements and Insurance Requirements............... 9
ARTICLE X............................................................................ 9
10.1 Maintenance and Repair; Return............................................. 9
10.2 Environmental Inspection................................................... 10
ARTICLE XI........................................................................... 11
11.1 Modifications.............................................................. 11
ARTICLE XII.......................................................................... 11
12.1 Warranty of Title.......................................................... 11
ARTICLE XIII......................................................................... 12
13.1 Permitted Contests Other Than in Respect of Indemnities.................... 12
ARTICLE XIV.......................................................................... 13
14.1 Public Liability and Workers' Compensation Insurance....................... 13
14.2 Permanent Hazard and Other Insurance....................................... 13
14.3 Coverage................................................................... 14
ARTICLE XV........................................................................... 15
15.1 Casualty and Condemnation.................................................. 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
15.2 Environmental Matters...................................................... 17
15.3 Notice of Environmental Matters............................................ 17
ARTICLE XVI........................................................................... 18
16.1 Termination Upon Certain Events............................................ 18
16.2 Procedures................................................................. 18
ARTICLE XVII.......................................................................... 18
17.1 Lease Events of Default.................................................... 18
17.2 Surrender of Possession.................................................... 21
17.3 Reletting.................................................................. 21
17.4 Damages.................................................................... 21
17.5 Power of Sale.............................................................. 22
17.6 Final Liquidated Damages................................................... 22
17.7 Lessee's Purchase Option During Default.................................... 23
17.8 Waiver of Certain Rights................................................... 23
17.9 Assignment of Rights Under Contracts....................................... 23
17.10 Remedies Cumulative........................................................ 24
ARTICLE XVIII......................................................................... 24
18.1 Lessor's Right to Cure Lessee's Lease Defaults............................. 24
ARTICLE XIX........................................................................... 24
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option............ 24
19.2 No Purchase or Termination With Respect to Less than All of a Property..... 24
ARTICLE XX............................................................................ 25
20.1 Purchase Option or Sale Option-General Provisions.......................... 25
20.2 Lessee Purchase Option..................................................... 26
20.3 Third Party Sale Option.................................................... 26
ARTICLE XXI........................................................................... 27
21.1 [Intentionally Omitted].................................................... 27
ARTICLE XXII.......................................................................... 27
22.1 Sale Procedure............................................................. 27
22.2 Application of Proceeds of Sale............................................ 29
22.3 Indemnity for Excessive Wear............................................... 29
22.4 Appraisal Procedure........................................................ 29
22.5 Certain Obligations Continue............................................... 30
ARTICLE XXIII......................................................................... 30
23.1 Holding Over............................................................... 30
ARTICLE XXIV.......................................................................... 31
24.1 Risk of Loss............................................................... 31
ARTICLE XXV........................................................................... 31
25.1 Assignment................................................................. 31
25.2 Subleases.................................................................. 31
ARTICLE XXVI.......................................................................... 32
26.1 No Waiver.................................................................. 32
ARTICLE XXVII......................................................................... 32
27.1 Acceptance of Surrender.................................................... 32
27.2 No Merger of Title......................................................... 32
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XXVIII....................................................................... 33
28.1 Incorporation of Covenants................................................ 33
ARTICLE XXIX......................................................................... 34
29.1 Notices................................................................... 34
ARTICLE XXX.......................................................................... 35
30.1 Miscellaneous............................................................. 35
30.2 Amendments and Modifications.............................................. 35
30.3 Successors and Assigns.................................................... 35
30.4 Headings and Table of Contents............................................ 36
30.5 Counterparts.............................................................. 36
30.6 GOVERNING LAW............................................................. 36
30.7 Calculation of Rent....................................................... 36
30.8 Memoranda of Lease and Lease Supplements.................................. 36
30.9 Allocations between the Lenders and the Holders........................... 36
30.10 Limitations on Recourse................................................... 37
30.11 WAIVERS OF JURY TRIAL..................................................... 37
30.12 Exercise of Lessor Rights................................................. 37
30.13 Submission To Jurisdiction; Waivers....................................... 37
30.14 USURY SAVINGS PROVISION................................................... 38
</TABLE>
iii
<PAGE>
EXHIBITS
- --------
EXHIBIT A Lease Supplement No. ___
EXHIBIT B Memorandum of Lease and Lease Supplement No.___
iv
<PAGE>
LEASE AGREEMENT
---------------
(Capital One Realty, Inc.)
(Tax Retention Operating Lease Agreement)
THIS LEASE AGREEMENT (Capital One Realty, Inc.) (Tax Retention Operating
Lease) (as amended, supplemented or modified from time to time, this "Lease"),
-----
dated as of September 3, 1999, is between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, having its principal office at 79
South Main Street, Salt Lake City, Utah 84111, not individually, but solely as
Owner Trustee under the Capital One Realty Trust 1998-1, as lessor (the
"Lessor"), and CAPITAL ONE REALTY, INC., a Delaware corporation, having its
------
principal place of business at 2980 Fairview Park Drive, Suite 1300, Falls
Church, VA 22042, as lessee (the "Lessee").
------
W I T N E S S E T H:
- - - - - - - - - -
A. WHEREAS, subject to the terms and conditions of the Agency
Agreement, Lessor will (i) purchase or ground lease various parcels of real
property, some of which will (or may) have existing Improvements thereon, from
one or more third parties designated by Lessee and (ii) fund the development,
refurbishment and construction by the Construction Agent of Improvements on such
real property; and
B. WHEREAS, the Basic Term shall commence with respect to each
Property upon the Completion of such Property (the "Basic Term Commencement
-----------------------
Date").
C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to
lease from Lessor, each Property;
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 Definitions.
------------
Capitalized terms used but not otherwise defined in this Lease have the
respective meanings specified in Appendix A to the Participation Agreement of
----------
even date herewith (as such may be amended, modified, supplemented, restated
and/or replaced from time to time, the "Participation Agreement") among the
-----------------------
Lessee, the Construction Agent, Capital One Bank, as Guarantor, First Security
Bank, National Association, not individually, except as expressly stated
therein, as Owner Trustee under the Capital One Realty Trust 1998-1, the
Holders, the Lenders and the Agent.
<PAGE>
1.2 Interpretation.
--------------
The rules of usage set forth in Appendix A to the Participation Agreement
----------
shall apply to this Lease.
ARTICLE II
2.1 Property.
--------
Subject to the terms and conditions hereinafter set forth and contained in
the respective Lease Supplement relating to each Property, Lessor hereby leases
to Lessee and Lessee hereby leases from Lessor, each Property. Each Property is
(or will be) legally described in the applicable Lease Supplement.
2.2 Lease Term.
----------
The basic term of this Lease with respect to each Property (the "Basic
-----
Term") shall begin upon the Basic Term Commencement Date and shall end on the
- ----
third annual anniversary of the Initial Closing Date (the "Basic Term Expiration
---------------------
Date"), unless the Basic Term is earlier terminated or the term of this Lease is
- ----
renewed (as described below) in accordance with the provisions of this Lease.
To the extent no Default or Event of Default has occurred and is
continuing, and if Lessee has not provided written notice to Lessor at least one
hundred twenty (120) days prior to the Basic Term Expiration Date of its
determination to exercise its purchase option or sale option under Article XX
hereof, the term of this Lease for each Property shall be automatically extended
for one (1) additional term of one (1) year's duration from the Basic Term
Expiration Date (the "Renewal Term"); provided, that the expiration date for
------------ --------
such Renewal Term for each Property shall not be later than the fourth annual
anniversary of the Initial Closing Date.
2.3 Title.
-----
Each Property is leased to Lessee without any representation or warranty,
express or implied, by Lessor and subject to the rights of parties in possession
(if any), the existing state of title (including, without limitation, the
Permitted Exceptions) and all applicable Legal Requirements. Lessee shall in no
event have any recourse against Lessor for any defect in title to any Property
other than for Lessor Liens.
2.4 Lease Supplements.
-----------------
On or prior to each Basic Term Commencement Date, Lessee and Lessor shall
each execute and deliver a Lease Supplement for the Property to be leased
effective as of such Basic Term Commencement Date in substantially the form of
Exhibit A hereto.
- ---------
-2-
<PAGE>
ARTICLE III
3.1 Rent.
----
(a) Lessee shall pay Basic Rent in arrears on each Payment Date,
and on any date on which this Lease shall terminate with respect to any or
all Properties during the Term; provided, however, with respect to each
individual Property Lessee shall have no obligation to pay Basic Rent with
respect to such Property until the Basic Term has commenced with respect to
such Property.
(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 (or within the applicable grace period) to
such account or accounts at such bank or banks as Lessor shall from time to
time direct.
(c) Lessee's inability or failure to take possession of all or
any portion of any Property when delivered by Lessor, whether or not
attributable to any act or omission of Lessor, the Construction Agent or
Lessee, or for any other reason whatsoever, shall not delay or otherwise
affect Lessee's obligation to pay Rent for such Property in accordance with
the terms of this Lease.
3.2 Payment of Basic Rent.
---------------------
Basic Rent shall be paid absolutely net to Lessor or its designee, so that
this Lease shall yield to Lessor the full amount thereof, without setoff,
deduction or reduction.
3.3 Supplemental Rent.
-----------------
Lessee shall pay to Lessor or its designee or to the Person entitled
thereto any and all Supplemental Rent promptly as the same shall become due and
payable, and if Lessee fails to pay any Supplemental Rent, Lessor shall have all
rights, powers and remedies provided for herein or by law or equity or otherwise
in the case of nonpayment of Basic Rent. Lessee shall pay to Lessor, as
Supplemental Rent, among other things, on demand, to the extent permitted by
applicable Legal Requirements, (a) any and all unpaid fees, charges, payments
and other obligations (other than the obligations of Lessor to pay the principal
amount of the Loans and the Holder Amount) due and owing by Lessor under the
Credit Agreement, under the Trust Agreement and/or under any other Operative
Agreement (including specifically without limitation any amounts owing to the
Lenders under Section 2.11, Section 2.12, Section 2.13 and Section 9.5 of the
Credit Agreement and any amounts owing to the Holders under Section 3.9 or
Section 3.10 of the Trust Agreement) and (b) interest at the applicable Overdue
Rate on any installment of Basic Rent not paid when due (subject to the
applicable grace period) for the period for which the same shall be overdue and
on any payment of Supplemental Rent not paid when due or demanded by 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 Lessee's
obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of
-3-
<PAGE>
Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in
this Lease, in the event of any failure on the part of Lessee to pay and
discharge any Supplemental Rent as and when due, Lessee shall also promptly pay
and discharge any fine, penalty, interest or cost which may be assessed or added
for nonpayment or late payment of such Supplemental Rent, all of which shall
also constitute Supplemental Rent. Notwithstanding the foregoing, with respect
to each individual Property, Lessee shall have no obligation to pay Supplemental
Rent with respect to such Property until the Basic Term has commenced with
respect to such Property; provided, nothing in this Section 3.3 shall excuse the
--------
Construction Agent from paying amounts (including amounts that would otherwise
constitute Supplemental Rent obligations) to the extent such amounts are payable
under the Agency Agreement prior to the Basic Term Commencement Date respecting
such Property.
3.4 Performance on a Non-Business Day.
---------------------------------
If any Basic Rent is required hereunder on a day that is not a Business
Day, then such Basic Rent shall be due on the corresponding Scheduled Interest
Payment Date. If any Supplemental Rent is required hereunder on a day that is
not a Business Day, then such Supplemental Rent shall be due on the next
succeeding Business Day.
3.5 Rent Payment Provisions.
-----------------------
Lessee shall make payment of all Basic Rent and Supplemental Rent when due
(subject to the applicable grace period) regardless of whether any of the
Operative Agreements pursuant to which same is calculated and is owing shall
have been rejected, avoided or disavowed in any bankruptcy or insolvency
proceeding involving any of the parties to any of the Operative Agreements.
Such provisions of such Operative Agreements and their related definitions are
incorporated herein by reference and shall survive any termination, amendment or
rejection of any such Operative Agreements.
ARTICLE IV
4.1 Taxes; Utility Charges.
----------------------
Lessee shall pay or cause to be paid all Impositions with respect to the
Properties and/or the use, occupancy or operation thereof and all charges for
electricity, power, gas, oil, water, telephone, sanitary sewer service and all
other rents, utilities and operating expenses of any kind or type used in or on
a Property and related real property during the Term. Upon Lessor's request,
Lessee shall provide from time to time Lessor with evidence of all such payments
referenced in the foregoing sentence. Lessee shall be entitled to receive any
credit or refund with respect to any Imposition or utility charge paid by
Lessee. Unless an Event of Default shall have occurred and be continuing, the
amount of any credit or refund received by Lessor on account of any Imposition
or utility charges paid by Lessee, net of the costs and expenses incurred by
Lessor in obtaining such credit or refund, shall be promptly paid over to
Lessee. All charges for Impositions or utilities imposed with respect to a
Property for a period during which this Lease
-4-
<PAGE>
expires or terminates shall be adjusted and prorated on a daily basis between
Lessor and Lessee, and each party shall pay or reimburse the other for such
party's pro rata share thereof.
ARTICLE V
5.1 Quiet Enjoyment.
---------------
Subject to the rights of Lessor contained in Sections 17.2, 17.3 and 20.3
and the other terms of this Lease and so long as no Lease Event of Default shall
have occurred and be continuing, Lessee shall peaceably and quietly have, hold
and enjoy each Property for the applicable Term, free of any claim or other
action by Lessor or anyone rightfully claiming by, through or under Lessor
(other than Lessee) with respect to any matters arising from and after the
applicable Basic Term Commencement Date.
ARTICLE VI
6.1 Net Lease.
---------
This Lease shall constitute a net lease, and the obligations of Lessee
hereunder are absolute and unconditional. Any present or future law to the
contrary notwithstanding, this Lease shall not terminate, nor shall Lessee be
entitled to any abatement, suspension, deferment, reduction, setoff,
counterclaim, or defense with respect to the Rent, nor shall the obligations of
Lessee hereunder be affected (except as expressly herein permitted and by
performance of the obligations in connection therewith) by reason of: (i) any
damage to or destruction of any Property or any part thereof; (ii) any taking of
any Property or any part thereof or interest therein by Condemnation or
otherwise; (iii) any prohibition, limitation, restriction or prevention of
Lessee's use, occupancy or enjoyment of any Property or any part thereof, or any
interference with such use, occupancy or enjoyment by any Person or for any
other reason; (iv) any title defect, Lien or any matter affecting title to any
Property; (v) any eviction by paramount title or otherwise; (vi) any default by
Lessor hereunder; (vii) any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution or other proceeding relating to or affecting Lessor,
Lessee, any Holder or any Governmental Authority; (viii) the impossibility or
illegality of performance by Lessor, Lessee or both; (ix) any action of any
Governmental Authority; (x) Lessee's acquisition of ownership of all or part of
any Property; (xi) breach of any warranty or representation with respect to any
Property or any Operative Agreement; (xii) any defect in the condition, quality
or fitness for use of any Property or any part thereof; or (xiii) any other
cause or circumstance whether similar or dissimilar to the foregoing and whether
or not Lessee shall have notice or knowledge of any of the foregoing. The
parties intend that the obligations of Lessee hereunder shall be covenants,
agreements and obligations that are separate and independent from any
obligations of Lessor hereunder and shall continue unaffected unless such
covenants, agreements and obligations shall have been modified or terminated in
accordance with an express provision of this Lease. Lessor and Lessee
acknowledge and agree that the provisions of this Section 6.1 have been
specifically reviewed and subject to negotiation.
-5-
<PAGE>
6.2 No Termination or Abatement.
---------------------------
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 Lessor or any
Governmental Authority, or any action with respect to this Lease or any
Operative Agreement which may be taken by any trustee, receiver or liquidator of
Lessor or any Governmental Authority or by any court with respect to Lessor,
Lessee, any Holder, or any Governmental Authority. Lessee hereby waives all
right (i) to terminate or surrender this Lease (except as permitted under the
terms of the Operative Agreements) or (ii) to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with respect
to any Rent. Lessee shall remain obligated under this Lease in accordance with
its terms and 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,
Lessee shall be bound by all of the terms and conditions contained in this
Lease.
ARTICLE VII
7.1 Ownership of the Property.
-------------------------
(a) Lessor and Lessee intend that (i) for financial accounting
purposes with respect to Lessee (A) this Lease will be treated as an
"operating lease" pursuant to Statement of Financial Accounting Standards
No. 13, as amended, (B) Lessor will be treated as the owner and lessor of
each Property and (C) Lessee will be treated as the lessee of each
Property, but (ii) for federal and all state and local income tax purposes,
bankruptcy purposes, commercial law and real estate purposes and all other
purposes (A) this Lease will be treated as a financing arrangement and (B)
Lessee will be treated as the owner of the Properties and will be entitled
to all tax benefits ordinarily available to owners of property similar to
the Properties for such tax purposes.
(b) For all purposes other than as set forth in Section 7.1(a),
Lessor and Lessee intend this Lease to constitute a finance lease and not a
true lease. Lessor and Lessee further intend and agree that, for the
purpose of securing Lessee's obligations hereunder, (i) this Lease shall be
deemed to be a security agreement and financing statement within the
meaning of Article 9 of the Uniform Commercial Code respecting each of the
Properties to the extent such is personal property and an irrevocable grant
and conveyance of a lien and mortgage on each of the Properties to the
extent such is real property; (ii) the acquisition of title in each
Property referenced in Article II shall be deemed to be a grant by Lessee
to Lessor of, and Lessee hereby grants to Lessor, a lien on and security
interest, mortgage lien and deed of trust in all of Lessee's right, title
and interest in and to the Property and all proceeds (including without
limitation insurance proceeds) of the conversion, voluntary or involuntary,
of the foregoing into cash,
-6-
<PAGE>
investments, securities or other property, whether in the form of cash,
investments, securities or other property, and an assignment of all rents,
profits and income produced by the Property; and (iii) notifications to
Persons holding such property, and acknowledgments, receipts or
confirmations from financial intermediaries, bankers or agents (as
applicable) of Lessee shall be deemed to have been given for the purpose of
perfecting such security interest, mortgage lien and deed of trust under
applicable law. Lessor and Lessee shall promptly take such actions as may
be necessary or advisable in either party's opinion (including without
limitation the filing of Uniform Commercial Code Financing Statements,
Uniform Commercial Code Fixture Filings and memoranda of this Lease and the
various Lease Supplements) to ensure that the security interest, lien,
mortgage lien and deed of trust in each Property will be deemed to be a
perfected lien and security interest of first priority under applicable law
and will be maintained as such throughout the Term.
ARTICLE VIII
8.1 Condition of the Property.
-------------------------
LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS IS"
WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY LESSOR AND
IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY
PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS WHICH AN ACCURATE
SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS
AND (E) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF
AND/OR THE DATE OF THE APPLICABLE LEASE SUPPLEMENT. NEITHER LESSOR NOR THE
AGENT NOR ANY LENDER NOR ANY HOLDER 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, VALUE, HABITABILITY, USE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY
(OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART
THEREOF), AND NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER SHALL
BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF ANY
PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. THE LESSEE
HAS OR WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE
IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS THE LESSOR, THE AGENT,
EACH LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS
INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS
OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE
PRECEDING SENTENCE, AS BETWEEN THE LESSOR, THE
-7-
<PAGE>
AGENT, THE LENDERS AND THE HOLDERS, ON THE ONE HAND, AND THE LESSEE, ON THE
OTHER HAND, ARE TO BE BORNE BY LESSEE.
8.2 Possession and Use of the Property.
----------------------------------
(a) At all times during the Term with respect to each Property,
such Property shall be used by Lessee in the ordinary course of its
business. Lessee shall pay, or cause to be paid, all charges and costs
required in connection with the use of the Properties as contemplated by
this Lease. Lessee shall not commit or permit any waste of the Properties
or any part thereof.
(b) The address stated in Section 29.1 of this Lease is the chief
place of business and chief executive office of Lessee (as such terms are
used in Section 9-103(3) of the Uniform Commercial Code of any applicable
jurisdiction), and Lessee will provide Lessor with prior written notice of
any change of location of its chief place of business or chief executive
office. Regarding a particular Property, each Lease Supplement correctly
identifies the initial location of the related Equipment and Improvements
and contains an accurate legal description for the related parcel of Land.
Lessee has no other places of business where the Equipment or Improvements
will be located other than those identified on the applicable Lease
Supplement.
(c) Lessee will not attach or incorporate any item of Equipment to
or in any other item of equipment or personal property or to or in any real
property (except the Land identified in the Lease Supplement in which such
Equipment is also described) in a manner that could give rise to the
assertion of any Lien on such item of Equipment by reason of such
attachment or the assertion of a claim that such item of Equipment has
become a fixture and is subject to a Lien in favor of a third party that is
prior to the Liens thereon created by the Operative Agreements.
(d) On the Basic Term Commencement Date for each Property, Lessor
and Lessee shall execute a Lease Supplement in regard to such Property
which shall contain an Equipment Schedule that has a complete description
of each item of Equipment, an Improvement Schedule that has a complete
description of each Improvement and a legal description of the Land, to be
leased hereunder as of such date. Simultaneously with the execution and
delivery of each Lease Supplement, such Equipment, Improvements and Land
shall be deemed to have been accepted by Lessee for all purposes of this
Lease and to be subject to this Lease.
(e) At all times during the Term with respect to each Property,
Lessee will comply with all obligations under and (to the extent no Event
of Default exists and provided that such exercise will not impair the value
of such Property) shall be permitted to exercise all rights and remedies
under, all operation and easement agreements and related or similar
agreements applicable to such Property.
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<PAGE>
(f) To the extent any punch list items with respect to any
particular Property are not complete as of the Basic Term Commencement Date
for such Property, Lessee shall cause such punch list items to be completed
promptly after the Basic Term Commencement Date respecting such Property.
ARTICLE IX
9.1 Compliance With Legal Requirements and Insurance Requirements.
-------------------------------------------------------------
Subject to the terms of Article XIII relating to permitted contests,
Lessee, at its sole cost and expense, shall (i) comply with all material Legal
Requirements (including without limitation all Environmental Laws), and all
Insurance Requirements relating to the Properties, including the use,
development, construction, operation, maintenance, repair, refurbishment and
restoration thereof, whether or not compliance therewith shall require
structural or extraordinary changes in the Improvements or interfere with the
use and enjoyment of the Properties, and (ii) procure, maintain and comply with
all material licenses, permits, orders, approvals, consents and other
authorizations required for the construction, use, maintenance and operation of
the Properties and for the use, development, construction, operation,
maintenance, repair and restoration of the Improvements. The Lessor agrees to
take such actions as may be reasonably requested by the Lessee in connection
with the compliance by the Lessee of its obligations under this Section 9.1.
ARTICLE X
10.1 Maintenance and Repair; Return.
------------------------------
(a) Lessee, at its sole cost and expense, shall maintain each
Property in good condition, repair and working order (ordinary wear and
tear excepted) and make all necessary repairs thereto, of every kind and
nature whatsoever, whether interior or exterior, ordinary or extraordinary,
structural or nonstructural or foreseen or unforeseen, in each case as
required by all Legal Requirements, Insurance Requirements, and
manufacturer's specifications and standards and on a basis consistent with
the operation and maintenance of properties or equipment comparable in type
and function to the applicable Property and in compliance with standard
industry practice subject, however, to the provisions of Article XV with
respect to Condemnation and Casualty.
(b) Lessee shall not use or locate any component of any Property
outside of any Approved State. Lessee shall not move or relocate any
component of any Property beyond the boundaries of the Land (comprising
part of the Property) described in the applicable Lease Supplement.
(c) If any component of any Property becomes worn out, lost,
destroyed, damaged beyond repair or otherwise permanently rendered unfit
for use and the failure to replace such component would have a Material
Adverse Effect on such Property, Lessee, at its own expense, will within a
reasonable time replace such component with a
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<PAGE>
replacement component which is free and clear of all Liens (other than
Permitted Liens) and has a value, utility and useful life at least equal to
the component replaced. All components which are added to the Property
shall immediately become the property of, and title thereto shall vest in,
Lessor, and shall be deemed incorporated in the Property and subject to the
terms of this Lease as if originally leased hereunder.
(d) Upon reasonable advance notice, Lessor and its agents shall
have the right to inspect each Property and all maintenance records with
respect thereto at any reasonable time during normal business hours but
shall not, in the absence of an Event of Default, materially disrupt the
business of Lessee.
(e) Lessee shall cause to be delivered to Lessor (at Lessee's
sole expense) any additional Appraisals (or reappraisals) as Lessor may
request if any one of Lessor, the Agent, any Lender or any Holder is
required pursuant to any applicable Legal Requirement to obtain such an
Appraisal (or reappraisal).
(f) Lessor shall under no circumstances be required to build any
improvements on any Property, make any repairs, replacements, alterations
or renewals of any nature or description to any Property, make any
expenditure whatsoever in connection with this Lease or maintain any
Property in any way. Lessor shall not be required to maintain, repair or
rebuild all or any part of any Property, and Lessee waives the right to (i)
require Lessor to maintain, repair, or rebuild all or any part of any
Property, or (ii) make repairs at the expense of Lessor pursuant to any
Legal Requirement, Insurance Requirement, contract, agreement, covenants,
condition or restriction at any time in effect.
(g) Lessee shall, upon the expiration or earlier termination of
this Lease with respect to a Property, if Lessee shall not have exercised
its Purchase Option with respect to such Property, surrender such Property
to Lessor, or the third party purchaser, as the case may be, subject to
Lessee's obligations under this Lease (including without limitation the
obligations of the Lessee at the time of such surrender under Sections 9.1,
10.1(a)-(f), 10.2, 11.1, 12.1, 22.1 and 23.1).
10.2 Environmental Inspection.
-------------------------
If Lessee has not given notice of exercise of its Purchase Option on the
Expiration Date pursuant to Section 20.1, then not more than 120 days nor less
than 60 days prior to the Expiration Date, Lessee shall, at its sole cost and
expense, provide to Lessor a report by a reputable environmental consultant
selected by Lessee, which report shall be in form and substance reasonably
satisfactory to Lessor.
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<PAGE>
ARTICLE XI
11.1 Modifications.
-------------
(a) Lessee at its sole cost and expense, at any time and from
time to time without the consent of Lessor may make alterations,
renovations, improvements and additions to the Property or any part thereof
and substitutions and replacements therefor (collectively,
"Modifications"), and Lessee shall make any and all Modifications required
-------------
to be made pursuant to any Legal Requirement; provided, that: (i) except
--------
for any Modification required to be made pursuant to a Legal Requirement,
no Modification shall materially impair the value, utility or useful life
of the Property from that which existed immediately prior to such
Modification; (ii) the Modification shall be done expeditiously and in a
good and workmanlike manner; (iii) Lessee shall comply with all material
Legal Requirements (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 adversely affected; (iv) to the extent required by
Section 14.2(a), Lessee shall maintain builders' risk insurance at all
times when a Modification is in progress; (v) subject to the terms of
Article XIII relating to permitted contests, Lessee shall pay all costs and
expenses and discharge any Liens arising with respect to the Modification;
(vi) such Modification shall comply with the requirements of this Lease
(including without limitation Sections 8.2 and 10.1); and (vii) no
Improvements shall be demolished unless Lessee shall finance the proposed
Modification outside of this lease facility. All Modifications shall
immediately and without further action upon their incorporation into the
applicable Property (1) become property of the Lessor, (2) be subject to
this Lease and (3) be titled in the name of Lessor. Lessee shall not remove
or attempt to remove any Modification from any Property. Each Ground Lease
for a Property shall expressly provide for the provisions of the foregoing
sentence. Lessee, at its own cost and expense, will pay for the repairs of
any damage to the Property caused by the removal or attempted removal of
any Modification.
(b) The construction process provided for in the Agency Agreement
is acknowledged by Lessor and the Agent to be consistent with and in
compliance with the terms and provisions of this Article XI.
ARTICLE XII
12.1 Warranty of Title.
-----------------
(a) Lessee agrees that, except as otherwise provided herein and
subject to the terms of Article XIII relating to permitted contests, 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 any 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 Agent pursuant to the
Credit Agreement, other than
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<PAGE>
Permitted Liens and Lessor Liens. Lessee shall promptly notify Lessor in
the event it receives actual knowledge that a Lien other than a Permitted
Lien or Lessor Lien has occurred with respect to a Property, and Lessee
represents and warrants to, and covenants with, Lessor that the Liens in
favor of the Lessor created by the Operative Agreements are first priority
perfected Liens subject only to Permitted Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied, to or
for the performance by any contractor, mechanic, laborer, materialman,
supplier or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition
of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT
LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING A PROPERTY OR
ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER
LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT
THE INTEREST OF LESSOR IN AND TO ANY PROPERTY.
ARTICLE XIII
13.1 Permitted Contests Other Than in Respect of Indemnities.
-------------------------------------------------------
Except to the extent otherwise provided for in Section 13 of the
Participation Agreement, Lessee, on its own or on Lessor's behalf but at
Lessee's sole cost and expense, may contest, by appropriate administrative or
judicial proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Legal Requirement, or
utility charges payable pursuant to Section 4.1 or any Lien, attachment, levy,
encumbrance or encroachment, and Lessor agrees not to pay, settle or otherwise
compromise any such item, provided that (a) the commencement and continuation of
such proceedings shall suspend the collection of any such contested amount from,
and suspend the enforcement thereof against, the applicable Properties, Lessor,
each Holder, the Agent and each Lender; (b) there shall not be imposed a Lien
(other than Permitted Liens) on any Property and no part of any Property nor any
Rent would be in any danger of being sold, forfeited, lost or deferred; (c) at
no time during the permitted contest shall there be a risk of the imposition of
criminal liability or material civil liability on Lessor, any Holder, the Agent
or any Lender for failure to comply therewith; and (d) in the event that, at any
time, there shall be a material risk of extending the application of such item
beyond the end of the Term, then Lessee shall deliver to Lessor an Officer's
Certificate certifying as to the matters set forth in clauses (a), (b) and (c)
of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
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<PAGE>
ARTICLE XIV
14.1 Public Liability and Workers' Compensation Insurance.
----------------------------------------------------
During the Term for each Property, Lessee shall procure and carry, at
Lessee's sole cost and expense, commercial general liability and umbrella
liability insurance for claims for injuries or death sustained by persons or
damage to property while on the Properties or the premises where the Equipment
is located and such other public liability coverages as are then customarily
carried by similarly situated companies conducting business similar to that
conducted by Lessee. Such insurance shall be on terms and in amounts that are
no less favorable than insurance maintained by Lessee with respect to similar
properties and equipment that it owns and are then carried by similarly situated
companies conducting business similar to that conducted by Lessee, and in no
event shall have a minimum combined single limit per occurrence coverage (i) for
commercial general liability of less than $1,000,000 and (ii) for umbrella
liability of less than $50,000,000. The policies shall name the Lessee as the
insured and shall be endorsed to name Lessor, the Holders, the Agent and the
Lenders as additional insureds. The policies shall also specifically provide
that such policies shall be considered primary insurance which shall apply to
any loss or claim before any contribution by any insurance which Lessor, any
Holder, the Agent or any Lender may have in force. Lessee shall, in the
operation of the Properties, comply with applicable workers' compensation laws
and protect Lessor, each Holder, the Agent and each Lender against any liability
under such laws.
14.2 Permanent Hazard and Other Insurance.
------------------------------------
(a) During the Term for each Property, Lessee shall keep each of
the Properties insured against loss or damage by fire and other risks and
shall maintain builders' risk insurance during construction of any
Improvements or Modifications in amounts no less than the Termination Value
from time to time and on terms that (a) are no less favorable than
insurance covering other similar properties owned by Lessee and (b) are
then carried by similarly situated companies conducting business similar to
that conducted by Lessee. The policies shall name the Lessee as the insured
and shall be endorsed to name Lessor as an additional insured and loss
payee and the Agent, on behalf of the Holders and the Lenders to the extent
of their respective interests, as mortgagee and an additional named insured
and loss payee; provided, so long as no Lease Event of Default exists, any
--------
loss payable under the insurance policies required by this Section for
losses up to $1,000,000 will be paid to Lessee.
(b) If, during the Term with respect to a Property the area in
which such Property is located is designated a "flood-prone" area pursuant
to the Flood Disaster Protection Act of 1973, or any amendments or
supplements thereto or is in a zone designated A or V, then Lessee shall
comply with the National Flood Insurance Program as set forth in the Flood
Disaster Protection Act of 1973. In addition, Lessee will fully comply with
the requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as each may be amended from time to time,
and with any
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<PAGE>
other Legal Requirement, concerning flood insurance to the extent that it
applies to any such Property.
14.3 Coverage.
--------
(a) As of the date of this Lease and annually thereafter during
the Term, Lessee shall furnish Lessor and the Agent with certificates
prepared by the insurers or insurance broker of Lessee showing the
insurance required under Sections 14.1 and 14.2 to be in effect, naming
(except with respect to workers' compensation insurance) Lessor, the
Holders, the Agent and the Lender as additional insureds and loss payees
and evidencing the other requirements of this Article XIV. All such
insurance shall be at the cost and expense of Lessee (or the Lessee's
Contractors with respect to insurance required to be maintained by such
Contractors) and provided by nationally recognized, financially sound
insurance companies having an A-X11 or better rating by Best's Key Rating
Guide. Such certificates shall include a provision for thirty (30) days'
advance written notice by the insurer to Lessor and the Agent in the event
of cancellation or material alteration of such insurance. If a Lease Event
of Default has occurred and is continuing and Lessor so requests, Lessee
shall deliver to Lessor copies of all insurance policies required by
Sections 14.1 and 14.2.
(b) Lessee agrees that the insurance policy or policies required
by Sections 14.1, 14.2(a) and 14.2(b) shall include an appropriate clause
pursuant to which any such policy shall provide that it will not be
invalidated should Lessee or any Contractor, as the case may be, waive, at
any time, any or all rights of recovery against any party for losses
covered by such policy or due to any breach of warranty, fraud, action,
inaction or misrepresentation by Lessee or any Person acting on behalf of
Lessee. Lessee hereby waives any and all such rights against the Lessor,
the Holders, the Agent and the Lenders to the extent of payments made to
any such Person under any such policy.
(c) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Article XIV, except that Lessor may carry
separate liability insurance at Lessor's sole cost so long as (i) Lessee's
insurance is designated as primary and in no event excess or contributory
to any insurance Lessor may have in force which would apply to a loss
covered under Lessee's policy and (ii) each such insurance policy will not
cause Lessee's insurance required under this Article XIV to be subject to a
coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for the
insurance required by Section 14.1 and Section 14.2, shall renew or replace
each policy prior to the expiration date thereof or otherwise maintain the
coverage required by such Sections without any lapse in coverage.
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<PAGE>
ARTICLE XV
15.1 Casualty and Condemnation.
-------------------------
(a) Subject to the provisions of this Article XV and Article XVI
(in the event Lessee delivers, or is obligated to deliver or is deemed to
have delivered, a Termination Notice), and prior to the occurrence and
continuation of a Lease Event of Default, Lessee shall be entitled to
receive (and Lessor hereby irrevocably assigns to Lessee all of Lessor's
right, title and interest in) any award, compensation or insurance proceeds
under Sections 14.2(a) or (b) hereof to which Lessee or Lessor may become
entitled by reason of their respective interests in a Property (i) if all
or a portion of such Property is damaged or destroyed in whole or in part
by a Casualty or (ii) if the use, access, occupancy, easement rights or
title to such Property or any part thereof is the subject of a
Condemnation; provided, however, if a Lease Event of Default shall have
-------- -------
occurred and be continuing or if such award, compensation or insurance
proceeds shall exceed $1,000,000, then such award, compensation or
insurance proceeds shall be paid directly to Lessor or, if received by
Lessee, shall be held in trust for Lessor, and shall be paid over by Lessee
to Lessor and held in accordance with the terms of this paragraph (a). All
amounts held by Lessor hereunder on account of any award, compensation or
insurance proceeds either paid directly to Lessor or turned over to Lessor
shall be held as security for the performance of Lessee's obligations
hereunder and when all such obligations of Lessee with respect to such
matters have been satisfied, all amounts so held by Lessor shall be paid
over to Lessee.
(b) 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 Lessee's reasonable request, and at Lessee's
sole cost and expense, Lessor and the Agent shall participate in any such
proceeding, action, negotiation, prosecution or adjustment. Lessor and
Lessee agree that this Lease shall control the rights of Lessor and Lessee
in and to any such award, compensation or insurance payment.
(c) If Lessee shall receive notice of a Casualty or a possible
Condemnation of a Property or any interest therein where damage to the
affected Property is estimated to equal or exceed twenty-five percent (25%)
of the Property Cost of such Property, Lessee shall give notice thereof to
the Lessor and to the Agent promptly after the receipt of such notice. In
such event or in the event that a condemnation award or other compensation
or insurance proceeds in excess of $15,000,000 are received by Lessee or
Lessor in respect of any Casualty or Condemnation, then Lessee shall be
deemed to have delivered a Termination Notice and the provisions of
Sections 16.1 and 16.2 shall apply.
(d) In the event of a Casualty or a Condemnation (regardless of
whether notice thereof must be given pursuant to paragraph (c)), this Lease
shall terminate with respect to the applicable Property in accordance with
Section 16.1 if Lessee, within thirty (30) days after such occurrence,
delivers to Lessor and the Agent a notice to such effect.
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<PAGE>
(e) If pursuant to this Section 15.1 this Lease shall continue in
full force and effect following a Casualty or Condemnation with respect to
the affected Property, Lessee shall, at its sole cost and expense and
using, if available, the proceeds of any award, compensation or insurance
with respect to such Casualty or Condemnation (including, without
limitation, any such award, compensation or insurance which has been
received by the Agent and which should be turned over to Lessee pursuant to
the terms of the Operative Agreements, and if not available or sufficient,
using its own funds), promptly and diligently repair any damage to the
applicable Property caused by such Casualty or Condemnation in conformity
with the requirements of Sections 10.1 and 11.1, using the as-built Plans
and Specifications or manufacturer's specifications for the applicable
Improvements or Equipment (as modified to give effect to any subsequent
Modifications, any Condemnation affecting the Property and all applicable
Legal Requirements), so as to restore the applicable Property to
substantially the same condition, operation, function and value as existed
immediately prior to such Casualty or Condemnation. In such event, title to
the applicable Property shall remain with Lessor.
(f) In no event shall a Casualty or Condemnation with respect to
which this Lease remains in full force and effect under this Section 15.1
affect Lessee's obligations to pay Rent pursuant to Section 3.1.
(g) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(e), if during the Term with respect to a Property a
Casualty occurs with respect to such Property or Lessee receives notice of
a Condemnation with respect to such Property, and following such Casualty
or Condemnation, the applicable Property cannot reasonably be restored,
repaired or replaced on or before the earlier of the 180th day prior to the
Expiration Date or the date nine (9) months after the occurrence of such
Casualty or Condemnation to the substantially same condition as existed
immediately prior to such Casualty or Condemnation or on or before such day
such Property is not in fact so restored, repaired or replaced, then Lessee
shall be required to exercise its Purchase Option for such Property on the
next Payment Date (notwithstanding the limits on such exercise contained in
Section 20.2) and pay Lessor the Termination Value for such Property;
provided, if any Default or Event of Default has occurred and is
--------
continuing, Lessee shall also promptly (and in any event within three (3)
Business Days) pay Lessor any award, compensation or insurance proceeds
received on account of any Casualty or Condemnation with respect to any
Property; provided, further, that no Default or Event of Default has
occurred and is continuing, any Excess Proceeds shall be paid to Lessee.
If a Default has occurred and is continuing and any Loans, Holder Funding
or other amounts are owing with respect thereto, then any Excess Proceeds
(to the extent of any such Loans, Holder Funding or other amounts owing
with respect thereto) shall be paid to the Lessor.
(h) The provisions of Section 15.1(a) through 15.1(g) shall not
apply to any Property until after the Basic Term commences with respect to
such Property.
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<PAGE>
15.2 Environmental Matters.
---------------------
Promptly upon Lessee's actual knowledge of the presence of Hazardous
Substances in any portion of any Property or Properties in concentrations and
conditions that constitute an Environmental Violation and which, in the
reasonable opinion of Lessee, the cost to undertake any legally required
response, clean up, remedial or other action will or might result in a cost to
Lessee of more than $15,000, Lessee shall notify Lessor in writing of such
condition. In the event of any Environmental Violation (regardless of whether
notice thereof must be given), Lessee shall, not later than thirty (30) days
after Lessee has actual knowledge of such Environmental Violation, either
deliver to Lessor a Termination Notice with respect to the applicable Property
or Properties pursuant to Section 16.1, if applicable, or, at Lessee's sole cost
and expense, promptly and diligently undertake and complete any response, clean
up, remedial or other action (including without limitation, the pursuit by
Lessee of appropriate action against any off-site or third party source for
contamination) necessary to remove, cleanup or remediate the Environmental
Violation in accordance with all Environmental Laws. If Lessee does not deliver
a Termination Notice with respect to such Property pursuant to Section 16.1,
Lessee shall, upon completion of remedial action by Lessee, cause to be prepared
by a reputable environmental consultant acceptable to Lessor a report describing
the Environmental Violation and the actions taken by Lessee (or its agents) in
response to such Environmental Violation, and a statement by the consultant that
the Environmental Violation has been remedied in full compliance with applicable
Environmental Law. Not less than sixty (60) days prior to any time that Lessee
elects to remarket any Property pursuant to Section 20.1 hereof or any other
provision of any Operative Agreement, Lessee shall deliver a Phase I
environmental survey respecting such Property satisfactory in form and substance
to the Lessor. Notwithstanding any other provision of any Operative Agreement,
if Lessee fails to comply with the foregoing obligation regarding the Phase I
environmental survey, Lessee shall be obligated to purchase such Property for
its Termination Value and shall not be permitted to exercise (and Lessor shall
have no obligation to honor any such exercise) any rights under any Operative
Agreement regarding a sale of such Property to a Person other than Lessee or any
Affiliate of Lessee.
15.3 Notice of Environmental Matters.
-------------------------------
Promptly, but in any event within five (5) days from the date Lessee has
actual knowledge thereof, Lessee shall provide to 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 any Property or
Properties. All such notices shall describe in reasonable detail the nature of
the claim, action or proceeding and Lessee's proposed response thereto. In
addition, Lessee shall provide to Lessor, within five (5) Business Days of
receipt, copies of all material written communications with any Governmental
Authority relating to any Environmental Law in connection with any Property.
Lessee shall also promptly provide such detailed reports of any such material
environmental claims as may reasonably be requested by Lessor.
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<PAGE>
ARTICLE XVI
16.1 Termination Upon Certain Events.
-------------------------------
If any of the following occur: (i) Lessee has delivered a notice pursuant
to Section 15.1(d), or is deemed to have delivered such notice pursuant to
Section 15.1(c), then following the applicable Casualty or Condemnation this
Lease shall terminate with respect to the affected Property, or (ii) Lessee has
delivered notice pursuant to the second sentence of Section 15.2 that, due to
the occurrence of an Environmental Violation, this Lease shall terminate with
respect to the affected Property, then Lessee shall be obligated to deliver,
within thirty (30) days of its receipt of notice of the applicable Condemnation
or the occurrence of the applicable Casualty or Environmental Violation, a
written notice to the Lessor in the form described in Section 16.2(a) (a
"Termination Notice") of the termination of this Lease with respect to the
------------------
applicable Property.
16.2 Procedures.
----------
(a) A Termination Notice shall contain: (i) notice of termination
of this Lease with respect to the affected Property on a Payment Date not
more than sixty (60) days after Lessor's receipt of such Termination Notice
(the "Termination Date"); and (ii) a binding and irrevocable agreement of
----------------
Lessee to pay the Termination Value for the applicable Property and
purchase such Property on such Termination Date.
(b) On each Termination Date, Lessee shall pay to Lessor the
Termination Value for the applicable Property, and Lessor shall convey such
Property or the remaining portion thereof, if any, to Lessee (or Lessee's
designee), all in accordance with Section 20.2.
ARTICLE XVII
17.1 Lease Events of Default.
-----------------------
If any one or more of the following events (each a "Lease Event of
--------------
Default") shall occur:
- -------
(a) Lessee shall fail to make payment of (i) any Basic Rent (except
as set forth in clause (ii)) within five (5) days after the same has become
due and payable or (ii) any Termination Value, on the date any such payment
is due, or any payment of Basic Rent or Supplemental Rent due on the due
date of any such payment of Termination Value, or any amount due on the
Expiration Date;
(b) Lessee shall fail to make payment of any Supplemental Rent
(other than Supplemental Rent referred to in Section 17(a)(ii)) within five
(5) days after notice that such payment is due and payable or the Guarantor
shall fail to make any payment of any amount under any Operative Agreement
which has become due and payable (subject to any applicable grace period)
after receipt of notice that such payment is due;
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<PAGE>
(c) Lessee shall fail to maintain insurance as required by Article
XIV of this Lease;
(d) Lessee shall fail to observe or perform any material term,
covenant or condition of Lessee under this Lease (including without
limitation the Incorporated Covenants) or any other Operative Agreement to
which Lessee is a party other than those set forth in Sections 17.1(a), (b)
or (c) hereof, or the Guarantor shall fail to observe or perform any term,
covenant, obligation or condition of the Guarantor under any Operative
Agreement other than those set forth in Section 17.1(b) hereof, or any
representation or warranty made by Lessee or the Guarantor set forth in
this Lease (including without limitation the Incorporated Representations
and Warranties) or in any other Operative Agreement or in any document
entered into in connection herewith or therewith or in any document,
certificate or financial or other statement delivered in connection
herewith or therewith shall be false or inaccurate in any material way,
and, to the extent such failure, misrepresentation or breach of warranty is
capable of being cured, such failure, misrepresentation or breach of
warranty shall remain uncured for a period of fifteen (15) days after the
Lessee or the Guarantor has reason to know or notice thereof; provided,
that if such failure misrepresentation or breach is not capable of being
cured or if there is no cure period for breach of the Incorporated
Representations and Warranties or Incorporated Covenants in the Capital One
Credit Agreement or any New Facility the grace period referred to in this
subclause (d) shall not apply;
(e) An Agency Agreement Event of Default shall have occurred and be
continuing;
(f) [Intentionally Omitted]
(g) [Intentionally Omitted];
(h) The liquidation or dissolution of the Construction Agent or any
Credit Party, or the suspension of the business of the Construction Agent
or any Credit Party, or the filing by the Construction Agent or any Credit
Party of a voluntary petition or an answer seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
United States Bankruptcy Code, as amended, or under any other insolvency
act or law, state or federal, now or hereafter existing, or any other
action of the Construction Agent or any Credit Party indicating its consent
to, approval of or acquiescence in, any such petition or proceeding; the
application by the Construction Agent or any Credit Party for, or the
appointment by consent or acquiescence of the Construction Agent or any
Credit Party of a receiver, a trustee or a custodian of the Construction
Agent or any Credit Party for all or a substantial part of its property;
the making by the Construction Agent or any Credit Party of any assignment
for the benefit of creditors; the inability of the Construction Agent or
any Credit Party or the admission by the Construction Agent or any Credit
Party in writing of its inability to pay its debts as
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<PAGE>
they mature; or the Construction Agent or any Credit Party taking any
corporate action to authorize any of the foregoing;
(i) The filing of an involuntary petition against the Construction
Agent or any Credit Party in bankruptcy or seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
United States Bankruptcy Code, as amended, or under any other insolvency
act or law, state or federal, now or hereafter existing; or the involuntary
appointment of a receiver, a trustee or a custodian of the Construction
Agent or any Credit Party for all or a substantial part of its property; or
the issuance of a warrant of attachment, execution or similar process
against any substantial part of the property of the Construction Agent or
any Credit Party, and the continuance of any of such events for ninety (90)
days undismissed or undischarged;
(j) The adjudication of the Construction Agent or any Credit Party
as bankrupt or insolvent;
(k) The entering of any order in any proceedings against the
Construction Agent or any Credit Party decreeing the dissolution,
divestiture or split-up of the Construction Agent or any Credit Party, and
such order remains in effect for more than sixty (60) days;
(l) Any material report, certificate, financial statement or other
instrument delivered to Lessor by or on behalf of the Construction Agent or
any Credit Party pursuant to the terms of this Lease or any other Operative
Agreement is false or misleading in any material respect when made or
delivered;
(m) Any Capital One Credit Agreement Event of Default (other than a
Capital One Credit Agreement Event of Default attributable solely to
Capital One, F.S.B.) or an event of default under any New Facility (other
than an event of default under such New Facility attributable solely to
Capital One, F.S.B.) shall have occurred and be continuing and shall not
have been waived by the Majority Lenders;
(n) The Construction Agent or any Credit Party or any Subsidiary of
the Construction Agent or any Credit Party shall default (beyond applicable
periods of grace and/or notice and cure) in the payment when due of any
principal of or interest on any Indebtedness having an outstanding
principal amount of at least $50,000,000; or any other event or condition
shall occur which results in a default of any such Indebtedness or enables
the holder of any such Indebtedness or any Person acting on such holder's
behalf to accelerate the maturity thereof;
(o) Any Operative Agreement shall cease to be in full force and
effect;
(p) Unless released in connection with the Operative Agreements,
the Guarantor shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to the guaranty set forth in
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Section 8B of the Participation Agreement or if any material provision of
the guaranty set forth in Section 8B of the Participation Agreement shall
cease to be in full force and effect;
then, in any such event Lessor may, in addition to the other rights
and remedies provided for in this Article XVII and in Section 18.1,
terminate this Lease by giving Lessee five (5) days notice of such
termination, and this Lease shall terminate, and all rights of Lessee under
this Lease shall cease. Lessee shall, to the fullest extent permitted by
law, pay as Supplemental Rent all costs and expenses incurred by or on
behalf of Lessor, including without limitation reasonable fees and expenses
of counsel, as a result of any Lease Event of Default hereunder.
17.2 Surrender of Possession.
-----------------------
If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessee shall, upon thirty (30) days written notice, surrender to Lessor
possession of the Properties. Lessor may enter upon and repossess the
Properties by such means as are available at law or in equity, and may remove
Lessee and all other Persons and any and all personal property and Lessee's
equipment and personalty and severable Modifications from the Properties.
Lessor shall have no liability by reason of any such entry, repossession or
removal performed in accordance with applicable law. Upon the written demand of
Lessor, Lessee shall return the Properties promptly to Lessor, in the manner and
condition required by, and otherwise in accordance with the provisions of,
Section 22.1(c) hereof.
17.3 Reletting.
---------
If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessor may, but shall be under no obligation to, relet any or all of the
Properties, for the account of Lessee or otherwise, for such term or terms
(which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may determine, and
Lessor may collect, receive and retain the rents resulting from such reletting.
Lessor shall not be liable to Lessee for any failure to relet any Property or
for any failure to collect any rent due upon such reletting.
17.4 Damages.
-------
Neither (a) the termination of this Lease as to all or any of the
Properties pursuant to Section 17.1; (b) the repossession of all or any of the
Properties; nor (c) the failure of Lessor to relet all or any of the Properties,
the reletting of all or any portion thereof, nor the failure of Lessor to
collect or receive any rentals due upon any such reletting, shall relieve Lessee
of its liabilities and obligations hereunder, all of which shall survive any
such termination, repossession or reletting. If any Lease Event of Default shall
have occurred and be continuing and notwithstanding any termination of this
Lease pursuant to Section 17.1, Lessee shall
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forthwith pay to Lessor all Rent and other sums due and payable hereunder to and
including the date of such termination. Thereafter, on the days on which the
Basic Rent or Supplemental Rent, as applicable, are payable under this Lease or
would have been payable under this Lease if the same had not been terminated
pursuant to Section 17.1 and until the end of the Term hereof or what would have
been the Term in the absence of such termination, Lessee shall pay Lessor, as
current liquidated damages (it being agreed that it would be impossible
accurately to determine actual damages) an amount equal to the Basic Rent and
Supplemental Rent that are payable under this Lease or would have been payable
by Lessee hereunder if this Lease had not been terminated pursuant to Section
17.1, less the net proceeds, if any, which are actually received by Lessor with
respect to the period in question of any reletting of any Property or any
portion thereof; provided that Lessee's obligation to make payments of Basic
--------
Rent and Supplemental Rent under this Section 17.4 shall continue only so long
as Lessor shall not have received the amounts specified in Section 17.6. In
calculating the amount of such net proceeds from reletting, there shall be
deducted all of Lessor's, any Holder's, the Agent's and any Lender's reasonable
expenses in connection therewith, including repossession costs, brokerage or
sales commissions, fees and expenses for counsel and any necessary repair or
alteration costs and expenses incurred in preparation for such reletting. To the
extent Lessor receives any damages pursuant to this Section 17.4, such amounts
shall be regarded as amounts paid on account of Rent. Lessee specifically
acknowledges and agrees that its obligations under this Section 17.4 shall be
absolute and unconditional under any and all circumstances and shall be paid
and/or performed, as the case may be, without notice or demand and without any
abatement, reduction, diminution, setoff, defense, counterclaim or recoupment
whatsoever.
17.5 Power of Sale.
-------------
Without limiting any other remedies set forth in this Lease, in the event
that a court of competent jurisdiction rules that this Lease constitutes a
mortgage, deed of trust or other secured financing as is the intent of the
parties, then the Lessor and the Lessee agree that the Lessee has granted,
pursuant to Section 7.1(b) hereof and each Lease Supplement, a Lien against the
Properties WITH POWER OF SALE, and that, upon the occurrence and during the
continuance of any Lease Event of Default, the Lessor shall have the power and
authority, to the extent provided by law, after prior notice and lapse of such
time as may be required by law, to foreclose its interest (or cause such
interest to be foreclosed) in all or any part of the Properties.
17.6 Final Liquidated Damages.
------------------------
If a Lease Event of Default shall have occurred and be continuing, whether
or not this Lease shall have been terminated pursuant to Section 17.1 and
whether or not Lessor shall have collected any current liquidated damages
pursuant to Section 17.4, Lessor shall have the right to recover, by demand to
Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for
final liquidated damages, but exclusive of the indemnities payable under Section
13 of the Participation Agreement, and in lieu of all current liquidated damages
beyond the date of such demand (it being agreed that it would be impossible
accurately to determine actual damages) the Termination Value. Upon payment of
the amount specified pursuant to the first sentence of this Section 17.6, Lessee
shall be entitled to receive from Lessor, either at Lessee's request or upon
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Lessor's election, in either case at Lessee's cost, an assignment of Lessor's
entire right, title and interest in and to the Properties, the Improvements,
Fixtures, Modifications and Equipment and any insurance or condemnation proceeds
in connection therewith, in each case in recordable form and otherwise in
conformity with local custom and free and clear of the Lien of this Lease
(including the release of any memorandum of Lease and Lease Supplement recorded
in connection therewith) and any Lessor Liens. The Properties shall be conveyed
to Lessee "AS IS" and in their then present physical condition. If any statute
or rule of law shall limit the amount of such final liquidated damages to less
than the amount agreed upon, Lessor shall be entitled to the maximum amount
allowable under such statute or rule of law; provided, however, Lessee shall not
-------- -------
be entitled to receive an assignment of Lessor's interest in the Properties, the
Improvements, Fixtures, Modifications or Equipment or documents unless Lessee
shall have paid in full the Termination Value. Lessee specifically acknowledges
and agrees that its obligations under this Section 17.4 shall be absolute and
unconditional under any and all circumstances and shall be paid and/or
performed, as the case may be, without notice or demand and without any
abatement, reduction, diminution, setoff, defense, counterclaim or recoupment
whatsoever.
17.7 Lessee's Purchase Option During Default.
---------------------------------------
If Lessee exercises its option to purchase a Property in accordance with
Section 20.2 (without regard to the limitation contained in the first sentence
of Section 20.2 regarding the absence of Lease Events of Default) within five
(5) days of the occurrence of a Lease Event of Default, the purchase of the
applicable Property within such five (5) day period shall be deemed to have
cured such Lease Event of Default to the extent such Lease Event of Default is
no longer continuing with respect to any other Property remaining subject to
this Lease after purchase of the Property in connection with the exercise of the
purchase option.
17.8 Waiver of Certain Rights.
------------------------
If this Lease shall be terminated pursuant to Section 17.1, 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 possession; (c) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt; and
(d) any other rights which might otherwise limit or modify any of Lessor's
rights or remedies under this Article XVII.
17.9 Assignment of Rights Under Contracts.
------------------------------------
If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessee shall upon Lessor's demand immediately assign, transfer and set over to
Lessor all of Lessee's right, title and interest in and to each agreement
executed by Lessee in connection with the purchase, construction, development,
use or operation of the Properties (including, without limitation, all right,
title and interest of Lessee with respect to all warranty, performance, service
and indemnity provisions), as and to the extent that the same relate to the
purchase, construction, use and operation of the Properties.
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<PAGE>
17.10 Remedies Cumulative.
-------------------
The remedies herein provided shall be cumulative and in addition to (and
not in limitation of) any other remedies available at law, equity or otherwise,
including, without limitation, any mortgage foreclosure remedies.
ARTICLE XVIII
18.1 Lessor's Right to Cure Lessee's Lease Defaults.
----------------------------------------------
Lessor, without waiving or releasing any obligation or Lease Event of
Default, may (but shall be under no obligation to) remedy any Lease Event of
Default for the account and at the sole cost and expense of Lessee, including
the failure by Lessee to maintain the insurance required by Article XIV, and
may, to the fullest extent permitted by law, and notwithstanding any right of
quiet enjoyment in favor of Lessee, enter upon any Property, or real property
owned or leased by Lessee and take all such action thereon as may be necessary
or appropriate therefor. No such entry shall be deemed an eviction of any
lessee. All out-of-pocket costs and expenses so incurred (including without
limitation 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 Lessor,
shall be paid by Lessee to Lessor on demand.
ARTICLE XIX
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option.
---------------------------------------------------------------
Subject to Section 19.2, in connection with any termination of this Lease
with respect to the Property pursuant to the terms of Section 16.2, or in
connection with Lessee's exercise of its Purchase Option, upon the date on which
this Lease is to terminate with respect to the Property, and upon tender by
Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as applicable,
Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's
cost and expense an assignment of Lessor's entire interest in the Property, in
each case in recordable form and otherwise in conformity with local custom and
free and clear of any Lessor Liens attributable to Lessor but without any other
warranties (of title or otherwise) from the Lessor. The Property shall be
conveyed to Lessee "AS IS" "WHERE IS" and in then present physical condition.
19.2 No Purchase or Termination With Respect to Less than All of a
-------------------------------------------------------------
Property.
- --------
Lessee shall not be entitled to exercise its Purchase Option or the Sale
Option separately with respect to any Property consisting of Land, Equipment
and/or Improvements but shall be required to exercise its Purchase Option or the
Sale Option with respect to an entire Property.
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<PAGE>
ARTICLE XX
20.1 Purchase Option or Sale Option-General Provisions.
-------------------------------------------------
Not less than 120 days and no more than 180 days prior to the Expiration
Date or any Payment Date after the Basic Term has commenced for all Properties,
Lessee may give Lessor and Agent irrevocable written notice (the "Election
--------
Notice") that Lessee is electing to exercise either (a) the option to purchase
- ------
all the Properties on the Expiration Date or on the Payment Date specified in
the Election Notice or, in accordance with the Individual Property Sale
Requirements, the option to purchase one or more, but less than all, the
Properties on the Payment Date specified in the Election Notice for such
purchase (the "Purchase Option") or (b) with respect to an Election Notice given
---------------
in connection with the Expiration Date only, the option to remarket all, but not
less than all, the Properties to a Person other than Lessee or any Affiliate of
Lessee and cause a sale of such Properties to occur on the Expiration Date
pursuant to the terms of Section 22.1 (the "Sale Option"). Regarding the
-----------
purchase of one or more, but less than all, the Properties, at Lessee's option
and without the consent of any Financing Party, Lessee may provide irrevocable
written notice to Lessor not less than one hundred twenty (120) days and no more
than one hundred eighty days prior to any Payment Date that Lessee desires to
purchase one or more, but less than all, of the Properties, if (i) the Lessee
shall have provided an Appraisal demonstrating that the Properties remaining in
the Trust and leased to Lessee pursuant to this Lease and subject to the
guaranty by Capital One Bank shall have a Fair Market Sale Value of 75% or more
of the Property Cost allocable to such remaining Properties and (ii) on the date
of such Election Notice and at the time of sale to Lessee of such Property, no
Default or Event of Default shall have occurred and be continuing (other than
those that will be cured by the payment of the Termination Value for such
Property pursuant to Section 17.7) (the terms referenced in the foregoing
subsections (i) and (ii) may be referred to as the "Individual Property Sale
------------------------
Requirements"). To the extent the Individual Property Sale Requirements are
- ------------
satisfied, Lessor shall sell such Property to Lessee. If Lessee does not give an
Election Notice indicating the Purchase Option or the Sale Option at least 120
days and not more than 180 days prior to the Expiration Date, then, unless such
Expiration Date is the final Expiration Date to which the Term may be extended,
the Term of this Lease shall be extended in accordance with Section 2.2 hereof;
if such Expiration Date is the final Expiration Date, then Lessee shall be
deemed to have elected the Purchase Option with respect to all the Properties.
If Lessee shall elect the Sale Option and fail to cause the Properties to be
sold or surrendered to Lessor at Lessor's option in accordance with the terms of
Section 22.1 on the Expiration Date, then Lessee shall be deemed to have elected
to exercise the Purchase Option (on the Sale Date) as set forth above. If Lessee
shall elect (or is deemed to have elected) to exercise the Purchase Option, then
Lessee shall pay to Lessor on the date on which such purchase is to occur an
amount equal to the Termination Value for all of the Properties (which the
parties do not intend to be a "bargain" purchase), and, upon receipt of such
amount, Lessor shall transfer to Lessee all of Lessor's right, title and
interest in and to the Properties in accordance with Section 20.2.
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<PAGE>
20.2 Lessee Purchase Option.
----------------------
Provided no Default or Event of Default shall have occurred and be
continuing (subject to Section 17.7) and provided that the Election Notice has
been appropriately given specifying the Purchase Option, Lessee shall purchase
all of the Properties (or, if applicable, and upon satisfaction of all
Individual Property Sale Requirements, one or more, but less than all, of the
Properties pursuant to a notice provided in accordance with Section 20.1) on the
Expiration Date or Payment Date (all as specified in the Election Notice) at a
price equal to the Termination Value for such Properties (which the parties do
not intend to be a "bargain" purchase price).
Subject to Section 19.2, in connection with any termination of this Lease
with respect to any Property pursuant to the terms of Section 16.2, or in
connection with Lessee's exercise of its Purchase Option, upon the date on which
this Lease is to terminate with respect to a Property or all of the Properties,
and upon tender by Lessee of the amounts set forth in Section 16.2(b) or this
Section 20.2, as applicable, Lessor shall execute, acknowledge (where required)
and deliver to Lessee, at Lessee's cost and expense, each of the following: (i)
a special or limited warranty Deed or a Bargain and Sale Deed conveying the
Property (to the extent it is real property) to Lessee free and clear of the
Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (ii)
a Bill of Sale conveying the Property (to the extent it is personal property) to
Lessee free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens; (iii) any real estate tax affidavit or other
document required by law to be executed and filed in order to record the Deed;
and (iv) a FIRPTA affidavit. The applicable Property, together with any
insurance or condemnation proceeds with respect to such Property, shall be
conveyed to Lessee "AS IS" "WHERE IS" and in then present physical condition.
If any Property is the subject of remediation efforts respecting Hazardous
Substances at the Expiration Date which could materially and adversely impact
the Fair Market Sales Value of such Property, then Lessee shall be obligated to
repurchase each such Property pursuant to Section 20.2.
20.3 Third Party Sale Option.
-----------------------
(a) Provided no Default or Event of Default shall have occurred and
be continuing and provided that the Election Notice has been appropriately
given specifying the Sale Option, Lessee shall undertake to cause a sale of
the Properties on the Expiration Date (all as specified in the Election
Notice) in accordance with the provisions of Section 22.1 hereof.
(b) In the event the Lessee exercises the Sale Option then, as soon
as practicable and in all events prior to the Expiration Date, the Lessee
at its expense shall cause to be delivered to Lessor an environmental site
assessment or an update to a prior environmental site assessment for each
of the Properties recently prepared (no later than 30 days old) by an
independent recognized professional acceptable to Lessor and the Agent and
in form, scope and content satisfactory to Lessor and the Agent. In the
event that Lessor and the Agent shall not have received such environmental
assessment by the
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Expiration Date or in the event that such environmental assessment shall
reveal the existence of any material violation of Environmental Laws, other
material Environmental Violation or potential material Environmental
Violation (with materiality determined in each case in Lessor's sole
discretion), then Lessee on the Expiration Date shall pay to Lessor an
amount equal to the Termination Value for all of the Properties and any and
all other amounts due and owing hereunder. Upon receipt of such payment and
all other amounts due under the Lease, Lessor shall transfer to Lessee all
of Lessor's right, title and interest in and to the Properties in
accordance with Section 19.1.
ARTICLE XXI
21.1 [Intentionally Omitted]
ARTICLE XXII
22.1 Sale Procedure.
--------------
(a) During the Marketing Period, Lessee, on behalf of the Lessor,
shall obtain bids for the cash purchase of the Properties in connection
with a sale to one or more purchasers to be consummated on the Expiration
Date (the "Sale Date") for the highest price available, shall notify Lessor
---------
promptly of the name and address of each prospective purchaser and the cash
price which each prospective purchaser shall have offered to pay for each
such Property and shall provide Lessor with such additional information
about the bids and the bid solicitation procedure as Lessor may reasonably
request from time to time. All such prospective purchasers must be Persons
other than Lessee or any Affiliate of Lessee. On the Sale Date unless such
amounts have been otherwise paid at such time, Lessee shall pay (or cause
to be paid) to Lessor the sum of all costs and expenses referred to in
clause FIRST of Section 22.2, all Rent and all other amounts then due and
payable or accrued under this Lease and/or any other Operative Agreement.
Lessor may reject any and all bids and may assume sole responsibility
for obtaining bids by giving Lessee written notice to that effect;
provided, however, that notwithstanding the foregoing, Lessor may not
-------- -------
reject the bids submitted by the Lessee if such bids, in the aggregate, are
greater than or equal to the sum of the Limited Recourse Amount for the
Properties, plus all costs and expenses referred to in clause FIRST of
Section 22.2 and represent bona fide offers from one or more third party
purchasers. If the Lessor rejects any and all bids pursuant to this Section
22.1 or if there are no bids, Lessee shall surrender, or cause to be
surrendered, each of the Properties in accordance with the terms and
conditions of Section 10.1.
Unless Lessor shall have elected to retain the Properties pursuant to
the provisions of the final sentence of the preceding paragraph, Lessee
shall arrange for Lessor to sell the Properties free and clear of the Lien
of this Lease and any Lessor Liens attributable to
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it, without recourse or warranty (of title or otherwise), for cash on the
Sale Date to the purchaser or purchasers identified by Lessee or Lessor, as
the case may be; provided, however, solely as to Lessor or the Trust
-------- -------
Company, in its individual capacity, any Lessor Lien shall not constitute a
Lessor Lien so long as Lessor or the Trust Company, in its individual
capacity, is diligently contesting such Lessor Lien by appropriate
proceedings. To effect such transfer and assignment, Lessor shall execute,
acknowledge (where required) and deliver to the appropriate purchaser each
of the following: (i) a special or limited warranty Deed conveying the
Properties (to the extent they are real property) to the appropriate
purchaser free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens; (ii) a Bill of Sale conveying the
Properties (to the extent it is personal property) to the appropriate
purchaser free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens; (iii) any real estate tax affidavit or
other document required by law to be executed and filed in order to record
the Deed; and (iv) a FIRPTA affidavit. Lessee shall surrender the
Properties so sold or subject to such documents to each purchaser in the
condition specified in Section 10.1. Lessee shall not take or fail to take
any action which would have the effect of unreasonably discouraging bona
fide third party bids for any Property. If each of the Properties is not
either (i) sold on the Sale Date in accordance with the terms of this
Section 22.1, or (ii) retained by the Lessor pursuant to the second
paragraph of this Section 22.1(a), then the Lessee shall be deemed to have
elected the Purchase Option pursuant to Section 20.1.
(b) If the Properties are sold on a Sale Date to one or more third
party purchasers in accordance with the terms of Section 22.1(a) and the
aggregate purchase price paid for the Properties is less than the sum of
the aggregate Property Cost for the Properties (hereinafter such difference
shall be referred to as the "Deficiency Balance"), then the Lessee hereby
------------------
unconditionally promises to pay to the Lessor on the Sale Date all Rent
(other than the Termination Value and the Maximum Residual Guarantee
Amount) and all other amounts then due and owing pursuant to the Operative
Agreements and the lesser of (i) the Deficiency Balance, or (ii) the
Maximum Residual Guarantee Amount for all of the Properties. If the
Properties are retained by the Lessor pursuant to an affirmative election
made by the Lessor pursuant to the provisions of Section 22.1(a), then the
Lessee hereby unconditionally promises to pay to the Lessor on the Sale
Date all Rent (other than the Termination Value and the Maximum Residual
Guarantee Amount) and all other amounts then due and owing pursuant to the
Operative Agreements and an amount equal to the Maximum Residual Guarantee
Amount for the Properties.
(c) In the event that the Properties are either sold to one or more
third party purchasers on the Sale Date or retained by the Lessor in
connection with an affirmative election made by the Lessor pursuant to the
provisions of Section 22.1(a), then in either case on the applicable Sale
Date, to the extent in Lessee's possession or reasonable control, the
Lessee shall provide Lessor or such third party purchaser with (i) all
permits, certificates of occupancy, governmental licenses and
authorizations necessary to use and operate each such Property for its
intended purposes, (ii) such easements, licenses, rights-of-way and other
rights and privileges in the nature of an easement as are reasonably
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<PAGE>
necessary or desirable in connection with the use, repair, access to or
maintenance of each such Property for its intended purpose or otherwise as
the Lessor shall reasonably request, and (iii) a services agreement
covering such services as Lessor or such third party purchaser may request
in order to use and operate each such Property for its intended purposes at
such rates (not in excess of arm's-length fair market rates) as shall be
acceptable to Lessee and Lessor or such third party purchaser. All
assignments, licenses, easements, agreements and other deliveries required
by clauses (i) and (ii) of this paragraph (c) shall be in form reasonably
satisfactory to the Lessor or such third party purchaser, as applicable,
and shall be fully assignable (including both primary assignments and
assignments given in the nature of security) without payment of any fee,
cost or other charge.
22.2 Application of Proceeds of Sale.
-------------------------------
The Lessor shall apply the proceeds of sale of any Property in the
following order of priority:
(i) FIRST, to pay or to reimburse Lessor for the payment of
-----
all reasonable costs and expenses incurred by Lessor in connection with the
sale;
(ii) SECOND, so long as the Credit Agreement is in effect and
------
any Holder Fundings or any amount is owing to the Holders under any
Operative Agreement, to the Agent to be applied pursuant to inter-creditor
provisions between the Lenders and the Holders contained in the Operative
Agreements; and
(iii) THIRD, to the Lessee.
-----
22.3 Indemnity for Excessive Wear.
----------------------------
If the proceeds of the sale described in Section 22.1 with respect to the
Properties, less all expenses incurred by Lessor in connection with such sale,
shall be less than the Limited Recourse Amount with respect to the Properties,
and at the time of such sale it shall have been reasonably determined (pursuant
to the Appraisal Procedure) that the Fair Market Sales Value of the Properties,
shall have been impaired by greater than expected wear and tear during the term
of the Lease, Lessee shall pay to Lessor within ten (10) days after receipt of
Lessor's written statement (i) the amount of such excess wear and tear
determined by the Appraisal Procedure or (ii) the amount of the Net Sale
Proceeds Shortfall, whichever amount is less.
22.4 Appraisal Procedure.
-------------------
For determining the Fair Market Sales Value of the Properties or any other
amount which may, pursuant to any provision of any Operative Agreement, be
determined by an appraisal procedure, Lessor and Lessee shall use the following
procedure (the "Appraisal Procedure"). Lessor and Lessee shall endeavor to
-------------------
reach a mutual agreement as to such amount for a period of ten (10) days from
commencement of the Appraisal Procedure under the applicable section of the
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Lease, and if they cannot agree within ten (10) days, then two qualified
appraisers, one chosen by Lessee and one chosen by Lessor, shall mutually agree
thereupon, but if either party shall fail to choose an appraiser within twenty
(20) days after notice from the other party of the selection of its appraiser,
then the appraisal by such appointed appraiser shall be binding on Lessee and
Lessor. If the two appraisers cannot agree within twenty (20) days after both
shall have been appointed, then a third appraiser shall be selected by the two
appraisers or, failing agreement as to such third appraiser within (30) days
after both shall have been appointed, by the American Arbitration Association.
The decisions of the three appraisers shall be given within twenty (20) days of
the appointment of the third appraiser and the decision of the appraiser most
different from the average of the other two shall be discarded and such average
shall be binding on Lessor and Lessee; provided that if the highest appraisal
--------
and the lowest appraisal are equidistant from the third appraisal, the third
appraisal shall be binding on Lessor and Lessee. The fees and expenses of the
appraiser appointed by Lessee shall be paid by Lessee; the fees and expenses of
the appraiser appointed by Lessor shall be paid by Lessor (such fees and
expenses not being indemnified pursuant to Section 13 of the Participation
Agreement); and the fees and expenses of the third appraiser shall be divided
equally between Lessee and Lessor.
22.5 Certain Obligations Continue.
----------------------------
During the Marketing Period, the obligation of Lessee to pay Rent with
respect to the Properties (including the installment of Basic Rent due on the
Expiration Date) shall continue undiminished until payment in full to Lessor of
the sale proceeds, if any, the Maximum Residual Guarantee Amount or portion
thereof payable under Section 22.1(b), the amount due under Section 22.3, if
any, and all other amounts due to Lessor with respect to all Properties. Lessor
shall have the right, but shall be under no duty, to solicit bids, to inquire
into the efforts of Lessee to obtain bids or otherwise to take action in
connection with any such sale, other than as expressly provided in this Article
XXII.
ARTICLE XXIII
23.1 Holding Over.
------------
If Lessee shall for any reason remain in possession of a Property after the
expiration or earlier termination of this Lease as to such Property (unless such
Property is conveyed to Lessee), such possession shall be as a tenancy at
sufferance during which time Lessee shall continue to pay Supplemental Rent that
would be payable by Lessee hereunder were the Lease then in full force and
effect with respect to the Property and Lessee shall continue to pay Basic Rent
at 110% of the Basic Rent that would otherwise be due and payable at such time.
Such Basic Rent shall be payable from time to time upon demand by Lessor and
such additional 10% amount shall be applied by the Lessor to the payment of the
Loans pursuant to the Credit Agreement and the Holder Fundings pursuant to the
Trust Agreement pro rata between the Loans and the Holder Fundings. During any
period of tenancy at sufferance, Lessee shall, subject to the second preceding
sentence, be obligated to perform and observe all of the terms, covenants and
conditions of this Lease, but shall have no rights hereunder other than the
right, to the extent
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<PAGE>
given by law to tenants at sufferance, to continue their occupancy and use of
such Property. Nothing contained in this Article XXIII shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease as to any Property (unless such
Property is conveyed to Lessee) and nothing contained herein shall be read or
construed as preventing Lessor from maintaining a suit for possession of such
Property or exercising any other remedy available to Lessor at law or in equity.
ARTICLE XXIV
24.1 Risk of Loss.
-------------
During the Term, unless Lessee shall not be in actual possession of the
Property in question solely by reason of Lessor's exercise of its remedies of
dispossession under Article XVII, the risk of loss or decrease in the enjoyment
and beneficial use of such Property as a result of the damage or destruction
thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is
assumed by Lessee, and Lessor shall in no event be answerable or accountable
therefor.
ARTICLE XXV
25.1 Assignment.
----------
(a) Lessee may not assign this Lease or any of its rights or
obligations hereunder in whole or in part to any Person other than COFC or
a Wholly-Owned Subsidiary of COFC without the prior written consent of the
Agent and the Lessor.
(b) No assignment (referenced in this Section 25.1 or otherwise) or
other relinquishment of possession to any Property shall in any way
discharge or diminish any of the obligations of Lessee to Lessor hereunder
and Lessee shall remain directly and primarily liable under this Lease as
to any assignment regarding this Lease.
25.2 Subleases.
---------
(a) Promptly following the execution and delivery of any sublease
permitted by this Article XXV, Lessee shall notify Lessor and the Agent of
the execution of such sublease. As of the date of each Lease Supplement,
Lessee shall lease the respective Properties described in such Lease
Supplement from Lessor, and there shall be no existing tenant respecting
such Property other than the Lessee, except to the extent such sublease is
permitted under subsection (b) of this Section 25.2.
(b) Upon written notice to the Financing Parties and subject to the
provisions of Section 25.2(c), Lessee may sublet any Property or portion
thereof (i) to any Person so long as the sublease shall be expressly
subject and subordinate to this Lease, the term of
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<PAGE>
the sublease does not extend beyond the Term of this Lease and the sublease
is on fair market terms and at a fair market rental, or (ii) to COFC or a
Wholly-Owned Subsidiary of COFC or to an Affiliate or Subsidiary of the
Lessee. No other subleases shall be permitted unless consented to in
writing by the Lessor.
(c) No sublease (referenced in this Section 25.2 or otherwise) or
other relinquishment of possession to any Property shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder and
Lessee shall remain directly and primarily liable under this Lease as to
the Property, or portion thereof, so sublet.
ARTICLE XXVI
26.1 No Waiver.
---------
No failure by Lessor or 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.
ARTICLE XXVII
27.1 Acceptance of Surrender.
-----------------------
No surrender to Lessor of this Lease or of all or any portion of any
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 Lessor and the Agent
and, prior to the payment or performance of all obligations under the Credit
Documents, the Agent, and no act by Lessor or the Agent or any representative or
agent of Lessor or the Agent, other than a written acceptance, shall constitute
an acceptance of any such surrender.
27.2 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) any right, title or interest in any Property, (c) any Notes, or (d) a
beneficial interest in Lessor.
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<PAGE>
ARTICLE XXVIII
28.1 Incorporation of Covenants.
--------------------------
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of May 25, 1999 (the "Capital One Credit Agreement") among
COFC, Capital One Bank and Capital One, F.S.B., as borrowers, The Chase
Manhattan Bank, as Administrative Agent and the other financial institutions
party thereto. Further reference is made to the representations and warranties
of the Guarantor contained in Section 7 of the Capital One Credit Agreement
other than the representations contained in Sections 7.04, 7.05, 7.06 and 7.13
(hereinafter referred to as the "Incorporated Representations and Warranties")
and the covenants of the Guarantor contained in Section 8 of the Capital One
Credit Agreement (hereinafter referred to as the "Incorporated Covenants"). The
----------------------
Lessee agrees with the Lessor that the Incorporated Representations and
Warranties and the Incorporated Covenants (and all other relevant provisions of
the Capital One Credit Agreement related thereto, including specifically without
limitation the defined terms contained in Section 1 thereof which are used in
the Incorporated Representations and Warranties and the Incorporated Covenants)
are hereby incorporated by reference into this Lease to the same extent and with
the same effect as if set forth fully herein and shall inure to the benefit of
the Lessor, without giving effect to any waiver, amendment, modification or
replacement of the Capital One Credit Agreement or any term or provision of the
Incorporated Representations and Warranties or the Incorporated Covenants
occurring subsequent to the date of this Lease, except to the extent otherwise
specifically provided in the following provisions of this paragraph. In the
event a waiver is granted under the Capital One Credit Agreement or an amendment
or modification is executed with respect to the Capital One Credit Agreement,
and such waiver, amendment and/or modification affects the Incorporated
Representations and Warranties or the Incorporated Covenants, then such waiver,
amendment or modification shall be effective with respect to the Incorporated
Representations and Warranties and the Incorporated Covenants as incorporated by
reference into this Lease only if consented to in writing by the Majority
Lenders. In the event of any replacement of the Capital One Credit Agreement
with a similar credit facility (the "New Facility") the representations and
------------
warranties and covenants of the Guarantor contained in the New Facility which
correspond to the representations and warranties and covenants of the Guarantor
contained in Section 7 and Section 8 of the Capital One Credit Agreement shall
become the Incorporated Representations and Warranties and the Incorporated
Covenants hereunder only if consented to in writing by the Lessor and the
Majority Lenders and, if such consent is not granted or if the Capital One
Credit Agreement is terminated and not replaced, then the representations and
warranties and covenants of the Guarantor contained in Section 7 and Section 8
of the Capital One Credit Agreement (together with any modifications or
amendments approved in accordance with this paragraph) shall continue to be the
Incorporated Representations and Warranties and the Incorporated Covenants
hereunder.
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<PAGE>
ARTICLE XXIX
29.1 Notices.
-------
All notices required or permitted to be given under this Lease shall be in
writing. Notices may be served by certified or registered mail, postage paid
with return receipt requested; by private courier, prepaid; by telex, facsimile,
or other telecommunication device capable of transmitting or creating a written
record; or personally. Mailed notices shall be deemed delivered five days after
mailing, properly addressed. Couriered notices shall be deemed delivered when
delivered as addressed, or if the addressee refuses delivery, when presented for
delivery notwithstanding such refusal. Telex or telecommunicated notices shall
be deemed delivered when receipt is either confirmed by confirming transmission
equipment or acknowledged by the addressee or its office. Personal delivery
shall be effective when accomplished. Unless a party changes its address by
giving notice to the other party as provided herein, notices shall be delivered
to the parties at the following addresses:
If to Lessee:
Capital One Realty, Inc.
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone No.: (703) 205-1000
Telecopy No.: (703) 205-1748
with a copy to:
Capital One Bank
c/o Capital One Services, Inc.
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone No.: (703) 205-1000
Telecopy No.: (703) 205-1748
with a further copy to the Legal Department of Capital One Bank at the
immediately preceding address.
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<PAGE>
If to Lessor:
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Val T. Orton
Telephone No.: (801) 246-5300
Telecopy No.: (801) 246-5053
with a copy to the Agent:
Bank of America, N.A.
901 Main Street
66th Floor
Dallas, Texas 75202
Attention: Shelly K. Harper
Telephone No.: (214) 209-0567
Telecopy No.: (214) 209-0604
or such additional parties and/or other address as such party may hereafter
designate, and shall be effective upon receipt or refusal thereof.
ARTICLE XXX
30.1 Miscellaneous.
-------------
Anything contained in this Lease to the contrary notwithstanding, all
claims against and liabilities of Lessee or Lessor arising from events
commencing prior to the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination. If any provision of this Lease
shall be held to be unenforceable in any jurisdiction, such unenforceability
shall not affect the enforceability of any other provision of this Lease and
such jurisdiction or of such provision or of any other provision hereof in any
other jurisdiction.
30.2 Amendments and Modifications.
----------------------------
Neither this Lease, any Lease Supplement nor any provision hereof may be
amended, waived, discharged or terminated except by an instrument in writing in
recordable form signed by Lessor and Lessee.
30.3 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.
-35-
<PAGE>
30.4 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.
30.5 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.
30.6 GOVERNING LAW.
-------------
THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF VIRGINIA, EXCEPT TO THE EXTENT THAT IN SEEKING TO ENFORCE
THIS LEASE WITH RESPECT TO A PROPERTY AND TO THE EXTENT ANY OTHER RIGHTS AND
OBLIGATIONS HEREUNDER ARE REQUIRED TO BE GOVERNED UNDER THE LAWS OF THE STATE IN
WHICH SUCH PROPERTY IS LOCATED, THE LAWS OF THE STATE IN WHICH SUCH PROPERTY IS
LOCATED SHALL APPLY.
30.7 Calculation of Rent.
-------------------
All calculation of Rent payable hereunder shall be computed based on the
actual number of days elapsed over a year of 360 days.
30.8 Memoranda of Lease and Lease Supplements.
----------------------------------------
This Lease shall not be recorded; provided, Lessor and Lessee shall
--------
promptly record (a) a memorandum of this Lease or a short form Lease (in form
and substance reasonably satisfactory to Lessor) regarding each Property
promptly after the Property Closing Date with respect thereto, and (b) a
memorandum of the applicable Lease Supplement (in substantially the form of
Exhibit B attached hereto, subject to revisions to accommodate local law) or a
- ---------
short form lease (in form and substance reasonably satisfactory to Lessor)
regarding each Property promptly after the Basic Term Commencement Date with
respect to such Property, in each case in the local filing office with respect
thereto, in all cases at Lessee's cost and expense, and as required under
applicable law to sufficiently evidence this Lease or any such Lease Supplement
in the applicable real estate filing records.
30.9 Allocations between the Lenders and the Holders.
-----------------------------------------------
Notwithstanding any other term or provision of this Lease to the contrary,
the allocations of the proceeds of the Properties and any and all other Rent and
other amounts received hereunder shall be subject to the inter-creditor
provisions between the Lenders and the Holders contained in the Operative
Agreements (or as otherwise agreed among the Lenders and the Holders from time
to time).
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<PAGE>
30.10 Limitations on Recourse.
-----------------------
Notwithstanding anything contained in this Lease to the contrary, Lessee
agrees to look solely to Lessor's estate and interest in the Properties (and in
no circumstance to the Agent, the Lenders, the Holder or otherwise to Lessor)
for the collection of any judgment requiring the payment of money by Lessor in
the event of liability by Lessor, and no other property or assets of Lessor or
any shareholder, owner or partner (direct or indirect) in or of Lessor, or any
director, officer, employee, beneficiary, Affiliate of any of the foregoing
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Lessee under or with respect to this Lease, the
relationship of Lessor and Lessee hereunder or Lessee's use of the Properties or
any other liability of Lessor to Lessee. Nothing in this Section shall be
interpreted so as to limit the terms of Sections 6.1 or 6.2.
30.11 WAIVERS OF JURY TRIAL.
---------------------
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE LESSOR AND THE LESSEE
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LEASE OR ANY COUNTERCLAIM THEREIN.
30.12 Exercise of Lessor Rights.
-------------------------
The Lessee hereby acknowledges and agrees that the rights and powers of the
Lessor under this Lease have been assigned to the Agent pursuant to the terms of
the Security Agreement and the other Operative Agreements.
30.13 Submission To Jurisdiction; Waivers.
-----------------------------------
Each of the parties hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Lease and the other Operative Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the
Commonwealth of Virginia, the courts of the United States of America for the
Eastern District of Virginia, and appellate courts from any thereof;
(b) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail) postage prepaid, to such party at its
address set forth in Section 29.1 or at such other address of which the parties
hereto shall have been notified pursuant thereto;
(c) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
-37-
<PAGE>
(d) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section 30.13 any special, exemplary or punitive damages.
30.14 USURY SAVINGS PROVISION.
-----------------------
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT
COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE EXTENT
ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF
COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS
SECTION 30.14 SHALL APPLY. ANY SUCH RENT OR PAYMENTS SO CHARACTERIZED AS
INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE
PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH
SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR
CONTINGENCY (INCLUDING, BUT NOT LIMITED TO, PREPAYMENT OR ACCELERATION OF THE
MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR,
CHARGED, OR RECEIVED UNDER THIS LEASE OR OTHERWISE, EXCEED THE MAXIMUM
NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE
CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR
AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM
NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF
THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE
AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER
APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW
DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS
CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR
UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF
THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST,
OR REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH
AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED
TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF
THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST
WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT
INTEND TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND.
ALL INTEREST PAID OR AGREED TO BE PAID
-38-
<PAGE>
TO LESSOR SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED,
PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING ANY
RENEWAL OR EXTENSION) OF THIS LEASE SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF
SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY
APPLICABLE LAW.
[Signature pages follow]
-39-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed
and delivered as of the date first above written.
TWO WITNESSES: CAPITAL ONE REALTY, INC.
1. /s/ Al Ciafre By: /s/ Stephen Linehan
------------------------- --------------------------------------------
Print: Al Ciafre Name: Stephen Linehan
------------------ ------------------------------------------
Title: Director of Corporate Funding
-----------------------------------------
2. /s/ John Stilmar
-------------------------
Print: John Stilmar
--------------------
TWO WITNESSES: FIRST SECURITY BANK, NATIONAL ASSOCIATION,
1. /s/ Arge Pavlos not individually, but solely as
-------------------------
Print: Arge Pavlos Owner Trustee under the Capital One Realty Trust
--------------------
1998-1, as Lessor
2. /s/ Krystal Bagsha By: /s/ DeAnn Madsen
------------------------- --------------------------------------------
Print: Krystal Bagsha Name: DeAnn Madsen
------------------- ------------------------------------------
Title: Assistant Trust Officer
-------------------------------------------
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as the date hereof
BANK OF AMERICA, N.A.,
as Agent
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
STATE OF Utah )
) ss:
COUNTY OF Salt Lake )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of Salt Lake this 13th day of August, by DeAnn
Madsen, as Assistant Trust Officer of FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not individually, but solely as
Owner Trustee under the Capital One Realty Trust 1998-1, on behalf of the Owner
Trustee.
[Notarial Seal] /s/ Michael Green
---------------------------------------
Notary Public
My commission expires: Sept. 10, 2002
STATE OF Virginia )
) ss:
COUNTY OF Fairfax )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of Fairfax this 23 day of August, by Stephen
Linehan, as Director of Corporate Funding of CAPITAL ONE REALTY, INC., a
Delaware corporation, on behalf of the corporation.
[Notarial Seal] /s/ Francine D. Minnich
---------------------------------------
Notary Public
My commission expires: 10/31/1999
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of BANK OF AMERICA,
N.A., a national banking association, as Agent.
[Notarial Seal] _______________________________________
Notary Public
My commission expires:____________
<PAGE>
EXHIBIT A TO
THE LEASE
------------
[CONFORM TO REQUIREMENTS OF LAW]
LEASE SUPPLEMENT NO. ___
THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of
----------------
[________________] between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee under the Capital One Realty Trust
1998-1, as lessor (the "Lessor"), and Capital One Realty, Inc., as lessee (the
------
"Lessee").
- -------
WHEREAS, the Lessor is the owner or will be the owner of the Property
described on Schedule I hereto (the "Leased Property") and wishes to lease the
---------- ---------------
same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions; Rules of Usage. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Participation Agreement,
----------
dated as of September 3, 1999, among the Lessee, the Lessor, not individually,
except as expressly stated therein, but solely as Owner Trustee under the
Capital One Realty Trust 1998-1, the Holders, the Lenders and Bank of America,
N.A., as Agent for the Lenders and respecting the Security Documents, as Agent
for the Lenders and the Holders, to the extent of their interests.
SECTION 2. The Properties. Attached hereto as Schedule I is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a
legal description of the Land for such Project attached hereto as Schedule I-C.
Effective upon the execution and delivery of this Lease Supplement by the Lessor
and the Lessee, the Leased Property shall be subject to the terms and provisions
of the Lease.
SECTION 3. Use of Property. At all times during the Term with respect to
each Property, Lessee will comply with all obligations under and (to the extent
no Event of Default exists and provided that such exercise will not impair the
value of such Property) shall be permitted to exercise all rights and remedies
under, all operation and easement agreements and related or similar agreements
applicable to such Property.
SECTION 4. Ratification; Incorporation by Reference. Except as
specifically modified hereby, the terms and provisions of the Lease and the
Operative Agreements are hereby ratified and confirmed and remain in full force
and effect. The Lease is hereby incorporated herein by reference as though
restated herein in its entirety.
<PAGE>
SECTION 5. Original Lease Supplement. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
-----------------
Counterpart"). To the extent that this Lease Supplement 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 Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF VIRGINIA.
SECTION 7. Mortgage; Power of Sale. Without limiting any other remedies
set forth in the Lease, in the event that a court of competent jurisdiction
rules that the Lease constitutes a mortgage, deed of trust or other secured
financing as is the intent of the parties, then the Lessor and the Lessee agree
that the Lessee hereby grants a Lien against the Leased Property WITH POWER OF
SALE, and that, upon the occurrence of any Lease Event of Default, the Lessor
shall have the power and authority, to the extent provided by law, after prior
notice and lapse of such time as may be required by law, to foreclose its
interest (or cause such interest to be foreclosed) in all or any part of the
Leased Property.
SECTION 8. Counterpart Execution. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
TWO WITNESSES: FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely as
1. _____________________ Owner Trustee under the Capital One Realty Trust
Print: ______________ 1998-1, as Lessor
2. _____________________ By:_____________________________________________
Print:_______________ Name____________________________________________
Title:__________________________________________
TWO WITNESSES: CAPITAL ONE REALTY, INC. as Lessee
1. _____________________ By:_____________________________________________
Print:_______________ Name:___________________________________________
Title:__________________________________________
2. _____________________
Print: ______________
<PAGE>
Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as the date hereof.
BANK OF AMERICA, N.A., as Agent
By:_______________________________________
Name:_____________________________________
Title:____________________________________
<PAGE>
[CONFORM TO STATE LAW REQUIREMENTS]
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as Owner Trustee under the Capital One Realty Trust 1998-1, on behalf
of the Owner Trustee.
[Notarial Seal] _________________________________________
Notary Public
My commission expires: ____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of CAPITAL ONE
REALTY, INC., a Delaware corporation, on behalf of the corporation.
[Notarial Seal] _________________________________________
Notary Public
My commission expires:_____________
<PAGE>
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of BANK OF AMERICA,
N.A., a national banking association, as Agent.
[Notarial Seal] _________________________________________
Notary Public
My commission expires:____________
<PAGE>
SCHEDULE I
TO LEASE SUPPLEMENT NO. ____
<PAGE>
SCHEDULE I-A
TO LEASE SUPPLEMENT NO. ____
(Equipment)
<PAGE>
SCHEDULE I-B
TO LEASE SUPPLEMENT NO. ____
(Improvements)
<PAGE>
SCHEDULE I-C
TO LEASE SUPPLEMENT NO. ____
(Land)
<PAGE>
EXHIBIT B TO THE LEASE
----------------------
[CONFORM TO REQUIREMENTS OF LAW]
Recordation requested by:
Moore & Van Allen, PLLC
After recordation return to:
Moore & Van Allen, PLLC (WMA)
Bank of America Corporate Center
100 North Tryon Street, Floor 47
Charlotte, NC 28202-4003
Space above this line
for Recorder's use
_________________________________
MEMORANDUM OF LEASE AGREEMENT
(TAX RETENTION OPERATING LEASE) AND
LEASE SUPPLEMENT NO. _____________
THIS MEMORANDUM OF LEASE AGREEMENT (TAX RETENTION OPERATING LEASE) AND
LEASE SUPPLEMENT NO. ____________ ("Memorandum"), dated as of _____________,
199___, is by and between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not individually, but solely as Owner Trustee under the
Capital One Realty Trust 1998-1, with an office at 79 South Main Street, Salt
Lake City, Utah 84111 (hereinafter referred to as "Landlord") and CAPITAL ONE
REALTY, INC., a Delaware corporation, with an office at 2980 Fairview Park
Drive, Suite 1300, Falls Church, Virginia 22042 (hereinafter referred to as
"Tenant").
WITNESSETH:
That for value received, Landlord and Tenant do hereby covenant, promise
and agree as follows:
1. Demised Premises. Landlord has leased to Tenant, and Tenant has
----------------
leased from Landlord, for the Term (as hereinafter defined), certain real
property and other property located in ________________, which is described in
the attached Exhibit A (the "Property"), pursuant to the terms of a Lease
Agreement (Capital One Realty, Inc.) (Tax Retention Operating Lease
<PAGE>
Agreement), between Landlord and Tenant dated September 3, 1999 (the "Lease")
and a Lease Supplement No. _____ between Landlord and Tenant dated
______________ (the "Lease Supplement").
2. Term. The term of the Lease ("Term") commenced on _______ and shall
----
end ______________, unless the Term is extended or earlier terminated in
accordance with the provisions of the Lease.
3. Mortgage; Power of Sale. Without limiting any other remedies set
-----------------------
forth in the Lease, in the event that a court of competent jurisdiction rules
that the Lease constitutes a mortgage, deed of trust or other secured financing
as is the intent of the parties, then the Lessor and the Lessee agree that the
Lessee has granted, pursuant to the terms of the Lease and the Lease Supplement,
a Lien against the Property WITH POWER OF SALE, and that, upon the occurrence
and during the continuance of any Lease Event of Default, the Lessor shall have
the power and authority, to the extent provided by law, after prior notice and
lapse of such time as may be required by law, to foreclose its interest (or
cause such interest to be foreclosed) in all or any part of the Property.
4. Effect of Memorandum. The purpose of this instrument is to give
--------------------
notice of the Lease and the Lease Supplement and their respective terms,
covenants and conditions to the same extent as if the Lease and the Lease
Supplement were fully set forth herein. This Memorandum shall not modify in any
manner the terms, conditions or intent of the Lease or the Lease Supplement and
the parties agree that this Memorandum is not intended nor shall it be used to
interpret the Lease or the Lease Supplement or determine the intent of the
parties under the Lease or the Lease Supplement.
[The remainder of this page has been intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this instrument
as of the day and year first written.
LANDLORD: TENANT:
FIRST SECURITY BANK, CAPITAL ONE REALTY, INC.
NATIONAL ASSOCIATION, not individually, a Delaware corporation
but solely as Owner Trustee
under the Capital One Realty
Trust 1998-1
By:___________________________ By:__________________________
Its:__________________________ Its:_________________________
<PAGE>
[CONFORM TO REQUIREMENTS OF LAW]
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as Owner Trustee under the Capital One Realty Trust 1998-1, on behalf
of the Owner Trustee.
[Notarial Seal] _______________________________________________
Notary Public
My commission expires:________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of CAPITAL ONE
REALTY, INC., a Delaware corporation, on behalf of the corporation.
[Notarial Seal] ________________________________________________
Notary Public
My commission expires:________
<PAGE>
EXHIBIT 10.23
________________________________________________________________________________
PARTICIPATION AGREEMENT
(Capital One Realty, Inc.)
Dated as of September 3, 1999
among
CAPITAL ONE REALTY, INC.,
as Construction Agent and as Lessee,
CAPITAL ONE BANK,
as Guarantor,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as Owner Trustee
under the Capital One Realty Trust 1998-1
THE VARIOUS BANKS AND OTHER
LENDING INSTITUTIONS WHICH ARE PARTIES HERETO
FROM TIME TO TIME,
as the Holders,
THE VARIOUS BANKS AND OTHER
LENDING INSTITUTIONS WHICH ARE PARTIES HERETO
FROM TIME TO TIME,
as the Lenders
and
BANK OF AMERICA, N.A.,
as Agent for the
Lenders and respecting
the Security Documents, as Agent for
the Lenders and the Holders,
to the extent of their interests
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 THE LOANS .................................................... 1
SECTION 2 HOLDER FUNDINGS............................................... 2
SECTION 3 SUMMARY OF TRANSACTIONS....................................... 2
3.1 Operative Agreements........................................... 2
3.2 Property Purchase.............................................. 2
3.3 Construction of Improvements; Lease or Disposition of
Property....................................................... 3
3.4 Ratable Interests of the Holders and the Lenders in the
Commitments and Holder Commitments under the COSI Participation
Agreement...................................................... 3
SECTION 4 THE CLOSINGS.................................................. 3
4.1 Initial Closing Date........................................... 3
4.2 Initial Closing Date; Property Closing Dates; Construction
Advances....................................................... 3
SECTION 5 FUNDING OF ADVANCES; REPORTING REQUIREMENTS ON COMPLETION
DATE; LESSEE DELIVERY OF NOTICES; CERTAIN COVENANTS........... 4
5.1 General........................................................ 4
5.2 Procedures for Funding......................................... 5
5.3 Conditions to the Holders' and the Lenders' Obligations to
Advance Funds for the Acquisition of Property.................. 6
5.4 Conditions to the Holders' and the Lenders' Obligations to Make
Construction Advances for the Ongoing Construction on any
Property Prior to the Construction Period Termination Date..... 9
5.5 Additional Reporting and Delivery Requirements on Completion
Date Respecting Each Property.................................. 10
5.6 Construction Agent Delivery of Construction Budget
Modifications.................................................. 10
5.7 Maintenance of the Lessee as a Wholly-Owned Entity............. 11
5.8 Unilateral Right to Increase the Holder Commitments and the
Lender Commitments............................................. 11
5.9 Borrower's Right to Increase the Commitments and the Holder
Commitments.................................................... 11
5.10 Additional Holder Representations; Lessee's Right to Replace
Holder......................................................... 11
5.11 Post-Closing Satisfaction of Conditions Respecting Certain
Properties..................................................... 12
SECTION 6 CONDITIONS OF THE INITIAL CLOSING............................. 12
6.1 Conditions to the Lessor's and the Holders' Obligations........ 12
6.2 Conditions to the Lessee's Obligations......................... 14
6.3 Conditions to the Agent's Obligations.......................... 16
SECTION 7 REPRESENTATIONS AND WARRANTIES ON THE INITIAL CLOSING
DATE.......................................................... 16
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.1 Representations and Warranties of the Holders.................. 16
7.2 Representations and Warranties of the Borrower................. 18
7.3 Representations and Warranties of the Construction Agent and
the Credit Parties............................................. 20
7.4 Representations and Warranties of the Agent.................... 22
SECTION 8 REPRESENTATIONS AND WARRANTIES ON FUNDING DATES............... 23
8.1 Representations and Warranties on Property Closing Dates....... 23
8.2 Representations and Warranties Upon Initial Construction
Advances....................................................... 25
8.3 Representations and Warranties Upon the Date of Each
Construction Advance That Is Not An Initial Advance............ 27
SECTION 8B. GUARANTY..................................................... 28
8B.1. Guaranty of Payment and Performance............................ 28
8B.2. Obligations Unconditional...................................... 28
8B.3. Modifications.................................................. 29
8B.4. Waiver of Rights............................................... 30
8B.5. Reinstatement.................................................. 30
8B.6. Remedies....................................................... 30
8B.7. Termination of Guaranty........................................ 31
8B.8. Payment of Amounts to the Agent................................ 31
8B.9. Denial or Disaffirmance of Guaranty............................ 31
SECTION 9 PAYMENT OF CERTAIN EXPENSES................................... 31
9.1 Transaction Expenses........................................... 31
9.2 [Reserved]..................................................... 32
9.3 Certain Fees and Expenses...................................... 32
9.4 Facility Fee................................................... 33
SECTION 10 OTHER COVENANTS AND AGREEMENTS............................... 33
10.1 Cooperation with the Construction Agent or the Lessee.......... 33
10.2 Covenants of the Owner Trustee and the Holders................. 34
10.3 Credit Party Covenants, Consent and Acknowledgment............. 36
10.4 Sharing of Certain Payments.................................... 37
10.5 Grant of Easements, etc........................................ 37
10.6 Appointment by Holders and Owner Trustee....................... 37
SECTION 11 CREDIT AGREEMENT AND TRUST AGREEMENT......................... 38
11.1 Construction Agent's and Lessee's Credit Agreement Rights...... 38
11.2 Construction Agent's and Lessee's Trust Agreement Rights....... 39
SECTION 12 TRANSFER OF INTEREST......................................... 40
12.1 Restrictions on Transfer....................................... 40
12.2 Effect of Transfer............................................. 40
SECTION 13 INDEMNIFICATION.............................................. 41
</TABLE>
<PAGE>
<TABLE>
<S> <C>
13.1 General Indemnity.............................................. 41
13.2 General Tax Indemnity.......................................... 43
13.3 EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
LIABILITY, ETC................................................. 48
13.4 Additional Provisions Regarding Environmental Indemnification.. 48
13.5 Additional Provisions Regarding Indemnification................ 49
13.6 Indemnifications Provided by the Owner Trustee in Favor of the
Other Indemnified Persons...................................... 49
SECTION 14 MISCELLANEOUS................................................ 50
14.1 Survival of Agreements......................................... 50
14.2 No Broker, etc................................................. 50
14.3 Notices........................................................ 51
14.4 Counterparts................................................... 52
14.5 Amendments and Termination..................................... 52
14.6 Headings, etc.................................................. 53
14.7 Parties in Interest............................................ 53
14.8 GOVERNING LAW; WAIVERS OF JURY TRIAL........................... 53
14.9 Severability................................................... 53
14.10 Liability Limited.............................................. 53
14.11 Rights of the Credit Parties................................... 55
14.12 Further Assurances............................................. 55
14.13 Calculations under Operative Agreements........................ 55
14.14 Confidentiality................................................ 55
</TABLE>
<PAGE>
SCHEDULES
- ---------
Schedule 5.11 - Description Of Tampa Property
<PAGE>
EXHIBITS
- --------
A - Forms of Requisition - Sections 4.2 and 5.2
B - Officer's Certificate - Section 5.6
C - Legal Opinion of Lessee's Counsel - Section 6.1(c)
D - Officer's Certificate - Section 6.1(g)
E - Officer's Certificate - Section 6.1(h)
F - Officer's Certificate - Section 6.2(d)
G - Officer's Certificate - Section 6.2(e)
H - Legal Opinion - Section 6.2(f)
I - Description of Material Litigation
J - Confidentiality Agreement
Appendix A Rules of Usage and Definitions
<PAGE>
PARTICIPATION AGREEMENT
(Capital One Realty, Inc.)
THIS PARTICIPATION AGREEMENT (Capital One Realty, Inc.) dated as of
September 3, 1999 (as amended or supplemented from time to time, this
"Agreement") is by and among CAPITAL ONE REALTY, INC., a Delaware corporation
("Lessee" or the "Construction Agent"); CAPITAL ONE BANK, a Virginia banking
corporation, as guarantor ("Guarantor"); FIRST SECURITY BANK, NATIONAL
---------
ASSOCIATION, a national banking association, not individually (in its individual
capacity, the "Trust Company"), except as expressly stated herein, but solely as
-------------
Owner Trustee under the Capital One Realty Trust 1998-1 (the "Owner Trustee",
-------------
the "Borrower" or the "Lessor"); the various banks and other lending
-------- ------
institutions which are parties hereto from time to time as holders of
certificates issued with respect to the Capital One Realty Trust 1998-1 (subject
to the definition of Holders in Appendix A hereto, individually, a "Holder" and
---------- ------
collectively, the "Holders"); the various banks and other lending institutions
-------
which are parties hereto from time to time as lenders (subject to the definition
of Lenders in Appendix A hereto, individually, a "Lender" and collectively, the
---------- ------
"Lenders"); and BANK OF AMERICA, N.A., a national banking association, as the
-------
agent for the Lenders and respecting the Security Documents, as the agent for
the Lenders and the Holders, to the extent of their interests (in such capacity,
the "Agent"). Capitalized terms used but not otherwise defined in this
-----
Agreement shall have the meanings set forth in Appendix A hereto.
This Agreement relates to the Lease, the CORI Trust Estate and the
Advances, Commitments and Holder Commitments related thereto.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
SECTION 1 THE LOANS.
The Lenders have agreed to make loans to the Lessor from time to time in an
aggregate principal amount of up to the aggregate amount of the Commitments of
the Lenders in order for the Lessor to acquire the Properties and certain
Improvements and to develop and construct certain Improvements in accordance
with the Agency Agreement and the terms and provisions hereof, and in
consideration of the receipt of proceeds of the Loans, the Lessor will issue the
Notes. The Loans shall be made and the Notes shall be issued pursuant to the
Credit Agreement. Pursuant to Section 5 of this Agreement and Section 2 of the
Credit Agreement, the Loans will be made to the Lessor from time to time at the
request of the Construction Agent in consideration for the Construction Agent
agreeing for the benefit of the Lessor, pursuant to the Agency Agreement, to
acquire the Properties, to acquire the Equipment, to construct certain
Improvements and to cause the Lessee to lease the Properties, each in accordance
with the Agency Agreement and the other Operative Agreements. The Loans and the
obligations of the Lessor under the Credit Agreement shall be secured by the
Collateral.
1
<PAGE>
SECTION 2 HOLDER FUNDINGS.
Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto on each date Advances made in accordance with
Section 5 hereof, each Holder shall make a Holder Funding on a pro rata basis to
the Lessor with respect to the Capital One Realty Trust 1998-1 based on its
Holder Commitment in an amount in immediately available funds such that the
aggregate of all Holder Fundings shall be three percent (3%) of the amount of
the Advance being funded on such date; provided, no Holder shall be obligated
for any Holder Funding in excess of its pro rata share of the Available Holder
Commitment; provided further, that the initial Advance hereunder shall consist
of Holder Fundings in an amount equal to $802,157 and Loans in an amount equal
to $936,412. The aggregate amount of Holder Fundings shall be up to the
aggregate amount of the Holder Commitments. No prepayment or any other payment
shall be permitted such that the aggregate outstanding Holder Fundings on the
date of such payment or prepayment are less than 3% of the aggregate outstanding
amount of Advances made as of such date, except as provided in Section 8 of the
Credit Agreement. The representations, warranties, covenants and agreements of
the Holders herein and in the other Operative Agreements are several, and not
joint or joint and several.
SECTION 3 SUMMARY OF TRANSACTIONS.
3.1 Operative Agreements.
---------------------
On the date hereof, each of the respective parties hereto and thereto shall
execute and deliver this Agreement, the Lease, the Agency Agreement, the Credit
Agreement, the Trust Agreement, the Security Agreement and such other documents,
instruments, certificates and opinions of counsel as agreed to by the parties
hereto.
3.2 Property Purchase.
-----------------
On each Property Closing Date and subject to the terms and conditions of
this Agreement (a) the Holders will each make a Holder Funding in accordance
with Sections 2 and 5 of this Agreement and the terms and provisions of the
Trust Agreement, (b) the Lenders will each make Loans in accordance with
Sections 1 and 5 of this Agreement and the terms and provisions of the Credit
Agreement, (c) the Lessor will purchase, or lease pursuant to a Ground Lease,
the applicable Property, each to be within an Approved State, identified by the
Construction Agent, in each case pursuant to a Deed and/or Bill of Sale or a
Ground Lease, as the case may be, and grant the Agent a lien on such Property by
execution of the required Security Documents, and (d) if the Property Closing
Date for such Property is also the Basic Term Commencement Date for such
Property, the Agent, the Lessee and the Lessor shall execute and deliver a Lease
Supplement relating to such Property.
2
<PAGE>
3.3 Construction of Improvements; Lease or Disposition of Property.
--------------------------------------------------------------
Construction Advances will be made with respect to particular Improvements
to be constructed and with respect to ongoing construction of particular
Improvements, in each case, pursuant to the terms and conditions of this
Agreement and the Agency Agreement. The Construction Agent will act as a
construction agent on behalf of the Lessor respecting the construction of such
Improvements and the expenditures of the Construction Advances related thereto.
The Construction Agent shall promptly notify the Lessor upon Completion of the
Improvements and the Lessee shall commence to pay Basic Rent as of the Basic
Term Commencement Date.
3.4 Ratable Interests of the Holders and the Lenders in the Commitments
-------------------------------------------------------------------
and Holder Commitments under the COSI Participation Agreement.
-------------------------------------------------------------
Each Holder and Lender agrees at all times (a) (i) that each Tranche A
Lender shall hold the same ratable portion of the aggregate Lender Commitment
for Tranche A Loans as such Tranche A Lender holds with respect to the aggregate
Lender Commitment for Tranche A Loans as defined in the COSI Participation
Agreement, (ii) that each Tranche B Lender shall hold the same ratable portion
of the aggregate Lender Commitment for Tranche B Loans as such Tranche B Lender
holds with respect to the aggregate Lender Commitment for Tranche B Loans as
defined in the COSI Participation Agreement, and (iii) that each Holder shall
hold the same ratable portion of the aggregate Holder Commitment as such Holder
holds with respect to the aggregate Holder Commitment as defined in the COSI
Participation Agreement, and (b) to make advances consistent with such committed
amounts referenced in Section 3.4(a) in accordance with the requirements of the
Operative Agreements, as defined in Appendix A hereto, and in accordance with
the requirements of the Operative Agreements, as defined in Appendix A to the
COSI Participation Agreement.
SECTION 4 THE CLOSINGS.
4.1 Initial Closing Date.
--------------------
All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC,
Charlotte, North Carolina, or at such other location as may be determined by the
Lessor, the Agent and the Lessee.
4.2 Initial Closing Date; Property Closing Dates; Construction Advances.
-------------------------------------------------------------------
The Construction Agent shall deliver to the Lessor and the Agent a
requisition (a "Requisition"), in the form attached hereto as Exhibit A or in
---------
such other form as is reasonably satisfactory to the Lessor and the Agent, in
connection with (a) the Initial Closing Date relating to the Transaction
Expenses and other fees, expenses and disbursements payable by the Lessor
pursuant to Section 9.1(a); and (b) each Property Closing Date relating to each
Acquisition Advance pursuant to Sections 5.3 and 9.1(b); and (c) each date of a
Construction Advance pursuant to Sections 5.4 and 9.1(b). Notwithstanding the
foregoing, the Lenders and the Holders may, in
3
<PAGE>
their sole discretion, make Advances pursuant to or in connection with Article
IX and Section 13.6 without a Requisition; provided, however, the failure of
-------- -------
such amounts so funded to be referenced in a Requisition shall not preclude the
Lessee from later contesting the reasonableness of the payment of such amounts,
and any amounts required to be refunded by the Lessor or any third party
following a successful contest shall be available for future Advances to be made
in accordance with the provisions of the Operative Agreements.
SECTION 5 FUNDING OF ADVANCES; REPORTING REQUIREMENTS ON COMPLETION DATE;
LESSEE DELIVERY OF NOTICES; CERTAIN COVENANTS.
5.1 General.
-------
(a) To the extent funds have been made available to the Lessor as
Loans by the Lenders and Holder Fundings by the Holders, the Lessor will
use such funds from time to time in accordance with the terms and
conditions of this Agreement and the other Operative Agreements (i) to pay
interest regarding the Loans relating to a Property and to pay the Holder
Yield regarding the Holder Fundings relating to a Property, in each case to
the extent accrued under the Credit Agreement or Trust Agreement (as the
case may be) during the period prior to the Basic Term Commencement Date
with respect to such Property, (ii) at the direction of the Construction
Agent to acquire the Properties in accordance with the terms of this
Agreement, the Agency Agreement and the other Operative Agreements, (iii)
to make Advances to the Construction Agent to permit the development,
construction, modification, design, and renovation, as applicable, of
Improvements in accordance with the terms of the Agency Agreement, and the
other Operative Agreements, and (iv) to pay Transaction Expenses and
disbursements payable by the Lessor under Article IX and Section 13.6.
(b) In lieu of the payment of interest on the Loans and Holder Yield
on the Holder Fundings on any Scheduled Interest Payment Date with respect
to any Property during the period prior to the Basic Term Commencement Date
with respect to such Property and subject to Section 5.8, (i) each Lender's
Loan shall automatically be increased by the amount of interest accrued and
unpaid on such Loan for such period (except to the extent that at any time
such increase would cause such Lender's Loan to exceed such Lender's
Available Commitment, in which case the Lessee shall pay such excess amount
to such Lender in immediately available funds on the Basic Term
Commencement Date, plus interest thereon at the Overdue Rate, and (ii) each
Holder's Holder Funding shall automatically be increased by the amount of
Holder Yield accrued and unpaid on such Holder Funding for such period
(except to the extent that at any time such increase would cause the Holder
Funding of such Holder to exceed such Holder's Available Holder Commitment,
in which case the Lessee shall pay such excess amount to such Holder in
immediately available funds on the Basic Term Commencement Date, plus
interest thereon at the Overdue Rate). Such increases in a Lender's Loan
and a Holder's Holder Funding shall occur without any disbursement of funds
by any Person.
4
<PAGE>
5.2 Procedures for Funding.
----------------------
(a) The Construction Agent shall designate the date for Advances
hereunder in accordance with the terms and provisions hereof; provided,
however, it is understood and agreed that no more than two Advances may be
requested during any calendar month and the Lenders and the Holders may, in
their sole discretion, fund Transaction Expenses, fees, expenses and other
disbursements payable by the Lessor pursuant to or in connection with
Article IX and Section 13.6 regardless whether the Construction Agent
provides such designation with respect thereto; and provided, further, not
more than one of such Advances may be a Eurodollar Loan. Not less than (i)
three (3) Business Days' prior to the Initial Closing Date and (ii) three
(3) Business Days prior to the date on which any Construction or
Acquisition Advance is to be made, the Construction Agent shall deliver to
the Agent, (A) with respect to the Initial Closing Date and each
Acquisition Advance, a Requisition as described in Section 4.2 hereof and
(B) with respect to each Construction Advance, a Requisition identifying
(among other things) the Property to which such Construction Advance
relates.
(b) Each Requisition shall: (i) be irrevocable, (ii) request funds in
an amount that is not in excess of the total aggregate of the Available
Commitments plus the Available Holder Commitments at such time, and (iii)
request that the Holders make a Holder Funding and that the Lenders make
Loans to the Lessor for the payment of the Property Acquisition Costs (in
the case of an Acquisition Advance) or other Property Costs (in the case of
a Construction Advance) that have previously been incurred and were not
subject to a prior Requisition, in each case as specified in the
Requisition.
(c) Subject to the satisfaction of the conditions precedent set forth
in Sections 5.3, 5.4 or 5.5, as applicable, on each Property Closing Date
or the date on which the Construction Advance is to be made, as applicable,
and further subject to the second proviso to the first sentence of Section
2 hereof respecting the initial Advance hereunder, (i) the Lenders shall
make Loans to the Lessor in an aggregate amount equal to 97% times the sum
of (w) the Requested Funds specified in any Requisition and (x) any
additional amount of Transaction Expenses or other costs as referenced in
Article IX and any additional amount respecting any indemnity payment as
referenced in Section 13.6 (unless any such funding of Transaction Expenses
or any indemnity payment is declined in writing by each Lender and each
Holder (such decision to be in the sole discretion of each Lender and each
Holder)), ratably between the Tranche A Lenders and the Tranche B Lenders
with the Tranche A Lenders funding eighty-six percent (86%) of the
Requested Funds and the Tranche B Lenders funding eleven percent (11%) of
the Requested Funds), up to an aggregate principal amount equal to the
Available Commitments, (ii) each Holder shall make a pro rata Holder
Funding based on its Holder Commitment in an amount such that the aggregate
of all Holder Fundings at such time shall be 3% times the sum of (y) the
Requested Funds specified in such Requisition and (z) any additional amount
of Transaction Expenses or other costs as referenced in Article IX and any
additional amount respecting any indemnity payment as referenced in Section
13.6 (unless any such funding of Transaction Expenses or any indemnity
payment is declined
5
<PAGE>
in writing by each Lender and each Holder (such decision to be in the sole
discretion of each Lender and each Holder)), up to the aggregate advanced
amount equal to the aggregate of the Available Holder Commitments and
provided no such Holder Funding shall exceed such Holder's pro rata share
of the Available Holder Commitments; and (iii) the total amount of such
Loans and Holder Fundings made on such date shall (a) be used by the Lessor
to pay Property Acquisition Costs including Transaction Expenses and other
costs and indemnity payments within three (3) Business Days of the receipt
by the Lessor of such Advance or (b) be advanced by the Lessor on the date
of such Advance to the Construction Agent or the Lessee to pay Property
Costs, as applicable.
(d) With respect to an Advance obtained by the Lessor to pay for
Property Acquisition Costs and/or Transaction Expenses or other costs
payable under Article IX or Section 13.6 hereof and not expended by Lessor
for such purpose on the date of such Advance, such amounts shall be held by
the Lessor (or the Agent on behalf of the Lessor) until the applicable
Property Closing Date or, if such Property Closing Date does not occur
within three (3) Business Days of the date of the Lessor's receipt of such
Advance, shall be applied to repay the applicable Advance to the Lenders
and the Holders and, subject to the terms hereof, and of the Credit
Agreement and the Trust Agreement, shall remain available for future
Advances. Any such amounts held by the Lessor (or the Agent on behalf of
the Lessor) shall be subject to the lien of the Security Agreement.
5.3 Conditions to the Holders' and the Lenders' Obligations to Advance
------------------------------------------------------------------
Funds for the Acquisition of Property.
--------------------------------------
The obligations of the Holders to make a Holder Funding, and of the Lenders
to make Loans to the Lessor, (i) on the Initial Closing Date to pay Transaction
Expenses, fees, expenses and other disbursements payable by the Lessor under
Article IX of this Agreement and (ii) on a Property Closing Date for the purpose
of providing funds to the Lessor necessary to pay the Transaction Expenses,
fees, expenses and other disbursements payable by the Lessor under Article IX of
this Agreement and to acquire a Property (an "Acquisition Advance") in each case
are subject to the satisfaction or waiver of the following conditions precedent:
(a) the correctness in all material respects on such Property Closing
Date of the representations and warranties (including without limitation
the Incorporated Representations and Warranties) of the Lessor, the
Construction Agent, the Lessee and the Holders contained herein and in each
of the other Operative Agreements;
(b) the performance in all material respects by the Construction Agent
and the Lessee of their respective agreements contained herein and in the
other Operative Agreements and to be performed by them on or prior to each
Property Closing Date;
(c) the Agent shall have received a fully executed counterpart copy of
the Requisition, appropriately completed;
6
<PAGE>
(d) title to each Property being acquired on such Property Closing
Date shall conform to the representations and warranties set forth in
Section 8.1(c) hereof;
(e) the Construction Agent shall have delivered to the Lessor a copy
of the Deed with respect to the Land (if applicable) and existing
Improvements (if applicable) and a copy of the Bill of Sale with respect to
the Equipment, respecting such of the foregoing as are being acquired on
such Property Closing Date, and such Land and existing Improvements shall
be located in an Approved State;
(f) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Advance requested by such Requisition;
(g) the Construction Agent shall have delivered to the Agent, title
insurance commitments to issue policies in favor of the Lessor and the
Agent from a title insurance company and in form and substance acceptable
to the Agent, with such title exceptions thereto as are acceptable to the
Agent;
(h) the Construction Agent shall have delivered to the Agent and the
Lessor an environmental site assessment prepared by an independent
recognized professional acceptable to the Agent and the Lessor and in a
form and substance that is acceptable to the Agent and the Lessor;
(i) the Construction Agent shall have delivered to the Agent a survey
prepared by an independent recognized professional acceptable to the Agent
and in a form and substance acceptable to the Agent;
(j) the Construction Agent shall have caused to be delivered to the
Agent and the Lessor (i) a legal opinion (in form and substance
satisfactory to the Agent) from counsel located in the state where the
Property is located and (ii) a good standing certificate for the
Construction Agent from the appropriate officer of the state in which the
Property is located;
(k) the Lessor and the Agent shall be satisfied, in their discretion,
that the acquisition and/or holding of the Property and the execution of
the Mortgage Instrument and the other Security Documents will not adversely
affect the rights of the Lessor, the Holders, the Agent or the Lenders
under or with respect to the Operative Agreements;
(l) the Lessor shall have delivered to the Agent and there shall have
been recorded by the Agent a Mortgage Instrument and the Lender Financing
Statements respecting such Property in a form acceptable to the Agent and
all necessary recording fees, documentary stamp taxes and similar amounts
shall have been paid;
7
<PAGE>
(m) the Construction Agent shall have delivered to the Agent with
respect to each Property, a Lease Supplement and a memorandum regarding the
Lease and such Lease Supplement (such memorandum to be substantially in the
form attached as Exhibit B to the Lease and in form suitable for
recording); provided, such items shall be delivered pursuant to this
--------
Section 5.3(m) on the Property Closing Date for such Property only if the
Basic Term Commencement Date for such Property shall also occur on such
Property Closing Date;
(n) the Construction Agent shall have delivered to the Agent with
respect to each Property or the acquisition of personal property and/or
fixtures in accordance with the Operative Agreements, Lessor Financing
Statements executed by the Lessee and the Lessor;
(o) (i) with respect to each Acquisition Advance, the Available
Commitment and the Available Holder Commitment (after deducting the
Unfunded Amount) will be sufficient to acquire the Property and to pay
interest regarding the Loans and the Holder Yield regarding the Holder
Fundings relating to all Properties to the extent accrued under the Credit
Agreement and the Trust Agreement, as the case may be, during the period
prior to the Basic Term Commencement Date with respect to such Properties;
and (ii) based upon the construction schedule relating to any Construction
Period Property, there is sufficient time for Completion of such
Construction Period Property to occur on or prior to the Construction
Period Termination Date;
(p) if the Property is subject to a Ground Lease the Construction
Agent shall have caused a lease memorandum (in form and substance
satisfactory to the Agent) to be delivered to the Agent for such Ground
Lease;
(q) Counsel for the ground lessor of each Property subject to a Ground
Lease shall have issued to the Lessee, the Holders, the Lenders and the
Agent its opinion (in form and substance satisfactory to the Agent);
(r) the Construction Agent shall have delivered to the Agent a
preliminary construction budget (the "Construction Budget") for the
Improvements (if any) to be constructed on such Property;
(s) the Construction Agent shall have provided evidence of general and
excess liability insurance with respect to such Property as provided in the
Lease; and
(t) in their sole and absolute discretion, the Lenders and the Holders
shall have agreed to accept, and to fund the respective Loans and Holder
Fundings regarding, the particular property then under consideration as a
Property; provided, however, it is hereby understood and agreed that (a)
-------- -------
that certain campus facility in Federal Way, Washington, Phase I of which
contains 10.29 acres and will have a single building of 143,958 square feet
and Phase II of which contains 11.87 acres is anticipated to have two
three-story buildings of approximately 100,000 square feet each, one of
which (including the related real property) may be financed hereunder, and
(b) that certain 4-story office building at 8715
8
<PAGE>
Henderson Road, Tampa, Florida 33634, its respective interest in the
related 5-story parking garage and the related ground lease for the real
property at such location are acceptable Properties.
5.4 Conditions to the Holders' and the Lenders' Obligations to Make
---------------------------------------------------------------
Construction Advances for the Ongoing Construction on any Property
------------------------------------------------------------------
Prior to the Construction Period Termination Date.
--------------------------------------------------
The obligations of the Holders to make a Holder Funding, and the Lenders to
make Loans, to the Lessor, (i) in connection with all requests for Advances
subsequent to the acquisition of a Property (and to pay the Transaction
Expenses, fees, expense and other disbursements payable by the Lessor under
Article IX of this Agreement in connection therewith) and, (ii) to pay the
Holder Yield regarding the Holder Fundings relating to a Property and interest
regarding the Loans relating to a Property, in each case regarding such Holder
Yield and Interest to the extent accrued and payable under the Credit Agreement
or Trust Agreement (as the case may be), during the period prior to the Basic
Term Commencement Date with respect to such Property, are subject to the
satisfaction or waiver of the following conditions precedent:
(a) the correctness in all material respects on such date of the
representations and warranties (including without limitation the
Incorporated Representations and Warranties) of the Lessor, the
Construction Agent, the Lessee and the Holders contained herein and in each
of the other Operative Agreements;
(b) the performance in all material respects by the Construction Agent
and the Lessee of their respective agreements contained herein and in the
other Operative Agreements and to be performed by them on or prior to each
such date;
(c) the Agent shall have received a fully executed counterpart of the
Requisition, appropriately completed;
(d) (i) based upon the applicable Construction Budget, the Available
Commitments and the Available Holder Commitment (after deducting the
Unfunded Amount) will be sufficient to complete the Improvements including
interest on Loans and yield on Holder Fundings related thereto prior to the
Basic Term Commencement Date for such Property; and (ii) based upon the
construction schedule relating to any Construction Period Property, there
is sufficient time for Completion of such Construction Period Property to
occur on or prior to the Construction Period Termination Date;
(e) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Construction Advance requested by such
Requisition;
(f) the title insurance policy delivered in connection with the
requirements of Section 5.3(g) shall provide for (or shall be endorsed to
provide for) insurance in an amount
9
<PAGE>
at least equal to the maximum total Property Cost indicated by the
Construction Budget referred to in subparagraph (d) above and there shall
be no title change or exception objectionable to the Agent;
(g) the Construction Agent or Lessee shall have delivered to the Agent
copies of the Plans and Specifications for the applicable Improvements; and
(h) the Construction Agent or Lessee shall have caused an Appraisal
regarding such Property on an as-built basis to be provided to the Agent
from an appraiser selected by the Agent, which Appraisal (including the
cost of Equipment located at such Property) shall indicate that the Fair
Market Sale Value of the Property as of the Property Completion Date shall
be at least equal to 75% of the Property Cost for such Property.
5.5 Additional Reporting and Delivery Requirements on Completion Date
-----------------------------------------------------------------
Respecting Each Property.
-------------------------
On the Completion Date for each Property, the Construction Agent shall
deliver to the Agent (with a copy to counsel for the Agent) an Officer's
Certificate in the form attached hereto as Exhibit B specifying (a) the
---------
Completion Date for the construction of Improvements at the Property and (b) the
aggregate Property Cost for the Property. Such Officer's Certificate shall also
include, in form reasonably acceptable to the Agent, detailed, itemized
documentation supporting the asserted Property Cost figures and a certification
to the effect that all Improvements have been made in accordance with all
applicable material Legal Requirements, in a good and workmanlike manner in
accordance with the Plans and Specifications and otherwise in full compliance
with the standards and practices of the Construction Agent with respect to
properties and improvements owned by the Construction Agent. The Agent shall
have the right to contest the information contained in such Officer's
Certificate. Furthermore, on the Completion Date for each Property, the
Construction Agent shall deliver or cause to be delivered to the Agent (unless
previously delivered to the Agent) originals of the following, each of which
shall be in form reasonably acceptable to the Agent: (u) an as-built survey for
the applicable Property; (v) insurance certificates respecting the Property as
required hereunder and under the Lease Agreement; (w) a Lease Supplement, (x) a
memorandum of the Lease and such Lease Supplement (in form suitable for
recording), and (y) Lessor Financing Statements executed by the Lessee and the
Lessor. In addition, as of the Completion Date for such Property the
Construction Agent covenants and agrees that the recording fees, documentary
stamp taxes or similar amounts required to be paid in connection with the
related Mortgage Instrument shall be paid (or shall have been paid) in an amount
required by applicable law.
5.6 Construction Agent Delivery of Construction Budget Modifications.
-----------------------------------------------------------------
The Construction Agent covenants and agrees to deliver to the Agent each
month notification of any modification to any Construction Budget regarding each
Property if such modification increases the cost to construct such Property;
provided, no Construction Budget shall be increased unless (a) the title
insurance policies referenced in Section 5.3(g) are also modified or
10
<PAGE>
endorsed, if necessary, to provide for insurance in an amount that satisfies the
requirements of Section 5.4(f) of this Agreement, and (b) after giving effect to
any such amendment the Construction Budget remains in compliance with the
requirements of Section 5.4(d) and 5.4(h) of this Agreement.
5.7 Maintenance of the Lessee as a Wholly-Owned Entity.
---------------------------------------------------
From the Initial Closing Date and thereafter until such time as all
obligations of all Credit Parties under the Operative Agreements have been
satisfied and performed in full, Capital One Bank shall retain the Lessee as a
Wholly-Owned Entity.
5.8 Unilateral Right to Increase the Holder Commitments and the Lender
------------------------------------------------------------------
Commitments.
------------
Notwithstanding any other provision of any Operative Agreement or any
objection by any Person (including without limitation any objection by any
Credit Party), (a) each Holder, in its sole discretion, may unilaterally elect
to increase its Holder Commitment in order to fund amounts due and owing
pursuant to Article IX and/or Section 13.6 and (b) each Lender, in its sole
discretion, may unilaterally elect to increase its Lender Commitment in order to
fund amounts due and owing pursuant to Article IX and/or Section 13.6.
5.9 Borrower's Right to Increase the Commitments and the Holder
-----------------------------------------------------------
Commitments.
-----------
The parties hereto hereby acknowledge and agree that, so long as no Default
or Event of Default shall have occurred and be continuing, the Borrower may, at
any one time during the Commitment Period upon five (5) Business Days written
notice to the Agent, increase the Commitments to up to $115,400,000 and the
Holder Commitments to up to $4,600,000; provided, however, that such increase
-------- -------
shall only be effective if the Agent has received (i) pursuant to Section 2.5(a)
of that certain Credit Agreement (Capital One Services, Inc.) dated as of the
Initial Closing Date among the Borrower, the several lenders parties thereto
from time to time and Bank of America, N.A., as Administrative Agent, notice of
a corresponding reduction in the Commitments thereunder and (ii) pursuant to the
Trust Agreement, notice of a corresponding reduction in Holder Commitments
allocable to the COSI Trust Estate.
5.10 Additional Holder Representations; Lessee's Right to Replace Holder.
-------------------------------------------------------------------
(a) At the reasonable written request of the Lessee, each of the
Holders hereby agrees to use commercially reasonable efforts to provide
additional representations and warranties (in addition to the
representations and warranties set forth in Section 7.1(j)) concerning the
nature and type of financing of Holder Fundings made by each such Holder;
provided, in no event shall any Holder be obligated (under this Section
--------
5.10 or otherwise) to provide any representation or warranty regarding the
ultimate financial or accounting treatment accorded to, or tax
characterization of, any such Holder Fundings,
11
<PAGE>
nor shall the Lessee be entitled to rely on any such representation or
warranty made by any Holder.
(b) In the event that any Holder is unable to make a representation,
as described in Section 5.10(a), to the reasonable satisfaction of the
Lessee, the Lessee shall have the right, subject to the repayment in full
of all Advances and all other amounts due such Holder (including all
amounts due to such Person in its capacity as a Lender) to replace such
Holder by requiring such Holder to assign, without recourse, its interests,
rights (except for rights to be indemnified for actions taken while a party
hereunder) and obligations under the Operative Agreements (including,
without limitation the Trust Agreement) in accordance with the procedure
set forth in Section 3.11(c) of the Trust Agreement; provided, to the
--------
extent such Holder is also a Lender, the Lessee shall also cause such
Lender to assign, without recourse, its interests, rights (except for
rights to be indemnified for actions taken while a party hereunder) and
obligations under the Operative Agreements (including, without limitation,
the Credit Agreement) in accordance with the procedure set forth in Section
2.14(b) of the Credit Agreement.
5.11 Post-Closing Satisfaction of Conditions Respecting Certain
----------------------------------------------------------
Properties.
The parties hereto acknowledge and agree that, solely with respect to that
certain parcel of real property located at 8715 Henderson Road, Tampa, Florida
33634, as more particularly described on Schedule 5.11 attached hereto, which
-------------
shall be ground leased by the Lessor as of the Initial Closing Date, one or more
of the conditions precedent relating to a Property Closing Date with respect to
the advance of funds for the purpose of acquiring or ground leasing a Property
set forth in Section 5.3 will not be satisfied as of the Property Closing Date
for such Property. The Construction Agent hereby covenants and agrees that (i)
each of the conditions set forth in Section 5.3 (other than the conditions set
forth in Sections 5.3(r) and (s)) with respect to such Property will be
satisfied within sixty (60) days after the Property Closing Date for such
Property, and (ii) failure to satisfy such conditions within such time will
constitute an Agency Agreement Event of Default and a Credit Agreement Event of
Default. The Construction Agent further covenants and agrees that each of the
conditions set forth in Sections 5.3(r) and (s) with respect to such Property
will be satisfied on or before the initial Construction Advance with respect to
such Property. Except as specifically provided in this Section 5.11, nothing
herein shall be deemed to be a waiver of any rights of the Agent or any
Financing Party to require the satisfaction of any conditions precedent with
respect to any other Advance requested pursuant to the Operative Agreements.
SECTION 6 CONDITIONS OF THE INITIAL CLOSING.
6.1 Conditions to the Lessor's and the Holders' Obligations.
-------------------------------------------------------
The obligations of the Lessor and the Holders to consummate the
transactions contemplated by this Agreement, including the obligation to execute
and deliver the applicable Operative Agreements to which each is a party on the
Initial Closing Date, are subject to (i) the accuracy and
12
<PAGE>
correctness on the Initial Closing Date of the representations and warranties of
the other parties hereto contained herein, (ii) the accuracy and correctness on
the Initial Closing Date of the representations and warranties of the other
parties hereto contained in any other Operative Agreement or certificate
delivered pursuant hereto or thereto, (iii) the performance by the other parties
hereto of their respective agreements contained herein and in the other
Operative Agreements and to be performed by them on or prior to the Initial
Closing Date and (iv) the satisfaction or waiver by the Lessor and the Holders
of all of the following conditions on or prior to the Initial Closing Date:
(a) Each of the Operative Agreements to be entered into on the Initial
Closing Date shall have been duly authorized, executed and delivered by the
parties thereto, other than the Lessor, and shall be in full force and
effect, and no Default or Event of Default shall exist thereunder (both
before and after giving effect to the transactions contemplated by the
Operative Agreements), and the Lessor shall have received a fully executed
copy of each of the Operative Agreements (other than the Notes of which it
shall have received specimens). The Operative Agreements (or memoranda
thereof), any supplements thereto and any financing statements and fixture
filings in connection therewith required under the Uniform Commercial Code
shall have been filed or shall be promptly filed, if necessary, in such
manner as to enable the Lessee's counsel to render its opinion referred to
in Section 6.1(c) hereof;
(b) All taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements shall have been paid or provisions for such payment shall have
been made to the satisfaction of the Lessor and the Agent;
(c) Counsel for the Lessee acceptable to the other parties hereto
shall have issued to the Lessor, the Agent, the Lenders and the Holders its
opinion in the form attached hereto as Exhibit C or in such other form as
---------
is reasonably acceptable to such parties;
(d) All necessary (or in the reasonable opinion of the Agent or its
counsel, advisable) Governmental Actions, in each case required by any law
or regulation enacted, imposed or adopted on or after the date hereof or by
any change in fact or circumstances since the date hereof, shall have been
obtained or made and be in full force and effect unless the failure to
obtain such item would not have a Material Adverse Effect;
(e) No action or proceeding shall have been instituted, nor shall any
action or proceeding be overtly threatened, before any Governmental
Authority, nor shall any order, judgment or decree have been issued or
proposed to be issued by any Governmental Authority or to set aside,
restrain, enjoin or prevent the full performance of this Agreement, any
other Operative Agreement or any transaction contemplated hereby or thereby
which is reasonably likely to have a Material Adverse Effect;
(f) In the reasonable opinion of the Lessor, the Agent, the Holders
and their counsel, the transactions contemplated by the Operative
Agreements do not and will not
13
<PAGE>
violate any Legal Requirements and do not and will not subject the Lessor,
the Lenders, the Agent or the Holders to any adverse regulatory
prohibitions or constraints;
(g) The Lessor, the Agent and the Holders shall each have received an
Officer's Certificate, dated as of the Initial Closing Date, of each Credit
Party in the form attached hereto as Exhibit D or in such other form as is
---------
reasonably acceptable to such parties stating that (i) each and every
representation and warranty of such Credit Party contained in the Operative
Agreements to which it is a party is true and correct in all material
respects on and as of the Initial Closing Date; (ii) no Default or Event of
Default has occurred and is continuing under any Operative Agreement; (iii)
each Operative Agreement to which such Credit Party is a party is in full
force and effect with respect to it; and (iv) such Credit Party has
performed and complied with all covenants, agreements and conditions
contained herein or in any Operative Agreement required to be performed or
complied with by it on or prior to the Initial Closing Date;
(h) The Lessor, the Agent and the Holders shall each have received (i)
a certificate of the Secretary or an Assistant Secretary of each Credit
Party in the form attached hereto as Exhibit E or in such other form as is
---------
reasonably acceptable to such parties attaching and certifying as to (1)
the resolutions of its Board of Directors duly authorizing the execution,
delivery and performance by such Credit Party of each of the Operative
Agreements to which it is or will be a party, (2) its certificate of
incorporation and by-laws, in each case certified as of a recent date by
the Secretary of State of the state of its incorporation and (3) the
incumbency and signature of persons authorized to execute and deliver on
its behalf the Operative Agreements to which it is a party and (ii) a good
standing certificate from the appropriate officer of each Credit Party's
state of incorporation or formation and the state where such Credit Party's
principal place of business is located as to its good standing in such
state(s); and
(i) As of the Initial Closing Date, there shall not have occurred any
material adverse change in the consolidated assets, liabilities,
operations, business or financial condition of the Guarantor and its
Subsidiaries, taken as a whole, from that set forth in the consolidated
financial statements of the Guarantor dated March 31, 1999.
6.2 Conditions to the Lessee's Obligations.
--------------------------------------
The obligation of the Lessee to consummate the transactions contemplated by
this Agreement, including the obligation to execute and deliver the Operative
Agreements to which it is a party on the Initial Closing Date, is subject to (i)
the accuracy and correctness on the Initial Closing Date of the representations
and warranties of the other parties hereto contained herein, (ii) the accuracy
and correctness on the Initial Closing Date of the representations and
warranties of the other parties hereto contained in any other Operative
Agreement or certificate delivered pursuant hereto or thereto, (iii) the
performance by the other parties hereto of their respective agreements contained
herein and in the other Operative Agreements, in each case to be performed by
them on or prior to the Initial Closing Date, and (iv) the satisfaction or
waiver by the Lessee of all of the following conditions on or prior to the
Initial Closing Date:
14
<PAGE>
(a) In the reasonable opinion of the Lessee and its counsel, the
transactions contemplated by the Operative Agreements do not violate any
material Legal Requirements and shall not subject Lessee to any adverse
regulatory prohibitions or constraints, in each case enacted, imposed,
adopted or proposed since the date hereof;
(b) 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 or to set aside, restrain, enjoin or
prevent the full performance of this Agreement, any other Operative
Agreement or any transaction contemplated hereby or thereby which is
reasonably likely to have a Material Adverse Effect;
(c) Each of the Operative Agreements shall have been duly authorized,
executed and delivered by the parties thereto, other than the Lessee, and
shall be in full force and effect, and no Default, other than Defaults of
the Lessee, shall exist thereunder, and the Lessee shall have received a
fully executed copy of each of the Operative Agreements;
(d) The Lessee and the Agent shall have received an Officer's
Certificate of the Lessor dated as of such Closing Date in the form
attached hereto as Exhibit F or in such other form as is reasonably
---------
acceptable to Lessee and the Agent, stating that (i) each and every
representation and warranty of the Lessor contained in the Operative
Agreements to which it is a party is true and correct on and as of the
Initial Closing Date; (ii) each Operative Agreement to which the Lessor is
a party is in full force and effect with respect to it, and (iii) the
Lessor has duly performed and complied with all covenants, agreements and
conditions contained herein or in any Operative Agreement required to be
performed or complied with by it on or prior to the Initial Closing Date;
(e) The Lessee and the Agent shall have received (i) a certificate of
the Secretary, an Assistant Secretary, Trust Officer or Vice President of
the Trust Company in the form attached hereto as Exhibit G or in such other
---------
form as is reasonably acceptable to Lessee and the Agent, attaching and
certifying as to (A) the signing resolutions, (B) its articles of
incorporation or other equivalent charter documents, as the case may be,
certified as of a recent date by an appropriate officer of the Trust
Company, (C) its by-laws and (D) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Operative Agreements to
which it is a party and (ii) a good standing certificate from the Office of
the Comptroller of the Currency regarding the Trust Company; and
(f) Counsel for the Lessor acceptable to the other parties hereto
shall have issued to the Lessee, the Holders, the Lenders and the Agent its
opinion in the form attached hereto as Exhibit H or in such other form as
---------
is reasonably acceptable to such parties.
15
<PAGE>
6.3 Conditions to the Agent's Obligations.
-------------------------------------
The obligation of the Agent to consummate the transactions contemplated by
this Agreement on the Initial Closing Date, including the obligation to execute
and deliver each of the Operative Agreements to which it is a party on the
Initial Closing Date, is subject to (i) the accuracy and correctness on the
Initial Closing Date of the representations and warranties of the other parties
hereto contained herein, (ii) the accuracy and correctness on the Initial
Closing Date of the representations and warranties of the other parties hereto
contained in any other Operative Agreement or certificate delivered pursuant
hereto or thereto, (iii) the performance by the other parties hereto of their
respective agreements contained herein and in the other Operative Agreements, in
each case to be performed by them on or prior to the Initial Closing Date, and
(iv) the receipt by the Agent of the items required to be delivered to the Agent
pursuant to this Section 6.
SECTION 7 REPRESENTATIONS AND WARRANTIES ON THE INITIAL CLOSING DATE.
7.1 Representations and Warranties of the Holders.
---------------------------------------------
Effective as of the Initial Closing Date, each Holder severally as to
itself, and not jointly, represents and warrants to each of the other parties
hereto that:
(a) It is duly organized, validly existing and in good standing under
the laws of the United States of America or the jurisdiction of its
formation or organization and has the power and authority to carry on its
business as now conducted and to enter into and perform its obligations
under each Operative Agreement to which it is or is to be a party and each
other agreement, instrument and document to be executed and delivered by it
on or before each Closing Date in connection with or as contemplated by
each such Operative Agreement to which it is or will be a party;
(b) The execution, delivery and performance of each Operative
Agreement to which it is or will be a party have been duly authorized by
all necessary action on its part and neither the execution and delivery
thereof, nor the consummation of the transactions contemplated thereby, nor
compliance by it with any of the terms and provisions thereof (i) requires
or will require any approval of the partners or stockholders of, or
approval or consent of any trustee or holder of any indebtedness or
obligations of, the Holder which have not been obtained, (ii) contravenes
or will contravene any Legal Requirement applicable to or binding on it
(except no representation or warranty is made as to any Legal Requirement
to which it may be subject solely as a result of the activities of the
Lessee) as of the date hereof, (iii) does or will contravene or result in
any breach of or constitute any default under, or result in the creation of
any Lien upon any Property or any of the Improvements (other than Liens
created by the Operative Agreements) under its certificate of incorporation
or other equivalent charter documents, as the case may be, or any material
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement or other agreement or instrument to
which it is a party or by which it or its
16
<PAGE>
properties is bound or affected or (iv) does or will require any
Governmental Action by any Governmental Authority (other than arising
solely by reason of the business, condition or activities of the Lessee or
any Affiliate thereof or the construction or use of the Properties or the
Improvements);
(c) Each Operative Agreement to which it is or will be a party has
been, or will be, duly executed and delivered by it and constitutes, or
upon execution and delivery will constitute, a legal, valid and binding
obligation enforceable against it in accordance with the terms thereof;
(d) To its knowledge, there is no action or proceeding pending or
threatened against it before any Governmental Authority that questions the
validity or enforceability of any Operative Agreement to which it is or
will become a party or that, if adversely determined, would materially and
adversely affect its ability to perform its obligations under the Operative
Agreements to which it is a party;
(e) It has not assigned or transferred any of its right, title or
interest in or under the Lease except in accordance with the Operative
Agreements;
(f) [Reserved];
(g) It is not a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of
1935, as amended, or a "public utility" within the meaning of the Federal
Power Act, as amended. It is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended;
(h) Except as otherwise contemplated by the Operative Agreements, it
shall not, nor shall it direct the Lessor to, use the proceeds of any Loan
or Holder Funding for any purpose other than purchase and/or lease of the
Properties, the construction of Improvements, the payment of the
Transaction Expenses and the fees, expenses and other disbursements
referenced in Sections 9.1 or 13.6 of this Agreement and the payment of the
interest regarding the Loans and the Holder Yield regarding the Holder
Fundings which accrues prior to the Rent Commencement Date with respect to
the Property; and
(i) It is acquiring its interest in the CORI Trust Estate for its own
account for investment and not with a view to any distribution. Neither it
nor anyone authorized to act on its behalf has taken or will take any
action which would subject the issuance or sale of any interest in the
Property, the CORI Trust Estate or the Lease to the registration
requirements of Section 5 of the Securities Act. No representation or
warranty contained in this Section 7.1(i) shall include or cover any action
or inaction of the Lessee or any Affiliate thereof whether or not
purportedly on behalf of the Holders, the Borrower or any of their
Affiliates; and
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(j) It has not and will not (i) finance Holder Advances with
nonrecourse debt that is collateralized by a Lien on the Construction
Period Properties, the Properties, or the Lease or cashflows therefrom; or
(ii) obtain a residual guarantee on the Holder Advances through a letter of
credit or other form of guarantee.
7.2 Representations and Warranties of the Borrower.
----------------------------------------------
Effective as of the Initial Closing Date, Trust Company in its individual
capacity and as the Borrower, as indicated, represents and warrants to each of
the other parties hereto as follows, provided, that the representations in the
following paragraphs (h), (i), (j) and (k) are made solely in its capacity as
the Borrower:
(a) It is a national banking association and is duly organized and
validly existing and in good standing under the laws of the United States
of America and has the power and authority to enter into and perform its
obligations under the Trust Agreement and (assuming due authorization,
execution and delivery of the Trust Agreement by the Holders) has the
corporate and trust power and authority to act as the Owner Trustee and to
enter into and perform the obligations under each of the other Operative
Agreements to which Trust Company or the Owner Trustee, as the case may be,
is or will be a party and each other agreement, instrument and document to
be executed and delivered by it on or before such Closing Date in
connection with or as contemplated by each such Operative Agreement to
which Trust Company or the Owner Trustee, as the case may be, is or will be
a party;
(b) The execution, delivery and performance of each Operative
Agreement to which it is or will be a party, either in its individual
capacity or (assuming due authorization, execution and delivery of the
Trust Agreement by the Holders) as the Owner Trustee, as the case may be,
has been duly authorized by all necessary action on its part and neither
the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will require any approval or
consent of any trustee or holders of any of its indebtedness or
obligations, (ii) does or will contravene any current law, governmental
rule or regulation relating to its banking or trust powers, (iii) does or
will contravene or result in any breach of or constitute any default under,
or result in the creation of any Lien upon any of its property under, (A)
its charter or by-laws, or (B) any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, bank loan or credit agreement or
other agreement or instrument to which it is a party or by which it or its
properties may be bound or affected, which contravention, breach, default
or Lien under clause (B) would materially and adversely affect its ability,
in its individual capacity or as Owner Trustee, to perform its obligations
under the Operative Agreements to which it is a party or (iv) does or will
require any Governmental Action by any Governmental Authority regulating
its banking or trust powers;
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<PAGE>
(c) The Trust Agreement and, assuming the Trust Agreement is the
legal, valid and binding obligation of the Holders, each other Operative
Agreement to which Trust Company or the Owner Trustee, as the case may be,
is or will be a party have been, or on or before such Closing Date will be,
duly executed and delivered by Trust Company or the Owner Trustee, as the
case may be, and the Trust Agreement and each such other Operative
Agreement to which Trust Company or the Owner Trustee, as the case may be,
is a party constitutes, or upon execution and delivery will constitute, a
legal, valid and binding obligation enforceable against Trust Company or
the Owner Trustee, as the case may be, in accordance with the terms
thereof;
(d) There is no action or proceeding pending or, to its knowledge,
threatened to which it is or will be a party, either in its individual
capacity or as the Owner Trustee, before any Governmental Authority that,
if adversely determined, would materially and adversely affect its ability,
in its individual capacity or as Owner Trustee, to perform its obligations
under the Operative Agreements to which it is a party or would question the
validity or enforceability of any of the Operative Agreements to which it
is or will become a party;
(e) It has not assigned or transferred any of its right, title or
interest in or under the Lease or the Agency Agreement except in accordance
with the Operative Agreements;
(f) No Default or Event of Default under the Operative Agreements
attributable to it has occurred and is continuing;
(g) Except as otherwise contemplated in the Operative Agreements, the
proceeds of the Loans and Holder Fundings shall not be applied by the Owner
Trustee for any purpose other than the payment of Transaction Expenses and
the fees, expenses and other disbursements referenced in Sections 9.1(a),
9.1(b) and 13.6 of this Agreement, the purchase and/or lease of the
Properties, the acquisition of the Equipment, the construction of
Improvements and the payment of interest regarding the Loans and the
payment of the Holder Yield regarding the Holder Fundings, in each case to
the extent accrued under the Credit Agreement or Trust Agreement (as the
case may be) during the period prior to the Basic Term Commencement Date
with respect to a particular Property;
(h) Neither the Owner Trustee nor any Person authorized by the Owner
Trustee to act on its behalf has offered or sold any interest in the CORI
Trust Estate or the Notes, or in any similar security relating to a
Property, or in any security the offering of which for the purposes of the
Securities Act would be deemed to be part of the same offering as the
offering of the aforementioned securities to, or solicited any offer to
acquire any of the same from, any Person other than, in the case of the
Notes, the Agent, and neither the Owner Trustee nor any Person authorized
by the Owner Trustee to act on its behalf will take any action which would
subject, as a direct result of such action alone, the issuance or sale of
any interest in the CORI Trust Estate or the Notes to the provisions of
Section 5 of the Securities Act or require the qualification of any
Operative Agreement under the Trust Indenture Act of 1939, as amended;
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<PAGE>
(i) The Owner Trustee's chief place of business, chief executive
office and office where the documents, accounts and records relating to the
transactions contemplated by this Agreement and each other Operative
Agreement are kept are located at 79 South Main Street, Salt Lake City,
Utah 84111;
(j) The Owner Trustee is not engaged principally in, and does not
have as one of its important activities, the business of extending credit
for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System of the United States), and no part of the proceeds of the Loans or
the Holder Fundings will be used by it to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock or for any purpose that violates, or is
inconsistent with, the provisions of Regulations G, T, U, or X of the Board
of Governors of the Federal Reserve System of the United States; and
(k) The Owner Trustee is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act.
7.3 Representations and Warranties of the Construction Agent and the
----------------------------------------------------------------
Credit Parties.
--------------
Effective as of the Initial Closing Date and the Basic Term Commencement
Date, as applicable, respecting each applicable Property, the Construction Agent
and each Credit Party, unless otherwise specified hereunder, represents and
warrants, as to itself, to each of the other parties hereto that:
(a) With respect to the Guarantor, the Incorporated Representations
and Warranties are true and correct and the Guarantor has delivered to each
of the Lenders and Holders the financial statements referred to in Section
8.01 of the Capital One Credit Agreement.
(b) The execution and delivery by the Construction Agent or such
Credit Party of this Agreement and the other Operative Agreements to which
the Construction Agent or such Credit Party is a party and the performance
by the Construction Agent or such Credit Party of its respective
obligations under this Agreement and the other Operative Agreements is
within the corporate powers of the Construction Agent or such Credit Party,
has been duly authorized by all necessary corporate action on the part of
the Construction Agent or such Credit Party (including any necessary
shareholder action), has received all necessary governmental approval, and
does not and will not (i) violate any material provision of applicable Law,
decree, judgment or award which is binding on the Construction Agent or
such Credit Party or any of their Subsidiaries unless such violation would
not have a Material Adverse Effect, (ii) contravene or conflict with, or
result in a breach of, any provision of the Certificate of Incorporation,
By-Laws or other organizational documents of the Construction Agent or such
Credit Party or any of their Subsidiaries or of any agreement, indenture,
instrument or other document which is binding on the Construction Agent or
such Credit Party or any of their
20
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Subsidiaries unless such conflict or breach would not have a Material
Adverse Effect or (iii) result in, or require, the creation or imposition
of any Lien (other than pursuant to the terms of the Operative Agreements)
on any asset of the Construction Agent or such Credit Party or any of their
Subsidiaries.
(c) This Agreement is, and upon the execution and delivery thereof
the other Operative Agreements will be, the legal, valid and binding
obligation of the Construction Agent or such Credit Party that is a party
thereto, enforceable against the Construction Agent or such Credit Party
that is a party thereto in accordance with their terms, except (i) as may
be limited by bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (ii) such enforceability
may be limited by the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Construction Agent or such Credit Party has executed
the various Operative Agreements required to be executed as of such date.
(d) [Intentionally Omitted].
(e) No Governmental Action by any Governmental Authority or
authorization, registration, consent, approval, waiver, notice or other
action by, to or of any other Person is required to authorize or is
required in connection with (i) the Construction Agent's or such Credit
Party's execution, delivery or performance of any Operative Agreement or
(ii) the legality, validity, binding effect or enforceability of any
Operative Agreement on the Construction Agent or such Credit Party that is
a party thereto, in each case, except those which have been obtained or
where failure to obtain would not cause a Material Adverse Effect.
(f) Upon the execution and delivery of each Lease Supplement to the
Lease, (i) the Lessee will have unconditionally accepted the Property
subject to the Lease Supplement and will have a valid and subsisting
leasehold interest in the Property, subject only to the Permitted
Exceptions, and (ii) no offset will exist with respect to any Rent or other
sums payable under the Lease.
(g) Except as otherwise contemplated by the Operative Agreements, the
Construction Agent shall not use the proceeds of any Holder Funding or Loan
for any purpose other than the purchase of the Properties, the acquisition
of the Equipment and the construction of Improvements.
(h) All information heretofore or contemporaneously herewith
furnished by any Credit Party or any of their Subsidiaries to the Agent,
the Owner Trustee, any Lender or any Holder for purposes of or in
connection with this Agreement and the transactions contemplated hereby is,
and all information hereafter furnished by or on behalf of any Credit Party
or any of their Subsidiaries to the Agent, the Owner Trustee, any Lender or
any
21
<PAGE>
Holder pursuant hereto or in connection herewith will be, true and accurate
(when taken as a whole) in every material respect on the date as of which
such information is dated or certified, and such information, taken as a
whole, does not and will not omit to state any material fact necessary to
make such information, taken as a whole, not misleading.
(i) Each Credit Party has (i) initiated a review and assessment of
all areas within its and each of its Subsidiaries' business and operations
that would be adversely affected by the "Year 2000 Problem" (that is, the
risk that computer applications used by such Credit Party or any of its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to, in and following the Year
2000), (ii) developed a plan for addressing the Year 2000 Problem on a
timely basis and (iii) initiated implementation of that plan. Based on the
foregoing, each Credit Party believes that any reprogramming or
replacements required to permit the proper functioning, prior to, in and
following the Year 2000, of (i) such Credit Party's material computer
systems and (ii) material equipment of such Credit Party containing
embedded microchips (including systems and equipment supplied by others or
with which such Credit Party's systems interface) and the verification of
all such systems and equipment, as so reprogrammed or replaced, as the case
may be, will be completed by September 1, 1999, except to the extent the
failure to so complete such reprogramming or replacement could not
reasonably be expected to have a Material Adverse Effect. Each Credit
Party believes that any reprogramming or replacements required to permit
the proper functioning in and following the Year 2000 of its computer
systems and any necessary equipment of such Credit Party containing
embedded microchips and the testing of all such systems and equipment as so
reprogrammed or replaced will be completed in a manner and to the extent
that any failure by such Credit Party to complete any such reprogramming,
replacement or testing will not result in a Default or could not reasonably
be expected to have a Material Adverse Effect.
7.4 Representations and Warranties of the Agent.
-------------------------------------------
Effective as of the Initial Closing Date, the Agent represents and warrants
to each of the other parties hereto that:
(a) It is a national banking association duly organized and validly
existing under the laws of the United States of America and has the full
power and authority to enter into and perform its obligations under this
Agreement and each other Operative Agreement to which it is or will be a
party;
(b) This Agreement and each other Operative Agreement to which it is
a party have been, or when executed and delivered will be, duly authorized
by all necessary corporate action on the part of the Agent and have been,
or on such Closing Date will have been, duly executed and delivered by the
Agent and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, are, or upon execution
and delivery thereof will be, legal, valid and binding obligations of the
Agent, enforceable against it in accordance with their respective terms;
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<PAGE>
(c) The execution, delivery and performance by the Agent of this
Agreement and each other Operative Agreement to which it is or will be a
party are not, and will not be, inconsistent with the articles of
incorporation or by-laws or other charter documents of the Agent, do not
and will not contravene any applicable Law of the State of Texas or of the
United States of America governing its activities and will not contravene
any provision of, or constitute a default under any indenture, mortgage,
contract or other instrument of which it is a party or by which it or its
properties are bound, or require any consent or approval of any
Governmental Authority under any applicable law, rule or regulation of the
State of Texas or any federal law, rule or regulation of the United States
of America governing its activities; and
(d) Except as otherwise contemplated by the Operative Agreements, the
Agent shall not, nor shall it direct the Lessor to, use the proceeds of any
Loan for any purpose other than the purchase of the Properties, the
acquisition of Equipment, the construction of Improvements and the payment
of Transaction Expenses, interest regarding the Loans which accrue under
the Credit Agreement during the period prior to the Basic Term Commencement
Date with respect to a particular Property and other uses authorized under
the Operative Agreements.
SECTION 8 REPRESENTATIONS AND WARRANTIES ON FUNDING DATES.
8.1 Representations and Warranties on Property Closing Dates.
--------------------------------------------------------
The Construction Agent and each Credit Party hereby represents and warrants
as to itself as of each Property Closing Date as follows:
(a) The representations and warranties (including the Incorporated
Representations and Warranties in the case of the Guarantor) of the
Construction Agent or such Credit Party set forth in the Operative
Agreements are true and correct in all material respects on and as of such
Property Closing Date as if made on and as of such date. The Construction
Agent or such Credit Party is in all material respects in compliance with
its respective obligations under the Operative Agreements and there exists
no Default or Event of Default under any of the Operative Agreements which
is continuing and which has not been cured within any cure period expressly
granted under the terms of the applicable Operative Agreement. No Default
or Event of Default will occur under any of the Operative Agreements as a
result of, or after giving effect to, the Advance requested by the
Requisition on such Property Closing Date;
(b) The Properties to be acquired or leased pursuant to a Ground
Lease are being acquired or ground leased at a price that is not in excess
of fair market value or fair market rental value, as the case may be, and
such Properties consist of (i) unimproved Land, or (ii) Land and existing
Improvements thereon which Improvements are either suitable for occupancy
at the time of acquisition or will be renovated and/or modified in
accordance
23
<PAGE>
with the terms of this Agreement. Each of the Properties is located at the
location set forth on the applicable Requisition, all of which are in one
of the Approved States;
(c) Upon the acquisition of each Property on such Property Closing
Date, and at all times thereafter, the Lessor will have good and marketable
fee simple title to such Property, or, if such Property is the subject of a
Ground Lease, the Lessor will have a lessee's interest enforceable against
the ground lessor of such Property in accordance with the terms of such
Ground Lease, subject only to Permitted Liens;
(d) The execution and delivery of each Operative Agreement delivered
by the Construction Agent or such Credit Party on such Property Closing
Date and the performance of the obligations of the Construction Agent or
such Credit Party under each Operative Agreement have been duly authorized
by all requisite corporate action of the Construction Agent or such Credit
Party, as applicable;
(e) Each Operative Agreement delivered on such Property Closing Date
by the Construction Agent or such Credit Party has been duly executed and
delivered by the Construction Agent or such Credit Party;
(f) Each Operative Agreement delivered by the Construction Agent or
such Credit Party on such Property Closing Date is a legal, valid and
binding obligation of the Construction Agent or such Credit Party,
enforceable against the Construction Agent or such Credit Party, in
accordance with its respective terms, except (i) as may be limited by
bankruptcy, insolvency, receivership, conservatorship, reorganization,
moratorium or similar laws of general applicability affecting the
enforcement of creditors' rights and (ii) such enforceability may be
limited by the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law);
(g) No portion of any Property being acquired by the Lessor on such
Property Closing Date is located in an area identified as a special flood
hazard area by the Federal Emergency Management Agency or other applicable
agency, or if any such Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or
other applicable agency, then flood insurance has been obtained for such
Property in accordance with Section 14.2(b) of the Lease and in accordance
with the National Flood Insurance Act of 1968, as amended;
(h) The Construction Agent has obtained insurance coverage for each
Property being acquired by the Lessor on such Property Closing Date which
meet the requirements of the Lease and all of such coverage is in full
force and effect;
(i) Each Property being acquired by the Lessor on such Property
Closing Date complies with all Legal Requirements (including, without
limitation, all zoning and land use laws and Environmental Laws), except to
the extent that failure to comply therewith would not, individually or in
the aggregate, have a Material Adverse Effect; and
24
<PAGE>
(j) All utility services and facilities necessary for the
construction of the Improvements existing on, or to be constructed after,
such Property Closing Date (including, without limitation, gas, electrical,
water and sewage services and facilities) are available at the boundaries
of the real property upon which such Improvements exist or will be
constructed on each such Property prior to the Completion Date for such
Property.
8.2 Representations and Warranties Upon Initial Construction Advances.
-----------------------------------------------------------------
The Construction Agent and each Credit Party hereby represents and warrants
as to itself as of each date on which an Initial Construction Advance is made as
follows:
(a) The representations and warranties (including the Incorporated
Representations and Warranties in the case of the Guarantor) of the
Construction Agent or such Credit Party set forth in the Operative
Agreements are true and correct in all material respects on and as of the
date of such Initial Construction Advance as if made on and as of such
date. The Construction Agent or such Credit Party is in all material
respects in compliance with its respective obligations under the Operative
Agreements and there exists no Default or Event of Default under any of the
Operative Agreements. No Default or Event of Default will occur under any
of the Operative Agreements as a result of, or after giving effect to, the
Advance requested by the Requisition on such date;
(b) The Lessor has good and marketable fee simple title to each
Property, or, if such Property is the subject of a Ground Lease, the Lessor
has a lessee's interest enforceable against the ground lessor in accordance
with the terms of such Ground Lease, subject only to Permitted Liens;
(c) [Intentionally Omitted]
(d) All consents, licenses, permits, authorizations, assignments and
building permits required as of the date on which such Advance is made by
all material Legal Requirements or pursuant to the terms of any contract,
indenture, instrument or agreement for construction, completion, occupancy,
operation, leasing or subleasing of each Property with respect to which an
Advance is being made have been obtained and are in full force and effect,
except to the extent that the failure to so obtain would not, individually
or in the aggregate, have a Material Adverse Effect;
(e) The Construction Agent has obtained insurance coverage covering
the Property which is the subject of such Advance which meets the
requirements of Section 2.6 of the Agency Agreement before commencing
construction, repairs or modifications, as the case may be, and such
coverage is in full force and effect;
(f) The Improvements which are the subject of the Advance, as
improved in accordance with the Plans and Specifications, will comply as of
the applicable Completion Date with all material Legal Requirements and
Insurance Requirements (including, without limitation, all zoning and land
use laws and Environmental Laws), except to the extent the
25
<PAGE>
failure to comply therewith would not, individually or in the aggregate,
have a Material Adverse Effect. The Plans and Specifications have been or
will be prepared in accordance with all applicable Legal Requirements
(including, without limitation, all applicable Environmental Laws and
building, planning, zoning and fire codes), except to the extent the
failure to comply therewith would not, individually or in the aggregate,
have a Material Adverse Effect, and upon completion of such Improvements in
accordance with the Plans and Specifications, such Improvements will not
encroach in any manner onto any adjoining land (except as permitted by
express written easements) and such Improvements and the use thereof by the
Lessee and its agents, assignees, employees, invitees, lessees, licensees
and tenants will comply as of the applicable Completion Date in all
respects with all applicable Legal Requirements (including, without
limitation, all applicable Environmental Laws and building, planning,
zoning and fire codes), except to the extent the failure to comply
therewith would not, individually or in the aggregate, have a Material
Adverse Effect. Upon completion of such Improvements in accordance with the
Plans and Specifications, (i) there will be no material defects to such
Improvements including, without limitation, the plumbing, heating, air
conditioning and electrical systems thereof and (ii) all water, sewer,
electric, gas, telephone and drainage facilities and all other utilities
required to adequately service such Improvements for their intended use
will be available pursuant to adequate permits (including any that may be
required under applicable Environmental Laws), except to the extent that
failure to obtain any such permit would not, individually or in the
aggregate, have a Material Adverse Effect. There is no action, suit or
proceeding (including any proceeding in condemnation or eminent domain or
under any Environmental Law) pending or, to the best knowledge of the
Lessee or the Construction Agent, overtly threatened which adversely
affects the title to, or the use, operation or value of, such Properties.
No fire or other casualty with respect to such Properties has occurred
which fire or other casualty has had a Material Adverse Effect. All
utilities serving the related Properties, or proposed to serve the related
Properties in accordance with the Plans and Specifications, are located in
(and in the future will be located in) and vehicular access to such
Improvements is provided by (or will be provided by), either public rights-
of-way abutting the related Property or Appurtenant Rights. All licenses,
approvals, authorizations, consents, permits (including, without
limitation, building, demolition and environmental permits, licenses,
approvals, authorizations and consents), easements and rights-of-way,
including proof of dedication, required for (i) the use, treatment,
storage, transport, disposal or disposition of any Hazardous Substance on,
at, under or from the real property underlying such Improvements during the
construction of such Improvements and the use and operation of such
Improvements following such construction, (ii) the construction of such
Improvements in accordance with the Plans and Specifications and the Agency
Agreement and (iii) the use and operation of such Improvements following
such construction with the applicable Equipment which such Improvements
support for the purposes for which they were intended have either been
obtained from the appropriate Governmental Authorities having jurisdiction
or from private parties, as the case may be, or will be 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; and
26
<PAGE>
(g) All conditions precedent contained in this Agreement and in the
other Operative Agreements relating to the initial Advance to the
Construction Agent of funds for the purpose of commencing construction,
repairs or modifications on any Property have been substantially satisfied.
8.3 Representations and Warranties Upon the Date of Each Construction
-----------------------------------------------------------------
Advance That Is Not An Initial Advance.
---------------------------------------
The Construction Agent and each Credit Party hereby represents and warrants
as to itself as of each date on which a Construction Advance is made, when such
Advance is not an Initial Construction Advance, as follows:
(a) The representations and warranties of the Construction Agent or
such Credit Party set forth in the Operative Agreements (including the
representations and warranties set forth in Section 8.2 and, in the case of
the Guarantor, the Incorporated Representations and Warranties) are true
and correct in all material respects on and as of the date of such
Construction Advance as if made on and as of such date. The Construction
Agent or such Credit Party is in all material respects in compliance with
its respective obligations under the Operative Agreements and there exists
no Default or Event of Default under any of the Operative Agreements which
is continuing and which has not been cured within any cure period expressly
granted under the terms of the applicable Operative Agreement. No Default
or Event of Default will occur under any of the Operative Agreements as a
result of, or after giving effect to, the Advance requested by the
Requisition on such date;
(b) 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
material Legal Requirements, except to the extent noncompliance with any
Legal Requirements would not, individually or in the aggregate, have a
Material Adverse Effect;
(c) All consents, licenses, permits, authorizations, assignments and
building permits required as of the date on which such Advance is made by
all material Legal Requirements or pursuant to the terms of any contract,
indenture, instrument or agreement for construction, completion, occupancy,
operation, leasing or subleasing of each Property have been obtained and
are in full force and effect except to the extent the failure to so obtain
would not, individually or in the aggregate, have a Material Adverse
Effect;
(d) When completed, the Improvements shall be wholly within any
building restriction lines (unless consented to by applicable Government
Authorities), however established; and
(i) Assuming that the applicable UCC Financing Statements and
Mortgage Instruments have been filed in the filing offices designated by
the Lessee or the Construction Agent, the Advance is secured by the Liens
of the Security Agreement and such Mortgage Instruments, and (ii) there
have been no Liens against the applicable
27
<PAGE>
Improvements since the filing of the Lender Financing Statements and such
Mortgage Instruments other than Permitted Liens.
The Construction Agent and each Credit Party further acknowledges that upon
the acceptance and use of the funds by the Construction Agent or the Lessee, as
the case may be, on behalf of the Lessor that all such representations and
warranties remain true and correct on the date of such Advance and that all
consents and approvals have been obtained prior to the date of such Advance.
SECTION 8B. GUARANTY
8B.1. Guaranty of Payment and Performance.
-----------------------------------
Subject to Section 8B.7, the Guarantor hereby unconditionally and
irrevocably guarantees to each Financing Party the prompt payment and
performance of the Company Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise) or when such
is otherwise to be performed; provided, notwithstanding the foregoing, the
--------
obligations of the Guarantor under this Section 8B shall not constitute a direct
guaranty of the indebtedness of the Lessor evidenced by the Notes but rather a
guaranty of the Company Obligations arising under the Operative Agreements. This
Section 8B is a guaranty of payment and performance and not of collection and is
a continuing guaranty and shall apply to all Company Obligations whenever
arising. The exercise of any rights granted to the Financing Parties under this
Section 8B shall be in accordance with the provisions of Section 10.2(j) and
10.6.
8B.2. Obligations Unconditional.
-------------------------
The Guarantor agrees that the obligations of the Guarantor hereunder are
irrevocable, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Operative Agreements, or
any other agreement or instrument referred to therein, or any substitution,
release or exchange of any other guarantee of or security for any of the Company
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety, guarantor or
co-obligor, it being the intent of this Section 8B.2 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. The Guarantor agrees that this Section 8B may be enforced by the
Financing Parties without the necessity at any time of resorting to or
exhausting any other security or collateral and without the necessity at any
time of having recourse to the Notes, the Certificates or any other of the
Operative Agreements or any collateral, if any, hereafter securing the Company
Obligations or otherwise and the Guarantor hereby waives the right to require
the Financing Parties to proceed against the Construction Agent, the Lessee or
any other Person (including without limitation a co-guarantor) or to require the
Financing Parties to pursue any other remedy or enforce any other right. The
Guarantor further agrees that it hereby waives any and all right of subrogation,
indemnity, reimbursement or contribution against the Lessee and the Construction
Agent or any other guarantor of the Company Obligations for amounts paid under
this Section 8B until such time as the Loans, Holder Fundings, accrued but
unpaid interest, accrued but unpaid Holder Yield and all
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other amounts owing under the Operative Agreements have been paid in full.
Without limiting the generality of the waiver provisions of this Section 8B, the
Guarantor hereby waives any rights to require the Financing Parties to proceed
against the Construction Agent, the Lessee or any co-guarantor or to require
Lessor to pursue any other remedy or enforce any other right, including without
limitation, any and all rights under N.C. Gen. Stat. (S) 26-7 through 26-9. The
Guarantor further agrees that nothing contained herein shall prevent the
Financing Parties from suing on any Operative Agreement or foreclosing any
security interest in or Lien on any collateral, if any, securing the Company
Obligations or from exercising any other rights available to it under any
Operative Agreement, or any other instrument of security, if any, and the
exercise of any of the aforesaid rights and the completion of any foreclosure
proceedings shall not constitute a discharge of the Guarantor's obligations
hereunder; it being the purpose and intent of the Guarantor that its obligations
hereunder shall be absolute, independent and unconditional under any and all
circumstances; provided that any amounts due under this Section 8B which are
--------
paid to or for the benefit of any Financing Party shall reduce the Company
Obligations by a corresponding amount (unless required to be rescinded at a
later date). Neither any Guarantor's obligations under this Section 8B nor any
remedy for the enforcement thereof shall be impaired, modified, changed or
released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of the Construction Agent or the Lessee
or by reason of the bankruptcy or insolvency of the Construction Agent or the
Lessee. The Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Company Obligations and notice of or proof of
reliance by any Financing Party upon this Section 8B or acceptance of this
Section 8B. The Company Obligations shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Section 8B. All dealings between the Construction Agent, the
Lessee and the Guarantor, on the one hand, and the Financing Parties, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this Section 8B.
8B.3. Modifications.
-------------
The Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Company Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) no Financing Party shall have
any obligation to protect, perfect, secure or insure any such security
interests, liens or encumbrances now or hereafter held, if any, for the Company
Obligations or the properties subject thereto; (c) the time or place of payment
of the Company Obligations may be changed or extended, in whole or in part, to a
time certain or otherwise, and may be renewed or accelerated, in whole or in
part; (d) the Construction Agent, the Lessee and any other party liable for
payment under the Operative Agreements may be granted indulgences generally; (e)
any of the provisions of the Notes, the Certificates or any of the other
Operative Agreements may be modified, amended or waived; (f) any party
(including any co-guarantor) liable for the payment thereof may be granted
indulgences or be released; and (g) any deposit balance for the credit of the
Construction Agent, the Lessee or any other party liable for the payment of the
Company Obligations or liable upon any security therefor may be released, in
whole or in part, at, before or after the stated, extended or accelerated
maturity of the Company Obligations, all without notice to or further assent by
the Guarantor, which shall remain bound thereon, notwithstanding any such
29
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exchange, compromise, surrender, extension, renewal, acceleration, modification,
indulgence or release.
8B.4. Waiver of Rights.
----------------
The Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Section 8B by any Financing
Party and of all extensions of credit or other Advances to the Construction
Agent and the Lessee by the Lenders pursuant to the terms of the Operative
Agreements; (b) presentment and demand for payment or performance of any of the
Company Obligations; (c) protest and notice of dishonor or of default with
respect to the Company Obligations or with respect to any security therefor; (d)
notice of any Financing Party obtaining, amending, substituting for, releasing,
waiving or modifying any security interest, lien or encumbrance, if any,
hereafter securing the Company Obligations, or any Financing Party's
subordinating, compromising, discharging or releasing such security interests,
liens or encumbrances, if any; and (e) all other notices to which the Guarantor
might otherwise be entitled. Notwithstanding anything to the contrary herein,
the Guarantor's payments hereunder shall be due five (5) Business Days after
written demand by the Agent to the Lessee or the Guarantor for such payment
(unless the Company Obligations are automatically accelerated pursuant to the
applicable provisions of the Operative Agreements or are deemed accelerated as
provided in Section 8B.6, in which case the Guarantor's payments shall be
automatically due).
8B.5. Reinstatement.
-------------
The obligations of the Guarantor under this Section 8B shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Company Obligations is rescinded or
must be otherwise restored by any holder of any of the Company Obligations,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise, and the Guarantor agrees that it will indemnify each Financing Party
on demand for all reasonable costs and expenses (including, without limitation,
reasonable fees of counsel) incurred by any Financing Party in connection with
such rescission or restoration, including without limitation any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
8B.6. Remedies.
--------
The Guarantor agrees that, as between the Guarantor, on the one hand, and
each Financing Party, on the other hand, the Company Obligations may be declared
to be forthwith due and payable as provided in the applicable provisions of the
Operative Agreements (and shall be deemed to have become automatically due and
payable on an Event of Default specified in Section 17.1(h), (i) or (j) of the
Lease) notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing such Company Obligations from becoming automatically
due and payable) as against any other Person and that, in the event of such
declaration (or such Company Obligations being deemed to have become
automatically due and payable), such Company Obligations (whether or not due and
payable by any other Person) shall forthwith become due and
30
<PAGE>
payable by the Guarantor in accordance with the applicable provisions of the
Operative Agreements.
8B.7. Termination of Guaranty.
-----------------------
Subject to Section 8B.5, upon the satisfaction of the Company Obligations
in full, regardless of the source of payment, the Guarantor's obligations
hereunder shall be deemed satisfied, discharged and terminated other than
indemnifications set forth herein that expressly survive.
8B.8. Payment of Amounts to the Agent.
-------------------------------
Each Financing Party hereby instructs the Guarantor, and the Guarantor
hereby acknowledges and agrees, that until such time as the Loans and the Holder
Fundings are paid in full and the Liens evidenced by the Security Agreement and
the Mortgage Instruments have been released any and all Rent (excluding Excepted
Payments which shall be payable to each Holder or other Person as appropriate)
and any and all other amounts of any kind or type under any of the Operative
Agreements due and owing or payable to any Person shall instead be paid directly
to the Agent (excluding Excepted Payments which shall be payable to each Holder
or other Person as appropriate) or as the Agent may direct from time to time for
allocation and distribution in accordance with the procedures set forth in
Section 10.4 hereof and Section 8 of the Credit Agreement.
8B.9. Denial or Disaffirmance of Guaranty.
-----------------------------------
Notwithstanding any provision to the contrary contained herein or in any
other Operative Agreement, the parties hereto agree that, unless released in
connection with the Operative Agreements, if the guaranty given by the Guarantor
under Section 8B of the Participation Agreement or any material provision
thereof shall cease to be in full force or effect, or the Guarantor or any
Person acting on behalf of the Guarantor shall deny or disaffirm the Guarantor's
obligations under such guaranty, then the Guarantor shall automatically, without
notice and without any further act, be deemed to be an additional construction
agent (or a co-construction agent) and/or an additional lessee (or co-lessee)
under the Operative Agreements with the Construction Agent and/or the Lessee, as
the case may be, and shall be jointly and severally liable with the Construction
Agent and/or the Lessee for the payment and performance of any obligations of
the Construction Agent and/or the Lessee under the Operative Agreements as
though the Guarantor was originally a party to such Operative Agreements in such
capacity or capacities.
SECTION 9 PAYMENT OF CERTAIN EXPENSES.
9.1 Transaction Expenses.
--------------------
(a) Lessor agrees on the Initial Closing Date, to pay, or cause to be
paid, all reasonable fees, expenses and disbursements of the various legal
counsels for the Lessor,
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the Lessee and the Agent in connection with the transactions contemplated
by the Operative Agreements and incurred in connection with such Initial
Closing Date, including all Transaction Expenses (arising from the Initial
Closing Date), and all other reasonable fees, expenses and disbursements in
connection with such Initial Closing Date, including, without limitation,
all fees, taxes and expenses for the recording, registration and filing of
documents; provided, however, the Lessor shall pay such amounts described
in this Section 9.1(a) only if funds are made available by the Lenders and
the Holders in an amount sufficient to allow such payment and without
regard to whether such amounts are referenced in any Requisition; provided,
--------
the failure of such amounts so funded to be referenced in a Requisition
shall not preclude the Lessee from later contesting the reasonableness of
the payment of such amounts. On the Initial Closing Date after satisfaction
of the conditions precedent for such date (excluding the requirement that a
Requisition be delivered), the Holders shall make Holder Fundings and the
Lenders shall make Loans to the Lessor to pay for the Transaction Expenses,
fees, expenses and other disbursements referenced in this Section 9.1(a).
(b) Lessor agrees on each Property Closing Date, on the date of any
Construction Advance and on the Completion Date to pay, or cause to be
paid, all reasonable fees, expenses and disbursements of the various legal
counsels for the Lessor, the Lessee and the Agent in connection with the
transactions contemplated by the Operative Agreements and billed in
connection with such Advance or such Completion Date including all
Transaction Expenses, all fees, expenses and disbursements incurred with
respect to the various items referenced in Sections 5.3, 5.4, 5.5 and/or
5.6 (including without limitation any premiums for title insurance policies
and charges for any updates to such policies) and all other reasonable
fees, expenses and disbursements in connection with such Advance or such
Completion Date including, without limitation, all expenses relating to and
all fees, taxes and expenses for the recording, registration and filing of
documents; provided, however, the Lessor shall pay such amounts described
in this Section 9.1(b) only if funds are made available by the Lenders and
the Holders in an amount sufficient to allow such payment and without
regard to whether such amounts are referenced in any Requisition; provided,
--------
the failure of such amounts so funded to be referenced in a Requisition
shall not preclude the Lessee from later contesting the reasonableness of
the payment of such amounts. On each Property Closing Date, on the date of
any Construction Advance or any Completion Date, after satisfaction of the
conditions precedent for such date (excluding the requirement that a
Requisition be delivered), the Holders shall make a Holder Funding and the
Lenders shall make Loans to the Lessor to pay for the Transaction Expenses,
fees, expenses and other disbursements referenced in this Section 9.1(b).
9.2 [Reserved].
--------
9.3 Certain Fees and Expenses.
-------------------------
Lessor agrees to pay or cause to be paid (i) the initial and annual Owner
Trustee's fee and all reasonable expenses of the Owner Trustee and any necessary
co-trustees (including without limitation reasonable counsel fees and expenses)
or any successor owner trustee, for acting as
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owner trustee under the Trust Agreement and (ii) all reasonable costs and
expenses incurred by the Credit Parties, the Construction Agent, the Agent, the
Lenders, the Holders or the Lessor in entering into any Lease Supplement and any
future amendments or supplements with respect to any of the Operative
Agreements, whether or not such Lease Supplement, amendments or supplements are
ultimately entered into, or giving or withholding of waivers of consents hereto
or thereto, which have been requested by the Lessor, the Holders, any Credit
Party, the Construction Agent, or the Agent; provided, however, the Lessor shall
-------- -------
pay such amounts described in this Section 9.3 only if funds are made available
by the Lenders and the Holders in an amount sufficient to allow such payment and
without regard to whether such amounts are referenced in any Requisition.
Notwithstanding the foregoing, the Lessee agrees to pay or cause to be paid any
amounts referenced in the immediately preceding sentence to the extent such
amounts are due and payable after the Construction Period Termination Date. The
Lessee agrees to pay or cause to be paid (i) all reasonable costs and expenses
incurred by the Lessor, the Holders, the Lenders or the Agent in connection with
any exercise of remedies under any Operative Agreement or any purchase of any
Property by the Lessee pursuant to Article XX of the Lease and (ii) all
reasonable costs and expenses incurred by the Credit Parties, the Construction
Agent, the Agent, the Lenders, the Holders or the Lessor in connection with any
transfer or conveyance of any Property, whether or not such transfer or
conveyance is ultimately accomplished.
9.4 Facility Fee.
------------
The Lessor agrees to pay to the Agent for the account of the Lenders and
the Holders a facility fee (the "Facility Fee") computed at a rate per annum
equal to Applicable Percentage for the Facility Fee multiplied times the sum of
(x) the aggregate Commitments (whether used or unused) and (y) the aggregate
Holder Commitments (whether used or unused); provided, however, the Lessor shall
-------- -------
pay such amounts described in this Section 9.4 only if funds are made available
by the Lenders and the Holders in an amount sufficient to allow such payment and
without regard to whether such amounts are referenced in any Requisition.
Notwithstanding the foregoing, the Lessee agrees to pay or cause to be paid any
amounts referenced in the immediately preceding sentence to the extent such
amounts are due and payable or are outstanding after the earlier of the last
Completion Date for all Properties or the Construction Period Termination Date.
Such Facility Fee shall be calculated on the basis of 360-day year from the
actual days elapsed and shall be payable quarterly in arrears on each Facility
Fee Payment Date. If all or a portion of any such Facility Fee shall not be paid
when due, such overdue amount shall bear interest, payable on demand, at a rate
per annum equal to the ABR plus three percent (3%) from the date of such non-
payment until such amount is paid in full (after as well as before judgment).
SECTION 10 OTHER COVENANTS AND AGREEMENTS.
10.1 Cooperation with the Construction Agent or the Lessee.
-----------------------------------------------------
The Holders, the Lessor (at the direction of the Holders) and the Agent
shall, to the extent reasonably requested by the Construction Agent or Lessee
(but without assuming additional liabilities on account thereof), cooperate with
the Construction Agent or the Lessee in connection with its covenants contained
herein including, without limitation, at any time and from time to time,
33
<PAGE>
upon the request of the Construction Agent or the Lessee to promptly and duly
execute and deliver any and all such further instruments, documents and
financing statements (and continuation statements related thereto) as the
Construction Agent or the Lessee may reasonably request in order to perform such
covenants.
10.2 Covenants of the Owner Trustee and the Holders.
----------------------------------------------
Each of the Owner Trustee and the Holders hereby agree that so long as this
Agreement is in effect:
(a) The Owner Trustee (both in its trust capacity and in its
individual capacity) will not create or permit to exist at any time, and
will, at its own cost and expense, promptly take such action as may be
necessary duly to discharge, or to cause to be discharged, all Lessor Liens
on the Properties attributable to it; provided, however, that the Owner
Trustee shall not be required to so discharge any such Lessor Lien while
the same is being contested in good faith by appropriate proceedings
diligently prosecuted so long as such proceedings shall not involve any
material danger of impairment of the Liens of the Security Documents or of
the sale, forfeiture or loss of, and shall not interfere with the use or
disposition of, any Property or title thereto or any interest therein or
the payment of Rent;
(b) Without prejudice to any right under the Trust Agreement of the
Owner Trustee to resign (subject to the requirement set forth in the Trust
Agreement that such resignation shall not be effective until a successor
shall have agreed to accept such appointment), or the Holders' rights under
the Trust Agreement to remove the institution acting as Owner Trustee
(after consent to such removal by the Agent as provided in the Trust
Agreement), each of the Holders and the Owner Trustee hereby agrees with
the Lessee and the Agent (i) not to terminate or revoke the trust created
by the Trust Agreement except as permitted by Article VIII of the Trust
Agreement, (ii) not to amend, supplement, terminate or revoke or otherwise
modify any provision of the Trust Agreement in such a manner as to
adversely affect the rights of any such party without the prior written
consent of such party and (iii) to comply with all of the terms of the
Trust Agreement, the nonperformance of which would adversely affect such
party;
(c) The Owner Trustee or any successor may resign or be removed by
the Holders as Owner Trustee, a successor Owner Trustee may be appointed
and a corporation may become the Owner Trustee under the Trust Agreement,
only in accordance with the provisions of Article IX of the Trust Agreement
and, with respect to such appointment, with the consent of the Lessee,
which consent shall not be unreasonably withheld or delayed;
(d) The Owner Trustee, in its capacity as Owner Trustee under the
Trust Agreement, and not in its individual capacity, shall not contract
for, create, incur or assume any indebtedness, or enter into any business
or other activity, other than pursuant to or under the Operative
Agreements;
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<PAGE>
(e) The Holders will not instruct the Owner Trustee to take any
action in violation of the terms of any Operative Agreement;
(f) Neither any Holder nor the Owner Trustee shall (i) commence any
case, proceeding or other action with respect to the Owner Trustee under
any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, arrangement, winding-
up, liquidation, dissolution, composition or other relief with respect to
it or its debts, or (ii) seek appointment of a receiver, trustee, custodian
or other similar official with respect to the Owner Trustee or for all or
any substantial benefit of the creditors of the Owner Trustee; and neither
any Holder nor the Owner Trustee shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in this paragraph;
(g) The Owner Trustee shall give prompt notice to the Lessee and
the Agent if the Owner Trustee's chief place of business or chief executive
office, or the office where the records concerning the accounts or contract
rights relating to the Property are kept, shall cease to be located at 79
South Main Street, Salt Lake City, Utah 84111, or if it shall change its
name;
(h) Provided that no Lease Default or Lease Event of Default has
occurred and is continuing, the Owner Trustee shall not, without the prior
written consent of the Lessee and the Guarantor, consent to or permit any
amendment, supplement or other modification of the terms and provisions of
the Credit Agreement or the Notes;
(i) The Owner Trustee shall not consent to or permit any amendment,
supplement or other modification of the terms and provisions of any
Operative Agreement, without the prior written consent of the Agent and, so
long as no Default or Event of Default shall have occurred and be
continuing and, in the case of any amendment, supplement or other
modification of Section 8.1 of the Credit Agreement, so long as Lessee
continues to have rights in any Property, the Lessee (such consent not to
be unreasonably withheld or delayed) except as described in Section 10.5 of
this Agreement; and
(j) The Owner Trustee (i) shall take such actions and shall refrain
from taking such actions with respect to the Operative Agreements and/or
relating to the Properties and shall grant such approvals and otherwise act
or refrain from acting with respect to the Operative Agreements and/or
relating to the Properties in each case as directed in writing by the Agent
or, in connection with Section 10.5 hereof, the Lessee, notwithstanding any
contrary instruction or absence of instruction by any Holder or Holders;
and (ii) shall not take any action, grant any approvals or otherwise act
under or with respect to the Operative Agreements and/or any matters
relating to the Properties without first obtaining the prior written
consent of the Agent (and without regard to any contrary instruction or
absence of instruction by any Holder); provided, however, that
notwithstanding the foregoing provisions of this subparagraph (j) the Owner
Trustee, the Agent and the Holders each acknowledge, covenant and agree
that, with respect to all matters under the Operative Agreements that
require the consent and/or concurrence of all of the Lenders pursuant to
the
35
<PAGE>
terms of Section 9.1 of the Credit Agreement (the "Unanimous Vote
Matters"), neither the Owner Trustee nor the Agent shall act or refrain
from acting with respect to any Unanimous Vote Matter until such party has
received the approval of each Lender and each Holder with respect thereto.
10.3 Credit Party Covenants, Consent and Acknowledgment.
--------------------------------------------------
(a) Each Credit Party acknowledges and agrees that the Owner
Trustee, pursuant to the terms and conditions of the Security Agreement and
the Mortgage Instruments, shall create Liens respecting the various
personal property, fixtures and real property described therein in favor of
the Agent. Each Credit Party hereby irrevocably consents to the creation,
perfection and maintenance of such Liens. Each Credit Party shall, to the
extent reasonably requested by any of the other parties hereto, cooperate
with the other parties in connection with their covenants herein or in the
other Operative Agreements and shall from time to time duly execute and
deliver any and all such future instruments, documents and financing
statements (and continuation statements related thereto) as any other party
hereto may reasonably request.
(b) Lessor hereby instructs each Credit Party, and each Credit Party
hereby acknowledges and agrees, that until such time as the Loans are paid
in full and the Liens evidenced by the Security Agreement and the Mortgage
Instruments have been released (i) any and all Rent and any and all other
amounts of any kind or type under any of the Operative Agreements due and
owing or payable to the Lessor or the Owner Trustee shall instead be paid
directly to the Agent or as the Agent may direct from time to time and (ii)
each Credit Party shall cause all notices, certificates, financial
statements, communications and other information which is delivered, or is
required to be delivered, to the Lessor, to also to be delivered at the
same time to the Agent and each Holder.
(c) No Credit Party shall consent to or permit any amendment,
supplement or other modification of the terms or provisions of any
Operative Agreement without, in each case, obtaining the prior written
consent of the Agent and, to the extent required by the proviso at the end
of Section 10.2(j) hereof, each of the Holders. The Lessee acknowledges
that the actions of the Owner Trustee are subject to the consent of the
Agent as set forth in Section 10.2(j).
(d) [Intentionally Omitted]
(e) Each Credit Party hereby covenants and agrees that, except for
amounts payable as Basic Rent and as otherwise expressly specified in the
Operative Agreements, any and all payment obligations owing from time to
time under the Operative Agreements to the Agent, any Lender or any Holder
shall (without further action) be deemed to be Supplemental Rent
obligations payable by Lessee and guaranteed by the Guarantor. Without
limitation, such obligations shall include commitment fees, unused fees,
prepayment penalties, indemnities, trustee fees and transaction expenses
incurred by the
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<PAGE>
parties hereto in connection with the transactions contemplated by the
Operative Agreements.
(f) Consistent with the terms and conditions of the Security
Agreement, each of the Construction Agent and Lessee hereby covenants and
agrees, at its own cost and expense, to assemble and make available to the
Agent (on behalf of Lessor) any and all personal property components of any
and all Properties.
10.4 Sharing of Certain Payments.
---------------------------
The parties hereto acknowledge and agree that all payments due and owing by
any Credit Party to the Lessor under the Lease or any of the other Operative
Agreements shall be made by such Credit Party directly to the Agent as more
particularly provided in Section 10.3 hereof. The Holders and the Agent, on
behalf of the Lenders, acknowledge the terms of Section 8 of the Credit
Agreement regarding the allocation of payments and other amounts made or
received from time to time under the Operative Agreements and agree, that all
such payments and amounts are to be allocated as provided in Section 8 of the
Credit Agreement. In connection therewith the Holders hereby (a) appoint the
Agent to act as collateral agent for the Holders in connection with the Lien
granted by the Security Documents to secure the Holder Amount and (b)
acknowledge and agree and direct that the rights and remedies of the
beneficiaries of the Lien of the Security Documents shall be exercised by the
Agent on behalf of the Lenders and the Holders as directed from time to time by
the Lenders without notice to or consent from the Holders.
10.5 Grant of Easements, etc.
------------------------
The Agent and the Holders hereby agree that, so long as no Event of Default
shall have occurred and be continuing, and until such time as the Agent gives
instructions to the contrary to the Owner Trustee, the Owner Trustee shall, from
time to time at the request of the Lessee, in connection with the transactions
contemplated by the Agency Agreement, the Lease or the other Operative
Agreements, (i) grant easements and other rights in the nature of easements with
respect to any Property, (ii) release existing easements or other rights in the
nature of easements which are for the benefit of any Property, (iii) execute and
deliver to any Person any instrument appropriate to confirm or effect such
grants or releases, and (iv) execute and deliver to any Person such other
documents or materials in connection with the acquisition, development or
operation of any Property, including, without limitation, reciprocal easement
agreements, operating agreements, development agreements, plats, replats or
subdivision documents; provided, that each of the agreements referred to in this
--------
Section 10.5 shall be of the type normally executed by the Lessee in the
ordinary course of the Lessee's business and shall be on commercially reasonable
terms so as not to diminish the value of any Property in any material respect.
10.6 Appointment by Holders and Owner Trustee.
----------------------------------------
Except as expressly provided in any Operative Agreement where the Owner
Trustee is required to act for or on behalf of the Holders, each Holder hereby
designates and appoints the Agent as the Agent of such Holder under this
Agreement and the other Operative Agreements, to
37
<PAGE>
take such action on behalf of such Holder under the provisions of this Agreement
and the other Operative Agreements and exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of this Agreement
(including, without limitation, provisions of other agreements incorporated
herein by reference) and other Operative Agreements with respect to the Lenders
and as specifically delegated to the Owner Trustee on behalf of such Holder in
any Operative Agreement. For purposes hereof, and except as expressly provided
herein to the contrary, the provisions of Section 7 of the Credit Agreement,
together with such other terms and provisions of the Credit Agreement and the
other Operative Agreements as required for the full interpretation and operation
of Section 7 of the Credit Agreement are hereby incorporated by reference as if
restated herein for the mutual benefit of the Agent and each Holder as if such
Holder were a Lender thereunder. Except as may be expressly provided to the
contrary, for purposes hereof, outstanding Holder Fundings shall be taken into
account and treated as Loans for purposes of determining Majority Lenders;
provided, however, in any case, under the Operative Agreements where the consent
of the Holder is expressly required or the Holder is entitled to take any
action, such consent shall be given or action taken, whether directly by the
Holder or by the Agent (without the requirement that the consent of any Lender
be obtained or permission for such action be granted by any Lender); and,
provided, further, no amendment to any provision expressly requiring the consent
of the Holder or permitting the Holder to take action (whether directly or
through the Agent), shall be effective without the written consent of the
Holder. Further, the Agent shall be entitled to take such action on behalf of
the Owner Trustee as is delegated to the Agent under any Operative Agreement
(whether express or implied) as may be reasonably incidental thereto. Each
Lender hereby agrees to the provisions contained in this Section 10.6.
SECTION 11 CREDIT AGREEMENT AND TRUST AGREEMENT.
11.1 Construction Agent's and Lessee's Credit Agreement Rights.
---------------------------------------------------------
Notwithstanding anything to the contrary contained in the Credit Agreement,
the Agent, the Lenders, the Holders, the Credit Parties and the Owner Trustee
hereby agree that, prior to the occurrence and continuation of any Default or
Event of Default, the Construction Agent and the Lessee (as designated below)
shall have the following rights:
(a) [Intentionally Omitted];
(b) the Construction Agent shall have the right to give the notice
referred to in Section 2.3 of the Credit Agreement and to designate the
account to which a borrowing under the Credit Agreement is to be credited
pursuant to Section 2.3 of the Credit Agreement;
(c) the Lessee shall have the right to terminate or reduce the
Commitments pursuant to Section 2.5(a) of the Credit Agreement;
(d) the Lessee shall have the right to exercise the conversion and
continuation options pursuant to Section 2.7 of the Credit Agreement;
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(e) the Lessee shall have the right to replace any Lender pursuant
to Section 2.14(b) of the Credit Agreement;
(f) the Lessee shall have the right to approve any successor agent
pursuant to Section 7.9 of the Credit Agreement;
(g) the Lessee shall have the right to consent to any assignment by
a Lender to which the Lessor has the right to consent pursuant to Section
9.8 of the Credit Agreement;
(h) without limiting the foregoing clauses (a) through (g), and in
addition thereto, provided that no Event of Default then exists, the Lessee
shall have the right to exercise any other right of the Owner Trustee under
the Credit Agreement upon not less than five (5) Business Days' prior
written notice from the Lessee to the Owner Trustee and the Agent;
(i) [Reserved]; and
(j) the Lessee shall have the right to give the notice respecting
any prepayment of any Loan, as provided in Section 2.6(a) of the Credit
Agreement.
11.2 Construction Agent's and Lessee's Trust Agreement Rights.
--------------------------------------------------------
Notwithstanding anything to the contrary contained in the Trust Agreement,
the Credit Parties, the Owner Trustee and the Holders hereby agree that neither
the Construction Agent nor any Credit Party controls the Lessor and, prior to
the occurrence and continuation of any Lease Default or Lease Event of Default,
the Construction Agent and the Lessee (as designated below) shall have the
following rights:
(a) [Intentionally Omitted];
(b) the Lessee shall have the right to exercise the conversion and
continuation options pursuant to Section 3.8 of the Trust Agreement;
(c) no removal of the Owner Trustee and appointment of a successor
Owner Trustee pursuant to Section 9.1 of the Trust Agreement shall be made
without the prior written consent (not to be unreasonably withheld or
delayed) of the Lessee;
(d) [Reserved]; and
(e) the Lessee shall have the right to give the notice respecting
any prepayment of any amount under any Certificate, as provided in Section
3.4(a) of the Trust Agreement.
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SECTION 12 TRANSFER OF INTEREST.
12.1 Restrictions on Transfer.
------------------------
Each Lender may assign or transfer all or a portion of its interest
hereunder and under the other Operative Agreements in accordance with Section
9.8 of the Credit Agreement; provided, (i) each assignee or transferee with
--------
respect to Tranche A Loans and Tranche A Commitments must obtain the same
ratable interest in Tranche A Loans and Tranche A Commitments as defined in the
COSI Participation Agreement, and (ii) each assignee or transferee with respect
to Tranche B Loans and Tranche B Commitments must obtain the same ratable
interest in Tranche B Loans and Tranche B Commitments as defined in the COSI
Participation Agreement. The Holders may, directly or indirectly, assign,
convey or otherwise transfer any of their right, title or interest in or to the
CORI Trust Estate (together with the same ratable interest in the COSI Trust
Estate) or the Trust Agreement with the prior written consent of the Agent and,
so long as no Lease Default or Lease Event of Default shall have occurred and be
continuing and the Lessee has rights in one or more of the Properties under the
Lease, the Lessee (which consent shall not be unreasonably withheld or delayed).
The Owner Trustee may, subject to the Lien of the applicable Security Documents
but only with the prior written consent of the Agent, the Holders (which consent
may be withheld by the Agent and/or the Holders in their sole discretion) and
(provided no Default or Event of Default has occurred and is continuing) with
the consent of the Lessee, directly or indirectly, assign, convey, appoint an
agent with respect to enforcement of, or otherwise transfer any of its right,
title or interest in or to any Property, the Lease, the Trust Agreement, this
Agreement (including, without limitation, any right to indemnification
thereunder), or any other document relating to a Property or any interest in a
Property as provided in the Trust Agreement and the Lease. The provisions of
the immediately preceding sentence shall not apply to the obligations of the
Owner Trustee to transfer Property to the Lessee or a third party purchaser
pursuant to Article XXII of the Lease upon payment for such Property in
accordance with the terms and conditions of the Lease.
12.2 Effect of Transfer.
------------------
From and after any transfer effected in accordance with this Section 12,
the transferor shall be released, to the extent of such transfer, from its
liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor Holder shall remain liable under Article
XI of the Trust Agreement to the extent that the transferee Holder shall not
have assumed the obligations of the transferor Holder thereunder. Upon any
transfer by the Owner Trustee, a Holder or a Lender as above provided, any such
transferee shall assume the obligations of the Owner Trustee, the Lessor, the
Holder or the Lender, as the case may be, and shall be deemed an "Owner
Trustee", "Lessor", "Holder", or "Lender", as the case may be, for all purposes
of such documents and each reference herein to the transferor shall thereafter
be deemed a reference to such transferee for all purposes, except as provided in
the preceding sentence. Notwithstanding any transfer of all or a portion of the
transferor's interest as provided in this Section 12, the transferor shall be
entitled to all benefits accrued and all rights vested prior to such transfer
including, without limitation, rights to indemnification under any such
document.
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SECTION 13 INDEMNIFICATION.
13.1 General Indemnity.
-----------------
Subject to and limited by in all respects the provisions of Sections 13.5
and 13.6 and whether or not any of the transactions contemplated hereby shall be
consummated, the Indemnity Provider hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person (by any third party, including Claims
arising from the negligence of an Indemnified Person (but not to the extent such
Claims arise from the gross negligence, willful misconduct or willful breach of
such Indemnified Person or are otherwise solely attributable to acts or events
occurring after the expiration of the Lease or after the transfer of all of the
Properties to the Lessee or a third party)) in any way relating to or arising or
alleged to arise out of the execution, delivery, performance or enforcement of
this Agreement, the Lease or any other Operative Agreement or on or with respect
to any Property or any component thereof, including, without limitation, Claims
in any way relating to or arising or alleged to arise out of (a) the financing,
refinancing, purchase, acceptance, rejection, ownership, design, construction,
refurbishment, development, delivery, acceptance, nondelivery, leasing,
subleasing, possession, use, operation, maintenance repair, modification,
transportation, condition, sale, return, repossession (whether by summary
proceedings or otherwise), or any other disposition of any Property or any part
thereof, including the acquisition, holding or disposition of any interest in
the Property, lease or agreement comprising a portion of any thereof; (b) any
latent or other defects in any Property or any portion thereof whether or not
discoverable by an Indemnified Person or the Indemnity Provider; (c) a violation
of Environmental Laws, Environmental Claims or other loss of or damage to any
property or the environment relating to the Property, the Lease, the Agency
Agreement or the Indemnity Provider; (d) the Operative Agreements, or any
transaction contemplated thereby; (e) any breach by the Indemnity Provider of
any of its representations or warranties under the Operative Agreements to which
the Indemnity Provider is a party or failure by the Indemnity Provider to
perform or observe any covenant or agreement to be performed by it under any of
the Operative Agreement; (f) the transactions contemplated hereby or by any
other Operative Agreement, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA; and (g) personal injury, death or property
damage, including Claims based on strict or absolute liability in tort.
If a written Claim is made against any Indemnified Person or if any
proceeding shall be commenced against such Indemnified Person (including a
written notice of such proceeding), for any Claim, such Indemnified Person shall
promptly notify the Indemnity Provider in writing and shall not take action with
respect to such Claim without the consent of the Indemnity Provider for thirty
(30) days after the receipt of such notice by the Indemnity Provider; provided,
however, that, in the case of any such Claim, if action shall be required by law
or regulation to be taken prior to the end of such 30-day period, such
Indemnified Person shall endeavor to, in such notice to the Indemnity Provider,
inform the Indemnity Provider of such shorter period, and no action shall be
taken with respect to such Claim without the consent of the Indemnity Provider
before 7 days before the end of such shorter period; provided, further, that the
failure of such Indemnified Person
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to give the notices referred to in this sentence shall not diminish the
Indemnity Provider's obligation hereunder except to the extent such failure
precludes the Indemnity Provider from contesting such Claim.
If, within thirty (30) days of receipt of such notice from the Indemnified
Person (or such shorter period as the Indemnified Person has notified the
Indemnity Provider is required by law or regulation for the Indemnified Person
to respond to such Claim), the Indemnity Provider shall request in writing that
such Indemnified Person respond to such Claim, the Indemnified Person shall, at
the expense of the Indemnity Provider, in good faith conduct and control such
action (including, without limitation, by pursuit of appeals) (provided,
however, that (A) if such Claim, in the Indemnity Person's reasonable
discretion, can be pursued by the Indemnity Provider on behalf of or in the name
of such Indemnified Person, the Indemnified Person, at the Indemnity Provider's
request, shall allow the Indemnity Provider to conduct and control the response
to such Claim and (B) in the case of any Claim, the Indemnified Person may
request the Indemnity Provider to conduct and control the response to such Claim
(with counsel to be selected by the Indemnity Provider and consented to by such
Indemnified Person, such consent not to be unreasonably withheld; provided,
however, that any Indemnified Person may retain separate counsel at the expense
of the Indemnity Provider in the event of a conflict)) by, in the sole
discretion of the Person conducting and controlling the response to such Claim
(1) resisting payment thereof, (2) not paying the same except under protest, if
protest is necessary and proper, (3) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings, or (4) taking such other action as is reasonably requested by the
Indemnity Provider from time to time.
The party controlling the response to any Claim shall consult in good faith
with the non-controlling party and shall keep the non-controlling party
reasonably informed as to the conduct of the response to such Claim; provided,
that all decisions ultimately shall be made in the discretion of the controlling
party. The parties agree that an Indemnified Person may at any time decline to
take further action with respect to the response to such Claim and may settle
such Claim if such Indemnified Person shall waive its rights to any indemnity
from the Indemnity Provider that otherwise would be payable in respect of such
Claim (and any future Claim, the pursuit of which is precluded by reason of such
resolution of such Claim) and shall pay to the Indemnity Provider any amount
previously paid or advanced by the Indemnity Provider pursuant to this Section
13.1 by way of indemnification or advance for the payment of an amount regarding
such Claim.
Notwithstanding the foregoing provisions of this Section 13.1, an
Indemnified Person shall not be required to take any action and no Indemnity
Provider shall be permitted to respond to any Claim in its own name or that of
the Indemnified Person unless (A) the Indemnity Provider shall have agreed to
pay and shall pay to such Indemnified Person on demand and on an After Tax Basis
all reasonable costs, losses and expenses that such Indemnified Person actually
incurs in connection with such Claim, including, without limitation, all
reasonable legal, accounting and investigatory fees and disbursements and, if
the Indemnified Person has informed the Indemnity Provider (in its initial
notice of the Claim) that it intends to contest such Claim (whether or not the
control of the contest is then assumed by the Indemnity Provider), the Indemnity
Provider shall have agreed that the Claim is an indemnifiable Claim hereunder,
(B) in the case of a Claim that must be pursued in
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the name of an Indemnified Person (or an Affiliate thereof), the amount of the
potential indemnity (taking into account all similar or logically related Claims
that have been or could be raised for which the Indemnity Provider may be liable
to pay an indemnity under this Section 13.1) exceeds $25,000, (C) the
Indemnified Person shall have reasonably determined that the action to be taken
will not result in any material danger of sale, forfeiture or loss of the
Property, or any part thereof or interest therein, will not interfere with the
payment of Rent, and will not result in risk of criminal liability, (D) if such
Claim shall involve the payment of any amount prior to the resolution of such
Claim, the Indemnity Provider shall provide to the Indemnified Person an
interest-free advance in an amount equal to the amount that the Indemnified
Person is required to pay (with no additional net after-tax cost to such
Indemnified Person), (E) in the case of a Claim that must be pursued in the name
of an Indemnified Person (or an Affiliate thereof), the Indemnity Provider shall
have provided to such Indemnified Person an opinion of independent counsel
selected by the Indemnified Person and reasonably satisfactory to the Indemnity
Provider stating that a reasonable basis exists to contest such Claim (or, in
the case of an appeal of an adverse determination, an opinion of such counsel to
the effect that the position asserted in such appeal will more likely than not
prevail) and (F) no Event of Default shall have occurred and be continuing. In
no event shall an Indemnified Person be required to appeal an adverse judicial
determination to the United States Supreme Court. In addition, an Indemnified
Person shall not be required to contest any Claim in its name (or that of an
Affiliate) if the subject matter thereof shall be of a continuing nature and
shall have previously been decided adversely by a court of competent
jurisdiction pursuant to the contest provisions of this Section 13.1, unless
there shall have been a change in law (or interpretation thereof) and the
Indemnified Person shall have received, at the Indemnity Provider's expense, an
opinion of independent counsel selected by the Indemnified Person and reasonably
acceptable to the Indemnity Provider stating that as a result of such change in
law (or interpretation thereof), it is more likely than not that the Indemnified
Person will prevail in such contest.
13.2 General Tax Indemnity.
---------------------
(a) Subject to and limited by in all respects the provisions of
Sections 13.5 and 13.6, the Indemnity Provider shall pay and assume
liability for, and does hereby agree to indemnify, protect and defend each
Property and all Indemnified Persons, and hold them harmless against, all
Impositions on an After Tax Basis, and all payments pursuant to the
Operative Agreements shall be made free and clear of and without deduction
for any and all present and future Impositions.
(b) Notwithstanding anything to the contrary in Section 13.2(a)
hereof, the following shall be excluded from the indemnity required by
Section 13.2(a):
(i) Taxes (other than Taxes that are, or are in the nature of,
sales, use, rental, value added, transfer or property taxes) that are
imposed on a Indemnified Person (other than Lessor) by the United
States federal government that are based on or measured by the net
income (including taxes based on capital gains and minimum taxes) of
such Person; 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;
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(ii) Taxes (other than Taxes that are, or are in the nature
of, sales, use, rental, value added, transfer or property taxes) that
are imposed on any Indemnified Person (other than Lessor) by any
state or local jurisdiction or taxing authority within any state or
local jurisdiction and that are based upon or measured by the net
income or net receipts, except that this clause (ii) shall not apply
to (and thus shall not exclude) any such Taxes imposed on an
Indemnified Person by a state (or any local taxing authority thereof
or therein) where any Property is located, possessed or used under
the Lease; provided, that this clause (ii) 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;
(iii) any Tax to the extent it relates to any act, event or
omission that occurs after the termination of the Lease and
redelivery or sale of the property in accordance with the terms of
the Lease (but not any Tax that relates to such termination,
redelivery or sale and/or to any period prior to such termination,
redelivery or sale); and
(iv) any Taxes which are imposed on an Indemnified Person as a
result of the gross negligence or willful misconduct of such
Indemnified Person itself (as opposed to gross negligence or willful
misconduct imputed to such Indemnified Person), but not Taxes imposed
as a result of ordinary negligence of such Indemnified Person;
(c) (i) Subject to the terms of Section 13.2(f), the Indemnity
Provider shall pay or cause to be paid all Impositions directly to the
taxing authorities where feasible and otherwise to the Indemnified Person,
as appropriate, and the Indemnity Provider shall at its own expense, upon
such Indemnified Person's reasonable request, furnish to such Indemnified
Person copies of official receipts or other satisfactory proof evidencing
such payment.
(ii) In the case of Impositions for which no contest is
conducted pursuant to Section 13.2(f) and which the Indemnity
Provider pays directly to the taxing authorities, the Indemnity
Provider shall pay such Impositions prior to the latest time
permitted by the relevant taxing authority for timely payment. In the
case of Impositions for which the Indemnity Provider reimburses an
Indemnified Person, the Indemnity Provider shall do so within thirty
(30) days after receipt by the Indemnity Provider of demand by such
Indemnified Person describing in reasonable detail the nature of the
Imposition and the basis for the demand (including the computation of
the amount payable). In the case of Impositions for which a contest
is conducted pursuant to Section 13.2(f), the Indemnity Provider
shall pay such Impositions or reimburse such Indemnified Person for
such Impositions, to the extent not previously paid or reimbursed
pursuant to subsection (a), prior to the latest time permitted by the
relevant taxing authority for timely payment after conclusion of all
contests under Section 13.2(f).
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(iii) At the Indemnity Provider's request, the amount of any
indemnification payment by the Indemnity Provider pursuant to
subsection (a) shall be verified and certified by an independent
public accounting firm mutually acceptable to the Indemnity Provider
and the Indemnified Person. The fees and expenses of such independent
public accounting firm shall be paid by the Indemnity Provider unless
such verification shall result in an adjustment in the Indemnity
Provider's favor of 15% or more of the payment as computed by the
Indemnified Person, in which case such fee shall be paid by the
Indemnified Person.
(d) The Indemnity Provider shall be responsible for preparing and
filing any real and personal property or ad valorem tax returns in respect
of each Property. In case any other report or tax return shall be required
to be made with respect to any obligations of the Indemnity Provider under
or arising out of subsection (a) and of which the Indemnity Provider has
knowledge or should have knowledge, the Indemnity Provider, at its sole
cost and expense, shall notify the relevant Indemnified Person of such
requirement and (except if such Indemnified Person notifies the Indemnity
Provider that such Indemnified Person intends to file such report or
return) (A) to the extent required or permitted by and consistent with
Legal Requirements, make and file in Indemnity Provider's name such return,
statement or report; and (B) in the case of any other such return,
statement or report required to be made in the name of such Indemnified
Person, advise such Indemnified Person of such fact and prepare such
return, statement or report for filing by such Indemnified Person or, where
such return, statement or report shall be required to reflect items in
addition to any obligations of the Indemnity Provider under or arising out
of subsection (a), provide such Indemnified Person at the Indemnity
Provider's expense with information sufficient to permit such return,
statement or report to be properly made with respect to any obligations of
the Indemnity Provider under or arising out of subsection (a). Such
Indemnified Person shall, upon the Indemnity Provider's request and at the
Indemnity Provider's expense, provide any data maintained by such
Indemnified Person (and not otherwise available to or within the control of
the Indemnity Provider) with respect to each Property which the Indemnity
Provider may reasonably require to prepare any required tax returns or
reports.
(e) As between the Indemnity Provider on one hand, and the Lessor or
the Agent, any Lender or any Holder on the other hand, the Indemnity
Provider shall be responsible for, and the Indemnity Provider shall
indemnify and hold harmless the Lessor, the Agent, the Lenders and each
Holder (without duplication of any indemnification required by subsection
(a)) on an After Tax Basis against, any obligation for United States or
foreign withholding taxes imposed in respect of the interest payable on the
Notes or with respect to Rent payments under the Lease (and, if the Lessor,
the Agent, any Lender or any Holder receives a demand for such payment from
any taxing authority, the Indemnity Provider shall discharge such demand on
behalf of the Lessor, the Agent, such Lender or such Holder); provided,
however, that the right of any Lender to make a claim for indemnification
under this Section 13.2(e) is subject to the compliance by such Lender with
the requirements of Section 2.13 of the Credit Agreement.
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(f) (i) If a written Claim is made against any Indemnified Person
or if any proceeding shall be commenced against such Indemnified Person
(including a written notice of such proceeding), for any Impositions, such
Indemnified Person shall promptly notify the Indemnity Provider in writing
and shall not take action with respect to such Claim or proceeding without
the consent of the Indemnity Provider for thirty (30) days after the
receipt of such notice by the Indemnity Provider; provided, however, that,
in the case of any such Claim or proceeding, if action shall be required by
law or regulation to be taken prior to the end of such 30-day period, such
Indemnified Person shall, in such notice to the Indemnity Provider, inform
the Indemnity Provider of such shorter period, and no action shall be taken
with respect to such Claim or proceeding without the consent of the
Indemnity Provider before 7 days before the end of such shorter period;
provided, further, that the failure of such Indemnified Person to give the
notices referred to this sentence shall not diminish the Indemnity
Provider's obligation hereunder except to the extent such failure
materially precludes the Indemnity Provider from contesting such Claim.
(ii) If, within thirty (30) days of receipt of such notice from
the Indemnified Person (or such shorter period as the Indemnified
Person has notified the Indemnity Provider is required by law or
regulation for the Indemnified Person to commence such contest), the
Indemnity Provider shall request in writing that such Indemnified
Person contest such Imposition, the Indemnified Person shall, at the
expense of the Indemnity Provider, in good faith conduct and control
such contest (including, without limitation, by pursuit of appeals)
relating to the validity, applicability or amount of such Impositions
(provided, however, that (A) if such contest involves a tax other
than a tax on net income and can be pursued independently from any
other proceeding involving a tax liability of such Indemnified
Person, the Indemnified Person, at the Indemnity Provider's request,
shall allow the Indemnity Provider (and the Indemnity Provider shall
be obligated) to conduct and control such contest and (B) in the case
of any contest, the Indemnified Person may request the Indemnity
Provider to conduct and control such contest (with counsel to be
selected by the Indemnity Provider and consented to by such
Indemnified Person, such consent not to be unreasonably withheld;
provided, however, that any Indemnified Person may retain separate
counsel at the expense of the Indemnity Provider in the event of a
conflict)) by, in the sole discretion of the Person conducting and
controlling such contest, (1) resisting payment thereof, (2) not
paying the same except under protest, if protest is necessary and
proper, (3) if the payment be made, using reasonable efforts to
obtain a refund thereof in appropriate administrative and judicial
proceedings, or (4) taking such other action as is reasonably
requested by the Indemnity Provider from time to time.
(iii) The party controlling any contest shall consult in good
faith with the non-controlling party and shall keep the non-
controlling party reasonably informed as to the conduct of such
contest; provided, that all decisions ultimately shall be made in the
sole discretion of the controlling party. The parties agree that an
Indemnified Person may at any time decline to take further action
with respect to
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the contest of any Imposition and may settle such contest if such
Indemnified Person shall waive its rights to any indemnity from the
Indemnity Provider that otherwise would be payable in respect of such
Claim (and any future Claim by any taxing authority, the contest of
which is precluded by reason of such resolution of such Claim) and
shall pay to the Indemnity Provider any amount previously paid or
advanced by the Indemnity Provider pursuant to this Section 13.2 by
way of indemnification or advance for the payment of an Imposition
other than expenses of such contest.
(iv) Notwithstanding the foregoing provisions of this Section
13.2, an Indemnified Person shall not be required to take any action
and no Indemnity Provider shall be permitted to contest any
Impositions in its own name or that of the Indemnified Person unless
(A) the Indemnity Provider shall have agreed to pay and shall pay to
such Indemnified Person on demand and on an After Tax Basis all
reasonable costs, losses and expenses that such Indemnified Person
actually incurs in connection with contesting such Impositions,
including, without limitation, all reasonable legal, accounting and
investigatory fees and disbursements, and, if the Indemnified Person
has informed the Indemnity Provider (in its initial notice of the
Imposition) that it intends to contest such Imposition (whether or
not the control of the contest is then assumed by the Indemnity
Provider), the Indemnity Provider shall have agreed that the
Imposition is an indemnifiable Imposition hereunder, (B) in the case
of a Claim that must be pursued in the name of an Indemnified Person
(or an Affiliate thereof), 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 Indemnified
Person for which the Indemnity Provider may be liable to pay an
indemnity under this Section 13.2) exceeds $25,000, (C) the
Indemnified Person shall have reasonably determined that the action
to be taken will not result in any material danger of sale,
forfeiture or loss of any Property, or any part thereof or interest
therein, will not interfere with the payment of Rent, and will not
result in risk of criminal liability, (D) if such contest shall
involve the payment of the Imposition prior to the contest, the
Indemnity Provider shall provide to the Indemnified Person an
interest-free advance in an amount equal to the Imposition that the
Indemnified Person is required to pay (with no additional net after-
tax cost to such Indemnified Person), (E) in the case of a Claim that
must be pursued in the name of an Indemnified Person (or an Affiliate
thereof), the Indemnity Provider shall have provided to such
Indemnified Person an opinion of independent tax counsel selected by
the Indemnified Person and reasonably satisfactory to the Indemnity
Provider stating that a reasonable basis exists to contest such Claim
(or, in the case of an appeal or an adverse determination, an opinion
of such counsel to the effect that the position asserted in such
appeal will more likely than not prevail) and (F) no Default or Event
of Default shall have occurred and be continuing. In no event shall
an Indemnified Person be required to appeal an adverse judicial
determination to the United States Supreme Court. In addition, an
Indemnified Person shall not be required to contest any Claim in its
name (or that of an Affiliate) if the subject
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matter thereof shall be of a continuing nature and shall have
previously been decided adversely by a court of competent
jurisdiction pursuant to the contest provisions of this Section 13.2,
unless there shall have been a change in law (or interpretation
thereof) and the Indemnified Person shall have received, at the
Indemnity Provider's expense, an opinion of independent tax counsel
selected by the Indemnified Person and reasonably acceptable to the
Indemnity Provider stating that as a result of such change in law (or
interpretation thereof), it is more likely than not that the
Indemnified Person will prevail in such contest.
13.3 EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY,
------------------------------------------------------------------
ETC.
---
SUBJECT TO AND LIMITED BY IN ALL RESPECTS THE PROVISIONS OF SECTION 13.5
AND 13.6 AND WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION PROVISIONS
OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING
INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER
EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS
FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR
OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY
NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH
BENEFICIARY, AND INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE
AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
CLAIMS, LOSSES, COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT
LIMITATION REASONABLE ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED
BY ANY SUCH BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY
TO THE ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER
OPERATIVE AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER
SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY.
13.4 Additional Provisions Regarding Environmental Indemnification.
-------------------------------------------------------------
Each and every Indemnified Person shall at all times have the rights and
benefits, and the Indemnity Provider shall have the obligations, in each case
provided pursuant to the Operative Agreements with respect to environmental
matters, violations of any Environmental Law, any Environmental Claim or other
loss of or damage to any property or the environment relating to any Property,
the Lease, the Agency Agreement or the Indemnity Provider (including without
limitation the rights and benefits provided pursuant to Section 13.1(c).
48
<PAGE>
13.5 Additional Provisions Regarding Indemnification.
-----------------------------------------------
Notwithstanding the provisions of Sections 13.1, 13.2, 13.3 and 13.4 (other
than with respect to matters concerning indemnification for pre-existing
environmental conditions and for environmental conditions arising out of the
Construction Agent's use or possession of the Property), (a) the Owner Trustee
shall be the only beneficiary of the provisions set forth in Sections 13.1,
13.2, 13.3 and 13.4 (again, subject to the immediately preceding parenthetical
phrase) with respect to each Property solely for the period prior to the
applicable Completion Date for such Property, and (b) such limited rights of
indemnification referenced in Section 13.5(a) (to the extent relating to third-
party claims) shall be limited to third-party claims caused by or resulting from
the Indemnity Provider's acts or omissions and/or all other Persons acting by,
through or under the Indemnity Provider. After the applicable Completion Date
for such Property, each Indemnified Person shall be a beneficiary of the
provisions set forth in Sections 13.1, 13.2, 13.3 and 13.4.
13.6 Indemnifications Provided by the Owner Trustee in Favor of the Other
--------------------------------------------------------------------
Indemnified Persons.
-------------------
To the extent the Indemnity Provider is not obligated to indemnify each
Indemnified Person with respect to the various matters described in this Section
13.6, the Owner Trustee shall provide such indemnities (but only to the extent
amounts sufficient to pay such indemnity are funded by the Lenders and the
Holders) in favor of each Indemnified Person in accordance with this Section
13.6 and shall pay all such amounts owed with respect to this Section 13.6 with
amounts advanced by the Lenders and the Holders (a) to the extent, but only to
the extent, amounts are available therefor with respect to the Available
Commitments and the Available Holder Commitments (subject to the rights of the
Lenders and the Holders to increase their respective commitment amounts in
accordance with the provisions of Section 5.8) and (b) unless each Lender and
each Holder has declined in writing to fund such amount. Notwithstanding any
other provision in any other Operative Agreement to the contrary, all amounts so
advanced shall be deemed added (ratably, based on the ratio of the Property Cost
for each Property individually to the Aggregate Property Cost of all Properties
at such time) to the Property Cost of all Properties then subject to the terms
of the Operative Agreements.
Whether or not any of the transactions contemplated hereby shall be
consummated, the Owner Trustee hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person by any third party, including without
limitation Claims arising from the negligence of an Indemnified Person (but not
to the extent such Claims arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction, as opposed to gross negligence or willful misconduct imputed to
such Indemnified Person or breach of such Indemnified Person's obligations under
this Agreement, the Lease or any other Operative Agreement) in any way relating
to or arising or alleged to arise out of the execution, delivery, performance or
enforcement of this Agreement, the Lease or any other Operative Agreement or on
or with respect to any Property or any component thereof, including without
limitation Claims in any
49
<PAGE>
way relating to or arising or alleged to arise out of the matters set forth in
clauses (a) through (g) of the first paragraph of Section 13.1.
The Owner Trustee shall pay and assume liability for, and does hereby agree
to indemnify, protect and defend each Property and all Indemnified Persons, and
hold them harmless against, all Impositions on an After Tax Basis, and all
payments pursuant to the Operative Agreements shall be made free and clear of
and without deduction for any and all present and future Impositions.
Notwithstanding anything to the contrary in this paragraph, the Excluded Taxes
shall be excluded from the indemnity provisions afforded by this paragraph.
THE INDEMNITY OBLIGATIONS UNDERTAKEN BY THE OWNER TRUSTEE PURSUANT TO THIS
SECTION 13.6 ARE IN ALL RESPECTS SUBJECT TO THE LIMITATIONS ON LIABILITY
REFERENCED IN SECTION 14.10.
SECTION 14 MISCELLANEOUS.
14.1 Survival of Agreements.
----------------------
The representations, warranties, covenants, indemnities and agreements of
the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of this Agreement, the transfer of any Property to the Owner Trustee, the
acquisition of any Equipment, the construction of any Improvements, any
disposition of any interest of the Owner Trustee in any Property or any interest
of the Holders in the Owner Trust, the payment of the Notes and any disposition
thereof and shall be and continue in effect notwithstanding any investigation
made by any party and the fact that any party may waive compliance with any of
the other terms, provisions or conditions of any of the Operative Agreements.
Except as otherwise expressly set forth herein or in other Operative Agreements,
the indemnities of the parties provided for in the Operative Agreements shall
survive the expiration or termination of any thereof.
14.2 No Broker, etc.
--------------
Except as expressly provided in that certain engagement letter agreement
dated as of April 13, 1999 among Bank of America, N.A., a national banking
association, which is the successor to NationsBank, N.A., BancAmerica Securities
LLC, which is the successor to NationsBanc Montgomery Securities, LLC, Capital
One Bank and Capital One Financial Corporation, 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 Agreement, 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.
50
<PAGE>
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 or by
hand and any such notice shall become effective upon receipt and shall be
directed to the address of such Person as indicated:
If to the Lessee or the Construction Agent, to it at the following address:
Capital One Realty, Inc.
2980 Fairview Park Drive
Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone: (703) 205-1000
Telecopy: (703) 205-1748
with a copy to:
Capital One Bank
c/o Capital One Services, Inc.
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone: (703) 205-1000
Telecopy: (703) 205-1748
If to the Guarantor, to it at the following address:
Capital One Bank
c/o Capital One Services, Inc.
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone: (703) 205-1000
Telecopy: (703) 205-1748
with a copy to the Legal Department of Capital One Bank at the immediately
preceding address.
51
<PAGE>
If to the Owner Trustee, to it at the following address:
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Val T. Orton
Corporate Trust Counsel
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
If to the Holders, to each such Holder at the address set forth for such
Holder on the signature page of the Trust Agreement.
If to the Agent, to it at the following address:
Bank of America, N.A.
901 Main Street, 66th Floor
Dallas, TX 75202
Attention: Shelly Harper
Telephone: (214) 209-0567
Telecopy: (214) 209-0604
If to any Lender, to it at the address set forth for such Lender in
Schedule 1.1 of the Credit Agreement.
From time to time any party may designate a new address for purposes of
notice hereunder by notice to each of the other parties hereto.
14.4 Counterparts.
------------
This 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.
14.5 Amendments and Termination.
--------------------------
Neither this Agreement nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified except by an instrument in writing
signed by the party against which the enforcement of the termination, amendment,
supplement, waiver or modification shall be sought. This Agreement may be
terminated by an agreement signed in writing by the Owner Trustee, the Holders,
the Lenders, each Credit Party and the Agent.
52
<PAGE>
14.6 Headings, etc.
--------------
The Table of Contents and headings of the various Articles and Sections of
this Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.
14.7 Parties in Interest.
-------------------
Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.
14.8 GOVERNING LAW; WAIVERS OF JURY TRIAL.
------------------------------------
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF VIRGINIA AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN.
14.9 Severability.
------------
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
14.10 Liability Limited.
-----------------
(a) The Agent, the Credit Parties, the Lenders and the Holders each
acknowledge and agree that the Owner Trustee is (except as otherwise
expressly provided herein or therein) entering into this Agreement and the
other Operative Agreements to which it is a party (other than the Trust
Agreement and to the extent otherwise provided in Section 7.2 of this
Agreement), solely in its capacity as trustee under the Trust Agreement and
not in its individual capacity and that Trust Company shall not be liable
or accountable under any circumstances whatsoever in its individual
capacity for or on account of any statements, representations, warranties,
covenants or obligations stated to be those of the Owner Trustee, except
for its own gross negligence or willful misconduct and as otherwise
expressly provided herein or in the other Operative Agreements.
(b) Anything to the contrary contained in this Agreement, the Credit
Agreement, the Notes or in any other Operative Agreement notwithstanding,
neither the
53
<PAGE>
Lessor nor any Holder nor any officer, director, shareholder, or partner
thereof, nor any of the successors or assigns of the foregoing (all such
Persons being hereinafter referred to collectively as the "Exculpated
Persons"), shall be personally liable in any respect for any liability or
obligation hereunder or in any other Operative Agreement including the
payment of the principal of, or interest on, the Notes, or for monetary
damages for the breach of performance of any of the covenants contained in
the Credit Agreement, the Notes, this Agreement, the Security Agreement or
any of the other Operative Agreements. The Agent (for itself and on behalf
of the Lenders) agrees that, in the event the Agent or any Lender pursues
any remedies available to them under the Credit Agreement, the Notes, this
Agreement, the Security Agreement, the Mortgage Instruments or under any
other Operative Agreement, neither the Lenders nor the Agent shall have any
recourse against any Exculpated Person, for any deficiency, loss or Claim
for monetary damages or otherwise resulting therefrom and recourse shall be
had solely and exclusively against the CORI Trust Estate and the Credit
Parties (with respect to the Credit Parties' obligations under the Lease,
the Participation Agreement and the Agency Agreement); but nothing
contained herein shall be taken to prevent recourse against or the
enforcement of remedies against the CORI Trust Estate in respect of any and
all liabilities, obligations and undertakings contained herein, in the
Credit Agreement, in the Notes, in the Security Agreement, the Mortgage
Instruments or in any other Operative Agreement. Notwithstanding the
provisions of this Section, nothing in this Agreement, the Credit
Agreement, the Notes, the Security Agreement, the Mortgage Instruments or
any other Operative Agreement shall: (i) constitute a waiver, release or
discharge of any indebtedness or obligation evidenced by the Notes or
arising under this Agreement, the Security Agreement, the Mortgage
Instruments or the Credit Agreement or secured by the Security Agreement,
the Mortgage Instruments or any other Operative Agreement, but the same
shall continue until paid or discharged; (ii) relieve the Lessor or any
Exculpated Person from liability and responsibility for (but only to the
extent of the damages arising by reason of): (a) active waste knowingly
committed by the Lessor or any Exculpated Person with respect to the
Properties or (b) any fraud, gross negligence, willful misconduct or
willful breach on the part of the Lessor or any such Exculpated Person;
(iii) relieve the Lessor or any Exculpated Person from liability and
responsibility for (but only to the extent of the moneys misappropriated,
misapplied or not turned over) (a) except for Excepted Payments,
misappropriation or misapplication by the Lessor (i.e., application in a
manner contrary to any Operative Agreement) of any insurance proceeds or
condemnation award paid or delivered to the Lessor by any Person other than
the Agent, (b) except for Excepted Payments, any deposits or any escrows or
amounts owed by the Lessee under the Agency Agreement held by the Lessor or
(c) except for Excepted Payments, any rents or other income received by the
Lessor from any Credit Party that are not turned over to the Agent; or (iv)
affect or in any way limit the Agent's rights and remedies under any
Operative Agreement with respect to the Rents and its rights and powers
thereunder or to obtain a judgment against the Lessee's interest in the
Properties or to the extent the Lessee may be personally liable as
otherwise contemplated in clauses (ii) and (iii) of this Section.
54
<PAGE>
14.11 Rights of the Credit Parties.
----------------------------
Notwithstanding any provision of the Operative Agreements, if at any time
all obligations (i) of the Owner Trustee under the Credit Agreement and the
Security Documents and (ii) of the Credit Parties under the Operative Agreements
have in each case been satisfied or discharged in full, then the Credit Parties
shall be entitled to (a) terminate the Lease and the guaranty obligations under
Section 8B (other than the obligations under Section 8B.5) and (b) receive all
amounts then held under the Operative Agreements and all proceeds with respect
to any of the Properties. Upon the termination of the Lease and the guaranty
obligations under Section 8B (other than the obligations under Section 8B.5)
pursuant to the foregoing clause (a), except as provided under Section 22.1 of
the Lease, the Lessor at the Lessee's expense shall transfer to the Lessee all
of its right, title and interest free and clear of the Lien of the Lease and all
Lessor Liens in and to any Properties then subject to the Lease and any amounts
or proceeds referred to in the foregoing clause (b) shall be paid over to the
Lessee.
14.12 Further Assurances.
------------------
The parties hereto shall promptly cause to be taken, executed, acknowledged
or delivered 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 Agreements and the transactions contemplated hereby and thereby
(including, without limitation, the preparation, execution and filing of any and
all Uniform Commercial Code financing statements and other filings or
registrations which the parties hereto may from time to time request to be filed
or effected). The Lessee, 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 Owner Trustee shall so request) as
so requested, in order to maintain and protect all security interests provided
for hereunder or under any other Operative Agreement.
14.13 Calculations under Operative Agreements.
---------------------------------------
The parties hereto agree that all calculations and numerical determinations
to be made under the Operative Agreements by the Owner Trustee shall be made by
the Agent and that such calculations and determinations shall be conclusive and
binding on the parties hereto in the absence of manifest error.
14.14 Confidentiality.
---------------
Each of the Owner Trustee, the Holders, the Agent and the Lenders severally
hereby agrees to use reasonable efforts to keep confidential all non-public
information pertaining to any Credit Party or such Credit Party's Subsidiaries
which is provided to it by any Credit Party or such Credit Party's Subsidiaries
and which an officer of any Credit Party or any of such Credit Party's
Subsidiaries has requested in writing be kept confidential, and shall not
intentionally disclose such information to any Person except:
55
<PAGE>
(a) to the extent such information is public when received by such
Person or becomes public thereafter due to the act or omission of any party
other than such Person;
(b) to the extent such information is lawfully and independently
obtained from a source other than a Credit Party or any of such Credit
Party's Affiliates and such Person neither knows or has reason to know that
such information from such source is subject to an obligation of
confidentiality or, if such information is subject to an obligation of
confidentiality, that disclosure of such information is permitted;
(c) to counsel, auditors, accountants or agents retained by any such
Person or any Affiliates of any such Person provided they agree to keep
such information confidential as if such Person or Affiliate were party to
this Agreement and to financial institution regulators, including examiners
of any Lender, the Agent or the Owner Trustee, any Holder or any Affiliate
in the course of examinations of such Persons;
(d) in connection with any litigation or the enforcement or
preservation of the rights of the Agent, the Owner Trustee, the Lessor, any
Lender or any Holder under the Operative Agreements;
(e) to the extent required by any applicable statute, rule or
regulation or court order (including, without limitation, by way of
subpoena) or pursuant to the request of any regulatory or Governmental
Authority having jurisdiction over any such Person; provided, however, that
such Person shall endeavor (if not otherwise prohibited by Law) to notify
the Lessee prior to any disclosure made pursuant to this clause (e), except
that no such Person shall be subject to any liability whatsoever for any
failure to so notify the Lessee;
(f) the Agent may disclose such information to the Lenders; or
(g) to the extent disclosure to other financial institutions or other
Persons is appropriate in connection with any proposed or actual (i)
assignment or grant of a participation by any of the Lenders of interests
in the Credit Agreement and/or any Note to such other financial
institutions or (ii) assignment by any Holder of interests in the Trust
Agreement to another Person; so long as such financial institution or other
Person first executes and delivers a "Confidentiality Agreement" in the
form attached hereto as Exhibit J.
The obligations of any such financial institution or other Person that has
executed a Confidentiality Agreement in the form of Exhibit J hereto shall be
---------
superseded by this Section 14.14 upon the date upon which such financial
institution or other Person becomes a Lender or Holder hereunder.
[signature pages follow]
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
CAPITAL ONE REALTY, INC., as
Construction Agent and as Lessee
By: /s/ Stephen Linehan
--------------------------------------------
Name: Stephen Linehan
------------------------------------------
Title: Director of Corporate Funding
------------------------------------------
CAPITAL ONE BANK,
as Guarantor
By: /s/ Stephen Linehan
--------------------------------------------
Name: Stephen Linehan
------------------------------------------
Title: Director of Corporate Funding
------------------------------------------
[Signature pages continue]
<PAGE>
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein,
but solely as Owner Trustee under the Capital One
Realty Trust 1998-1
By: /s/ Val T. Orton
--------------------------------------------
Name: Val T. Orton
------------------------------------------
Title: Vice President
------------------------------------------
[Signature pages continue]
<PAGE>
BANK OF AMERICA, N.A.,
as a Holder, as a Lender and as Administrative
Agent
By: /s/ Shelly K. Harper
--------------------------------------------
Name: Shelly K. Harper
------------------------------------------
Title: Vice President
------------------------------------------
[Signature pages continue]
<PAGE>
FIRST NATIONAL BANK OF CHICAGO, as a Holder and a
Lender
By: /s/ Steven D. Franklin
--------------------------------------------
Name: Steven D. Franklin
------------------------------------------
Title: Vice President
------------------------------------------
[Signature pages continue]
<PAGE>
BARCLAYS BANK PLC, as a Holder and a Lender
By: /s/ Richard Herder
--------------------------------------------
Name: Richard Herder
------------------------------------------
Title: Director
------------------------------------------
[Signature pages continue]
<PAGE>
FIRST UNION NATIONAL BANK, as a Holder and a
Lender
By: /s/ Carrie H. McAllister
--------------------------------------------
Name: Carrie H. McAllister
------------------------------------------
Title: Vice President
------------------------------------------
[Signature pages continue]
<PAGE>
BMO GLOBAL CAPITAL SOLUTIONS, INC., as a Holder
By: /s/ Joseph A. Bliss
--------------------------------------------
Name: Joseph A. Bliss
-----------------------------------------
Title: Vice President
-----------------------------------------
[Signature pages continue]
<PAGE>
BMO GLOBAL CAPITAL SOLUTIONS, INC., as a Lender
By: /s/ Joseph A. Bliss
--------------------------------------------
Name: Joseph A. Bliss
-----------------------------------------
Title: Vice President
-----------------------------------------
[Signature pages continue]
<PAGE>
BANK OF MONTREAL, as a Lender
By: /s/ Kanu Modi
--------------------------------------------
Name: Kanu Modi
-----------------------------------------
Title: Director
-----------------------------------------
[Signature pages continue]
<PAGE>
KBC BANK N.V., as a Lender
By: /s/ W. Jay Buckley
----------------------------------------------
Name: W. Jay Buckly
-----------------------------------------
Title: Vice President
-----------------------------------------
[Signature page continues]
<PAGE>
CREDIT LYONNAIS - NY BRANCH, as a Lender
By: /s/ Robert Snauffer
--------------------------------------------
Name: Robert Snauffer
-----------------------------------------
Title: First Vice President
-----------------------------------------
By: /s/ Robert M. Surdam, Jr.
--------------------------------------------
Name: Robert M. Surdam, Jr.
-----------------------------------------
Title: Vice President
-----------------------------------------
[Signature pages end]
<PAGE>
SCHEDULE 5.11
--------------
[Description of Property located at 8715 Henderson Road, Tampa, Florida 33634]
<PAGE>
EXHIBIT A
---------
REQUISITION FORM
----------------
(Capital One Realty, Inc.)
(Pursuant to Sections 4.2 and 5.2 of the Participation Agreement)
Capital One Realty, Inc., a Delaware corporation (the "Company") hereby
certifies as true and correct and delivers the following Requisition to First
Security Bank, National Association, not individually, except as expressly
stated in the Participation Agreement (hereinafter defined), but solely as Owner
Trustee under the Capital One Realty Trust 1998-1 ("Lessor"), the banks and
------
other lending institutions parties thereto from time to time, as the holders
(the "Holders"), the banks and other lending institutions parties thereto from
-------
time to time, as lenders (the "Lenders") and Bank of America, N.A., as
Administrative Agent for the Lenders and respecting the Security Documents, as
Administrative Agent for the Lenders and the Holders, to the extent of their
interests (the "Agent"):
-----
Reference is made herein to that certain Participation Agreement dated as
of September 3, 1999 (as such may be amended from time to time, the
"Participation Agreement") among the Company, in its capacity as Lessee and as
- ------------------------
Construction Agent, the Guarantor, the Lessor, the Holders, the Lenders and the
Agent. Capitalized terms used herein but not otherwise defined herein shall have
the meanings set forth therefor in the Participation Agreement.
Check one:
____ INITIAL CLOSING DATE: _________________
(three Business Days prior notice required for Advance)
____ PROPERTY CLOSING DATE: _________________
(three Business Days prior notice required for Advance)
____ CONSTRUCTION ADVANCE DATE: _____________
(three Business Days prior notice required for Advance)
1. Transaction Expenses and other fees, expenses and disbursements under
Article IX of the Participation Agreement and any and all other amounts
contemplated to be financed under the Participation Agreement including
without limitation any Work, broker's fees, taxes, recording fees and the
like (with supporting invoices or closing statement attached):
<TABLE>
<CAPTION>
Party to Whom Amount Owed
Amount is Owed (in U.S. Dollars)
-------------- -----------------
<S> <C>
_______ _______
_______ _______
_______ _______
_______ _______
_______ _______
</TABLE>
A-1
<PAGE>
2. Legal Description of Land (which shall be a legal description of the Land
in connection with an Advance to pay Property Acquisition Costs and which
shall otherwise be a street address for the applicable Property): See
attached Schedule 1
----------
3. Aggregate Loans and Holder Fundings requested since the Initial Closing
Date with respect to each Property for which Advances are requested under
this Requisition (listed on a Property by Property basis), including all
amounts requested under this Requisition:
$______________ [Property]
In connection with this Requisition, the Company hereby requests that the
Lenders make Loans to the Lessor in the amount of $______________ and that the
Holders make Holder Fundings to the Lessor in the amount of $________________.
The Company hereby certifies (i) that the foregoing amounts requested do not
exceed the total aggregate of the Available Commitments plus the Available
Holder Commitments and (ii) each of the provisions of the Participation
Agreement applicable to the Loans and Holder Fundings requested hereunder have
been complied with as of the date of this Requisition.
The Company has caused this Requisition to the executed by its duly
authorized officer as of this _____ day of __________, ___.
CAPITAL ONE REALTY, INC.
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
A-2
<PAGE>
Schedule 1
----------
Legal Description of Land
A-3
<PAGE>
EXHIBIT B
---------
CAPITAL ONE BANK
OFFICER'S CERTIFICATE
---------------------
(Pursuant to Section 5.5 of the Participation Agreement)
CAPITAL ONE REALTY, INC., a Delaware corporation (the "Company") DOES HEREBY
CERTIFY as follows:
1. The address for the subject Property is ___________________
__________________________________.
2. The Completion Date for the construction of Improvements at the Property
occurred on ______________.
3. The aggregate Property Cost for the Property was $___________.
4. All Improvements have been made in accordance with all applicable Legal
Requirements, in a good and workmanlike manner and otherwise in full
compliance with the standards and practices of the Company with respect to
Company-owned properties and improvements.
Capitalized terms used in this Officer's Certificate and not otherwise defined
have the respective meanings ascribed thereto in the Participation Agreement
dated as of September 3, 1999 among the Company, as Lessee and as Construction
Agent, Capital One Bank, as Guarantor, First Security Bank, National
Association, as Owner Trustee, the various banks and other lending institutions
which are parties thereto from time to time, as Holders, the various banks and
other lending institutions which are parties thereto from time to time, as
Lenders and Bank of America, N.A., as the Administrative Agent.
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this ____ day of ______________, _____.
CAPITAL ONE REALTY, INC.
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
B-1
<PAGE>
EXHIBIT C
---------
[Counsel Opinion for Lessee]
(Pursuant to Section 6.1(c) of the Participation Agreement)
__________ ___, 1999
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Tax Retention Operating Lease Financing Provided in favor of Capital
One Realty, Inc.
Dear Sirs:
We have acted as special counsel to Capital One Realty, Inc., a Delaware
corporation (the "Lessee") and Capital One Bank, a Virginia banking corporation
(the "Guarantor") in connection with certain transactions contemplated by the
Participation Agreement dated as of September 3, 1999 (the "Participation
Agreement"), among the Lessee, the Guarantor, First Security Bank, National
Association, not individually, but solely as Owner Trustee under the Capital One
Realty Trust 1998-1 (the "Owner Trustee"), the various banks and other lending
institutions parties thereto from time to time, as the holders (the "Holders),
the various banks and other lending institutions parties thereto from time to
time, as the lenders (the "Lenders"), and Bank of America, N.A., as the
administrative agent for the Lenders and respecting the Security Documents, as
the administrative agent for the Lenders and the Holders, to the extent of their
interests (the "Administrative Agent"). This opinion is delivered pursuant to
Section 6.1(c) of the Participation Agreement. All capitalized terms used
herein, and not otherwise defined herein, shall have the meanings assigned
thereto in Appendix A to the Participation Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of the Operative Agreements, and such other
corporate documents and records of the Credit Parties, certificates of public
officials and representatives of the Credit Parties as to certain factual
matters, and such other instruments and documents which we have deemed necessary
or advisable to examine for the purpose of this opinion. With respect to such
examination, we have assumed (i) the statements of fact made in all such
certificates, documents and instruments are true, accurate and complete; (ii)
the due authorization, execution and delivery of the Operative Agreements by the
parties thereto other than the Credit Parties; (iii) the genuineness of all
signatures (other than the signatures of persons signing on behalf of the Credit
Parties), the authenticity and completeness of all documents, certificates,
instruments, records and corporate records submitted to us as originals and the
conformity to the original instruments of all documents
C-1
<PAGE>
submitted to us as copies, and the authenticity and completeness of the
originals of such copies; (iv) that all parties other than the Credit Parties
have all requisite corporate power and authority to execute, deliver and perform
the Operative Agreements; and (v) the enforceability of the Operative Agreements
against all parties thereto other than the Credit Parties.
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including the matters set forth in the last two paragraphs hereof, we
are of the opinion that:
(a) Each Credit Party is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation or
formation and has the power and authority to conduct its business as presently
conducted and to execute, deliver and perform its obligations under the
Operative Agreements to which it is a party. Each Credit Party is duly qualified
to do business in all jurisdictions in which its failure to so qualify would
materially impair its ability to perform its obligations under the Operative
Agreements to which it is a party or its financial position or its business as
now and now proposed to be conducted.
(b) The execution, delivery and performance by each Credit Party of the
Operative Agreements to which it is a party have been duly authorized by all
necessary corporate action on the part of such Credit Party and the Operative
Agreements to which such Credit Party is a party have been duly executed and
delivered by such Credit Party.
(c) The Operative Agreements to which each Credit Party is a party
constitute valid and binding obligations of such Credit Party enforceable
against such Credit Party in accordance with the terms thereof, subject to
bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and
similar laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
(d) The execution and delivery by each Credit Party of the Operative
Agreements to which it is a party and compliance by such Credit Party with all
of the provisions thereof do not and will not (i) contravene the provisions of,
or result in any breach of or constitute any default under, or result in the
creation of any Lien (other than Permitted Liens) upon any of its property
under, its Articles of Incorporation or By-Laws or any indenture, mortgage,
chattel mortgage, deed of trust, lease, conditional sales contract, bank loan or
credit agreement or other agreement or instrument to which such Credit Party is
a party or by which it or any of its property may be bound or affected, or (ii)
contravene any Laws or any order of any Governmental Authority applicable to or
binding on such Credit Party.
(e) No Governmental Action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery or
performance by any Credit Party of any of the Operative Agreements to which it
is a party.
(f) Except as set forth on Schedule 1 hereto, there are no actions, suits
or proceedings pending or to our knowledge, threatened against any Credit Party
in any court or before any
C-2
<PAGE>
Governmental Authority, that concern the Property or any Credit Party's interest
therein or that question the validity or enforceability of any Operative
Agreement to which such Credit Party is a party or the overall transaction
described in the Operative Agreements to which such Credit Party is a party.
(g) Neither the nature of the Property, nor any relationship between any
Credit Party and any other Person, nor any circumstance in connection with the
execution, delivery and performance of the Operative Agreements to which such
Credit Party is a party is such as to require any approval of stockholders of,
or approval or consent of any trustee or holders of indebtedness of, such Credit
Party, except for such approvals and consents which have been duly obtained and
are in full force and effect.
(h) The Security Documents which have been executed and delivered as of the
date of this opinion create, for the benefit of the holders of the Notes, the
security interest in the C Collateral described therein which by their terms
such Security Documents purports to create. Upon filing of the UCC-1 financing
statements with ________________________ [identify filing offices], the Agent
will have a perfected security interest in that portion of the Collateral which
can be perfected by such filing under Article 9 of the UCC.
(i) The Operative Agreements to which First Security Bank, National
Association, as Owner Trustee, is a party constitute are enforceable against
First Security Bank, National Association, as Owner Trustee, as the case may be,
enforceable against First Security Bank, National Association, individually or
as Owner Trustee, in accordance with the terms thereof, subject to bankruptcy,
insolvency, liquidation, reorganization, fraudulent conveyance, and similar laws
affecting creditors, rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).
(j) The execution and delivery by First Security Bank, National
Association, individually or as Owner Trustee, as the case may be, of the
Operative Agreements (other than the Trust Agreement) to which it is a party and
compliance by First Security Bank, National Association, individually or as
Owner Trustee, with all of the provisions thereof do not and will not contravene
any law, rule or regulation of ___________________.
(k) The Mortgage Instrument and UCC fixture filings relating thereto are in
proper form for recording and/or filing with the _________________ and
___________________ [identify filing offices in state], respectively.
This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters stated herein. This opinion is
based on and is limited to the laws of the ______________________, and the
federal laws of the United States of America. Insofar as the foregoing opinion
relates to matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of Lessee, the Guarantor, Bank of America,
N.A., as the Administrative Agent, the Holders, the Lenders, First Security
Bank, National Association, not individually, but solely as Owner Trustee under
the Capital One Realty Trust 1998-1 and their
C-3
<PAGE>
respective successors and assigns and may not be relied upon by any other person
other than such parties and their respective successors and assigns without the
express written consent of the undersigned. The opinions expressed herein are as
of the date hereof and we make no undertaking to amend or supplement such
opinions if facts come to our attention or changes in the current law of the
jurisdictions mentioned herein occur which could affect such opinions.
Very truly yours,
[LESSEE'S COUNSEL]
C-4
<PAGE>
Distribution List
Bank of America, N.A., as Administrative Agent
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as the Lenders.
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as the Holders.
First Security Bank, National Association, not individually, but solely as Owner
Trustee under the Capital One Realty Trust 1998-1
C-5
<PAGE>
EXHIBIT D
---------
[NAME OF CREDIT PARTY]
OFFICER'S CERTIFICATE
(Pursuant to Section 6.1(g) of the Participation Agreement)
[NAME OF CREDIT PARTY], a ________ corporation (the "Company"), DOES HEREBY
CERTIFY as follows:
1. Each and every representation and warranty of the Company contained in the
Operative Agreements to which it is a party is true and correct on and as
of the date hereof.
2. No Default or Event of Default has occurred and is continuing under any
Operative Agreement.
3. Each Operative Agreement to which the Company is a party is in full force
and effect with respect to it.
4. The Company has duly performed and complied with all covenants, agreements
and conditions contained in the Participation Agreement (hereinafter
defined) or in any Operative Agreement required to be performed or complied
with by it on or prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of September 3, 1999 among the Capital One Realty, Inc., as
Lessee and as Construction Agent, Capital One Bank, as guarantor (the
"Guarantor"), First Security Bank, National Association, not individually, but
---------
solely as owner Trustee under the Capital One Realty Trust 1998-1, the various
banks and other lending institutions which are parties thereto from time to
time, as holders (the "Holders"), the various banks and other lending
-------
institutions which are parties thereto from time to time, as lenders (the
"Lenders") and Bank of America, N.A., as Administrative Agent for the Lenders
and respecting the Security Documents, as Administrative Agent for the Lenders
and the Holders, to the extent of their interests (the "Agent")
-----
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this _____ day of __________, 1999.
[NAME OF CREDIT PARTY]
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
D-1
<PAGE>
EXHIBIT E
---------
[NAME OF CREDIT PARTY]
OFFICER'S CERTIFICATE
---------------------
(Pursuant to Section 6.1(h) of the Participation Agreement)
[NAME OF CREDIT PARTY], a __________________ corporation (the "Company")
DOES HEREBY CERTIFY as follows:
1. Attached hereto as Schedule I is a true, correct and complete copy of the
----------
resolutions of the Board of Directors of the Company duly adopted by the
Board of Directors of the Company on __________. Such resolutions have not
been amended, modified or rescinded since their date of adoption and remain
in full force and effect as of the date hereof.
2. Attached hereto as Schedule II is a true, correct and complete copy of the
-----------
Articles of Incorporation of the Company on file in the Office of
_____________. Such Articles of Incorporation have not been amended,
modified or rescinded since their date of adoption and remain in full force
and effect as of the date hereof.
3. Attached hereto as Schedule III is a true, correct and complete copy of the
------------
Bylaws of the Company. Such Bylaws have not been amended, modified or
rescinded since their date of adoption and remain in full force and effect
as of the date hereof.
4. The persons named below now hold the offices set forth opposite their
names, and the signatures opposite their names and titles are their true
and correct signatures.
<TABLE>
<CAPTION>
Name Office Signature
---- ------ ---------
<S> <C> <C>
________________ ________________ ________________
________________ ________________ ________________
</TABLE>
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this _____ day of ___________, 1999.
[NAME OF CREDIT PARTY]
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
E-1
<PAGE>
SCHEDULE I
----------
BOARD RESOLUTIONS
E-2
<PAGE>
SCHEDULE II
-----------
ARTICLES OF INCORPORATION
E-3
<PAGE>
SCHEDULE III
------------
BYLAWS
E-4
<PAGE>
EXHIBIT F
---------
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
(Pursuant to Section 6.2(d) of the Participation Agreement)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually (except with
respect to paragraph 1 below, to the extent any such representations and
warranties are made in its individual capacity) but solely as owner trustee
under the Capital One Realty Trust 1998-1 (the "Owner Trustee"), DOES HEREBY
CERTIFY as follows:
(a) Each and every representation and warranty of the Owner Trustee contained
in the Operative Agreements to which it is a party is true and correct on
and as of the date hereof.
(b) Each Operative Agreement to which the Owner Trustee is a party is in full
force and effect with respect to it.
(c) The Owner Trustee has duly performed and complied with all covenants,
agreements and conditions contained in the Participation Agreement
(hereinafter defined) or in any Operative Agreement required to be
performed or complied with by it on or prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of September 3, 1999 among Capital One Realty, Inc., as
Lessee and as Construction Agent, Capital One Bank, as guarantor (the
"Guarantor"), the Owner Trustee, the various banks and other lending
---------
institutions which are parties thereto from time to time, as holders (the
"Holders"), the various banks and other lending institutions which are parties
-------
thereto from time to time, as lenders (the "Lenders") and Bank of America, N.A.,
as Administrative Agent for the Lenders and respecting the Security Documents,
as Administrative Agent for the Lenders and the Holders, to the extent of their
interests (the "Agent").
-----
IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's Certificate to
be duly executed and delivered as of this _____ day of __________ 1999.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein,
but solely as Owner Trustee under the Capital One
Realty Trust 1998-1
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
F-1
<PAGE>
EXHIBIT G
---------
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
---------------------
(Pursuant to Section 6.2(e) of the Participation Agreement)
CERTIFICATE OF ASSISTANT SECRETARY
I, ______________________, duly elected and qualified Assistant Secretary
of the Board of Directors of First Security Bank, National Association (the
"Association"), hereby certify as follows:
1. The Association is a National Banking Association duly organized,
validly existing and in good standing under the laws of the United States. With
respect thereto the following is noted:
A. Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et
seq., the Comptroller of the Currency charters and exercises
regulatory and supervisory authority over all National Banking
Associations;
B. On December 9, 1881, the First National Bank of Ogden, Utah was
chartered as a National Banking Association under the laws of the
United States and under Charter No. 2597;
C. On October 2, 1922, in connection with a consolidation of The First
National Bank of Ogden, Ogden, Utah, and The Utah National Bank of
Ogden, Ogden, Utah, the title was changed to "The First & Utah
National Bank of Ogden"; on January 18, 1923, The First & Utah
National Bank of Ogden changed its title to "First Utah National Bank
of Ogden"; on January 19, 1926, the title was changed to "First
National Bank of Ogden"; on February 24, 1934, the title was changed
to "First Security Bank of Utah, National Association"; on June 21,
1996, the title was changed to "First Security Bank, National
Association"; and
D. First Security Bank, National Association, Ogden, Utah, continues to
hold a valid certificate to do business as a National Banking
Association.
2. The Association's Articles of Association, as amended, are in full
force and effect, and a true, correct and complete copy is attached hereto as
Schedule A and incorporated herein by reference. Said Articles were last amended
October 20, 1975, as required by law on notice at a duly called special meeting
of the shareholders of the Association.
G-1
<PAGE>
3. The Association's By-Laws, as amended, are in full force and effect;
and a true, correct and complete copy is attached hereto as Schedule B and
incorporated herein by reference. Said By-Laws, still in full force and effect,
were adopted September 17, 1942, by resolution, after proper notice of
consideration and adoption of By-Laws was given to each and every shareholder,
at a regularly called meeting of the Board of Directors with a quorum present.
4. Pursuant to the authority vested in it by an Act of Congress approved
December 23, 1913 and known as the Federal Reserve Act, as amended, the Federal
Reserve Board (now the Board of Governors of the Federal Reserve System) has
granted to the Association now known as "First Security Bank, National
Association" of Ogden, Utah, the right to act, when not in contravention of
State or local law, as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver, committee of estates of
lunatics, or in any other fiduciary capacity in which State banks, trust
companies or other corporations which come into competition with National Banks
are permitted to act under the laws of the State of Utah; and under the
provisions of applicable law, the authority so granted remains in full force and
effect.
5. Pursuant to authority vested by Act of Congress (12 U.S.C. 92a and 12
U.S.C. 481, as amended) the Comptroller of the Currency has issued Regulation 9,
as amended, dealing, in part, with the Fiduciary Powers of National Banks, said
regulation providing in subparagraph 9.7 (a) (1-2):
(1) The board of directors is responsible for the proper exercise of
fiduciary powers by the Bank. All matters pertinent thereto,
including the determination of policies, the investment and
disposition of property held in fiduciary capacity, and the direction
and review of the actions of all officers, employees, and committees
utilized by the Bank in the exercise of its fiduciary powers, are the
responsibility of the board. In discharging this responsibility, the
board of directors may assign, by action duly entered in the minutes,
the administration of such of the Bank's fiduciary powers as it may
consider proper to assign to such director(s), officer(s), employee(s)
or committee(s) as it may designate.
(2) No fiduciary account shall be accepted without the prior approval of
the board, or of the director(s), officer(s), or committee(s) to whom
the board may have designated the performance of that responsibility.
6. A Resolution relating to Exercise of Fiduciary Powers was adopted by
the Board of Directors at a meeting held July 26, 1994 at which time there was a
quorum present; said resolution is still in full force and effect and has not
been rescinded. Said resolution is attached hereto as Schedule C and
incorporated herein by reference.
G-2
<PAGE>
7. A Resolution relating to the Designation of Officers and Employees to
Exercise Fiduciary Powers was adopted by the Trust Policy Committee at a meeting
held February 7, 1996 at which time a quorum was present; said resolution is
still in full force and effect and has not been rescinded. Said resolution is
attached hereto as Schedule D and is incorporated herein by reference.
8. Attached hereto as Schedule E and incorporated herein by reference, is
a listing of facsimile signatures of persons authorized (herein "Authorized
Signatory or Signatories") on behalf of the Association and its Trust Group to
act in exercise of its fiduciary powers subject to the resolutions in Paragraphs
6 and 7, above.
9. The principal office of the First Security Bank, National Association,
Trust Group and of its departments, except for the St. George, Utah, Ogden,
Utah, and Provo, Utah, branch offices, is located at 79 South Main Street, Salt
Lake City, Utah 84111 and all records relating to fiduciary accounts are located
at such principal office of the Trust Group or in storage facilities within Salt
Lake County, Utah, except for those of the Ogden, Utah, St. George, Utah, and
Provo, Utah, branch offices, which are located at said office.
10. Each Authorized Signatory (i) is a duly elected or appointed, duly
qualified officer or employee of the Association; (ii) holds the office or job
title set forth below his or her name on the date hereof; (iii) and the
facsimile signature appearing opposite the name of each such officer or employee
is a true replica of his or her signature.
G-3
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Association this __________ day of _________________, ______.
(SEAL)
________________________________________
R. James Steenblik
Senior Vice President
Assistant Secretary
G-4
<PAGE>
Schedule A
----------
Articles of Association
G-5
<PAGE>
Schedule B
----------
Bylaws
G-6
<PAGE>
Schedule C
----------
Resolution Relating to
Exercise of Fiduciary Powers
G-7
<PAGE>
Schedule D
----------
Resolution Relating to the
Designation of Officers and Employees
To Exercise Fiduciary Powers
G-8
<PAGE>
Schedule E
----------
Authorized Signatory or Signatories
G-9
<PAGE>
EXHIBIT H
---------
[Owner Trustee's Outside Counsel Opinion]
(Pursuant to Section 6.2(f) of the
Participation Agreement)
__________ __, 1999
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Amended and Restated Trust Agreement dated as of August 31, 1999
Dear Sirs:
We have acted as special counsel for First Security Bank, National Association,
a national banking association, in its individual capacity ("FSB") and in its
capacity as trustee (the "Owner Trustee") under the Amended and Restated Trust
Agreement dated as of September 3, 1999 (the "Trust Agreement") by and among it
and the Holders, in connection with the execution and delivery by the Owner
Trustee of the Operative Agreements to which it is a party. Except as otherwise
defined herein, the terms used herein shall have the meanings set forth in
Appendix A to the Participation Agreement dated as of September 3, 1999 among
Capital One Realty, Inc., as Lessee and as Construction Agent, Capital One Bank,
as guarantor (the "Guarantor"), the Owner Trustee, the various banks and other
---------
lending institutions which are parties thereto from time to time, as holders
(the "Holders"), the various banks and other lending institutions which are
-------
parties thereto from time to time, as lenders (the "Lenders") and Bank of
America, N.A., as Administrative Agent for the Lenders and respecting the
Security Documents, as Administrative Agent for the Lenders and the Holders, to
the extent of their interests (the "Agent").
-----
We have examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary or advisable for the purpose of rendering this opinion.
Based upon the foregoing, we are of the opinion that:
1. FSB is a national banking association duly organized, validly existing
and in good standing under the laws of United States of America and each of
FSB and the Owner Trustee has under the laws of the State of Utah and
federal banking law the power and authority to enter into and perform its
obligations under the Trust Agreement and each other Operative Agreement to
which it is a party.
H-1
<PAGE>
2. The Owner Trustee is the duly-appointed trustee under the Trust
Agreement.
3. The Trust Agreement has been duly authorized, executed and delivered
by one of the officers of FSB and, assuming due authorization, execution
and delivery by the Holders, is a legal, valid and binding obligation of
the Owner Trustee (and to the extent set forth therein, against FSB),
enforceable against the Owner Trustee (and to the extent set forth therein,
against FSB) in accordance with its terms, and the Trust Agreement creates
under the laws of the State of Utah for the Holders the beneficial interest
in the CORI Trust Estate it purports to create and is a valid trust under
the laws of the State of Utah.
4. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by FSB, and, assuming due authorization,
execution and delivery by the other parties thereto, are legal, valid and
binding obligations of FSB, enforceable against FSB in accordance with
their respective terms.
5. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by the Owner Trustee, and, assuming due
authorization, execution and delivery by the other parties thereto, are
legal, valid and binding obligations of the Owner Trustee, enforceable
against the Owner Trustee in accordance with their respective terms. The
Notes and the Certificates have been duly issued, executed and delivered by
the Owner Trustee, pursuant to authorization contained in the Trust
Agreement, and the Certificates are entitled to the benefits and security
afforded by the Trust Agreement in accordance with its terms and the terms
of the Trust Agreement.
6. The execution and delivery by each of FSB and the Owner Trustee of the
Trust Agreement and the Operative Agreements to which it is a party, and
compliance by FSB or Owner Trustee, as the case may be, with all of the
provisions thereof do not and will not contravene any Laws applicable to or
binding on FSB, or as Owner Trustee, or contravene the provisions of, or
constitute a default under, its charter documents or by-laws or, to our
knowledge after due inquiry, any indenture, mortgage contract or other
agreement or instrument to which FSB or Owner Trustee is a party or by
which it or any of its property may be bound or affected.
7. The execution and delivery of the Operative Agreements by each of FSB
and the Owner Trustee and the performance by each of FSB and the Owner
Trustee of their respective obligations thereunder does not require on or
prior to the date hereof the consent or approval of, the giving of notice
to, the registration or filing with, or the taking of any action in respect
of any Governmental Authority or any court.
8. Assuming that the trust created by the Trust Agreement is treated as a
grantor trust for federal income tax purposes within the contemplation of
Section 671 through 678 of the Internal Revenue Code of 1986, there are no
fees, taxes, or other charges (except taxes imposed on fees payable to the
Owner Trustee) payable to the State of Utah or any political subdivision
thereof in connection with the execution, delivery or performance by the
Owner Trustee, the Agent, the Lenders, the Lessee or the Holders, as the
case may be, of the
H-2
<PAGE>
Operative Agreements or in connection with the acquisition of any Property
by the Owner Trustee or in connection with the making by any Holder of its
investment in the Trust or its acquisition of the beneficial interest in
the CORI Trust Estate or in connection with the issuance and acquisition of
the Certificate, or the Notes, and neither the Owner Trustee, the CORI
Trust Estate nor the trust created by the Trust Agreement will be subject
to any fee, tax or other governmental charge (except taxes on fees payable
to the Owner Trustee) under the laws of the State of Utah or any political
subdivision thereof on, based on or measured by, directly or indirectly,
the gross receipts, net income or value of the CORI Trust Estate by reason
of the creation or continued existence of the trust under the terms of the
Trust Agreement pursuant to the laws of the State of Utah or the Owner
Trustee's performance of its duties under the Trust Agreement.
9. There is no fee, tax or other governmental charge under the laws of
the State of Utah or any political subdivision thereof in existence on the
date hereof on, based on or measured by any payments under the
Certificates, Notes or the beneficial interests in the CORI Trust Estate,
by reason of the creation of the trust under the Trust Agreement pursuant
to the laws of the State of Utah or the Owner Trustee's performance of its
duties under the Trust Agreement within the State of Utah.
10. Upon the filing of the financing statement on form UCC-1 in the form
attached hereto as Exhibit A with the _____________, the Administrative
Agent's security interest in the CORI Trust Estate, for the benefit of the
Lenders, will be perfected, to the extent that such perfection is governed
by Article 9 of the Uniform Commercial Code as in effect in the State of
Utah (the "Utah UCC").
Your attention is directed to the Utah UCC, which provides, in part, that a
filed financing statement which does not state a maturity date or which states a
maturity date of more than five years is effective only for a period of five
years from the date of filing, unless within six months prior to the expiration
of said period a continuation statement is filed in the same office or offices
in which the original statement was filed. The continuation statement must be
signed by the secured party, identify the original statement by file number and
state that the original statement is still effective. Upon the timely filing of
a continuation statement, the effectiveness of the original financing statement
is continued for five years after the last date to which the original statement
was effective. Succeeding continuation statements may be filed in the same
manner to continue the effectiveness of the original statement.
The opinions set forth in paragraphs 3 and 4 above are subject to the
qualification that enforceability of the Trust Agreement and the other Operative
Agreements to which the Owner Trustee is a party, in accordance with their
respective terms, may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally.
We are attorneys admitted to practice in the State of Utah and in rendering the
foregoing opinions we have not passed upon, or purported to pass upon, the laws
of any jurisdictions other than the State of Utah and the federal banking law
governing the banking and trust powers of FSB.
H-3
<PAGE>
This opinion is for the sole benefit of Capital One Realty, Inc., Capital One
Bank, Bank of America, N.A., as the Administrative Agent, the Lenders, the
Holders, FSB, not individually, but solely as Owner Trustee under the Capital
One Realty Trust 1998-1 and their respective successors and assigns and may not
be relied upon by any other person other than such parties and their respective
successors and assigns without the express written consent of the undersigned.
The opinions expressed herein are as of the date hereof and we make no
undertaking to amend or supplement such opinions if facts come to our attention
or changes in the current law of the jurisdictions mentioned herein occur which
could affect such opinions.
Very truly yours,
RAY, QUINNEY & NEBEKER
M. John Ashton
H-4
<PAGE>
Distribution List
-----------------
Bank of America, N.A., as Administrative Agent
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as Lenders
Capital One Realty, Inc., as the Lessee and as the Construction Agent
Capital One Bank, as Guarantor
First Security Bank, National Association, not individually, but solely as Owner
Trustee under the Capital One Realty Trust 1998-1
H-5
<PAGE>
EXHIBIT I
---------
[Description of Material Litigation]
In connection with the transfer of substantially all of Signet Bank's
credit card business to Capital One Bank in November 1994, Capital One Financial
Corporation and Capital One Bank agreed to indemnify Signet Bank (which has
since been acquired by First Union Bank on November 30, 1997) for certain
liabilities incurred in litigation arising from that business, which may include
liabilities, if any, incurred in the purported class action case described
below.
During 1995, Capital One Financial Corporation and Capital One Bank became
involved in a purported class action suit relating to certain collection
practices engaged in by Signet Bank and, subsequently, by Capital One Bank. The
complaint in this case alleges that Signet Bank and/or Capital One Bank violated
a variety of California state statutes and constitutional and common law duties
by filing collection lawsuits, obtaining judgements and pursuing garnishment
proceedings in the Virginia state courts against defaulted credit card customers
who were not residents of Virginia. This case was filed in the Superior Court of
California in the County of Alameda, Southern Division, on behalf of a class of
California residents. The complaint in this case seeks unspecified statutory
damages, compensatory damages, punitive damages, restitution, attorneys' fees
and costs, a permanent injunction and other equitable relief.
In early 1997, the California court entered judgment in favor of Capital
One Bank on all of the plaintiffs' claims. The plaintiffs appealed the ruling to
the California Court of Appeal First Appellate District Division 4. In early
1999, the Court of Appeals affirmed the trial court's ruling in favor of Capital
One Bank on six counts, but reversed the trial court's ruling on two counts of
the plaintiffs' complaint. The California Supreme Court rejected Capital One
Bank's Petition for Review of the remaining two counts and remitted them to the
trial court. The Bank intends to petition for further appellate review of the
ruling on the two remaining counts.
Because no specific measure of damages is demanded in the complaint of the
California case and the trial court entered judgment in favor of Capital One
Bank before the parties completed any significant discovery, an informed
assessment of the ultimate outcome of this case cannot be made at this time.
Management believes, however, that there are meritorious defenses to this
lawsuit and intends to continue to defend it vigorously.
Capital One Financial Corporation is commonly subject to various other
pending and threatened legal actions arising from the conduct of its normal
business activities. In the opinion of management, the ultimate aggregate
liability, if any, arising out of any pending or threatened action will not have
a material adverse effect on the consolidated financial condition of Capital One
Financial Corporation. At the present time, however, management is not in a
position to determine whether the resolution of pending or threatened litigation
will have a material effect on Capital One Financial Corporation's results of
operations in any future reporting period.
I-1
<PAGE>
EXHIBIT J
---------
[Form of Confidentiality Agreement]
______________, 1999
[Address]
Attention:
Re: Confidentiality Agreement
-------------------------
Dear __________________:
In the course of further discussions between you and Capital One Financial
Corporation and/or any one or more of its subsidiaries or affiliates
(individually and collectively, "Capital One"), you may be supplied with
materials and information concerning Capital One and its subsidiaries or
affiliates and our business, which information is non-public, confidential or
proprietary in nature ("Confidential Information"). Because the use or
disclosure of such Confidential Information would be damaging to Capital One,
Capital One is willing to supply you with such information only if you agree to
the conditions set forth in this confidentiality agreement (this "Agreement").
1. The Transaction. The services you are contemplating providing to
---------------
Capital One are in connection with those certain Participation Agreements dated
as of September 3, 1999 (together, the "Participation Agreement"), among (i)
Capital One Reality, Inc., as Construction Agent and Lessee, Capital One Bank,
as Guarantor, First Security Bank, National Association, as Owner Trustee, the
Holders named therein and the Lenders named therein and (ii) Capital One
Services, Inc., as Construction Agent and Lessee, Capital One Financial
Corporation, as Guarantor, First Security Bank, National Association, as Owner
Trustee, the Holders named therein and the Lenders named therein (the
"Transaction"). Terms used herein but not defined herein have the meanings set
forth in the respective Participation Agreements.
2. Description of Information. Confidential Information includes
--------------------------
without limitation (i) information transmitted in written, oral, magnetic or any
other medium, and (ii) all copies and reproductions, in whole or in part, of
such information and (iii) all summaries, analyses, compilations, studies, notes
or other records which contain, reflect, or are generated from such information.
Confidential Information does not include information that (w) has become part
of the public domain through no act or omission of you; (x) was lawfully
disclosed
J-1
<PAGE>
to you without restriction on disclosure by a third party; (y) was developed
independently by you; or (z) is or was lawfully and independently provided to
you prior to disclosure hereunder, from a third party who is not subject to an
obligation of confidentiality or otherwise prohibited from transmitting such
information.
3. Nondisclosure of Information. You agree that you will use the
----------------------------
Confidential Information solely for the purpose of the Transaction and, except
as provided in paragraph 7 hereof, agree to reveal the Confidential Information
only to your affiliates, subsidiaries, directors, officers, employees and agents
(collectively "Affiliates") with a need to know the Confidential Information for
the purpose of the Transaction. Except as provided in paragraph 7 hereof, you
agree not to disclose to any third party any of the Confidential Information now
or hereafter received or obtained by you without our prior written consent;
provided, however, that you may disclose any such Confidential Information to
your respective accountants, attorneys and other confidential advisors
(collectively "Advisors") who need to know such information for the purpose of
assisting you in connection with the Transaction. You agree to be responsible
for any breach of this Agreement by your Affiliates and Advisors, and you agree
that your Affiliates and Advisors will be advised by you of the confidential
nature of such information and shall agree to be bound by this Agreement.
4. Nondisclosure of Transaction. Neither you nor your Agents or
----------------------------
Advisors, without our prior written consent, will disclose to any person the
fact that Confidential Information has been provided to you or them, that
discussions or negotiations are taking place with respect to the Transaction, or
the existence, terms, conditions, or other facts of such Transaction, including
the status thereof.
5. Ownership of Information. You acknowledge and agree that any
------------------------
Confidential Information provided to you, in whatever form, is the sole property
of Capital One. Neither you nor your Affiliates or Advisors shall use any of the
Confidential Information now or hereafter received or obtained from Capital One
in furtherance of your business or the business of anyone else whether or not in
competition with Capital One, or for any other purpose whatsoever, other than as
contemplated by the Transaction. You agree that if we should request that you
destroy or return the Confidential Information, you shall return or destroy such
Confidential Information as so directed.
6. Remedies. You acknowledge that all Confidential Information is
--------
considered to be proprietary and of competitive value, and in many instances
trade secrets. You agree that because of the unique nature of the Confidential
Information any breach of this Agreement would cause Capital One irreparable
harm, and money damages and other remedies available at law in the event of a
breach would not be adequate to compensate Capital One for any such breach.
Accordingly, you agree that we shall be entitled, without the requirement of
posting a bond or other security, to equitable relief, including, without
limitation, injunctive relief and specific performance, as a remedy for any such
breach. Such relief shall be in addition to, and not in lieu of, all other
remedies available to us whether at law or in equity.
J-2
<PAGE>
7. Compelled Disclosure. If you or any of your Affiliates or Advisors
--------------------
is legally compelled (whether by deposition, interrogatory, request for
documents, subpoena, civil investigation, demand or similar process) to disclose
any of the Confidential Information (including the fact that discussions or
negotiations are taking place with respect to the Transaction) you shall use
your best efforts to notify Capital One in writing of such requirement prior to
disclosure thereof so that we may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions hereof; provided, that you
--------
shall not be subject to any liability whatsoever for any failure to so notify
Capital One.
8. No Waiver of Rights. It is understood and agreed that no failure or
-------------------
delay by Capital One in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
9. No Representations and Warranties. You understand and acknowledge
---------------------------------
that Capital One is not making any representation or warranty, expressed or
implied, as to the accuracy or completeness of the Confidential Information and
we shall not be liable to you or to any other person resulting from the use of
the Confidential Information. Only those representations or warranties that are
made in any definitive agreement executed in connection with the Transaction,
and subject to any limitations and restrictions as may be specified in such
definitive agreement, shall have any legal effect.
10. Indemnification; Expenses. You agree to indemnify Capital One for
-------------------------
any and all losses, liabilities, obligations, damages, penalties, judgments,
suits, costs, expenses or disbursements of any kind (including, without
limitation, attorneys' fees and expenses) arising out of, or incurred by us, as
the result of a violation, breach or non-performance by you of any of the terms
of this Agreement.
11. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Virginia, shall be binding
upon you and your successors and assigns, and shall inure to the benefit of the
Capital One and its successors and assigns.
12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but which together shall
constitute one and the same instrument.
13. Facsimile Signatures. This Agreement may be executed and
--------------------
delivered by facsimile. Any facsimile signatures shall have the same legal
effect as manual signatures.
14. Term. This Agreement shall terminate on the date definitive
----
documentation is executed by you and any other appropriate parties in connection
with the Transaction.
J-3
<PAGE>
PLEASE ACKNOWLEDGE YOUR ACCEPTANCE OF THIS AGREEMENT, INCLUDING YOUR
AGREEMENT TO HOLD ALL MATTERS STRICTLY CONFIDENTIAL AS DISCUSSED HEREIN, BY
SIGNING IN THE SPACE PROVIDED BELOW.
Very truly yours,
CAPITAL ONE FINANCIAL CORPORATION
By: ____________________________
ACCEPTED AND AGREED TO AS OF THIS ___
DAY OF ____________, 1999
By:______________________
J-4
<PAGE>
________________________________________________________________________________
Appendix A
Rules of Usage and Definitions
________________________________________________________________________________
Rules of Usage
The following rules of usage shall apply to this Appendix A and the
Operative Agreements (and each appendix, schedule, exhibit and annex to the
foregoing) unless otherwise required by the context or unless otherwise defined
therein:
(a) Except as otherwise expressly provided, any definitions set forth
herein or in any other document shall be equally applicable to the singular
and plural forms of the terms defined.
(b) Except as otherwise expressly provided, references in any document
to articles, sections, paragraphs, clauses, annexes, appendices, schedules
or exhibits are references to articles, sections, paragraphs, clauses,
annexes, appendices, schedules or exhibits in or to such document.
(c) The headings, subheadings and table of contents used in any
document are solely for convenience of reference and shall not constitute a
part of any such document nor shall they affect the meaning, construction
or effect of any provision thereof.
(d) References to any Person shall include such Person, its successors
and permitted assigns and transferees.
(e) Except as otherwise expressly provided, reference to any agreement
means such agreement as amended, modified, extended, supplemented, restated
and/or replaced from time to time in accordance with the applicable
provisions thereof.
(f) Except as otherwise expressly provided, references to any law
includes any amendment or modification to such law and any rules or
regulations issued thereunder or any law enacted in substitution or
replacement therefor.
(g) When used in any document, words such as "hereunder", "hereto",
"hereof" and "herein" and other words of like import shall, unless the
context clearly indicates to the contrary, refer to the whole of the
applicable document and not to any particular article, section, subsection,
paragraph or clause thereof.
Appendix - 1
<PAGE>
(h) References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof
the rule of ejusdem generis shall not be applicable to limit a general
statement, followed by or referable to an enumeration of specific matters,
to matters similar to those specifically mentioned.
(i) References herein to "attorney's fees", "legal fees", "costs of
counsel" or other such references shall be deemed to include the allocated
cost of in-house counsel.
(j) Each of the parties to the Operative Agreements and their counsel
have reviewed and revised, or requested revisions to, the Operative
Agreements, and the usual rule of construction that any ambiguities are to
be resolved against the drafting party shall be inapplicable in the
construing and interpretation of the Operative Agreements and any
amendments or exhibits thereto.
(k) Capitalized terms used in any Operative Agreements which are not
defined in this Appendix A but are defined in another Operative Agreement
----------
shall have the meaning so ascribed to such term in the applicable Operative
Agreement.
Definitions
"ABR" shall mean, for any day, a rate per annum equal to the greater of (a)
the Prime Lending Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Lending Rate" shall mean the rate which the Administrative Agent
-------------------
announces from time to time as its prime lending rate as in effect from time to
time. The Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. Any Lender
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate. The Prime Lending Rate shall change automatically and
without notice from time to time as and when the prime lending rate of the
Administrative Agent changes. "Federal Funds Effective Rate" shall mean, for
----------------------------
any period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight Federal funds
transactions with members or the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it. Any change in the ABR due to a change in the Prime Lending Rate
or the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Lending Rate or the
Federal Funds Effective Rate, respectively.
"ABR Holder Funding" shall mean a Holder Funding bearing a Holder Yield
based on the ABR.
Appendix - 2
<PAGE>
"ABR Loans" shall mean Loans the rate of interest applicable to which is
based upon the ABR.
"Acceleration" shall have the meaning given to such term in Section 6 of
the Credit Agreement.
"acquire" or "purchase" shall mean, with respect to any Property, the
acquisition or purchase of such Property by the Lessor from any Person.
"Acquisition Advance" shall have the meaning given to such term in Section
5.3 of the Participation Agreement.
"Administration Fee" shall mean a construction administration fee payable
to the Agent pursuant to Section 9.5 of the Participation Agreement.
"Advance" shall mean a Construction Advance or an Acquisition Advance.
"Affiliate" shall mean, with respect to any Person, any Person or group
acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of a Person, whether through the
ownership of voting securities or by contract or otherwise.
"After Tax Basis" shall mean, 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 calculated at the then maximum
marginal rates generally applicable to Persons of the same type as the
recipients (less any tax savings realized as a result of the payment of the
indemnified amount) with respect to the receipt by the recipient of such
amounts, such increased payment (as so reduced) is equal to the payment
otherwise required to be made.
"Agency Agreement" shall mean the Agency Agreement (Capital One Realty,
Inc.) dated as of the Initial Closing Date between the Construction Agent and
the Lessor.
"Agency Agreement Event of Default" shall mean an "Event of Default" as
defined in Section 5.1 of the Agency Agreement.
"Agent" or "Administrative Agent" shall mean Bank of America, N.A., as
Administrative Agent for the Lenders pursuant to the Credit Agreement, or any
successor agent appointed in accordance with the terms of the Credit Agreement
and respecting the Security Documents, for the Lenders and the Holders, to the
extent of their interests.
"Applicable Percentage" shall mean with respect to the applicable Level
Status, the applicable rate per annum set forth opposite such Level Status:
appendix - 3
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Applicable Percentage Applicable Percentage
Level Status for for
Eurodollar Loans Facility Fee
<S> <C> <C>
- -------------------------------------------------------------------------------
Level I Status .375% .125%
- -------------------------------------------------------------------------------
Level II Status .55% .15%
- -------------------------------------------------------------------------------
Level III Status .675% .175%
- -------------------------------------------------------------------------------
Level IV Status 1.10% .25%
- -------------------------------------------------------------------------------
Level V Status 1.725% .375%
================================================================================
</TABLE>
Changes in the Applicable Percentage resulting from changes in the Debt Rating
shall become effective on the date on which such Debt Rating is announced to the
public by S&P, Moody's or Fitch, as applicable, and shall remain in effect until
the next change in such Debt Rating; provided, that, until the effectiveness of
--------
any change in the Applicable Percentage based upon a Debt Rating announced after
the Initial Closing Date, Level II Status shall apply.
"Appraisal" shall mean, with respect to any Property, an appraisal to be
delivered in connection with the Participation Agreement or in accordance with
the terms of the Lease, in each case prepared by a reputable appraiser
reasonably acceptable to the Agent, which in the judgment of counsel to the
Agent, complies with all of the provisions of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, the rules and regulations
adopted pursuant thereto, and all other applicable Legal Requirements.
"Appraisal Procedure" shall have the meaning given such term in Section
22.4 of the Lease.
"Approved State" means Florida, Washington and any other state within the
continental United States proposed by the Lessee and consented to in writing by
the Agent.
"Appurtenant Rights" shall mean (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 underlying the Improvements or the Improvements, including, without
limitation, the use of any streets, ways, alleys, 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 such Land or the
Improvements.
"Assignment and Acceptance" shall mean the Assignment and Acceptance in the
form attached to the Credit Agreement as Exhibit B.
---------
"Available Commitment" shall mean, as to any Lender at any time, an amount
equal to the excess, if any, of (a) the amount of such Lender's Commitment over
(b) the aggregate principal
Appendix - 4
<PAGE>
amount of all Loans made by such Lender as of such date after giving effect to
any repayments pursuant to Section 5.2(d) of the Participation Agreement (but
without giving effect to any other repayments or prepayments of any Loans
hereunder).
"Available Holder Commitments" shall mean an amount equal to the excess, if
any, of (i) the amount of the Holder Commitments over (ii) the aggregate amount
of the Holder Fundings made since the Initial Closing Date after giving effect
to any repayments pursuant to Section 5.2(d) of the Participation Agreement (but
without giving effect to any other repayments or prepayments of any Holder
Fundings).
"Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled
"Bankruptcy," as now or hereafter in effect or any successor thereto.
"Basic Rent" shall mean, the sum of (i) the Loan Basic Rent and (ii) the
Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is
due.
"Basic Term" shall have the meaning specified in Section 2.2 of the Lease.
"Basic Term Commencement Date" shall have the meaning specified in the
recitals to of the Lease.
"Basic Term Expiration Date" shall have the meaning specified in Section
2.2 of the Lease.
"Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and
substance satisfactory to the Holders, the Agent and the Owner Trustee.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Borrowing Date" shall mean any Business Day specified in a notice
delivered pursuant to Section 2.3 of the Credit Agreement as a date on which the
Lessor requests the Lenders to make Loans hereunder.
"Budgeted Total Loan Property Cost" shall mean, at any date of
determination with respect to any Construction Period Property, an amount equal
to the aggregate amount which the Construction Agent in good faith expects to be
expended in order to achieve Completion with respect to such Property, including
interest on Loans and yield on Holder Fundings through the Basic Term
Commencement Date respecting such Construction Period Property.
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in Dallas, Texas or New York, New York are authorized
or required by law to close; provided, however, that when used in connection
-------- -------
with a Eurodollar Loan, the term "Business Day" shall also exclude any day on
which banks are not open for dealings in dollar deposits in the London interbank
market.
Appendix - 5
<PAGE>
"Capital One Bank" shall mean Capital One Bank, a Virginia banking
corporation, and its successors and permitted assigns.
"Capital One Credit Agreement" shall have the meaning given such term in
Section 28.1 of the Lease.
"Capital One Credit Agreement Event of Default" shall mean an Event of
Default as defined in Section 9 of the Capital One Credit Agreement,
"Capitalized Lease" shall mean, as applied to any Person, any lease of
property (whether real, personal, tangible, intangible or mixed of such Person)
by such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"Casualty" shall mean any damage or destruction of all or any portion of
the Property as a result of a fire or other casualty.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. (S)(S) 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986.
"Certificate" shall mean a Certificate (Capital One Realty, Inc.) in favor
of each Holder regarding the Holder Commitment of such Holder issued pursuant to
the terms and conditions of the Trust Agreement in favor of each Holder.
"Claims" shall mean any and all obligations, liabilities, losses, actions,
suits, penalties, claims, demands, costs and expenses (including, without
limitation, reasonable attorney's fees and expenses) of any nature whatsoever.
"Closing Date" shall mean the Initial Closing Date and each Property
Closing Date.
"Capital One Realty Trust 1998-1" shall mean the grantor trust created
pursuant to the terms and conditions of the Trust Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute hereto.
"COFC" shall mean Capital One Financial Corporation, a Delaware
corporation, and its successors and assigns.
"Collateral" shall mean all assets of the Lessor, now owned or hereafter
acquired, upon which a lien is purported to be created by the Security
Documents.
"Commitment" shall mean, as to any Lender, the obligation of such Lender to
make the portion of the Loans to the Lessor in an aggregate principal amount at
any time outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule 1.1 of the Credit Agreement,
Appendix - 6
<PAGE>
as such amount may be increased or reduced from time to time in accordance with
the provisions of the Credit Agreement.
"Commitment Percentage" shall mean, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Loans then outstanding constitutes of the aggregate principal amount of all of
the Loans then outstanding), and such Commitment Percentage shall take into
account both the Lender's Tranche A Commitment and the Lender's Tranche B
Commitment.
"Commitment Period" shall mean the period from and including the Initial
Closing Date to and including the Construction Period Termination Date, or such
earlier date as the Commitments shall terminate as provided in the Credit
Agreement.
"Company Obligations" shall mean the obligations of CORI, in any and all
capacities under and with respect to the Operative Agreements and each Property.
"Completion" shall mean, with respect to a Property, such time as
substantial completion of the Improvements on such Property has been achieved in
accordance with the Plans and Specifications, the Agency Agreement and/or the
Lease, and in compliance with all material Legal Requirements and Insurance
Requirements and a certificate of occupancy has been issued with respect to such
Property by the appropriate governmental entity. If the Lessor purchases a
Property that includes existing Improvements that are to be immediately occupied
by the Lessee, the date of Completion for such Property shall be the Property
Closing Date.
"Completion Date" shall mean, with respect to a Property, the date on which
Completion for such Property has occurred.
"Condemnation" shall mean any taking or sale of the use, access, occupancy,
easement rights or title to any 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, any Property
or alter the pedestrian or vehicular traffic flow to any Property so as to
result in a 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.
"Contractor" shall mean each entity with whom the Construction Agent or the
Lessee contracts to construct any Improvements or any portion thereof on the
Property.
"Construction Advance" shall mean an advance of funds to pay Property Costs
pursuant to Section 5.4 of the Participation Agreement.
"Construction Agent" shall mean Capital One Realty, Inc., a Delaware
corporation, as construction agent under the Agency Agreement.
Appendix - 7
<PAGE>
"Construction Agent Options" shall have the meaning given to such term in
Section 2.1(c) of the Agency Agreement.
"Construction Budget" shall mean the cost of constructing and developing
any Improvements as determined by the Construction Agent in its reasonable, good
faith judgment.
"Construction Commencement Date" shall mean, with respect to Improvements,
the date on which construction of such Improvements commences pursuant to the
Agency Agreement.
"Construction Contract" shall mean any contract entered into between the
Construction Agent or the Lessee with a Contractor for the construction of
Improvements or any portion thereof on the Property.
"Construction Loan" shall mean any Loan made in connection with a
Construction Advance, including Loans to pay interest thereon.
"Construction Loan Property Cost" shall mean with respect to each
Construction Period Property at the date of determination, an amount equal to
(a) the aggregate principal amount of Construction Loans made on or prior to
such date with respect to the Property minus (b) the aggregate principal amount
-----
of prepayments or repayments of the Loans allocated to reduce the Construction
Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit
Agreement.
"Construction Period" shall mean, with respect to a Property, the period
commencing on the Construction Commencement Date for such Property and ending on
the Completion Date for such Property.
"Construction Period Property" means, at any date of determination, any
Property as to which the Basic Term has not commenced on or prior to such date.
"Construction Period Termination Date" shall mean the earlier of (i) the
date that the Commitments have been terminated in their entirety in accordance
with the terms of Section 2.5(a) of the Credit Agreement, or (ii) the third
anniversary of the Initial Closing Date.
"Contingent Obligation" shall mean, as applied to any Person, any
agreement, undertaking or arrangement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes or is contingently liable upon, the obligation or liability
of any other Person or agrees to maintain the net worth or working capital or
other financial condition of any other Person, or otherwise assures any creditor
of such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or application for a letter of
credit (or similar instrument which is issued upon the application of such
Person or upon which such Person becomes an account party or for which such
Person is in any way liable), but excluding the endorsement of instruments for
deposit or collection in the ordinary course of business.
Appendix - 8
<PAGE>
"Control" shall mean (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 and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Co-Owner Trustee" shall have the meaning specified in Section 9.2 of the
Trust Agreement.
"CORI" shall mean Capital One Realty, Inc., a Delaware corporation, and its
successors and permitted assigns.
"CORI Participation Agreement" shall have the meaning given to such term in
Section 1.1 of the Trust Agreement.
"CORI Trust Estate" shall have the meaning given to such term in Section
2.2 of the Trust Agreement.
"COSI" shall mean Capital One Services, Inc., a Delaware corporation, and
its successors and permitted assigns.
"COSI Participation Agreement" shall have the meaning given to such term in
Section 1.1 of the Trust Agreement.
"COSI Trust Estate" shall have the meaning given to such term in Section
2.2 of the Trust Agreement.
"Credit Agreement" shall mean the Credit Agreement (Capital One Realty,
Inc.), dated as of the Initial Closing Date, among the Lessor, the Agent and the
Lenders, as specified therein.
"Credit Agreement Default" shall mean any event or condition which, with
the lapse of time or the giving of notice, or both, would constitute a Credit
Agreement Event of Default.
"Credit Agreement Event of Default" shall mean any event or condition
defined as an "Event of Default" in Section 6 of the Credit Agreement.
"Credit Documents" shall mean the Credit Agreement, the Notes and the
Security Documents.
"Credit Parties" shall mean the Lessee and the Guarantor.
"Debt Rating" shall mean, as of any date of determination thereof, the
ratings most recently published by the Rating Agencies relating to the
unsecured, unsupported senior long-term debt obligations of the Guarantor.
Appendix - 9
<PAGE>
"Deed" shall mean a warranty deed regarding the Land and/or Improvements in
form and substance satisfactory to the Holders, the Agent and the Owner Trustee.
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall have the meaning given to such term in Section
9.1 of the Credit Agreement.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Election Notice" shall have the meaning given to such term in Section 20.1
of the Lease.
"Employee Benefit Plan" or "Plan" shall mean an employee benefit plan
(within the meaning of Section 3(3) of ERISA, including any Multiemployer Plan),
or any "plan" as defined in Section 4975(e)(1) of the Code and as interpreted by
the Internal Revenue Service and the Department of Labor in rules, regulations,
releases or bulletins in effect on any Closing Date.
"Environmental Claims" shall mean any investigation, notice, violation,
demand, allegation, action, suit, injunction, judgment, order, consent decree,
penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection with, an actual or
alleged violation of, any Environmental Law, (b) in connection with any
Hazardous Substance, (c) from any abatement, removal, remedial, corrective, or
other response action in connection with a Hazardous Substance, Environmental
Law, or other order of a Tribunal or (d) from any actual or alleged damage,
injury, threat, or harm to health, safety, natural resources, or the
environment.
"Environmental Laws" shall mean any Law, permit, consent, approval,
license, award, or other authorization or requirement of any Tribunal relating
to emissions, discharges, releases, threatened releases of any Hazardous
Substance into ambient air, surface water, ground water, publicly owned
treatment works, septic system, or land, or otherwise relating to the handling,
storage, treatment, generation, use, or disposal of Hazardous Substances,
pollution or to the protection of health or the environment, including without
limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901, et seq., and state statutes analogous thereto.
"Environmental Violation" shall mean any activity, occurrence or condition
that violates or threatens (if the threat requires remediation under any
Environmental Law and is not remediated during any grace period allowed under
such Environmental Law) to violate or results in or threatens (if the threat
requires remediation under any Environmental Law and is not remediated during
any grace period allowed under such Environmental Law) to result in
noncompliance with any Environmental Law.
"Equipment" shall mean equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired using the proceeds of the Loans or the Holder Fundings by the
Construction Agent, the Lessee or the Lessor as specified
Appendix -10
<PAGE>
or described in either a requisition or a Lease Supplement, whether or not now
or subsequently attached to, contained in or used or usable in any way in
connection with any operation of any Improvements or other improvements to real
property, including but without limiting the generality of the foregoing, all
equipment described in the Appraisal including, without limitation, all heating,
electrical, and mechanical equipment, lighting, switchboards, plumbing,
ventilation, air conditioning and air-cooling apparatus, refrigerating, and
incinerating equipment, escalators, elevators, loading and unloading equipment
and systems, cleaning systems (including window cleaning apparatus), telephones,
communication systems (including satellite dishes and antennae), televisions,
computers, sprinkler systems and other fire prevention and extinguishing
apparatus and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of every kind and
description.
"Equipment Schedule" shall mean (a) each Equipment Schedule attached to the
applicable Requisition and (b) each Equipment Schedule attached to the
applicable Lease Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean each entity required to be aggregated with the
Construction Agent or any Credit Party pursuant to the requirements of Section
414(b) or (c) of the Code.
"Eurocurrency Reserve Requirements" shall mean for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed or eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Holder Funding" shall mean a Holder Funding bearing a Holder
Yield based on the Eurodollar Rate.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean for the Interest Period for each Eurodollar
Loan or Eurodollar Holder Funding comprising part of the same borrowing or
advance (including conversions, extensions and renewals), a per annum interest
rate equal to the per annum rate determined by the Administrative Agent on the
basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day of such
Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) two (2) Business Days before the first day of such Interest Period
(provided that, if at least two such offered rates appear on the Reuters Screen
--------
LIBO Page, the rate in respect of such Interest Period will be the arithmetic
mean of such offered rates). As used herein, "Reuters Screen LIBO Page" means
the display designated as page "LIBO" on the Reuters Monitor Money Rates Service
(or such other page as may replace the LIBO page on that service for the purpose
of displaying London interbank
Appendix - 11
<PAGE>
offered rates of major banks) ("RMMRS"). In the event the RMMRS is not then
quoting such offered rates, "Eurodollar Rate" shall mean for the Interest Period
for each Eurodollar Loan or Eurodollar Holder Funding comprising part of the
same borrowing or advance (including conversions, extensions and renewals), the
average (rounded upward to the nearest one-sixteenth (1/16) of one percent) per
annum rate of interest determined by the office of the Administrative Agent
(each such determination to be conclusive and binding) as of two Business Days
prior to the first day of such Interest Period, as the effective rate at which
deposits in immediately available funds in U.S. dollars are being, have been, or
would be offered or quoted by the Administrative Agent to major banks in the
applicable interbank market for Eurodollar deposits at any time during the
Business Day which is the second Business Day immediately preceding the first
day of such Interest Period, for a term comparable to such Interest Period and
in the amount of the requested Eurodollar Loan and Eurodollar Holder Funding. If
no such offers or quotes are generally available for such amount, then the
Administrative Agent shall be entitled to determine the Eurodollar Rate by
estimating in its reasonable judgment the per annum rate (as described above)
that would be applicable if such quote or offers were generally available.
"Event of Default" shall mean a Lease Event of Default, an Agency Agreement
Event of Default or a Credit Agreement Event of Default.
"Excepted Payments" shall mean: (a) all indemnity payments (including
indemnity payments made pursuant to Section 13 of the Participation Agreement),
whether made by adjustment to Basic Rent or otherwise, to which the Owner
Trustee, any Holder or any of their respective Affiliates, agents, officers,
directors or employees is entitled;
(b) any amounts (other than Basic Rent or Termination Value) payable under
any Operative Agreement to reimburse the Owner Trustee, any Holder or any of
their respective Affiliates (including the reasonable expenses of the Owner
Trustee, the Trust Company and the Holders incurred in connection with any such
payment) for performing or complying with any of the obligations of any Credit
Party under and as permitted by any Operative Agreement;
(c) any amount payable to a Holder by any transferee of such interest of a
Holder as the purchase price of such Holder's interest in the CORI Trust Estate
(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 Agent or any Lender;
(e) any insurance proceeds under policies maintained by the Owner Trustee
or any Holder;
(f) Transaction Expenses or other amounts or expenses paid or payable to or
for the benefit of the Owner Trustee or any Holder;
Appendix - 12
<PAGE>
(g) all right, title and interest of any Holder or the Owner Trustee to any
Property or any portion thereof or any other property to the extent any of the
foregoing has been released from the Liens of the Security Documents and the
Lease pursuant to the terms thereof;
(h) upon termination of the Credit Agreement pursuant to the terms thereof,
all remaining property covered by the Lease or Security Documents;
(i) all payments in respect of the Holder Yield;
(j) any payments in respect of interest to the extent attributable to
payments referred to in clauses (a) through (i) above; and
(k) any rights of either the Owner Trustee or Trust Company to demand,
collect, sue for or otherwise receive and enforce payment of any of the
foregoing amounts, provided that such rights shall not include the right to
terminate the Lease.
"Excepted Rights" shall mean the rights retained by the Owner Trustee
pursuant to Section 8.2(a)(i) of the Credit Agreement.
"Excess Proceeds" shall mean the excess, if any, of the aggregate of all
awards, compensation or insurance proceeds payable in connection with a Casualty
or Condemnation over the Termination Value paid by the Lessee pursuant to the
Lease with respect to such Casualty or Condemnation.
"Exculpated Persons" shall have the meaning given to such term in Section
14.10 of the Participation Agreement.
"Expiration Date" shall mean the later of (i) the Basic Term Expiration
Date and (ii) the last day of any Renewal Term.
"Expiration Date Purchase Option" shall mean the Lessee's option to
purchase all (but not less than all) of the Properties on the Expiration Date.
"Facility" shall mean a facility used for the treatment, storage or
disposal of Hazardous Substances.
"Facility Fee" shall mean that fee payable by the Lessee pursuant to
Section 9.4 of the Participation Agreement.
"Facility Fee Payment Date" shall mean the 15th day of each January, April,
July and October of each year and the last day of the Term.
"Fair Market Sales Value" shall mean, with respect to any Property, the
amount, which in any event, shall not be less than zero, that would be paid in
cash in an arms-length transaction between an informed and willing purchaser and
an informed and willing seller, neither of whom is
Appendix - 13
<PAGE>
under any compulsion to purchase or sell, respectively, such Property. Fair
Market Sales Value of any Property shall be determined based on the assumption
that, except for purposes of Section 17 of the Lease, such Property is in the
condition and state of repair required under Section 10.1 of the Lease and each
Credit Party is in compliance with the other requirements of the Operative
Agreements.
"Federal Funds Effective Rate" shall have the meaning given to such term in
the definition of ABR.
"Financing Parties" shall mean the Lessor, the Owner Trustee, in its trust
capacity, the Agent, the Holders and the Lenders.
"Fitch" shall mean Fitch Investors Service, Inc.
"Fixtures" shall mean 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" shall mean any event beyond the control of the
Construction Agent, other than a Casualty or Condemnation, including, but not
limited to, strikes or lockouts (but only when the Construction Agent is legally
prevented from securing replacement labor or materials as a result thereof),
adverse soil conditions, acts of God, adverse weather conditions, inability to
obtain labor or materials, governmental activities or regulations, civil
commotion and enemy action; but excluding any event, cause or condition that
results from the Construction Agent's financial condition.
"Future Amounts" shall have the meaning given to such term in Section 2.1
of the Agency Agreement.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the accounting principles board of the American
Institute of Certified Public Accountants, and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, that are applicable to the circumstances as of the date of
determination.
"Governmental Action" shall mean 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 Legal Requirement, and shall include,
without limitation, all environmental and operating permits and licenses that
are required for the full use, occupancy, zoning and operating of the Property.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Appendix - 14
<PAGE>
"Ground Lease" shall mean a ground lease (in form and substance
satisfactory to the Agent and the Holder) respecting any Property owned by the
Lessee and leased to the Lessor where such lease (i) has a 99 year term and
payments set at $1.00 per year, or (ii) is subject to such other terms and
conditions as are satisfactory to the Agent, the Lenders and the Holders.
"Guarantor" shall mean Capital One Bank, a Virginia banking corporation.
"Hard Costs" shall mean all costs and expenses payable for supplies,
materials, labor and profit with respect to the Improvements under any
Construction Contract.
"Hazardous Substance" shall mean any of the following: (i) any petroleum
or petroleum product, explosives, radioactive materials, asbestos, formaldehyde,
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 determined in accordance with 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.
"Holder Funding" shall mean any advance made by any Holder to the Owner
Trustee pursuant to the terms of the Trust Agreement (solely as it relates to
the CORI Trust Estate) or the Participation Agreement.
"Holder Amount" shall mean as of any date, the aggregate amount of Holder
Fundings made by each Holder to the CORI Trust Estate pursuant to Section 2 of
the Participation Agreement and Section 3.1 of the Trust Agreement less any
payments of any Holder Fundings received by the Holders pursuant to Section 3.4
of the Trust Agreement.
"Holder Applicable Margin" shall mean (i) with respect to Eurodollar Holder
Fundings, the Applicable Percentage for Eurodollar Loans of the same Interest
Period as such Eurodollar Holder Funding, plus one percent (1.00%), or (ii) with
respect to ABR Holder Fundings, a percentage equal to the ABR plus one percent
(1.00%).
"Holder Commitments" shall mean $3,450,000 respecting the CORI Trust
Estate, provided, that the Holder Commitment of each Holder shall be as set
forth on the Holder Certificate issued in favor of such Holder pursuant to the
Trust Agreement.
"Holder Construction Property Cost" shall mean, with respect to each
Construction Period Property for which the Basic Term has not commenced, at any
date of determination, an amount equal to the outstanding Holder Fundings made
with respect thereto under the Trust Agreement.
"Holder Overdue Rate" shall mean the lesser of (i) the ABR plus two percent
(2%) and (ii) the highest rate permitted by applicable law.
Appendix - 15
<PAGE>
"Holder Property Cost" shall mean with respect to a Property an amount
equal to the outstanding Holder Fundings with respect thereto.
"Holders" shall mean Bank of America, N.A. and shall include the other
banks and other financial institutions which are from time to time holders of
Certificates in connection with the Capital One Realty Trust 1998-1.
"Holder Yield" shall mean with respect to Holder Fundings from time to time
either the Eurodollar Rate plus the Holder Applicable Margin or the ABR as
elected by the Owner Trustee from time to time with respect to such Holder
Fundings in accordance with the terms of the Trust Agreement; provided, however,
(i) upon delivery of the notice described in Section 3.7(c) of the Trust
Agreement, the outstanding Holder Fundings of each Holder shall bear a yield at
the ABR applicable from time to time from and after the dates and during the
periods specified in Section 3.7(c) of the Trust Agreement, and (ii) upon the
delivery by a Holder of the notice described in Section 3.9(d) of the Trust
Agreement, the Holder Fundings of such Holder shall bear a yield at the ABR
applicable from time to time after the dates and during the periods specified in
Section 3.9(d) of the Trust Agreement.
"Impositions" shall mean any and all liabilities, losses, expenses, costs,
charges and Liens of any kind whatsoever for fees, taxes, levies, imposts,
duties, charges, assessments or foreign withholdings ("Taxes") and all interest,
additions to tax and penalties thereon, which at any time prior to, during or
with respect to the Term or in respect of any period for which the Lessee shall
be obligated to pay Supplemental Rent, may be levied, assessed or imposed by any
Governmental Authority upon or with respect to (a) any Property or the leasing,
financing, refinancing, demolition, construction, substitution, subleasing,
assignment, control, condition, occupancy, servicing, maintenance, repair,
ownership, possession, activity conducted on, delivery, insuring, use,
operation, improvement, sale, transfer of title, return or other disposition of
such Property or any part thereof or interest therein or any rentals, receipts
or earnings arising therefrom; (b) the Notes or Certificates or any part thereof
or interest therein; or (c) the Operative Agreements, the performance thereof,
or any payment made or accrued pursuant thereto or otherwise in connection with
the transactions contemplated thereby.
"Improvements" shall mean, with respect to the construction, renovations
and/or Modifications on any Land, all buildings, structures, Fixtures, and other
improvements of every kind existing at any time and from time to time on or
under the Land purchased, leased or otherwise acquired using the proceeds of the
Loans or the Holder Fundings, 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, including
without limitation (a) any Improvements existing as of the Property Closing Date
as such Improvements may be referenced on the applicable Requisition and (b) any
Improvements made subsequent to such Property Closing Date.
"Incorporated Covenants" shall have the meaning given to such term in
Section 28.1 of the Lease.
Appendix - 16
<PAGE>
"Incorporated Representations and Warranties" shall have the meaning given
to such term in Section 28.1 of the Lease.
"Indebtedness" of a Person shall mean, without duplication, such Person's:
(i) obligations for borrowed money;
(ii) obligations representing the deferred purchase price of Property
(whether real, personal, tangible, intangible or mixed) or services (other
than accounts payable arising in the ordinary course of such Person's
business payable on terms customary in the trade);
(iii) obligations, whether or not assumed, secured by liens or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person;
(iv) obligations which are evidenced by notes, acceptances or other
instruments;
(v) Capitalized Lease Obligations;
(vi) net liabilities under interest rate swap, exchange or cap
agreements; and
(vii) contingent obligations.
"Indemnified Person" shall mean the Lessor, the Owner Trustee, in its
individual and its trust capacity, the Agent, the Holders, the Lenders, and
their respective successors, assigns, directors, shareholders, partners,
officers, employees, agents and Affiliates.
"Indemnity Provider" shall mean, respecting each Property, the Lessee.
"Individual Property Sale Requirements" shall have the meaning given to
such term in Section 20.1 of the Lease.
"Initial Closing Date" shall mean September 3, 1999.
"Initial Construction Advance" shall mean any initial Advance to pay for:
(i) Property Costs for construction of any Improvements; and (ii) the Property
Costs of restoring or repairing any Property which is required to be restored or
repaired in accordance with Section 15.1(e) of the Lease.
"Inspector" shall mean any Person engaged by the Agent to oversee the
monitoring of the progress of any Improvements and reviewing of Requisitions and
to provide related services relating to administration of such Improvements
during the Construction Period.
"Insurance Requirements" shall mean all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Agency Agreement
Appendix - 17
<PAGE>
to be maintained by the Construction Agent, and all requirements of the issuer
of any such policy and, regarding self insurance, any other requirements of
Lessee.
"Interest Period" shall mean during the Commitment Period and thereafter as
to any Eurodollar Loan or Eurodollar Holder Funding (i) with respect to the
initial Interest Period, the period beginning on the date of the first
Eurodollar Loan and Eurodollar Holder Funding and ending one (1) month, two (2)
months, three (3) months or (to the extent available to all Lenders and all
Holders) six (6) months thereafter, as selected by the Lessor (in the case of a
Eurodollar Loan) or the Owner Trustee (in the case of a Eurodollar Holder
Funding) in its applicable notice given with respect thereto and (ii)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Funding
and ending one (1) month, two (2) months, three (3) months or (to the extent
available to all Lenders and all Holders) six (6) months thereafter, as selected
by the Lessor by irrevocable notice to the Agent (in the case of a Eurodollar
Loan) or by the Owner Trustee (in the case of a Eurodollar Holder Funding) in
each case not less than three (3) Business Days prior to the last day of the
then current Interest Period with respect thereto; provided, however, that all
-------- -------
of the foregoing provisions relating to Interest Periods are subject to the
following: (A) if any Interest Period would end on a day which is not a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next succeeding
calendar month, then on the next preceding Business Day), (B) no Interest Period
shall extend beyond the Maturity Date or the Expiration Date, as the case may
be, (C) where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the Interest Period
is to end, such Interest Period shall end on the last Business Day of such
calendar month, (D) there shall not be more than four (4) Interest Periods
outstanding at any one (1) time.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"IRS" shall mean the United States Internal Revenue Service, or any
successor or analogous organization.
"Land" shall mean a parcel of real property described on (a) the
Requisition issued by the Construction Agent on the Property Closing Date
relating to such parcel and (b) the schedules to each applicable Lease
Supplement executed and delivered in accordance with the requirements of Section
2.4 of the Lease.
"Law" shall mean any statute, law, ordinance, regulation, rule, directive,
order, writ, injunction or decree of any Tribunal.
"Lease" or "Lease Agreement" shall mean the Lease Agreement (Capital One
Realty, Inc.) (Tax Retention Operating Lease) dated as of the Initial Closing
Date, between the Lessor and the Lessee, together with any Lease Supplements
thereto, as such Lease Agreement may from time to time be supplemented, amended
or modified in accordance with the terms thereof.
Appendix - 18
<PAGE>
"Lease Default" shall mean 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" shall have the meaning specified in Section 17.1
of the Lease.
"Lease Supplement" shall mean each Lease Supplement substantially in the
form of Exhibit A to the Lease, together with all attachments and schedules
thereto, as such Lease Supplement may be supplemented, amended or modified from
time to time.
"Legal Requirements" shall mean all foreign, federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Owner Trustee, the
Holders, the Lessor, any Credit Party, the Agent, any Lender or any Property,
Land, Improvement, Equipment or the taxation, demolition, construction, use or
alteration of such Improvements, whether now or hereafter enacted and in force,
including any that require repairs, modifications or alterations in or to any
Property or in any way limit the use and enjoyment thereof (including all
building, zoning and fire codes and the Americans with Disabilities Act of 1990,
42 U.S.C. (S) 12101 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 any Credit
Party affecting any Property or the Appurtenant Rights.
"Lender Commitments" shall mean $86,550,000 as such amount may be increased
or reduced from time to time pursuant to the Credit Agreement; provided if there
shall be more than one Lender, the Lender Commitment of each Lender shall be as
set forth in Schedule 1.1 to the Credit Agreement as such Schedule 1.1 may be
amended and replaced from time to time.
"Lender Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdiction in order to procure a security interest in favor of the
Agent in any Equipment or in any Improvements.
"Lenders" shall mean the several banks and other financial institutions
from time to time party to the Credit Agreement.
"Lessee" shall mean Capital One Realty, Inc., a Delaware corporation.
"Lessor" shall mean the Owner Trustee, not in its individual capacity, but
as Lessor under the Lease.
"Lessor Basic Rent" shall mean the scheduled Holder Yield due on the Holder
Fundings on any Scheduled Interest Payment Date pursuant to the Trust Agreement
(but not including interest on (i) any such scheduled Holder Yield due on the
Holder Fundings prior to the Basic Term Commencement Date with respect to the
Property to which such Holder Fundings relate or (ii) overdue amounts under the
Trust Agreement or otherwise).
Appendix - 19
<PAGE>
"Lessor Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdictions in order to protect the Lessor's interest under the
Lease to the extent the Lease is a security agreement or a mortgage.
"Lessor Lien" shall mean any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against the Lessor or Trust Company,
in its individual capacity, not resulting from the transactions contemplated by
the Operative Agreements, (b) any act or omission of the Lessor or Trust
Company, in its individual capacity, which is not required by the Operative
Agreements or is in violation of any of the terms of the Operative Agreements,
(c) any claim against the Lessor or Trust Company, in its individual capacity,
with respect to Taxes or Transaction Expenses against which the Lessee is not
required to indemnify Lessor or Trust Company, in its individual capacity,
pursuant to Section 13 of the Participation Agreement or (d) any claim against
the Lessor arising out of any transfer by the Lessor of all or any portion of
the interest of the Lessor in the Properties, the CORI Trust Estate or the
Operative Agreements other than the transfer of title to or possession of any
Properties by the Lessor pursuant to and in accordance with the Lease, the
Credit Agreement, the Security Agreement or the Participation Agreement or
pursuant to the exercise of the remedies set forth in Article XVII of the Lease.
"Level Status" means the applicable Level Status set forth in the table
below (with Level Status V being the lowest Level Status and Level Status I
being the highest Level Status), it being agreed that the applicable Level
Status as of any date of determination shall be deemed to be the lowest Level
Status which includes the applicable Debt Rating by at least two of the Rating
Agencies:
<TABLE>
<CAPTION>
=========================================================================================================
Moody's Investors Standard & Poor's Fitch Investors Service,
Level Status Service, Inc. Ratings Services Inc.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Level Status I Baa1 or higher BBB+ or higher BBB+ or higher
- ---------------------------------------------------------------------------------------------------------
Level Status II Baa2 or higher BBB or higher BBB or higher
- ---------------------------------------------------------------------------------------------------------
Level Status III Baa3 or higher BBB- or higher BBB- or higher
- ---------------------------------------------------------------------------------------------------------
Level Status IV Ba1 or higher BB+ or higher BB+ or higher
- ---------------------------------------------------------------------------------------------------------
Level Status V Below Ba1 or unrated Below BB+ or unrated Below BB+ or unrated
=========================================================================================================
</TABLE>
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien, option or charge of any kind.
"Limited Recourse Amount" shall mean with respect to the Properties on an
aggregate basis, an amount equal to the sum of the Termination Values with
respect to all of the Properties on each Payment Date, less the Maximum Residual
Guarantee Amount as of such date with respect to the Properties.
Appendix - 20
<PAGE>
"Loans" shall have the meaning given to such term in Section 2.1(a) in the
Credit Agreement and shall include both the Tranche A Loans and the Tranche B
Loans.
"Loan Basic Rent" shall mean the interest due on the Loans on any Scheduled
Interest Payment Date pursuant to the Credit Agreement (but not including
interest on (i) any such Loan prior to the Basic Term Commencement Date with
respect to the Property to which such Loan relates or (ii) any overdue amounts
under Section 2.8(c) of the Credit Agreement or otherwise).
"Loan Property Cost" shall mean, with respect to each Property at any date
of determination, an amount equal to (a) the aggregate principal amount all
Loans (including without limitation all Acquisition Loans and Construction
Loans) made on or prior to such date with respect to such Property (including
any Loans made to fund interest, Transaction Expenses and indemnity payments
prior to the Basic Term Commencement Date for each Property Date attributed or
allocated to such Property), minus (b) the aggregate amount of prepayments or
-----
repayments as the case may be of the Loans allocated to reduce the Loan Property
Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement.
"Majority Lenders" shall mean at any time, Lenders whose Loans outstanding
represent at least fifty-one percent (51%) of the aggregate Loans outstanding.
"Marketing Period" shall mean, if the Lessee has given a Sale Notice in
accordance with Section 20.1 of the Lease, the period commencing on the date
such Sale Notice is given and ending on the Expiration Date.
"Material Adverse Effect" shall, mean a material adverse effect on (a) the
business, condition (financial or otherwise), assets, liabilities or operations
of the Credit Parties and their Affiliates taken as a whole, (b) the ability of
any Credit Party to perform its respective obligations under any Operative
Agreement to which it is a party, (c) the validity or enforceability of any
Operative Agreement or the rights and remedies of the Agent, the Lenders, the
Holders, or the Lessor thereunder, (d) the validity, priority or enforceability
of any Lien on any Property created by any of the Operative Agreements, or (e)
the value, utility or useful life of any Property or the use, or ability of the
applicable Lessee to use, any Property for the purpose for which it was
intended.
"Maturity Date" shall mean the Expiration Date.
"Maximum Amount" shall mean, as of any date of payment, without
duplication, (a) one hundred percent (100%) of the cost of acquiring the Land
for all, but not less than all, the Construction Period Properties
(collectively, the "Land Cost"), plus (b) the product of eighty-nine and nine-
tenths percent (89.9%) multiplied by the following: aggregate Termination Value
for all, but not less than all, the Construction Period Properties, minus the
-----
Land Cost, minus all structuring fees payable in connection with the
-----
transactions evidenced by the Operative Agreements to Bank of America Securities
LLC, Bank of America, N.A. and/or any Affiliates of either of the foregoing,
minus accrued, unpaid Holder Yield respecting any and all Construction Period
- -----
Properties) minus (c) the value (calculated at a rate of six and one tenth
-----
percent
Appendix - 21
<PAGE>
(6.10%) per annum) of any payments previously made by the Construction Agent or
the Lessee regarding any and all Construction Period Properties and not
reimbursed minus (d) the product of ten and one-tenth percent (10.1%) multiplied
-----
by the aggregate Future Amounts deposited into escrow with the Agent pursuant to
Section 2.1 of the Agency Agreement.
"Maximum Property Cost" shall mean the aggregate amount of the Property
Costs for all Properties subject to the Lease as of the applicable determination
date (calculated without regard to the purchase or sale of any Property).
"Maximum Residual Guarantee Amount" shall mean an amount equal to the
product of the aggregate Property Cost for all of Properties times 85%.
"Modifications" shall have the meaning specified in Section 11.1(a) of the
Lease.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage Instrument" shall mean any mortgage, deed of trust or any other
instrument executed by the Owner Trustee and the Lessee in favor of the Agent
(for the benefit of the Lenders and the Holders) and evidencing a Lien on the
Property, in form and substance reasonably acceptable to the Agent.
"Multiemployer Plan" shall mean any plan described in Section 4001(a)(3) of
ERISA to which contributions are or have been made or required by the
Construction Agent or any Credit Party or any of its Subsidiaries or ERISA
Affiliates.
"Multiple Employer Plan" shall mean a plan to which the Construction Agent
or any Credit Party or any ERISA Affiliate and at least one other employer other
than an ERISA Affiliate is making or accruing an obligation to make, or has made
or accrued an obligation to make, contributions.
"Net Proceeds" shall mean all amounts paid in connection with any Casualty
or Condemnation, 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 Agent or Lessor are entitled to be reimbursed pursuant
to the Lease.
"Net Sale Proceeds Shortfall" shall mean the amount by which the proceeds
of a sale described in Section 22.1 of the Lease (net of all expenses of sale)
are less than the Limited Recourse Amount with respect to the Properties to the
extent it has been determined that the Fair Market Sales Value of the Properties
at the expiration of the term of the Lease has been impaired by greater than
expected wear and tear during the Term of the Lease.
"Non-Excluded Taxes" shall have the meaning given to such term in Section
2.13 of the Credit Agreement.
Appendix - 22
<PAGE>
"Notes" shall mean those notes issued to the Lenders pursuant to the Credit
Agreement and shall include both the Tranche A Notes and the Tranche B Notes.
"Occupational Safety and Health Law" shall mean the Occupational Safety and
Health Act of 1970 and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating or relating to, or
imposing liability or standards of conduct concerning, employee health and/or
safety, as now or at any time hereafter in effect.
"Officer's Certificate" with respect to any person shall mean a certificate
executed on behalf of such person by a Responsible Officer who has made or
caused to be made such examination or investigation as is necessary to enable
such Responsible Officer to express an informed opinion with respect to the
subject matter of such Officer's Certificate.
"Operative Agreements" shall mean the following: the Participation
Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the
Credit Agreement, the Notes, the Lease (and a memorandum thereof in a form
reasonably acceptable to the Agent), each Lease Supplement (and a memorandum
thereof in a form reasonably acceptable to the Agent), the Security Documents
and each Ground Lease.
"Overdue Interest" shall mean any interest payable pursuant to Section
2.8(b) of the Credit Agreement.
"Overdue Rate" shall mean (i) with respect to Loan Basic Rent, and any
other amount owed under or with respect to the Credit Agreement or the Security
Documents, the rate specified in Section 2.8(b) of the Credit Agreement, (ii)
with respect to Lessor Basic Rent, the Holder Yield and any other amount owed
under or with respect to the Trust Agreement, the applicable rate specified in
the Trust Agreement, and (iii) with respect to any other amount, the lesser of
the ABR plus two percent (2%) or the amount referred to in clause (y) of Section
2.8(b) of the Credit Agreement.
"Owner Trustee," "Borrower" or "Lessor" shall mean First Security Bank,
National Association, not individually, except as expressly stated in the
various Operative Agreements, but solely as Owner Trustee under the Capital One
Realty Trust 1998-1, and any successor or replacement Owner Trustee expressly
permitted under the Operative Agreements.
"Participant" shall have the meaning given to such term in Section 9.7 of
the Credit Agreement.
"Participation Agreement" shall mean the Participation Agreement (Capital
One Realty, Inc.) dated as of the Initial Closing Date, among the Lessee, the
Guarantor, the Owner Trustee, not in its individual capacity except as expressly
stated therein, the Holders, the Lenders and the Agent, as such Participation
Agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof or of any other Operative Agreement.
Appendix - 23
<PAGE>
"Payment Date" shall mean any Scheduled Interest Payment Date and any date
on which interest or Holder Yield in connection with a prepayment of principal
on the Loans or of the Holder Fundings is due under the Credit Agreement or the
Trust Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002(a) of ERISA or any successor thereto.
"Pension Plan" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan), and to which the Lessee or any ERISA Affiliate may have any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five (5) years, or by reason of being deemed to be a contributing
sponsor under section 4069 of ERISA.
"Permitted Exceptions" shall mean Liens of the types described in clauses
(i), (ii), (iii), (v) and (viii) of the definition of Permitted Liens.
"Permitted Facility" shall mean (a) that certain campus facility in Federal
Way, Washington, Phase I of which contains 10.29 acres and will have a single
building of 143,958 square feet and Phase II of which contains 11.87 acres is
anticipated to have two three-story buildings of approximately 100,000 square
feet each, one of which (including the related real property) may be financed
hereunder and (b) that certain 4-story office building at 8715 Henderson Road,
Tampa, Florida 33634, its respective interest in the related 5-story parking
garage and the related ground lease for the real property at such location or
such other facility proposed by the Lessee and acceptable to the Lenders and the
Holders, as provided in Section 5.3(t) of the Participation Agreement.
"Permitted Liens" shall mean:
(i) the respective rights and interests of the parties to the
Operative Agreements as provided in the Operative Agreements;
(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 13.1 of the Lease;
(iv) Liens arising by operation of law, materialmen's,
mechanics', workmen's, repairmen's, employees', carriers', warehousemen's
and other like Liens relating to the construction of the Improvements or in
connection with any Modifications or arising in the ordinary course of
business for amounts 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 13.1 of the Lease;
Appendix - 24
<PAGE>
(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 and
the Agent have been made), which bonding (or arrangements) shall comply
with applicable Legal Requirements, and shall have 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 Taxes set forth in Section 13.1 of the Lease;
(vii) Liens in favor of municipalities to the extent agreed to
by the Lessor; and
(viii) all encumbrances, exceptions, restrictions, easements,
rights of way, servitudes, encroachments and irregularities in title, other
than Liens which, in the reasonable assessment of the Agent, do not
materially impair the value or the use of the Property for its intended
purpose.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
governmental authority or any other entity.
"Plans and Specifications" shall mean, with respect to Improvements, the
plans and specifications for such Improvements to be constructed or already
existing, as such Plans and Specifications may be amended, modified or
supplemented from time to time in accordance with the terms of the Participation
Agreement.
"Prime Lending Rate" shall have the meaning given to such term in the
definition of ABR.
"Property" shall mean, with respect to each Permitted Facility that is (or
is to be) acquired, constructed and/or renovated pursuant to the terms of the
Operative Agreements, the Land and each item of Equipment and the various
Improvements, in each case located on such Land, including without limitation
each Construction Period Property and each Property for which the Basic Term has
commenced.
"Property Acquisition Cost" shall mean the cost to Lessor to purchase a
Property on a Property Closing Date.
"Property Closing Date" shall mean the date on which the Lessor purchases
or leases (pursuant to a Ground Lease) a Property or, with respect to the first
Advance, the date on which the Lessor seeks reimbursement for Property
previously purchased or leased by the Lessor.
Appendix - 25
<PAGE>
"Property Cost" shall mean with respect to a Property the aggregate amount
of the Loan Property Cost, plus the Holder Property Cost for such Property (as
such amounts shall be increased equally among all Properties respecting the
Holder Fundings and the Loans extended from time to time to pay for the
Transaction Expenses, fees, expenses and other disbursements referenced in
Article IX and indemnity payments pursuant to Section 13.6, in each case of the
Participation Agreement).
"Purchase Option" shall have the meaning given to such term in Section 20.1
of the Lease.
"Purchasing Lender" shall have the meaning given to such term in Section
9.8(a) of the Credit Agreement.
"Rating Agencies" shall mean Moody's, S&P and Fitch or, in each case, any
successor nationally recognized statistical rating organization.
"Redemption Date" shall have the meaning given to such term in Section
3.1(d) of the Trust Agreement.
"Register" shall have the meaning given to such term in Section 9.9(a) of
the Credit Agreement.
"Release" shall mean any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leek, flow, discharge, disposal or
emission of a Hazardous Substance.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Renewal Term" shall have the meaning specified in Section 2.2 of the
Lease.
"Rent" shall mean, collectively, the Basic Rent and the Supplemental Rent,
in each case payable under the Lease.
"Reportable Event" shall have the meaning specified in ERISA.
"Requested Funds" shall mean any funds requested by the Lessee or the
Construction Agent, as applicable, in accordance with Section 5 of the
Participation Agreement.
"Requirement of Law" shall mean, as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
Appendix - 26
<PAGE>
"Requisition" shall have the meaning specified in Section 4.2 of the
Participation Agreement.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, any Senior Vice President or Executive Vice
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer or any other officer with responsibility
for and knowledge of the subject matter, except that when used with respect to
the Trust Company or the Owner Trustee, "Responsible Officer" shall also include
the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust
Officer, the Controller and any Assistant Controller or any other officer of the
Trust Company or the Owner Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"S&P" shall mean Standard and Poors Rating Group, a division of McGraw
Hill, Inc.
"Sale Date" shall have the meaning given to such term in Section 22.1(a) of
the Lease.
"Sale Notice" shall mean a notice given to Lessor in connection with the
election by Lessee of its Sale Option.
"Sale Option" shall have the meaning given to such term in Section 20.1 of
the Lease.
"Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar Loan
or Eurodollar Holder Funding, the last day of the Interest Period applicable to
such Eurodollar Loan or Eurodollar Holder Funding (or respecting any Eurodollar
Loan or Eurodollar Holder Funding having an Interest Period of six (6) months,
the three (3) month anniversary of such Interest Period), (b) as to any ABR Loan
or any ABR Holder Funding, the fifteenth day of each month, unless such day is
not a Business Day and in such case on the next occurring Business Day and (c)
as to all Loans and Holder Fundings, the date of any voluntary or involuntary
payment, prepayment, return or redemption, and the Redemption Date or the
Expiration Date, as the case may be.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Agreement" shall mean the Security Agreement (Capital One Realty,
Inc.) dated as of the Initial Closing Date between the Lessor and the Agent, for
the benefit of the Lenders and, respecting the Security Documents, the Holders,
as amended, supplemented or otherwise modified from time to time.
"Security Documents" shall mean the collective reference to the Security
Agreement, the Mortgage Instruments, and all other security documents hereafter
delivered to the Agent granting a lien on any asset or assets of any Person to
secure the obligations and liabilities of the Lessor under
Appendix - 27
<PAGE>
the Credit Agreement and/or under any of the other Credit Documents or to secure
any guarantee of any such obligations and liabilities.
"Soft Costs" shall mean all costs related to the development and
construction of the Improvements other than Hard Costs.
"Subsidiary" shall mean, as to any Person, any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person, or by one or
more Subsidiaries, or by such Person and one or more Subsidiaries.
"Supplemental Rent" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay to Lessor, the
Trust Company, the Holders, the Agent, the Lenders or any other Person under the
Lease or under any of the other Operative Agreements including, without
limitation, payments of the Termination Value and the Maximum Residual Guarantee
Amount and all indemnification amounts, liabilities and obligations.
"Taxes" shall have the meaning specified in the definition of Impositions.
"Term" shall mean the Basic Term (including any Renewal Term).
"Termination Date" shall have the meaning specified in Section 16.2(a) of
the Lease.
"Termination Event" shall mean (a) with respect to any Pension Plan, the
occurrence of a Reportable Event or an event described in Section 4062(e) of
ERISA, (b) the withdrawal of the Construction Agent or any Credit Party or any
ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was
a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA),
or the termination of a Multiple Employer Plan, (c) the distribution of a notice
of intent to terminate a Plan or Multiemployer Plan pursuant to Section
4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate a
Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (f) the complete or partial withdrawal of the
Construction Agent or any Credit Party or any ERISA Affiliate from a
Multiemployer Plan.
"Termination Notice" shall have the meaning specified in Section 16.1 of
the Lease.
"Termination Value" shall mean, without duplication, the sum of (a) either
(i) with respect to all Properties, an amount equal to the aggregate outstanding
Property Cost for all the Properties, in each case as of the last occurring
Payment Date, or (ii) with respect to a particular Property, an amount equal to
the product of the Termination Value of all the Properties times a fraction, the
numerator of which is the Property Cost allocable to the particular Property in
question and the denominator of which is the aggregate Property Cost for all the
Properties, in each case as of the
Appendix - 28
<PAGE>
last occurring Payment Date, plus (b) respecting the amounts described in each
of the foregoing subclause (i) or (ii), as applicable, any and all accrued and
unpaid interest on the Loans and any and all accrued and unpaid Holder Yield on
the Holder Fundings related to the applicable Property Cost plus (c) all other
Rent and other amounts then due and payable or accrued and unpaid under the
Agency Agreement, Lease and/or under any other Operative Agreement (including
without limitation all costs and expenses referred to in clause FIRST of Section
-----
22.2 of the Lease).
"Total Condemnation" shall mean a Condemnation that involves a taking of
Lessor's entire title to a Property.
"Tranche A Commitments" shall mean the obligation of the Tranche A Lenders
to make the Tranche A Loans to the Lessor in an aggregate principal amount at
any one time outstanding not to exceed the aggregate of the amounts set forth
opposite each Tranche A Lender's name on Schedule 1.1 to the Credit Agreement,
as such amount may be reduced from time to time in accordance with the
provisions of the Operative Agreements; provided no Tranche A Lender shall be
obligated to make Tranche A Loans in excess of such Tranche A Lender's share of
the Tranche A Commitments as set forth adjacent to such Tranche A Lender's name
on Schedule 1.1 to Credit Agreement.
"Tranche A Lenders" shall mean the several banks and other financial
institutions from time to time party to the Credit Agreement that commit to make
the Tranche A Loans, together with their successors and assigns.
"Tranche A Loans" shall mean the Loans made pursuant to the Tranche A
Commitment.
"Tranche A Note" shall have the meaning given to it in Section 2.2 of the
Credit Agreement.
"Tranche B Commitments" shall mean the obligation of the Tranche B Lenders
to make the Tranche B Loans to the Lessor in an aggregate principal amount at
any one time outstanding not to exceed the aggregate of the amounts set forth
opposite each Tranche B Lender's name on Schedule 1.1 to the Credit Agreement,
as such amount may be reduced from time to time in accordance with the
provisions of the Operative Agreements; provided no Tranche B Lender shall be
obligated to make Tranche B Loans in excess of such Tranche B Lender's share of
the Tranche B Commitments as set forth adjacent to such Tranche B Lender's name
on Schedule 1.1 to Credit Agreement.
"Tranche B Lenders" shall mean the several banks and other financial
institutions from time to time party to the Credit Agreement that commit to make
the Tranche B Loans, together with their successors and assigns.
"Tranche B Loan" shall mean the Loans made pursuant to the Tranche B
Commitment.
"Tranche B Note" shall have the meaning given to it in Section 2.2 of the
Credit Agreement.
Appendix - 29
<PAGE>
"Transaction Expenses" shall mean all costs and expenses incurred in
connection with the preparation, execution and delivery of the Operative
Agreements and the transactions contemplated by the Operative Agreements
including without limitation:
(a) the reasonable fees, out-of-pocket expenses and disbursements of
counsel in negotiating the terms of the Operative Agreements and the other
transaction documents, preparing for the closings 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
Agreements;
(b) any and all other reasonable fees, charges or other amounts
payable to the Lenders, Agent, the Holders, the Owner Trustee or any broker
which arises under any of the Operative Agreements;
(c) any other reasonable fee, out-of-pocket expenses, disbursement or
cost of any party to the Operative Agreements or any of the other
transaction documents; and
(d) any and all Taxes and fees incurred in recording or filing any
Operative Agreement 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 Agreement.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision agency, department,
commission, board, bureau or instrumentality of a governmental body.
"Trust Agreement" shall mean the Amended and Restated Trust Agreement dated
as of the Initial Closing Date between the Holders and the Owner Trustee.
"Trust Company" shall mean First Security Bank, National Association, in
its individual capacity, and any successor owner trustee under the Trust
Agreement in its individual capacity.
"Trust Estate" shall have the meaning specified in Section 2.2 of the Trust
Agreement.
"Type" shall mean, as to any Loan, whether it is an ABR Loan or a
Eurodollar Loan.
"UCC Financing Statements" shall mean collectively the Lender Financing
Statements and the Lessor Financing Statements.
"Unanimous Vote Matters" shall have the meaning given it in Section 10.2(j)
of the Participation Agreement.
"Unfunded Amount" shall have the meaning specified in Section 3.2 of the
Agency Agreement.
Appendix - 30
<PAGE>
"Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial Code
as in effect in any applicable jurisdiction.
"United States Bankruptcy Code" shall mean Title 11 of the United States
Code.
"Voting Power" shall mean, 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 or such Person, other than securities having such power
only by reason of the happening of a contingency.
"Wholly-Owned Entity" shall mean a Person all of the shares of capital
stock or other ownership interest of which are owned by the referenced Person
and/or one of its wholly-owned Subsidiaries or other wholly-owned entities.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Work" shall mean the furnishing of labor, materials, components,
furniture, furnishings, fixtures, appliances, machinery, equipment, tools,
power, water, fuel, lubricants, supplies, goods and/or services with respect to
any Property.
"Year 2000 Problem" shall have the meaning specified in Section 7.3(i) of
the Participation Agreement.
Appendix - 31
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 10.24
-------------
CREDIT AGREEMENT
(Capital One Services, Inc.)
among
First Security Bank, National Association,
not individually, except as
expressly stated herein,
but solely as Owner Trustee
for Capital One Realty Trust 1998-1
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
and
BANK OF AMERICA, N.A.
as Administrative Agent
Dated as of September 3, 1999
- --------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS........................................................................................ 1
1.1 Definitional Provisions............................................................................... 1
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS.................................................................... 2
2.1 Commitments........................................................................................... 2
2.2 Notes................................................................................................. 2
2.3 Procedure for Borrowing............................................................................... 3
2.4 Facility Fee.......................................................................................... 3
2.5 Termination or Reduction of Commitments............................................................... 4
2.6 Prepayments and Payments.............................................................................. 4
2.7 Conversion and Continuation Options................................................................... 5
2.8 Interest Rates and Payment Dates...................................................................... 6
2.9 Computation of Interest............................................................................... 6
2.10 Pro Rata Treatment and Payments...................................................................... 7
2.11 Increased Costs, Illegality, etc..................................................................... 8
2.12 Funding Indemnity.................................................................................... 9
2.13 Taxes................................................................................................ 10
2.14 Notice of Amounts Payable; Mandatory Assignment...................................................... 12
SECTION 3 REPRESENTATIONS AND WARRANTIES..................................................................... 12
3.1 Due Organization, etc................................................................................ 13
3.2 Authorization; No Conflict........................................................................... 13
3.3 Enforceability, Etc.................................................................................. 13
3.4 Litigation........................................................................................... 14
3.5 Lessor Liens......................................................................................... 14
3.6 Assignment........................................................................................... 14
3.7 Defaults............................................................................................. 14
3.8 Documentation........................................................................................ 14
3.9 Use of Proceeds...................................................................................... 14
3.10 Securities Act....................................................................................... 14
3.11 Chief Place of Business.............................................................................. 15
3.12 Federal Reserve Regulations.......................................................................... 15
3.13 Investment Company Act............................................................................... 15
SECTION 4 CONDITIONS PRECEDENT............................................................................... 15
4.1 Conditions to Effectiveness........................................................................... 15
4.2 Conditions to Each Loan............................................................................... 15
SECTION 5 COVENANTS.......................................................................................... 16
5.1 Other Activities...................................................................................... 16
5.2 Ownership of Properties, Indebtedness................................................................. 16
5.3 Disposition of Assets................................................................................. 17
5.4 Compliance with Operative Agreements.................................................................. 17
5.5 Further Assurances.................................................................................... 17
5.6 Notices............................................................................................... 17
5.7 Discharge of Liens.................................................................................... 17
5.8 Trust Agreement....................................................................................... 18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 6 EVENTS OF DEFAULT................................................................................... 18
SECTION 7 THE ADMINISTRATIVE AGENT............................................................................ 20
7.1 Appointment............................................................................................ 20
7.2 Delegation of Duties................................................................................... 21
7.3 Exculpatory Provisions................................................................................. 21
7.4 Reliance by Administrative Agent....................................................................... 21
7.5 Notice of Default...................................................................................... 22
7.6 Non-Reliance on Administrative Agent and Other Lenders................................................. 22
7.7 Indemnification........................................................................................ 23
7.8 Administrative Agent in Its Individual Capacity........................................................ 23
7.9 Successor Administrative Agent......................................................................... 23
7.10 Actions of Administrative Agent on Behalf of Holders................................................... 24
SECTION 8 MATTERS RELATING TO PAYMENT AND COLLATERAL.......................................................... 24
8.1 Collection of Payments and Other Amounts............................................................... 24
8.2 Certain Remedial Matters............................................................................... 27
8.3 Release of Properties, etc............................................................................. 28
8.4 Excepted Payments...................................................................................... 28
SECTION 9 MISCELLANEOUS....................................................................................... 28
9.1 Amendments and Waivers................................................................................. 28
9.2 Notices................................................................................................ 30
9.3 No Waiver; Cumulative Remedies......................................................................... 31
9.4 Survival of Representations and Warranties............................................................. 31
9.5 Payment of Expenses and Taxes.......................................................................... 31
9.6 Successors and Assigns; Participations and Assignments................................................. 31
9.7 Participations......................................................................................... 31
9.8 Assignments............................................................................................ 32
9.9 The Register; Disclosure; Pledges to Federal Reserve Banks............................................. 34
9.10 Adjustments; Set-off................................................................................... 35
9.11 Counterparts........................................................................................... 36
9.12 Severability........................................................................................... 36
9.13 Integration............................................................................................ 36
9.14 GOVERNING LAW.......................................................................................... 36
9.15 Submission To Jurisdiction; Waivers.................................................................... 36
9.16 Acknowledgments........................................................................................ 37
9.17 WAIVERS OF JURY TRIAL.................................................................................. 37
9.18 Nonrecourse............................................................................................ 37
9.19 USURY SAVINGS PROVISION................................................................................ 38
</TABLE>
SCHEDULES
Schedule 1.1......Commitments and Addresses of Lenders
ii
<PAGE>
EXHIBITS
Exhibit A-1 Form of Tranche A Note
Exhibit A-2 Form of Tranche B Note
Exhibit B Form of Assignment and Acceptance
iii
<PAGE>
CREDIT AGREEMENT
(Capital One Services, Inc.)
THIS CREDIT AGREEMENT (Capital One Services, Inc.), dated as of September
3, 1999, is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually,
except as expressly stated herein, but solely as Owner Trustee for Capital One
Realty Trust 1998-1 (the "Owner Trustee" or the "Borrower"), the several banks
------------- --------
and other financial institutions from time to time parties to this Agreement
(the "Lenders") and BANK OF AMERICA, N.A., a national banking association, as a
-------
Lender and as Administrative Agent.
The parties hereto hereby agree as follows:
SECTION 1 DEFINITIONS
1.1 Definitional Provisions.
-----------------------
(a) Each capitalized term used in this Agreement and not otherwise
defined herein shall have the meaning ascribed thereto in Appendix A to that
certain Participation Agreement dated as of September 3, 1999 (the
"Participation Agreement") among Capital One Services, Inc., as the Construction
-----------------------
Agent and the Lessee, Capital One Financial Corporation, as the Guarantor, First
Security Bank, National Association, not individually, except as expressly
stated therein, but solely as Owner Trustee under the Capital One Realty Trust
1998-1, the various banks and other lending institutions which are parties
thereto from time to time, as Holders, the various banks and other lending
institutions which are parties thereto from time to time, as Lenders and Bank of
America, N.A., as Agent for the Lenders and respecting the Security Documents,
as Agent for the Lenders and the Holders to the extent of their interests.
(b) Unless otherwise specified therein, all terms described in this
Agreement shall have the defined meanings when used in the other Credit
Documents or any certificate or other document made or delivered pursuant hereto
or thereto.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) All accounting terms used herein shall have the respective
meanings given to them in accordance with GAAP, unless otherwise provided
herein. All computations and determinations for purposes of determining
compliance with the financial requirements of this Agreement shall be made in
accordance with GAAP, unless otherwise provided herein.
<PAGE>
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms or such terms.
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments.
-----------
(a) Subject to the terms and conditions hereof, each of the Lenders
agrees to make the portion of the Tranche A Loans and the Tranche B Loans to the
Borrower from time to time during the Commitment Period as is set forth adjacent
to such Lender's name for the purpose of enabling the Borrower to purchase the
Properties and to pay Property Acquisition Costs, Property Costs and Transaction
Expenses provided that the aggregate principal amount at any one time
outstanding with respect to each of the Tranche A Loans and the Tranche B Loans
shall not exceed the amount of the Tranche A Commitments and the Tranche B
Commitments respectively. Any prepayments of the Loans, whether mandatory or at
Borrower's election, shall not be subject to reborrowing.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Administrative Agent in accordance with Section 2.3 and 2.7. In
the event the Borrower fails to provide notice pursuant to Section 2.3, the Loan
shall be an ABR Loan. Further, any Loan by any Lender in an amount less than
$100,000 shall be an ABR Loan, unless the remaining Available Commitment for
such Lender is less than $100,000, in which case, the Borrower may elect a
Eurodollar Loan for such remaining amount.
2.2 Notes.
-----
The Loans made by each Lender shall be evidenced by promissory notes
of the Borrower, substantially in the form of Exhibit A-1 in the case of the
-----------
Tranche A Loans (each, a "Tranche A Note") or Exhibit A-2 in the case of the
-----------
Tranche B Loans (each, a "Tranche B Note," and with the Tranche A Notes, the
"Notes"), with appropriate insertions as to payee, date and principal amount,
payable to the order of such Lender and in a principal amount equal to the
Tranche A Commitment or Tranche B Commitment, as the case may be, of such
Lender. Each Lender is hereby authorized to record the date, Type and amount of
each Loan made by such Lender, each continuation thereof, each conversion of all
or a portion thereof to another Type, and the date and amount of each payment or
prepayment of principal thereof on the schedule annexed to and constituting a
part of its Note, and any such recordation shall constitute prima facie evidence
----- -----
of the accuracy of the information so recorded, provided that the failure to
--------
make any such recordation or any error in such recordation shall not affect the
Borrower's obligations hereunder or under such Note. Each Note shall be dated
the Closing Date, be stated to mature on the Maturity Date and (iii) provide
for the payment of interest in accordance with Section 2.8.
2
<PAGE>
2.3 Procedure for Borrowing.
--------- -------------
(a) The Borrower may borrow under the Commitments during the
Commitment Period on any Business Day that an Advance may be requested pursuant
to the terms of Section 5.2 of the Participation Agreement, provided that the
--------
Borrower shall give the Administrative Agent irrevocable notice (which must be
received by the Administrative Agent (i) prior to 12:00 Noon, Dallas, Texas
time, three Business Days prior to the requested Borrowing Date if all or any
part of the requested Loans are to be Eurodollar Loans, or (ii) prior to 10:00
a.m. Dallas, Texas time three Business Days prior to the requested Borrowing
Date with respect to any Loans that are to be ABR Loans) specifying (A) the
amount to be borrowed (which on any date shall not be in excess of the then
Available Commitments), (B) the requested Borrowing Date, (C) whether the
borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof, (D)
if the borrowing is to be a combination of Eurodollar Loans and ABR Loans, the
respective amounts of each Type of Loan and (E) the Interest Period applicable
to any Eurodollar Loan; provided, however, that during the Commitment Period (1)
there shall be only one Interest Period applicable for all amounts outstanding
hereunder bearing interest based on the Eurodollar Rate, (2) such Interest
Period shall commence on the date that the first Eurodollar Loan hereunder is
extended and (3) any amounts thereafter borrowed or converted hereunder during
the Commitment Period which are to bear interest based on the Eurodollar Rate
may only be borrowed or converted on the first day of the Interest Period
applicable to Eurodollar Loans. Pursuant to the terms of the Participation
Agreement, the Borrower shall be deemed to have delivered such notice upon the
delivery of a notice by the Construction Agent or the Lessee containing such
required information. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Lender thereof. Each Lender
will make the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in Section 9.2 prior to 12:00 Noon, Dallas, Texas
time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent crediting an account
designated, subject to Section 11.1 of the Participation Agreement, by the
Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent. No amount of any Loan which is repaid or
prepaid by the Borrower may be reborrowed hereunder.
(b) Interest accruing on each Loan during the Construction Period
with respect to any Property shall, subject to the limitations set forth in
Section 5.1(b) of the Participation Agreement be added to the principal amount
of such Loan on the relevant Scheduled Interest Payment Date. On each such
Scheduled Interest Payment Date, the Loan Property Cost and Construction Loan
Property Cost shall be increased by the amount of interest added to the Loans.
2.4 Facility Fee.
------------
(a) Promptly after receipt of the payment of the Facility Fee payable
pursuant to Section 9.4 of the Participation Agreement, the Agent shall
distribute such payments to the
3
<PAGE>
Lenders and the Holders pro rata in accordance with their respective Commitments
and Holder Commitments.
(b) On each Facility Fee Payment Date during the Construction Period,
the Loan Property Cost and Construction Loan Property Cost of each Property
shall be increased by a pro rata share of any Facility Fees funded on such date
with the proceeds of Loans in accordance with the Operative Agreements.
2.5 Termination or Reduction of Commitments.
------------------------ --------------
(a) The Borrower shall have the right, upon not less than five (5)
Business Days' written notice to the Administrative Agent, to terminate the
Commitments or, from time to time, to reduce the amount of the Commitments,
provided, that (i) after giving effect to such reduction, the aggregate
- --------
outstanding principal amount of the Loans shall not exceed the aggregate
Commitments and (ii) such notice shall be accompanied by a certificate of the
Construction Agent stating that the amount equal to 97% of aggregate remaining
Budgeted Total Loan Property Costs as of the date of such reduction does not
exceed the aggregate amount of Available Commitments as of such date after
giving effect to such reduction. Any such reduction shall be in an amount equal
to the lesser of (A) $10,000,000 (or such greater amount in multiples of
$1,000,000 as the Borrower shall elect) or (B) the remaining Available
Commitments, and shall reduce permanently the Commitments then in effect.
(b) On any date on which the Commitments shall automatically be
reduced to zero pursuant to Section 6, the Borrower shall prepay all outstanding
Loans, together with accrued unpaid interest thereon and all other amounts owing
thereunder.
2.6 Prepayments and Payments.
------------------------
(a) Subject to Sections 2.11, 2.12 and 2.13, the Borrower may at any
time and from time to time prepay the Loans, in whole or in part, without
premium or penalty, upon at least three (3) Business Days' irrevocable notice to
the Administrative Agent, specifying the date and amount of prepayment and
whether the prepayment is of Eurodollar Loans, ABR Loans or a combination
thereof, and, if a combination thereof, the amount allocable to each. Upon
receipt of any such notice the Administrative Agent shall promptly notify each
Lender thereof. If any such notice is given, the amount specified in such
notice shall be due and payable on the date specified therein. Amounts prepaid
may not be reborrowed.
(b) If on any date the Administrative Agent or the Lessor shall
receive any payment in respect of (i) any Casualty or Condemnation pursuant to
Section 15.1(a) or 15.1(g) of the Lease (excluding any payments in respect
thereof which are payable to Lessee in accordance with the Lease or held by
Lessor as security for performance of Lessee's obligations under the Lease), or
(ii) the Termination Value of any Property in connection with the delivery of a
Termination Notice pursuant to Article XVI of the Lease, or (iii) the
Termination Value of any Property in connection with the exercise of the
Purchase Option under Section 20.1 of the Lease or the exercise of the option of
the Lessor to transfer the Properties to the Lessee pursuant to
4
<PAGE>
Section 20.3 of the Lease, or (iv) any payment in an amount equal to the
Termination Value for any and all Construction Period Properties required to be
made or elected to be made by the Construction Agent to the Lessor pursuant to
the terms of the Agency Agreement, then in each case, such amounts shall be
applied and allocated in the manner contemplated by Section 8.1(b)(ii).
(c) Each prepayment of the Loans pursuant to Section 2.6(b) shall be
allocated to reduce the Loan Property Cost of the applicable Property. Each
prepayment of the Loans pursuant to Section 2.6(a) shall be allocated to reduce
the respective Loan Property Costs of all Properties pro rata according to the
--- ----
Loan Property Costs of such Properties immediately before giving effect to such
prepayment. Any amounts applied to reduce the Loan Property Cost of any
Construction Period Property pursuant to this paragraph (c) shall also be
applied to reduce the Construction Loan Property Cost of such Property until
such Construction Loan Property Cost has been reduced to zero.
2.7 Conversion and Continuation Options.
-----------------------------------
(a) The Borrower may elect from time to time to convert Eurodollar
Loans to ABR Loans by giving the Agent at least three Business Days' prior
irrevocable notice of such election, provided that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert ABR Loans
to Eurodollar Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election. Upon receipt of any such notice, the Agent
shall promptly notify each Lender thereof. All or any part of outstanding
Eurodollar Loans or ABR Loans may be converted as provided herein, provided that
(i) no ABR Loan may be converted into a Eurodollar Loan after the date that is
one month prior to the Maturity Date or when an Event of Default exists, (ii)
during the Commitment Period such conversion may only occur on the first day of
the single Interest Period for Eurodollar Loans permitted pursuant to the terms
of Section 2.3 hereof and (iii) after the Commitment Period such notice of
conversion shall contain an election by the Borrower of an Interest Period for
such Eurodollar Loan to be created by such conversion and such Interest Period
shall be in accordance with the terms of subparagraph (b) of the definition of
the term "Interest Period".
(b) Subject to the restrictions set forth in Section 2.3 hereof, any
Eurodollar Loan may be continued as such upon the expiration of the current
Interest Period with respect thereto by the Borrower giving irrevocable notice
to the Agent in accordance with the applicable provisions of the term "Interest
Period" of the length of the next Interest Period to be applicable to such
Loans, provided that no Eurodollar Loan may be continued as such after the date
that is one month prior to the Maturity Date or when an Event of Default exists
and provided, further, that if the Borrower shall fail to give any required
notice as described above or otherwise herein, or if such continuation is not
permitted pursuant to the proceeding proviso, such Loan shall automatically be
converted to an ABR Loan on the last day of such then expiring Interest Period.
5
<PAGE>
2.8 Interest Rates and Payment Dates.
--------------------------------
(a) The Loans outstanding hereunder from time to time shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to either (i) the Eurodollar Rate determined for such day plus
the Applicable Percentage or (ii) the ABR, as selected by the Borrower in
accordance with the provisions hereof; provided, however, (A) upon delivery by
the Administrative Agent of the notice described in Section 2.9(c), the Loans of
each of the Lenders shall bear interest at the ABR applicable from time to time
from and after the dates and during the periods specified in Section 2.9(c), (B)
upon the delivery by a Lender of the notice described in Section 2.11(d), the
Loans of such Lender shall bear interest at the ABR applicable from time to time
from and after the dates and during the periods specified in Section 2.11(d) and
(C) in such other circumstances as expressly provided herein, the Loans shall
bear interest at the ABR.
(b) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum which is
the lesser of (x) then current rate of interest respecting such payment plus 2%
and (y) the highest interest rate permitted by applicable law, in each case from
the date of such non-payment until such amount is paid in full (whether after or
before judgment).
(c) Interest shall be payable in arrears on the applicable Scheduled
Interest Payment Date (but for any Loan having an Interest Period of six (6)
months or longer, interest shall be payable in arrears on each applicable three
(3) month anniversary date of the commencement of such Loan), provided that (i)
--------
interest accruing pursuant to paragraph (b) of this Section 2.8 shall be payable
from time to time on demand and (ii) each prepayment of the Loans shall be
accompanied by accrued interest to the date of such prepayment on the amount
prepaid.
2.9 Computation of Interest.
-----------------------
(a) Whenever it is calculated on the basis of the Prime Lending Rate,
interest shall be calculated on the basis of a 365- (or 366-, as the case may
be) day year for the actual days elapsed; and, otherwise, interest shall be
calculated on the basis of a 360-day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve
Requirements shall become effective as of the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error.
6
<PAGE>
(c) If the Eurodollar Rate cannot be determined by the Administrative
Agent in the manner specified in the definition of the term "Eurodollar Rate"
contained in Appendix A to the Participation Agreement, the Administrative Agent
shall give telecopy or telephonic notice thereof to the Borrower and the Lenders
as soon as practicable thereafter. Until such time as the Eurodollar Rate can
be determined by the Administrative Agent in the manner specified in the
definition of such term, no further Eurodollar Loans shall be made or shall be
continued as such at the end of the then current Interest Period nor shall the
Borrower have the right to convert ABR Loans to Eurodollar Loans.
2.10 Pro Rata Treatment and Payments.
-------------------------------
(a) Each borrowing by the Borrower from the Lenders hereunder and any
reduction of the Commitments of the Lenders shall be made pro rata according to
their respective Commitments. Subject to the provisions of Section 8 hereof,
each payment (including each prepayment) by the Borrower on account of principal
of and interest on the Loans shall be made pro rata according to the respective
outstanding principal amounts on the Loans then held by the Lenders. All
payments (including prepayments) to be made by the Borrower hereunder and under
the Notes, whether on account of principal, interest or otherwise, shall be made
without setoff or counterclaim and shall be made prior to 12:00 Noon, Dallas,
Texas time, on the due date thereof to the Administrative Agent, for the account
of the Lenders, at the Administrative Agent's office specified in Section 9.2,
in Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder becomes due and payable on a day other than
a Business Day, such payment shall be extended to the next succeeding Business
Day; provided, however, if such payment includes an amount of interest
calculated with reference to the Eurodollar Rate and the result of such
extension would be to extend such payment into another calendar month, then such
payment shall be made on the immediately preceding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate during
such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make its
share of such borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender is making such amount available
to the Administrative Agent, and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If such
amount is not made available to the Administrative Agent by the required time on
the Borrowing Date therefor, such Lender shall pay to the Administrative Agent,
on demand, such amount with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period until such Lender makes such
amount immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this Section 2.10(b) shall be conclusive in the absence of manifest error.
Nothing in this Section 2.10(b) or in any other provision in any Operative
Agreement shall require the Administrative Agent to make any borrowing available
to the Borrower unless such amounts have been made available to the
Administrative Agent by the Lenders.
7
<PAGE>
2.11 Increased Costs, Illegality, etc.
--------------------------------
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request hereafter adopted, promulgated or made by any central bank
or other governmental authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining Loans, then the Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to the Administrative Agent
but subject to the terms of Section 2.14), pay (with funds provided by the
Lessee as Supplemental Rent pursuant to Section 3.3 of the Lease after the Basic
Term Commencement Date or pursuant to Article IX or Section 13.6 of the
Participation Agreement prior to the Basic Term Commencement Date) to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law, but in each case
promulgated or made after the date hereof) affects or would affect the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type or upon the Loans, then, upon demand by such Lender
(with a copy of such demand to the Administrative Agent but subject to the terms
of Section 2.14), the Borrower shall pay (with funds provided by the Lessee as
Supplemental Rent pursuant to Section 3.3 of the Lease after the Basic Term
Commencement Date or pursuant to Article IX or Section 13.6 of the Participation
Agreement prior to the Basic Term Commencement Date) to the Administrative Agent
for the account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder or upon the Loans. A certificate as to
such amounts submitted to the Borrower and the Administrative Agent by such
Lender shall be conclusive and binding for all purposes, absent manifest error.
(c) Without limiting the effect of the foregoing, the Borrower shall
pay to each Lender on the last day of the Interest Period therefor so long as
such Lender is maintaining reserves against "Eurocurrency liabilities" under
Regulation D an additional amount (determined by such Lender and notified to the
Borrower through the Administrative Agent) equal to the product of the following
for each Eurodollar Loan for each day during such Interest Period:
(i) the principal amount of such Eurodollar Loan outstanding on
such day; and
(ii) the remainder of (x) a fraction the numerator of which is
the rate (expressed as a decimal) at which interest accrues on such
Eurodollar Loan for such
8
<PAGE>
Interest Period as provided in this Credit Agreement (less the Applicable
Percentage) and the denominator of which is one minus the effective rate
(expressed as a decimal) at which such reserve requirements are imposed
on such Lender on such day minus (y) such numerator; and
-----
(iii) 1/360.
(d) Without affecting its rights under Section 2.11(a) or 2.11(b) or
any other provision of this Agreement, each Lender agrees that if there is any
increase in any cost to or reduction in any amount receivable by such Lender
with respect to which the Borrower would be obligated to compensate such Lender
pursuant to Sections 2.11(a) or 2.11(b), such Lender shall use reasonable
efforts to select an alternative lending office which would not result in any
such increase in any cost to or reduction in any amount receivable by such
Lender; provided, however, that no Lender shall be obligated to select an
-------- -------
alternative lending office if such Lender determines that (i) as a result of
such selection such Lender would be in violation of any applicable law,
regulation, treaty, or guideline, or would incur additional costs or expenses or
(ii) such selection would be inadvisable for regulatory reasons or inconsistent
with the interests of such Lender.
(e) Notwithstanding any other provision of this Agreement, if any
Lender shall notify the Administrative Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for any Lender to perform its obligations hereunder to make or maintain
Eurodollar Loans, then (i) each Eurodollar Loan will automatically, at the
earlier of the end of the Interest Period for such Eurodollar Loan or the date
required by law, convert into an ABR Loan and (iii) the obligation of the
Lenders to make, convert or continue Eurodollar Loans shall be suspended until
the Administrative Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist.
2.12 Funding Indemnity.
-----------------
Subject to the provisions of Section 2.14(a), the Borrower agrees,
subject to and in accordance with the provisions of the Participation Agreement,
to indemnify each Lender and to hold each Lender harmless from any loss or
reasonable expense which such Lender may sustain or incur as a consequence of
default by the Borrower in making a borrowing of any Loan hereunder after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, default by the Borrower in making any prepayment
after the Borrower has given a notice thereof in accordance with the provisions
of this Agreement or the making of a voluntary or involuntary prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification shall be in an amount equal to the
excess, if any, of the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or continued for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable Eurodollar Rate for
9
<PAGE>
such Loan for such Interest Period over the amount of interest (as determined
by such Lender) which would have accrued to such Lender on such amount by
reemploying such funds in loans of the same type and amount during the period
from the date of prepayment or failure to borrow to the last day of the then
applicable Interest Period (or, in the case of a failure to borrow, the Interest
Period that would have commenced on the date of such failure). This covenant
shall survive the termination of this Agreement and the payment of all other
amounts payable hereunder.
2.13 Taxes.
-----
(a) All payments made by the Borrower to both U.S. and non-U.S.
Persons under this Agreement and the Notes shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes and franchise
taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent
or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or the
Notes). If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
------------------
from any amounts payable to the Administrative Agent or any Lender hereunder or
under the Notes, the amounts so payable to the Administrative Agent or such
Lender shall be increased to the extent necessary to yield to the Administrative
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement and the Notes, provided, however, that the foregoing obligations
-------- -------
of the Borrower shall not apply:
(i) to any payment to any Lender hereunder unless such Lender is, on
the date hereof (or on the date it becomes a Lender hereunder as provided
in Section 9.8 hereof) and on the date of any change in the Lending Office
of such Lender, either entitled to submit a Form 1001 (relating to such
Lender and entitling it to a complete exemption from withholding on all
interest to be received by it hereunder in respect of the Loans) or Form
4224 (relating to all interest to be received by such Lender hereunder in
respect of the Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by a
non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
10
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For the purposes of this Section 2.13(a), (A) "U.S. Person" shall mean a
-----------
citizen, national or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under any laws of the
United States of America or any State thereof, or any estate or trust that is
subject to Federal income taxation regardless of the source of its income, (B)
"U.S. Taxes" shall mean any present or future tax, assessment or other charge or
----------
levy imposed by or on behalf of the United States of America or any taxing
authority thereof or therein, (C) "Form 1001" shall mean Form 1001 (Ownership,
---------
Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the
United States of America and (D) "Form 4224" shall mean Form 4224 (Exemption
---------
from Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States) of the Department of Treasury of the
United States of America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant taxing
authorities of the United States of America to document a claim to which such
Form relates). Each of the Forms referred to in the foregoing clauses (C) and
(D) shall include such successor and related forms as may from time to time be
adopted by the relevant taxing authorities of the United States of America to
document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing authority, the Borrower shall
deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
(c) If a Lender or an affiliate with whom such Lender files a
consolidated tax return (or equivalent) subsequently receives the benefit in any
country of a tax credit or an allowance resulting from U.S. Taxes with respect
to which it has received a payment of an additional amount under this Section
2.13, such Lender will pay to the Borrower such part of that benefit as in the
opinion of such Lender will leave it (after such payment) in a position no more
and no less favorable than it would have been in if no additional payment had
been required to be paid, provided always that (i) such Lender will be the sole
judge of the amount of any such benefit and of the date on which it is received,
(ii) such Lender will have the absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances available to it and (iii)
such Lender will not be obliged to disclose to the Borrower any information
regarding its tax affairs or tax computations other than the nature and amount
of any tax credit pursuant to this Section 2.13(c).
(d) Each non-U.S. Person that shall become a Participant pursuant to
Section 9.7 or a Lender pursuant to Section 9.8 shall, upon the effectiveness of
the related transfer, be required to provide all of the forms and statements
referenced under subsection 2.13(a)(i), provided that in the case of a
Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
11
<PAGE>
2.14 Notice of Amounts Payable; Mandatory Assignment.
-----------------------------------------------
(a) Notice. In the event that any Lender becomes aware that any
------
amounts are or will be owed to it pursuant to Section 2.11, 2.12 or 2.13 or that
it is unable to make Eurodollar Loans, then it shall promptly notify the
Borrower and the Administrative Agent thereof and, as soon as possible
thereafter, such Lender shall submit to the Borrower (with a copy to the
Administrative Agent) a certificate indicating the amount owing to it and the
calculation thereof. The amounts set forth in such certificate shall be prima
facie evidence of the obligations of the Borrower hereunder.
(b) Mandatory Assignment. In the event that any Lender delivers to
--------------------
the Borrower a certificate in accordance with Section 2.14(a) in connection with
amounts payable pursuant to Section 2.11, Section 2.12 or Section 2.13 or such
Lender is required to make Loans as ABR Loans in accordance with Section 2.11(d)
then, subject to Section 11.1 of the Participation Agreement, the Borrower may,
at its own expense and in its sole discretion, (i) require such Lender to
transfer or assign, in whole, without recourse (in accordance with Section 9.8),
all of its interests, rights (except for rights to be indemnified for actions
taken while a party hereunder) and obligations under this Agreement to a
replacement bank or institution if the Borrower (subject to Section 11.1 of the
Participation Agreement), with the full cooperation of such Lender, can identify
a Person who is ready, willing and able to be such replacement bank or
institution with respect thereto and such replacement bank or institution (which
may be another Lender) shall assume such assigned obligations, or (ii) during
such time as no Default or Event of Default has occurred and is continuing,
terminate the Commitment of such Lender and prepay all outstanding Loans and
such Lender; provided, however, that (x) subject to Section 11.1 of the
-------- -------
Participation Agreement, the Borrower or such replacement bank or institution,
as the case may be, shall have paid to such Lender in immediately available
funds the principal of and interest accrued to the date of such payment on all
the Loans made by it hereunder and all other amounts owed to it hereunder (and,
if such Lender is also a Holder, all Holder Fundings and Holder Yield accrued
and unpaid thereon), (y) any termination of Commitments shall be subject to the
terms of Section 2.5(a) and (z) such assignment or termination of the Commitment
of such Lender and prepayment of Loans does not conflict with any law, rule or
regulation or order of any court or Governmental Authority.
SECTION 3 REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans, each of the Trust Company and the Owner Trustee
hereby represents and warrants to the Administrative Agent and each Lender as
follows (provided that the representations in Sections 3.8, 3.9. 3.10, 3.12 and
3.13 are made solely by the Owner Trustee in its capacity as such):
12
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3.1 Due Organization, etc.
---------------------
It is a national banking association duly organized and validly existing
and in good standing under the laws of the United States of America and has the
power and authority to enter into and perform its obligations under the Trust
Agreement and (assuming due authorization, execution and delivery of the Trust
Agreement by the Holders) has the corporate and trust power and authority to act
as the Owner Trustee and to enter into and perform the obligations under each of
the other Operative Agreements to which the Trust Company or the Owner Trustee,
as the case may be, is or will be a party and each other agreement, instrument
and document to be executed and delivered by it on or before the date this
representation is made or deemed made in connection with or as contemplated by
each such Operative Agreement to which the Trust Company or the Owner Trustee,
as the case may be, is or will be a party.
3.2 Authorization; No Conflict.
--------------------------
The execution, delivery and performance of each Operative Agreement to
which it is or will be a party, either in its individual capacity or (assuming
due authorization, execution and delivery of the Trust Agreement by the Holders)
as the Owner Trustee, as the case may be, has been duly authorized by all
necessary action on its part and neither the execution and delivery thereof, nor
the consummation of the transactions contemplated thereby, nor compliance by it
with any of the terms and provisions thereof does or will require any approval
or consent of any trustee or holders of any of its indebtedness or obligations,
does or will contravene any current law, governmental rule or regulation
relating to its banking or trust powers, does or will contravene or result in
any breach of or constitute any default under, or result in the creation of any
Lien upon any of its property under, its charter or by-laws, or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan
or credit agreement or other agreement or instrument to which it is a party or
by which it or its properties may be bound or affected (other than as
contemplated by the Operative Agreements) which contravention, breach, default
or Lien under clause (ii) would materially and adversely affect its ability, in
its individual capacity or as Owner Trustee, to perform its obligations under
the Operative Agreements to which it is a party or does or will require any
Governmental Action by any Governmental Authority regulating its banking or
trust powers.
3.3 Enforceability, Etc.
-------------------
The Trust Agreement and, assuming the Trust Agreement is the legal,
valid and binding obligation of the Holder, each other Operative Agreement to
which the Trust Company or the Owner Trustee, as the case may be, is or will be
party have been, or on or before the date this representation is made or deemed
made will be, duly executed and delivered by the Trust Company or the Owner
Trustee, as the case may be, and the Trust Agreement and each such other
Operative Agreement to which the Trust Company or the Owner Trustee, as the case
may be, is a party constitutes, or upon execution and delivery will constitute,
a legal, valid and binding obligation enforceable against the Trust Company or
the Owner Trustee, as the case may be, in accordance with the terms thereof.
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3.4 Litigation.
----------
There is no action or proceeding pending or, to its knowledge,
threatened to which it is or will be a party, either in its individual capacity
or as the Owner Trustee, before any Governmental Authority that concerns any
Property being purchased or leased or Construction Advance being funded on the
date this representation is made or deemed made or that, if adversely
determined, would materially and adversely affect its ability, in its individual
capacity or as Owner Trustee, to perform its obligations under the Operative
Agreements to which it is a party or would question the validity or
enforceability of any of the Operative Agreements to which it is or will become
a party.
3.5 Lessor Liens.
------------
Each Property is free and clear of all Lessor Liens attributable to it
in its individual capacity.
3.6 Assignment.
----------
It has not assigned or transferred any of its right, title or interest
in or under the Lease, the Agency Agreement or its interest in any Property or
any portion thereof, except as provided in the Operative Agreements.
3.7 Defaults.
--------
No Default or Event of Default under any Operative Agreement
attributable to it has occurred and is continuing.
3.8 Documentation.
-------------
The Owner Trustee, in its trust capacity, is a party to no documents,
instruments or agreements other than the Operative Agreements (and any other
documents delivered in connection with the Operative Agreements).
3.9 Use of Proceeds.
---------------
The proceeds of the Loans shall be applied by the Owner Trustee solely
in accordance with the terms of the Operative Agreements.
3.10 Securities Act.
--------------
Neither the Owner Trustee nor any Person authorized by the Owner
Trustee to act on its behalf has offered or sold any interest in the COSI Trust
Estate or the Notes, or in any similar security relating to a Property, or in
any security the offering of which for the purposes of the Securities Act of
1933, as amended, would be deemed to be part of the same offering as the
offering of the aforementioned securities to, or solicited any offer to acquire
any of the same
14
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from, any Person other than in the case of the Notes, the Lenders, and neither
the Owner Trustee nor any Person authorized by the Owner Trustee to act on its
behalf will take any action which would subject, as a direct result of such
action alone, the issuance or sale of any interest in the COSI Trust Estate or
the Notes to the provisions of Section 5 of the Securities Act of 1933, as
amended, or require the qualification of any Operative Agreement under the Trust
Indenture Act of 1939, as amended.
3.11 Chief Place of Business.
-----------------------
The Owner Trustee's chief place of business, chief executive office
and office where the documents, accounts and records relating to the
transactions contemplated by this Agreement and each other Operative Agreement
are kept are each located at 79 South Main Street, 3rd Floor, Salt Lake City,
Utah 84111.
3.12 Federal Reserve Regulations.
---------------------------
The Owner Trustee is not engaged principally in, and does not have as
one of its important activities, the business of extending credit for the
purpose of purchasing or carrying any margin stock (within the meaning of
Regulation U of the Board), and no part of the proceeds of the Loans will be
used by it to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock or for any
purpose that violates, or is inconsistent with, the provisions of Regulations T,
U or X of the Board.
3.13 Investment Company Act.
----------------------
The Owner Trustee is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness.
---------------------------
The effectiveness of this Agreement is subject to the satisfaction of
all conditions precedent set forth in Section 6 of the Participation Agreement
required by said Section to be satisfied on or prior to the Initial Closing
Date.
4.2 Conditions to Each Loan.
-----------------------
The agreement of each Lender to make any Loan requested to be made by
it on any date is subject to the satisfaction of the following conditions
precedent:
15
<PAGE>
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Borrower in or pursuant to the Operative Agreements shall
be true and correct in all material respects on and as of such date as if made
on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the Loans requested to
be made on such date.
(c) Participation Agreement Conditions. With respect to each
----------------------------------
Acquisition Loan and each Construction Loan, the applicable conditions
precedent to the Advance associated therewith specified in Section 5 of the
Participation Agreement shall have been satisfied.
(d) Holder Contribution. With respect to each Loan, the
-------------------
Administrative Agent shall be satisfied that the Lessor shall receive from the
Holders on the relevant Borrowing Date an amount equal to the Holder Fundings
associated with such Loan.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this Section 4.2 have been satisfied.
SECTION 5 COVENANTS
So long as any Loan or Note remains outstanding and unpaid or any
other amount is owing to any Lender or the Administrative Agent hereunder:
5.1 Other Activities.
----------------
The Borrower 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 Agreements and other activities incidental or
related to the foregoing.
5.2 Ownership of Properties, Indebtedness.
-------------------------------------
The Borrower shall not own, lease, manage or otherwise operate any
properties or assets other than in connection with the activities described in
Section 5.1, 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 Section 5.1 (including, without limitation, the Loans and other
obligations incurred by the Borrower hereunder).
16
<PAGE>
5.3 Disposition of Assets.
---------------------
The Borrower 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 Agreements.
5.4 Compliance with Operative Agreements.
------------------------------------
The Borrower shall at all times observe and perform all of the
covenants, conditions and obligations required to be performed by it (whether in
its capacity as Lessor, Owner Trustee or otherwise) under each Operative
Agreement to which it is a party and (b) observe and perform, or cause to be
observed and performed, all of the covenants, conditions and obligations of the
Lessor under the Lease, even in the event that the Lease is terminated at stated
expiration following a Lease Event of Default or otherwise.
5.5 Further Assurances.
------------------
At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Borrower, the Borrower will
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Administrative Agent or the Majority Lenders may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and the other Operative Agreements and of the rights and
powers herein or therein granted.
5.6 Notices.
-------
If on any date, a Responsible Officer of the Borrower shall obtain
actual knowledge of the occurrence of a Default or Event of Default, the
Borrower will give written notice thereof to the Administrative Agent within
five Business Days after such date.
5.7 Discharge of Liens.
------------------
Neither the Borrower nor the Trust Company will create or permit to
exist at any time, and will, at its own expense, promptly take such action as
may be necessary duly to discharge, or cause to be discharged, all Lessor Liens
attributable to it, provided, that the Borrower and the Trust Company shall not
--------
be required to discharge any Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as such
proceedings shall not involve any material danger of impairment of any of the
Liens contemplated by the Security Documents or of the sale, forfeiture or loss
of, and shall not materially interfere with the disposition of, any Property or
title thereto or any interest therein or the payment of Rent.
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5.8 Trust Agreement.
---------------
Without prejudice to any right under the Trust Agreement of the Owner
Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII 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 Administrative Agent or the Lenders hereunder or under the other Operative
Agreements and (c) agrees to comply with all of the terms of the Trust
Agreement.
SECTION 6 EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
----------------
(a) The Borrower shall (i) default in the payment when due of any
principal of the Loans or (ii) except as provided in paragraph (c), default, and
such default shall continue for three (3) or more days, in the payment when due
of any interest on the Loans; or
(b) Except as provided in paragraphs (a) and (c), the Borrower shall
default, and such default shall continue for ten (10) or more days, in the
payment of any amount owing under any Credit Document; or
(c) The Borrower shall default in the payment of any amount due on
the Maturity Date owing under any Credit Document; or
(d) The Borrower shall default in the due performance or observance
by it of any term, covenant or agreement contained in any Credit Document to
which it is a party (other than those referred to in paragraphs (a), (b) and (c)
above), provided, that in the case of any such default under Section 5.4, 5.5 or
--------
5.8(c), such default shall have continued unremedied for a period of at least
thirty (30) days after notice to the Borrower by the Administrative Agent or the
Majority Lenders; or
(e) Any representation, warranty or statement made or deemed made by
the Borrower herein or in any other Credit Document or by the Borrower or the
Lessee in the Participation Agreement or the Lease, or in any statement or
certificate delivered or required to be delivered pursuant hereto or thereto,
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or
18
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(f) (i) Any Lease Event of Default shall have occurred and be
continuing, or (ii) the Owner Trustee shall default in the due performance or
observance by it of any term, covenant or agreement contained in the
Participation Agreement or in the Trust Agreement to or for the benefit of the
Administrative Agent or a Lender, provided, that in the case of this clause (ii)
--------
such default shall have continued unremedied for a period of at least thirty
(30) days after notice to the Owner Trustee by the Administrative Agent or the
Majority Lenders; or
(g) The Borrower shall commence a voluntary case concerning itself
under Title 11 of the U.S. Code entitled "Bankruptcy", as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
---------------
is commenced against the Borrower and the petition is not contravened within 10
days after commencement of the case or an involuntary case is commenced against
the Borrower and the petition is not dismissed within sixty (60) days after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower; or the Borrower commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrower, or there is commenced against the
Borrower any such proceeding which remains undismissed for a period of ninety
(90) days; or the Borrower is adjudicated insolvent or bankrupt, or any order of
relief or other order approving any such case or proceeding is entered; or the
Borrower suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of ninety (90) days; or the Borrower makes a general assignment for the
benefit of creditors; or any corporate or partnership action is taken by the
Borrower for the purpose of effecting any of the foregoing; or
(h) Any Security Document shall cease to be in full force and effect,
or shall cease to give the Administrative Agent the Liens, rights, powers and
privileges purported to be created thereby (including, without limitation, a
first priority perfected security interest in, and Lien on, all of the
Properties), in favor of the Administrative Agent on behalf of the Lenders,
superior to and prior to the rights of all third Persons and subject to no other
Liens (except in each case to the extent expressly permitted herein or in any
Operative Agreement); or
(i) The Lease shall cease to be enforceable against the Lessee; or
(j) One or more judgments or decrees shall be entered against the
Borrower involving a liability of $50,000 or more in the case of any one such
judgment or $100,000 or more in the aggregate for all such judgments and decrees
for the Borrower and any such judgments or decrees shall not have been
satisfied, vacated, discharged or stayed or bonded pending appeal within thirty
(30) days from the entry thereof.
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i)
with the
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<PAGE>
consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes to be due and payable
forthwith, whereupon the same shall immediately become due and payable (any of
the foregoing occurrences or actions referred to in clause (A) or (B) above, an
"Acceleration"). Except as expressly provided above in this Section 6,
------------
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Administrative Agent
shall, upon the written instructions of the Majority Lenders, exercise any or
all of the rights and powers and pursue any and all of the remedies available to
it hereunder and (subject to the terms thereof) under the other Credit
Documents, the Lease and the other Operative Agreements and shall have any and
all rights and remedies available under the Uniform Commercial Code or any
provision of law.
Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Administrative Agent
may, and upon request of the Majority Lenders shall, proceed to protect and
enforce this Agreement, the Notes, the other Credit Documents and the Lease by
suit or suits or proceedings in equity, at law or in bankruptcy, and whether for
the specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted, or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Property or for the
recovery of judgment for the indebtedness secured thereby or for the enforcement
of any other proper, legal or equitable remedy available under applicable laws.
The Borrower shall be liable for any and all accrued and unpaid
amounts due hereunder before, after or during the exercise of any of the
foregoing remedies, including all reasonable legal fees and other reasonable
costs and expenses incurred by the Administrative Agent or any Lender by reason
of the occurrence of any Event of Default or the exercise of remedies with
respect thereto.
SECTION 7 THE ADMINISTRATIVE AGENT
7.1 Appointment.
-----------
Each Lender hereby irrevocably designates and appoints the
Administrative Agent as the agent of such Lender under this Agreement and the
other Operative Agreements, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to execute the Operative Agreements as
agent for and on behalf of such Lender, to take such action on behalf of such
Lender under the provisions of this Agreement and the other Operative Agreements
and to
20
<PAGE>
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and other Operative
Agreements, together with such other powers as are reasonably incidental
thereto. Without limiting the generality of the foregoing, each of the Lenders
hereby specifically acknowledges the terms and provisions of the Participation
Agreement and directs the Administrative Agent to exercise such powers, make
such decisions and otherwise perform such duties as are delegated to the
Administrative Agent thereunder without being required to obtain any specific
consent with respect thereto from any Lender. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Operative Agreement or otherwise exist against the
Administrative Agent.
7.2 Delegation of Duties.
--------------------
The Administrative Agent may execute any of its duties under this
Agreement and the other Operative Agreements by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Administrative Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
7.3 Exculpatory Provisions.
----------------------
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Operative Agreement (except for its
or such Person's own gross negligence or willful misconduct) or (b) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or the Lessee or any officer
thereof contained in this Agreement or any other Operative Agreement or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Operative Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Operative Agreement or for any failure of the Borrower or the Lessee
to perform its obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Operative Agreement, or to inspect
the properties, books or records of the Borrower or the Lessee.
7.4 Reliance by Administrative Agent.
--------------------------------
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and
21
<PAGE>
upon advice and statements of legal counsel (including, without limitation,
counsel to the Borrower or the Lessee), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may deem
and treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Operative Agreement unless it shall first receive such advice or
concurrence of the Majority Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other
Operative Agreements in accordance with a request of the Majority Lenders, and
such and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
7.5 Notice of Default.
-----------------
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received written notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give
notice thereof to the Lenders. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Majority Lenders; provided that unless and until the Administrative Agent
--------
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
7.6 Non-Reliance on Administrative Agent and Other Lenders.
------------------------------------------------------
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereinafter taken, including any review of the
affairs of the Borrower or the Lessee, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the
Lessee and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Operative Agreements, and to make such
investigation as it deems necessary to inform itself as to the
22
<PAGE>
business, operations, property, financial and other condition and
creditworthiness of the Borrower, the Lessee and the Guarantor. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower, the
Lessee or the Guarantor which may come into the possession of the Administrative
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
7.7 Indemnification.
---------------
The Lenders agree to indemnify the Administrative Agent, in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought under this Section 7.7 (or, if indemnification is sought after the
date upon which the Commitments shall have terminated and the Loans shall have
been paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against any of them in any way relating
to or arising out of, the Commitments, this Agreement, any of the other
Operative Agreements or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by any of them under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment or any portion of such
- --------
liabilities, obligations, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of the Administrative Agent. The agreements in this Section 7.7
shall survive the payment of the Notes and all other amounts payable hereunder.
7.8 Administrative Agent in Its Individual Capacity.
-----------------------------------------------
The Administrative Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower,
the Lessee or the Guarantor as though the Administrative Agent were not the
Administrative Agent hereunder and under the other Operative Agreements. With
respect to its Loans made or renewed by it and any Note issued to it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Operative Agreements as any Lender and may exercise the same as
though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
7.9 Successor Administrative Agent.
------------------------------
The Administrative Agent may resign as Administrative Agent upon
thirty days' notice to the Lenders, the Borrower, the Lessee and the Guarantor.
If the Administrative Agent
23
<PAGE>
shall resign as Administrative Agent under this Agreement, the Majority Lenders
shall appoint from among the Lenders a successor Administrative Agent which
successor Administrative Agent shall be subject to the approval of the Borrower
and, so long as no Lease Event of Default shall have occurred and be continuing,
the Lessee and the Guarantor, such approval not to be unreasonably withheld or
delayed. If no successor Administrative Agent is appointed prior to the
effective date of the resignation of the resigning Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and subject
to the approval of the Borrower and, so long as no Lease Event of Default shall
have occurred and be continuing, the Lessee and the Guarantor, such approval not
to be unreasonably withheld or delayed, a successor Administrative Agent from
among the Lenders. If no successor Administrative Agent has accepted appointment
as Administrative Agent by the date which is thirty days following a retiring
Administrative Agent's notice of resignation, the retiring agent's notice of
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of Administrative Agent until such time, if any, as
the Majority Lenders appoint a successor Administrative Agent, as provided for
above. Upon the effective date of such resignation, only the Lenders or such
successor Administrative Agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor agent and the retiring Administrative Agent's rights,
powers and duties in such capacity shall be terminated. After any retiring
Administrative Agent resigns hereunder as Administrative Agent, the provisions
of this Article VII and Section 9.5 shall inure to their respective benefit as
to any actions taken or omitted to be taken by it while it was Administrative
Agent under this Agreement.
7.10 Actions of Administrative Agent on Behalf of Holders.
----------------------------------------------------
The parties hereto specifically acknowledge and consent to the Agent's
acting on behalf of the Holder as provided in the Participation Agreement, and,
in any such case, the Lenders acknowledge that the Holders shall be entitled to
vote as "Lenders" hereunder to the extent required or permitted by the Operative
Agreements (including specifically without limitation Section 10.6 of the
Participation Agreement).
SECTION 8 MATTERS RELATING TO PAYMENT AND COLLATERAL
8.1 Collection of Payments and Other Amounts.
----------------------------------------
(a) The Construction Agent and each Credit Party has agreed pursuant
to the terms of the Participation Agreement to pay to the Administrative Agent
any and all Rent and any and all other amounts of any kind or type owing by the
Lessee, the Guarantor or the Construction Agent to the Lessor or the Owner
Trustee under the Lease or any of the other Operative Agreements. Promptly
after receipt, the Administrative Agent shall apply, in accordance with the
terms of this Section 8, such amounts received by the Construction Agent or any
Credit Party and all other payments, receipts and other consideration of any
kind whatsoever received by the Administrative Agent pursuant to the Security
Agreement or otherwise received
24
<PAGE>
by the Administrative Agent or any of the Lenders in connection with the
Collateral, the Security Documents or any of the other Operative Agreements.
(b) Payments and other amounts received by the Administrative Agent
from time to time in accordance with the terms of subparagraph (a) shall be
applied as follows (subject to all events to Section 8.1(c)):
(i) Any such payment or amount identified as or deemed to be
Basic Rent shall be applied and allocated by the Administrative Agent
first, ratably to the Lenders and the Holders for application and
-----
allocation to the payment of interest on the Loans and thereafter the
principal of the Loans which is due and payable on such date and to the
payment of accrued Holder Yield with respect to the Holder Fundings and
thereafter the portion of the Holder Fundings which is due on such date;
and second, if no Default or Event of Default is in effect, any excess
------
shall be paid to such Person or Persons as the Lessee may designate;
provided, that if a Default or Event of Default is in effect, such excess
--------
(if any) shall instead be held by the Administrative Agent until the
earlier of (I) the first date thereafter on which no Default or Event of
Default shall be in effect (in which case such payments or returns shall
then be made to such other Person or Persons as the Lessee may designate)
and (II) the Maturity Date or the Expiration Date, as the case may be (or,
if earlier, the date of any Acceleration), in which case such amounts shall
be applied and allocated in the manner contemplated by Section 8.1(b)(iv).
(ii) If on any date the Administrative Agent or the Lessor shall
receive any amount in respect of (A) any Casualty or Condemnation pursuant
to Sections 15.1(a) or 15.1(g) of the Lease (excluding any payments in
respect thereof which are payable to the Lessee in accordance with the
Lease or held by Lessor as security for performance of Lessee's obligations
under the Lease), or (B) the Termination Value in connection with the
delivery of a Termination Notice pursuant to Article XVI of the Lease, or
(C) the Termination Value in connection with the exercise of the Purchase
Option under Section 20.1 of the Lease or the exercise of the option of the
Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (D) any payment in an amount equal to the Termination Value
for any or all Construction Period Properties required to be made or
elected to be made by the Construction Agent to the Lessor pursuant to the
terms of the Agency Agreement, then in each case, the Lessor shall be
required to pay such amount received (1) if no Acceleration has occurred,
to prepay the principal balance of the Loans on such date in an amount
equal to ninety-seven percent (97%) of such payment and the remaining three
percent (3%) of such payment shall be applied pro rata to the principal
amount of outstanding Holder Fundings on such date until the Loans are paid
in full, and to Holder Fundings thereafter, (2) if an Acceleration has
occurred, to apply and allocate the proceeds respecting Sections
8.1(b)(ii)(A) through 8.1(b)(ii)(D) in accordance with Section 8.1(b)(iii)
hereof.
(iii) An amount equal to any payment identified as proceeds of
the sale or other disposition (or lease upon the exercise of remedies) of
the Properties or any portion thereof, whether pursuant to Article XXII of
the Lease or the exercise of remedies under
25
<PAGE>
the Security Documents, the Lease or otherwise, and any payment in respect
of excess wear and tear pursuant to Section 22.3 of the Lease (whether such
payment relates to a period before or after the Construction Period
Termination Date) shall be applied and allocated by the Administrative
Agent first, ratably to the payment of the principal and interest of the
-----
Tranche B Loans then outstanding, second, to the extent such amount exceeds
------
the maximum amount to be paid pursuant to the foregoing provisions of this
paragraph (iii), ratably to the payment of the principal and interest of
the Tranche A Loans then outstanding, third, to any and all other amounts
-----
owing under the Operative Agreements to the Lenders under the Tranche B
Loans, fourth, to any and all other amounts owing under the Operative
------
Agreements to the Lenders under the Tranche A Loans, fifth, ratably to the
-----
payment to the Holders of the outstanding principal balance of all Holder
Fundings plus all outstanding Holder Yield with respect to such outstanding
Holder Fundings, sixth, to any and all other amounts owing under the
-----
Operative Agreements to the Holders, and seventh, to the extent moneys
-------
remain after application and allocation pursuant to clauses first through
-----
sixth above, to the Owner Trustee for application and allocation to any and
-----
all other amounts owing to the Holders or the Owner Trustee and as the
Holders shall determine; provided, further, where no Event of Default shall
-------- -------
exist and be continuing and a prepayment is made for any reason with
respect to less than the full amount of the outstanding principal amount of
the Loans and the outstanding Holder Fundings, the proceeds shall be
applied and allocated ratably among the Lenders and among the Holders.
(iv) An amount equal to (A) any such payment identified as a
payment of the Maximum Amount pursuant to the third paragraph of Section
2.1 of the Agency Agreement or any payment pursuant to Section 22.1(b) of
the Lease (or otherwise) of the Maximum Residual Guarantee Amount (and any
such lesser amount as may be required by Section 22.1(b) of the Lease) in
respect of the Properties and (B) any other amount payable upon any
exercise of remedies after the occurrence of an Event of Default not
covered by Sections 8.1(b)(i) or 8.1(b)(iii) above (including without
limitation any amount received in connection with an Acceleration which
does not represent proceeds from the sale or liquidation of the Properties)
and (C) any other amount payable by the Guarantor pursuant to Section 6B
shall be applied and allocated by the Administrative Agent first, ratably,
-----
to the payment of the principal and interest balance of Tranche A Loans
then outstanding, second, ratably to the payment of the principal and
------
interest balance of the Tranche B Loans then outstanding, third, to the
-----
payment of any other amounts owing to the Lenders hereunder or under any of
the other Operative Agreements, fourth, ratably to the payment of the
------
principal balance of all Holder Fundings plus all outstanding Holder Yield
with respect to such outstanding Holder Fundings, and fifth, to the extent
-----
moneys remain after application and allocation pursuant to clauses first
-----
through fourth above, to the Owner Trustee for application and allocation
--------------
to Holder Fundings and Holder Yield and any other amounts owing to the
Holders or the Owner Trustee as the Holders shall determine.
(v) An amount equal to any such payment identified as
Supplemental Rent and any payment by the Construction Agent not otherwise
covered under Sections
26
<PAGE>
8.1(b)(i)-(iv) hereof shall be applied and allocated by the Administrative
Agent to the payment of any amounts then owing to the Administrative Agent,
the Lenders, the Holders and the other parties to the Operative Agreements
(or any of them) (other than any such amounts payable pursuant to the
preceding provisions of this Section 8.1(b)) as shall be determined by the
Administrative Agent in its reasonable discretion; provided, however, that
-------- -------
Supplemental Rent received upon the exercise of remedies after the
occurrence and continuance of an Event of Default in lieu of or in
substitution of the Maximum Residual Guarantee Amount or as a partial
payment thereon shall be applied and allocated as set forth in Section
8.1(b)(iv).
(vi) The Administrative Agent in its reasonable judgment shall
identify the nature of each payment or amount received by the
Administrative Agent and apply and allocate each such amount in the manner
specified above.
(c) Upon the payment in full of the Loans, the Holder Fundings and
all other amounts then due and owing by the Owner Trustee hereunder or under any
Credit Document and the payment in full of all other amounts then due and owing
to the Lenders, the Holders, the Administrative Agent, the Owner Trustee and the
other Financing Parties pursuant to the Operative Agreements, any moneys
remaining with the Administrative Agent shall be returned to the Lessee. In the
event of an Acceleration it is agreed that, prior to the application and
allocation of amounts received by the Administrative Agent in the order
described in Section 8.1(b) above or any distribution of money to the Lessee,
any such amounts shall first be applied and allocated to the payment of (i) any
and all sums advanced by the Administrative Agent in order to preserve the
Collateral or to preserve its Lien thereon, (ii) the expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing or
realizing on the Collateral, or of any exercise by the Administrative Agent of
its rights under the Security Documents, together with reasonable attorneys'
fees and expenses and court costs and (iii) any and all other amounts reasonably
owed to the Administrative Agent under or in connection with the transactions
contemplated by the Operative Agreements (including without limitation any
accrued and unpaid administration fees).
8.2 Certain Remedial Matters.
------------------------
Notwithstanding any other provision of this Agreement or any other
Credit Document:
(a) the Borrower shall at all times retain all rights to Excepted
Payments payable to it and to demand, collect or commence an action at law to
obtain such payments and to enforce any judgment with respect thereto; and
(b) the Borrower and each Holder shall at all times retain the right,
but not to the exclusion of the Administrative Agent, (A) to receive from the
Lessee all notices, certificates and other documents and all information that
the Lessee is permitted or required to give or furnish to the "Borrower" or the
"Lessor" pursuant to the Lease, the Participation Agreement or any other
Operative Agreement, (B) to retain all rights with respect to insurance that
Article XIV
27
<PAGE>
of the Lease specifically confers upon the "Lessor", (C) to provide such
insurance as the Lessee shall have failed to maintain or as the Borrower or any
Holder may desire, and (D) to enforce compliance by the Lessee with the
provisions of Articles VIII, IX, X, XI, XIV and XVII of the Lease.
8.3 Release of Properties, etc.
--------------------------
If the Lessee shall at any time purchase any Property pursuant to the
terms of the Lease, or the Construction Agent shall purchase any Property
pursuant to the Agency Agreement, or if any Property shall be sold in accordance
with Article XXII of the Lease, then, upon satisfaction by the Borrower of its
obligation to prepay the Loans and Holder Fundings, the Administrative Agent is
hereby authorized and directed to release such Properties from the Liens created
by the Security Documents. In addition, upon the termination of the Commitments
and the payment in full of the Loans and all other amounts owing by the Borrower
hereunder or under any other Credit Document the Administrative Agent is hereby
authorized and directed to release all of the Properties from the Liens created
by the Security Documents. Upon request of the Borrower following any such
release, the Administrative Agent shall, at the sole cost and expense of the
Lessee, execute and deliver to the Borrower and the Lessee such documents as the
Borrower or the Lessee shall reasonably request to evidence such release.
8.4 Excepted Payments.
-----------------
Notwithstanding any other provision of this Agreement or the Security
Documents, any Excepted Payment received at any time by the Administrative Agent
shall be distributed promptly to the Person entitled to receive such Excepted
Payment.
SECTION 9 MISCELLANEOUS
9.1 Amendments and Waivers.
----------------------
Neither this Agreement, any other Credit Document, nor any terms
hereof or thereof may be amended, supplemented or modified except in accordance
with the provisions of this Section 9.1. The Majority Lenders may, or, with the
written consent of the Majority Lenders, the Administrative Agent may, from time
to time, (a) with the consent of the Lessee and the Guarantor (so long as no
Default or Event of Default shall have occurred and be continuing and,
respecting an amendment, supplement or modification to Section 8.1 only, so long
as Lessee has rights in any Property under the Operative Agreements), enter into
with the Borrower written amendments, supplements or modifications to the Credit
Documents (including, without limitation, any amendment to Section 8.1 hereof)
for the purpose of adding any provisions to the Credit Documents or changing in
any manner the rights of the Administrative Agent, the Lenders or the Borrower
thereunder or (b) waive, on such terms and conditions as the Majority Lenders or
the Administrative Agent, as the case may be, may specify in such instrument,
any of the requirements of the Credit Documents or any Default or Event of
Default and its consequences. In addition, the Administrative Agent may from
time to time consent in writing to amendments,
28
<PAGE>
supplements, modifications or waivers with respect to any Operative Agreement
(other than the Credit Documents), subject to receipt of the prior written
consent of the Majority Lenders and, so long as no Default or Event of Default
shall have occurred and be continuing, the Lessee and the Guarantor; provided,
--------
however, that so long as the Administrative Agent has no actual knowledge of the
- -------
existence of an Event of Default the Administrative Agent may grant waivers
and/or consents with respect to the terms and requirements of the Participation
Agreement without the prior consent of the Lenders to the extent provided
therein (as such authority of the Administrative Agent is more specifically
described in Section 7.1 hereof). Notwithstanding the foregoing, no such
amendment, supplement, modification or waiver shall (i) reduce the amount or
extend the scheduled date of maturity of any Note, or reduce the stated rate of
any interest payable hereunder (other than as a result of waiving the
applicability of any post-default increase in interest rates) or any Facility
Fees payable under the Participation Agreement or extend the scheduled date of
any payment of such interest or Commitment Fees or increase the amount or extend
the expiration date of any Lender's Commitment, in each case without the consent
of each Lender directly affected thereby, or (ii) amend, modify or waive any
provision of this Section 9.1 or the definition of Majority Lenders, or reduce
the percentage specified in the definition of Majority Lenders, or consent to
the assignment or transfer by the Borrower of any of its rights and obligations
under the Credit Documents or release a material portion of the Collateral
(except in accordance with Section 8.3) or release the Lessee from its
obligations under the Lease or otherwise alter any payment obligations of the
Lessee to the Lessor under the Operative Agreements, in each case without the
written consent of all the Lenders, or (iii) amend, modify or waive any
provision of Section 7 without the written consent of the then Administrative
Agent or (iv) permit Advances for Work in excess of the Construction Budget
without the unanimous consent of the Lenders and Holders, or (v) eliminate the
automatic option (in the absence of the unanimous election of the Lenders and
the Holders) under Section 5.3(a) of the Agency Agreement requiring that the
Construction Agent pay certain liquidated damages in exchange for the conveyance
of a Property to the Construction Agent or (vi) permit the extension of the
Construction Period Termination Date beyond the date that is three (3) years
from the Initial Closing Date without the unanimous consent of the Lenders and
the Holders. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the Lessee, the Guarantor, the Lenders and the Administrative Agent
and all future holders of the Notes. In the case of any waiver, the Borrower,
the Lessee, the Guarantor, the Lenders and the Administrative Agent shall be
restored to their former position and rights under the Credit Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extent to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Section 4.2 hereof to any Loan
hereunder are, in the opinion of the Majority Lenders, satisfied, any Lender
shall fail to fulfill its obligations to make such Loan (any such Lender, a
"Defaulting Lender") then, for so long as such failure shall continue, the
- ------------------
Defaulting Lender shall (unless the Borrower and the Majority Lenders,
determined as if the Defaulting Lender were not a "Lender" hereunder, shall
otherwise consent in writing) be deemed for all purposes relating to amendments,
modifications, waivers or consents under this Agreement (including, without
limitation, under this Section 9.1) to have no Loans, shall not be
29
<PAGE>
treated as a "Lender" hereunder when performing the computation of Majority
Lenders, and shall have no rights under the preceding paragraph of this Section
9.1; provided that any action taken by the other Lenders pursuant to this
paragraph with respect to the matters referred to in clause (i) through (vi) of
the preceding paragraph shall not be effective as against the Defaulting Lender.
9.2 Notices.
-------
All notices, request and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered, or three Business Days after being deposited in the mail,
postage prepaid, or, in the case of telecopy notice, when received, addressed as
follows in the case of the Borrower and the Administrative Agent, and as set
forth in Schedule 1.1 in the case of the other parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto and any
future holders of the Notes:
The Borrower:
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Mr. Val T. Orton
Corporate Trust Counsel
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
Bank of America, N.A., as Administrative Agent:
Bank of America, N.A.
901 Main Street
66th Floor
Dallas, TX 75202
Attention: Shelly K. Harper
Telephone: (214) 209-0567
Telecopy: (214) 209-0604
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders pursuant to Section 2.3, 2.5 2.6 or 2.7 shall not be effective
until received.
A copy of any notice delivered hereunder shall also be delivered to
the Lessee, the Guarantor and the Legal Department of the Guarantor at the
addresses for notices set forth in Section 14.3 of the Participation Agreement.
30
<PAGE>
9.3 No Waiver; Cumulative Remedies.
------------------------------
No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Credit Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties.
------------------------------------------
All representations and warranties made hereunder, in the other Credit
Documents and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Notes and the making of the Loans hereunder.
9.5 Payment of Expenses and Taxes.
-----------------------------
The Borrower agrees to: (a) pay all reasonable out-of-pocket costs
and expenses of (i) the Administrative Agent whether or not the transactions
herein contemplated are consummated, in connection with the negotiation,
preparation, execution and delivery of the Operative Agreements and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of Moore & Van Allen, PLLC) and (ii) the Administrative Agent and
each of the Lenders in connection with the enforcement of the Operative
Agreements and the documents and instruments referred to therein (including,
without limitation, the reasonable fees and disbursements of counsel for the
Administrative Agent and for each of the Lenders) and (b) pay and hold each of
the Lenders harmless from and against any and all present and future stamp and
other similar taxes with respect to the foregoing matters and save each of the
Lenders harmless from and against any all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Lender) to pay such taxes.
9.6 Successors and Assigns; Participations and Assignments.
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent, all future holders of the Notes
and their respective permitted successors and assigns, except that the Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
9.7 Participations.
--------------
Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
-----------
in any Loan owing to such Lender, any Note held by such
31
<PAGE>
Lender, any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Operative Agreements; provided that any such sale
--------
of a participating interest shall be in a principal amount of at least
$2,000,000. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Note for all purposes under this Agreement and the Notes, and
the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the Notes. In no event shall any
Participant have any right to approve any amendment or waiver of any provision
of this Agreement or any other Operative Agreement, or any consent to any
departure by the Borrower or any other Person therefrom, except to the extent
that such amendment, waiver or consent would (a) reduce the principal of, or
interest on, any Loan or Note, or postpone the date of the final maturity of any
Loan or Note, or reduce the amount of any Facility Fee, in each case to the
extent subject to such participation or (b) release all or substantially all of
the Collateral. The Borrower agrees that, while an Event of Default shall have
occurred and be continuing, if amounts outstanding under this Agreement and the
Notes are due or unpaid, or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interests in amounts owing directly to it as a Lender under
this Agreement or any Note, provided that, in purchasing such participating
--------
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 9.10(a) as fully as if it
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.11, 2.12 and 2.13 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it was a Lender; provided that, in the case of Section 2.13, such Participant
--------
shall have complied with the requirements of said Section and provided, further,
-------- -------
that no Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
9.8 Assignments.
-----------
(a) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to time assign to any
Lender or any affiliate of any Lender or, with the consent, subject to Section
11.1 of the Participation Agreement, of the Borrower and the Administrative
Agent and, so long as no Default or Event of Default shall have occurred and be
continuing, the Lessee and the Guarantor (which in each case shall not be
unreasonably withheld or delayed), to an additional bank, financial institution
or other entity that is either organized under the laws of the United States or
any state thereof or is a foreign bank that operates a branch office in the
United States, (each, a "Purchasing Lender") all or any part of its rights and
-----------------
obligations under this Agreement and the other Operative Agreements pursuant to
an Assignment and Acceptance, substantially in the form of Exhibit B, executed
---------
by such Purchasing Lender, such assigning Lender (and, in the case of a
Purchasing Lender that is not a Lender or an affiliate thereof, subject to
Section 11.1 of the Participation Agreement, by the
32
<PAGE>
Borrower and the Administrative Agent) and delivered to the Administrative Agent
for its acceptance and recording in the Register; provided that no such
--------
assignment to a Purchasing Lender (other than any Lender or any affiliate
thereof) shall be in an aggregate principal amount less than $5,000,000 (other
than in the case of an assignment of all of a Lender's interests under this
Agreement and the Notes). Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Commitment as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding anything to the contrary in this Agreement, the consent of the
Borrower shall not be required, and, unless requested by the relevant Purchasing
Lender and/or assigning Lender, new Notes shall not be required to be executed
and delivered by the Borrower, for any assignment which occurs at any time when
any of the events described in Section 6(g) shall have occurred and be
continuing.
(b) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not a Lender or an affiliate thereof, by the Borrower and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $2,500 (which shall not be payable by the
Borrower or the Lessee, except as otherwise provided in connection with an
assignment requested in accordance with Section 2.14(b)), the Administrative
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) promptly
after the effective date determined pursuant thereto, record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower. On or prior to such effective
date, the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent new Notes (in exchange for the Notes of the assigning
Lender), each in an amount equal to the Commitment assumed or Loans purchased by
the relevant Purchasing Lender pursuant to such Assignment and Acceptance, and,
if the assigning Lender has retained a Commitment or any Loan hereunder, new
Notes to the order of the assigning Lender, each in an amount equal to the
Commitment or Loans retained by it hereunder. Such new Notes shall be dated the
Effective Date and shall otherwise be in the form of the Notes replaced thereby.
(c) Each Purchasing Lender (other than any Lender organized and
existing under the laws of the U.S. or any political subdivision in or of the
U.S.), by executing and delivering an Assignment and Acceptance,
(A) agrees to execute and deliver to the Administrative Agent,
as promptly as practicable, four signed copies (two for the Administrative
Agent and two for delivery by the Administrative Agent to the Borrower) of
Form 1001 or Form 4224 (or any successor form or comparable form) (it being
understood that if the applicable form is not so delivered, payments under
or in respect of this Agreement may be subject to withholding and
deduction);
33
<PAGE>
(B) represents and warrants to the Borrower and the
Administrative Agent that the form so delivered is true and accurate and
that, as of the effective date of the applicable Assignment and Acceptance,
each of such Purchasing Lender's Lending Offices is entitled to receive
payments of principal and interest under or in respect of this Agreement
without withholding or deduction for or on account of any taxes imposed by
the U.S. Federal government;
(C) agrees to thereafter deliver to each of the Borrower and the
Administrative Agent upon reasonable request and not later than December 31
of the year preceding the year to which it will apply, such further
properly completed signed copies of Form 1001 or Form 4224 (or any
successor form or comparable form), as appropriate, unless an event has
occurred which renders the relevant form inapplicable (it being understood
that if the applicable form is not so delivered, payments under or in
respect of this Agreement may be subject to withholding and deduction);
(D) agrees to promptly notify the Borrower and the
Administrative Agent in writing if it ceases to be entitled to receive
payments of principal and interest under or in respect of this Agreement
without withholding or deduction for or on account of any taxes imposed by
the U.S. or any political subdivision in or of the U.S. (it being
understood that payments under or in respect of this Agreement may be
subject to withholding and deduction in such event);
(E) acknowledges that in the event it ceases to be exempt from
withholding and/or deduction of such taxes, the Administrative Agent may
withhold and/or deduct the applicable amount from any payments to which
such assignee Lender would otherwise be entitled, without any liability to
such assignee Lender therefor; and
(F) agrees to indemnify the Borrower and the Administrative
Agent from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs or expenses that
result from such assignee Lender's breach of any such representation,
warranty or agreement.
(d) Any Lender party to this Agreement may, from time to time and
without the consent of the Borrower or any other Person, may pledge or assign
for security purposes any portion of its Loans or any other interests in this
Agreement and the other Credit Documents to any Federal Reserve Bank.
9.9 The Register; Disclosure; Pledges to Federal Reserve Banks.
----------------------------------------------------------
(a) The Administrative Agent shall maintain at its address referred
to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
--------
Lenders, the Commitments of the Lenders, and the principal amount of the Loans
owing to each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of clearly demonstrable error, and the
34
<PAGE>
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as the owner of the Loan recorded therein for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Lender at any reasonable time and from time to time upon
reasonable notice.
(b) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
9.10 Adjustments; Set-off.
--------------------
(a) Except as otherwise expressly provided in Section 8.1 hereof
where, and to the extent, one Lender is entitled to payments prior to other
Lenders, if any Lender (a "Benefited Lender") shall at any time receive any
----------------
payment of all or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 6(g), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans,
or interest thereon, such Benefited Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender's Loan, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
-------- -------
portion of such excess payment or benefits is thereafter recovered from such
Benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the event of such recovery, but without interest.
(b) In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of an Event of Default, the Administrative Agent and each
Lender is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by the Administrative Agent or such
Lender (including, without limitation, by branches and agencies of the
Administrative Agent or such Lender wherever located) to or for the credit or
the account of the Borrower against and on account of the obligations and
liabilities of the Borrower to the Administrative Agent or such Lender under
this Agreement or under any of the other Operative Agreements, including,
without limitation, all interests in obligations of the Borrower purchased by
any such Lender pursuant to Section 9.10(a), and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Operative Agreement, irrespective or whether or not the Administrative Agent or
such Lender shall have made any demand and although said obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
35
<PAGE>
9.11 Counterparts.
------------
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by telecopy), and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
9.12 Severability.
------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.13 Integration.
-----------
This Agreement and the other Credit Documents represent the agreement
of the Borrower, the Administrative Agent, and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Administrative Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other
Credit Documents.
9.14 GOVERNING LAW.
-------------
THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.
9.15 Submission To Jurisdiction; Waivers.
-----------------------------------
The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Credit Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the
Commonwealth of Virginia, the courts of the United States of America for the
Eastern District of Virginia, and appellate courts from any thereof;
(b) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail) postage prepaid, to the Borrower at its
address set forth in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
36
<PAGE>
(c) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(d) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section 9.15 any special, exemplary, punitive or consequential damages.
9.16 Acknowledgments.
---------------
Borrower hereby acknowledges that:
(a) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duly to the Borrower arising out of or in connection with
this Agreement or any of the other Credit Documents, and the relationship
between the Administrative Agent and the Lenders, on one hand, and the Borrower,
on the other hand, in connection herewith or therewith is solely that of debtor
and creditor; and
(b) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
9.17 WAIVERS OF JURY TRIAL.
---------------------
THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
9.18 Nonrecourse.
-----------
Anything to the contrary contained in this Agreement or in any other
Operative Agreement notwithstanding, neither the Borrower nor any officer,
director or shareholder thereof, nor any of the Borrower's successors or assigns
(all such Persons being hereinafter referred to collectively as the "Exculpated
----------
Persons"), shall be personally liable in any respect for any liability or
- -------
obligation hereunder or under any other Operative Agreement including the
payment of the principal of, or interest on, the Notes, or for monetary damages
for the breach of performance of any of the covenants contained in this
Agreement, the Notes or any of the other Operative Agreements. The
Administrative Agent and the Lenders agree that, in the event any of them
pursues any remedies available to them under this Agreement, the Notes or any
other Operative Agreement, neither the Administrative Agent nor the Lenders
shall have any recourse against the Borrower, nor any other Exculpated Person,
for any deficiency, loss or claim for monetary damages or otherwise resulting
therefrom and recourse shall be had solely and exclusively against the COSI
Trust Estate and as permitted under the Operative Agreements; but nothing
contained herein shall be taken to prevent recourse against or the enforcement
of
37
<PAGE>
remedies against the COSI Trust Estate in respect of any and all liabilities,
obligations and undertakings contained in this Agreement, the Notes or any other
Operative Agreement. The Administrative Agent and the Lenders further agree
that the Borrower shall not be responsible for the payment of any amounts owing
hereunder (excluding principal and interest (other than Overdue Interest) in
respect of the Loans) (such non-excluded amounts, "Supplemental Amounts") except
--------------------
to the extent that payments of Supplemental Rent designated by the Lessee for
application to such Supplemental Amounts shall have been paid by the Lessee
pursuant to the Lease (it being understood that the failure by the Lessee for
any reason to pay any Supplemental Rent in respect of such Supplemental Amounts
shall nevertheless be deemed to constitute a default by the Borrower for the
purposes of Section 6(a)(ii)). Notwithstanding the foregoing provisions of this
Section 9.18, nothing in this Agreement or any other Operative Agreement shall
(a) constitute a waiver, release or discharge of any obligation evidenced or
secured by this Agreement or any other Credit Document, (b) limit the right of
the Administrative Agent or any Lender to name the Borrower as a party defendant
in any action or suit for judicial foreclosure and sale under any Security
Document, or (c) affect in any way the validity or enforceability of any
guaranty (whether of payment and/or performance) given to the Lessor, the
Administrative Agent or the Lenders, or of any indemnity agreement given by the
Borrower, in connection with the Loans made hereunder.
9.19 USURY SAVINGS PROVISION.
-----------------------
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN
STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE
EXTENT ANY PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF
COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS
SECTION 9.19 SHALL APPLY. ANY SUCH PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE
REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE
HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND
CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING,
BUT NOT LIMITED TO, PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY
OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR
RECEIVED UNDER THIS AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS
AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF
ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST
WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH
CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH
AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE
MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY
OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE AGENT OR ANY
LENDER SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS
38
<PAGE>
CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR
UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF
THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST,
OR REFUNDED TO BORROWER OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH
AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED
TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF
THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST
WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND NEITHER THE
AGENT NOR ANY LENDER INTENDS TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE
EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO THE AGENT OR ANY
LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED,
ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING ANY RENEWAL OR
EXTENSION) OF THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH
PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE
LAW.
[The remainder of this page has been left blank intentionally.]
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually except as expressly stated herein,
but solely as Owner Trustee for Capital One Realty
Trust 1998-1
By: /s/ DeAnn Madsen
--------------------------
Name: DeAnn Madsen
-----------------------
Title: Assistant Trust Officer
-----------------------
[Signature pages continue]
<PAGE>
BANK OF AMERICA, N.A., as Administrative Agent,
and as a Lender
By: /s/ Shelly K. Harper
----------------------------
Name: Shelly K. Harper
--------------------------
Title: Vice President
-------------------------
[Signature pages continue]
<PAGE>
FIRST NATIONAL BANK OF CHICAGO, as a Lender
By: /s/ Steven D. Franklin
-----------------------------
Name: Steven D. Franklin
---------------------------
Title: Vice President
--------------------------
[Signature pages continue]
<PAGE>
BARCLAYS BANK PLC, as a Lender
By: /s/ Richard Herder
--------------------------
Name: Richard Herder
------------------------
Title: Director
-----------------------
[Signature pages continue]
<PAGE>
FIRST UNION NATIONAL BANK, as a Lender
By: /s/ Carrie H. McAllister
--------------------------------
Name: Carrie H. McAllister
------------------------------
Title: Vice President
-----------------------------
[Signature pages continue]
<PAGE>
KBC BANK N.V., as a Lender
By: /s/ Robert Snauffer
-----------------------------
Name: Robert Snauffer
---------------------------
Title: First Vice President
--------------------------
By: /s/ Robert M. Surdam, Jr.
-----------------------------
Name: Robert M. Surdam, Jr.
---------------------------
Title: Vice President
--------------------------
[Signature pages continue]
<PAGE>
CREDIT LYONNAIS - NY BRANCH, as a Lender
By: /s/ W. Jay Buckly
-----------------------------
Name: W. Jay Buckly
---------------------------
Title: Vice President
--------------------------
[Signature page continues]
<PAGE>
BMO GLOBAL CAPITAL SOLUTIONS, INC., as a Lender
By: /s/ Joseph A. Bliss
-------------------------------
Name: Joseph A. Bliss
-----------------------------
Title: Vice President
----------------------------
[Signature page continues]
<PAGE>
BANK OF MONTREAL, as a Lender
By: /s/ Kanu Modi
------------------------
Name: Kanu Modi
----------------------
Title: Director
---------------------
[Signature pages end]
<PAGE>
Schedule 1.1
------------
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
--------------------------- --------------------------
Name and Address of Lender Amount Percentage Amount Percentage
- -------------------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Bank of America, N.A. $5,114,825.58 20.0581% $608,091.09 18.1520%
901 Main Street, 66th Floor
Dallas, TX 75202
Attn: Shelly K. Harper, Vice President
Telephone: 214-209-0567
Facsimile: 214-209-0604
First National Bank of Chicago $ 3,187,500 12.5000% $ 418,750 12.5000%
1 First National Plaza, Suite 0155
Chicago, IL 60670
Attn: R. Eric Weidelman
Telephone: 312-732-5294
Facsimile: 312-732-6222
Barclays Bank PLC $ 3,187,500 12.5000% $ 418,750 12.5000%
222 Broadway
New York, NY 10038
Attn: Richard Herder
Telephone: 212-412-7660
Facsimile: 212-412-5610
First Union National Bank $ 3,187,500 12.5000% $ 418,750 12.5000%
7 N. 8th Street, VA 3246
Richmond, VA 23219
Attn: Carrie H. McAllister, Vice President
Telephone: 804-771-7294
Facsimile: 804-771-7577
KBC Bank, N.V. - Atlanta Rep. Office $3,286,337.21 12.8876% $463,662.79 13.8407%
1349 W. Peachtree St., Suite 1750
Atlanta, GA 30309
Attn: Jackie Brunetto, Vice President
Telephone: 404-876-2566
Facsimile: 404-876-3212
Credit Lyonnais - NY Branch $3,286,337.21 12.8876% $463,662.79 13.8407%
1301 6th Avenue
New York, NY 10019
Attn: Jay Buckley, Vice President
Telephone: 212-261-7430
Facsimile: 212-261-3401
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
--------------------------- --------------------------
Name and Address of Lender Amount Percentage Amount Percentage
- -------------------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Bank of Montreal $ 4,250,000 16.6667% $ 0.00 0.0000%
115 S. LaSalle St., 12th Floor
Chicago, IL 60603
Attn: Kanu Modi, Director
Telephone: 312-750-3891
Facsimile: 312-756-6057
BMO Global Capital Solutions $ 0.00 0.0000% $558,333.33 16.6667%
115 S. LaSalle St., 13th Floor
Chicago, IL 60603
Attn: Doug Deal
Telephone: (312) 845-2074
Facsimile: (312) 750-1790
Total $25,500,000 100% $ 3,350,000 100%
</TABLE>
<PAGE>
Exhibit A-1
-----------
TRANCHE A NOTE
(Capital One Services, Inc.)
$______________ _______________
_______________
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as Owner Trustee for the
Capital One Realty Trust 1998-1 (the "Borrower"), hereby unconditionally
--------
promises to pay to the order of [Lender] (the "Lender") at the office of
------
______________________ ______________________________________________
________________________ in lawful money of the United States of America and in
immediately available funds, on the Maturity Date, the principal amount of (a)
_________________________ ____________________________________ NO/100 DOLLARS
($_____________), or, if less, (b) the aggregate unpaid principal amount of all
Loans made by the Lender to the Borrower pursuant to Section 2.1 of the Credit
Agreement (as defined below). The Borrower further agrees to pay interest in
like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in Section 2.8 of such
Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each Loan
made pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof and each conversion
of all or a portion thereof to another Type. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
----- -----
The failure to make any such endorsement or any error in such endorsement shall
not affect the obligations of the Borrower in respect of such Loan.
This Note (a) is one of the Notes referred to in the Credit Agreement
(Capital One Services, Inc.) dated September 3, 1999 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
----------------
Borrower, the Lender, the other banks and financial institutions from time to
time parties thereto and Bank of America, N.A., as Administrative Agent, (b) is
subject to the provisions of the Credit Agreement (including, without
limitation, Section 9.18 thereof) and (c) is subject to optional and mandatory
prepayment in whole or in part as provided in the Credit Agreement. Reference
is hereby made to the Credit Documents for a description of the properties and
assets in which a security interest has been granted, the nature and extent of
the security and the guarantees, the terms and conditions upon which the
security interests and each guarantee were granted and the rights of the holder
of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
1
<PAGE>
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.
[The remainder of this page has been left blank intentionally.]
2
<PAGE>
IN WITNESS WHEREOF, the undersigned authorized officer of the borrower has
executed this note as of the date first set forth above.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee for
Capital One Realty Trust 1998-1
By:_____________________________
Name:___________________________
Title:__________________________
3
<PAGE>
Exhibit A-2
-----------
TRANCHE B NOTE
(Capital One Services, Inc.)
$______________ _______________
_______________
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as Owner Trustee for the
Capital One Realty Trust 1998-1 (the "Borrower"), hereby unconditionally
--------
promises to pay to the order of [Lender] (the "Lender") at the office of _______
------
______________________________________________________________________________
in lawful money of the United States of America and in immediately available
funds, on the Maturity Date, the principal amount of (a)
_________________________ ____________________________________ NO/100 DOLLARS
($_____________), or, if less, (b) the aggregate unpaid principal amount of all
Loans made by the Lender to the Borrower pursuant to Section 2.1 of the Credit
Agreement (as defined below). The Borrower further agrees to pay interest in
like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in Section 2.8 of such
Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each Loan
made pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof and each conversion
of all or a portion thereof to another Type. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
----- -----
The failure to make any such endorsement or any error in such endorsement shall
not affect the obligations of the Borrower in respect of such Loan.
This Note (a) is one of the Notes referred to in the Credit Agreement
(Capital One Services, Inc.) dated September 3, 1999 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
----------------
Borrower, the Lender, the other banks and financial institutions from time to
time parties thereto and Bank of America, N.A., as Administrative Agent, (b) is
subject to the provisions of the Credit Agreement (including, without
limitation, Section 9.18 thereof) and (c) is subject to optional and mandatory
prepayment in whole or in part as provided in the Credit Agreement. Reference
is hereby made to the Credit Documents for a description of the properties and
assets in which a security interest has been granted, the nature and extent of
the security and the guarantees, the terms and conditions upon which the
security interests and each guarantee were granted and the rights of the holder
of this Note in respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.
[The remainder of this page has been left blank intentionally.]
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned authorized officer of the borrower has
executed this note as of the date first set forth above.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee for
Capital One Realty Trust 1998-1
By:_____________________________________
Name:___________________________________
Title:__________________________________
-3-
<PAGE>
Exhibit B
---------
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement (Capital One Services, Inc.),
dated as of September 3, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among FIRST SECURITY BANK, NATIONAL
----------------
ASSOCIATION, not in its individual capacity, but solely as Owner Trustee for the
Capital One Realty Trust 1998-1 (the "Owner Trustee" or the "Borrower"), the
------------- --------
Lenders named therein and Bank of America, N.A., as Administrative Agent.
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
____________________ (the "Assignor") and _______________ (the "Assignee")
-------- --------
agree as follows:
The Assignor hereby irrevocably sells and assigns to the Assignee without
recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor without recourse to the Assignor, as of the Effective
Date (as defined below), a ___% interest (the "Assigned Interest") in and to the
-----------------
Assignor's rights and obligations under the Credit Agreement with respect to the
credit facility contained in the Credit Agreement as are set forth on Schedule 1
hereto (the "Assigned Facility"), in a principal amount for the Assigned
-----------------
Facility as set forth on Schedule 1.
The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Operative
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Operative Agreement or
any other instrument or document furnished pursuant thereto, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, or any other obligor or the
performance or observance by the Borrower, or any other obligor of any of their
respective obligations under the Credit Agreement or any other Operative
Agreement or any other instrument or document furnished pursuant hereto or
thereto; and (c) attaches the Note held by it evidencing the Assigned Facility
and requests that the Administrative Agent exchange such Note for a new Note
payable to the Assignee and (if the Assignor has retained any interest in the
Assigned Facility) a new Note payable to the Assignor in the respective amounts
which reflect the assignment being made hereby (and after giving effect to any
other assignments which have become effective on the Effective Date).
The Assignee (a) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (b) confirms that it has received
copies of the Operative Agreements, and such other documents and information as
it has deemed appropriate to make its
<PAGE>
own credit analysis and decision to enter into this Assignment and Acceptance;
(c) agrees that it will, independently and without reliance upon the Assignor,
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
other Operative Agreements or any other instrument or document furnished
pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent
to take such action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement, the other Operative Agreements or any
other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and the other Operative Agreements to which
Assignee is a party and will perform in accordance herewith all the obligations
which by the terms of the Credit Agreement and the other Operative Agreements to
which Assignee is a party are required to be performed by it as a Lender
including, if it is organized under the laws of a jurisdiction outside the U.S.,
its obligation pursuant to Section 2.13(b) of the Credit Agreement.
The effective date of this Assignment and Acceptance shall be ________,
19__ (the "Effective Date"). Following the execution of this Assignment and
--------------
Acceptance, it will be delivered to the Administrative Agent for acceptance by
it and recording by the Administrative Agent pursuant to Section 9.9 of the
Credit Agreement, effective as of the Effective Date (which shall not, unless
otherwise agreed to by the Administrative Agent, be earlier than five Business
Days after the date of such acceptance and recording by the Administrative
Agent).
Upon such acceptance and recording, from and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignee whether such amounts have accrued prior to the Effective Date or accrue
subsequent to the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.
From and after the Effective Date, (a) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Lender thereunder and under the other
Operative Agreements and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement and the other Operative Agreements.
This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of Commonwealth of Virginia.
[The remainder of this page has been left blank intentionally.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
[Name of Assignor]
By:__________________________________
Name:________________________________
Title:_______________________________
[Name of Assignee]
By:__________________________________
Name:________________________________
Title:_______________________________
Consented To:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely
as the Owner Trustee under the Capital One Real Trust 1998-1
By:__________________________________
Name:________________________________
Title:_______________________________
BANK OF AMERICA, N.A., as the Agent
By:__________________________________
Name:________________________________
Title:_______________________________
[consents required only to the extent expressly provided in Section 9.8 of the
Credit Agreement]
<PAGE>
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT (CAPITAL ONE SERVICES, INC.),
DATED AS OF AUGUST 31, 1999,
AMONG
FIRST SECURITY BANK, NATIONAL ASSOCIATION
NOT INDIVIDUALLY,
BUT SOLELY AS OWNER TRUSTEE,
THE LENDERS NAMED THEREIN
AND
BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT
FOR THE LENDERS (IN SUCH CAPACITY, THE "ADMINISTRATIVE AGENT")
--------------------
Name of Assignor:_________________________
Name of Assignee:_________________________
Effective Date of Assignment:_____________
Credit Facility Principal Amount Commitment Percentage
Assigned Assigned Assigned
-------- -------- --------
--------------- $---------------- ----------------------%
[Name of Assignor]
By:__________________________________
Name:________________________________
Title:_______________________________
[Name of Assignee]
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 10.25
-------------
LEASE AGREEMENT
(Capital One Services, Inc.)
(Tax Retention Operating Lease)
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually,
but solely as Owner Trustee
under the Capital One Realty Trust 1998-1,
as Lessor
and
CAPITAL ONE SERVICES, INC.,
as Lessee
Dated as of September 3, 1999
- --------------------------------------------------------------------------------
This Lease Agreement is subject to a security interest in favor of Bank of
America, N.A., as Administrative Agent (the "Agent") under a Security Agreement
dated as of September 3, 1999, between First Security Bank, National
Association, not individually except as expressly stated therein, but solely as
Owner Trustee under the Capital One Realty Trust 1998-1 and the Agent, as
amended, modified, supplemented, restated and/or replaced from time to time.
This Lease Agreement has been executed in several counterparts. To the extent,
if any, that this Lease Agreement 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 Agreement may be created
through the transfer or possession of any counterpart other than the original
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I..................................................................................................................... 1
1.1 Definitions.......................................................................................................... 1
1.2 Interpretation....................................................................................................... 2
ARTICLE II.................................................................................................................... 2
2.1 Property............................................................................................................. 2
2.2 Lease Term........................................................................................................... 2
2.3 Title................................................................................................................ 2
2.4 Lease Supplements.................................................................................................... 2
ARTICLE III................................................................................................................... 3
3.1 Rent................................................................................................................. 3
3.2 Payment of Basic Rent................................................................................................ 3
3.3 Supplemental Rent.................................................................................................... 3
3.4 Performance on a Non-Business Day.................................................................................... 4
3.5 Rent Payment Provisions.............................................................................................. 4
ARTICLE IV.................................................................................................................... 4
4.1 Taxes; Utility Charges............................................................................................... 4
ARTICLE V..................................................................................................................... 5
5.1 Quiet Enjoyment...................................................................................................... 5
ARTICLE VI.................................................................................................................... 5
6.1 Net Lease............................................................................................................ 5
6.2 No Termination or Abatement.......................................................................................... 6
ARTICLE VII................................................................................................................... 6
7.1 Ownership of the Property............................................................................................ 6
ARTICLE VIII.................................................................................................................. 7
8.1 Condition of the Property............................................................................................ 7
8.2 Possession and Use of the Property................................................................................... 8
ARTICLE IX.................................................................................................................... 9
9.1 Compliance With Legal Requirements and Insurance Requirements........................................................ 9
ARTICLE X..................................................................................................................... 9
10.1 Maintenance and Repair; Return...................................................................................... 9
10.2 Environmental Inspection............................................................................................ 10
ARTICLE XI.................................................................................................................... 11
11.1 Modifications....................................................................................................... 11
ARTICLE XII................................................................................................................... 11
12.1 Warranty of Title................................................................................................... 11
ARTICLE XIII.................................................................................................................. 12
13.1 Permitted Contests Other Than in Respect of Indemnities............................................................. 12
ARTICLE XIV................................................................................................................... 13
14.1 Public Liability and Workers' Compensation Insurance................................................................ 13
14.2 Permanent Hazard and Other Insurance................................................................................ 13
14.3 Coverage............................................................................................................ 14
ARTICLE XV.................................................................................................................... 15
15.1 Casualty and Condemnation........................................................................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
15.2 Environmental Matters............................................................................................... 17
15.3 Notice of Environmental Matters..................................................................................... 17
ARTICLE XVI................................................................................................................... 18
16.1 Termination Upon Certain Events..................................................................................... 18
16.2 Procedures.......................................................................................................... 18
ARTICLE XVII.................................................................................................................. 18
17.1 Lease Events of Default............................................................................................. 18
17.2 Surrender of Possession............................................................................................. 21
17.3 Reletting........................................................................................................... 21
17.4 Damages............................................................................................................. 22
17.5 Power of Sale....................................................................................................... 22
17.6 Final Liquidated Damages............................................................................................ 23
17.7 Lessee's Purchase Option During Default............................................................................. 23
17.8 Waiver of Certain Rights............................................................................................ 23
17.9 Assignment of Rights Under Contracts................................................................................ 24
17.10 Remedies Cumulative................................................................................................ 24
ARTICLE XVIII................................................................................................................. 24
18.1 Lessor's Right to Cure Lessee's Lease Defaults...................................................................... 24
ARTICLE XIX................................................................................................................... 24
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option..................................................... 24
19.2 No Purchase or Termination With Respect to Less than All of a Property.............................................. 25
ARTICLE XX.................................................................................................................... 25
20.1 Purchase Option or Sale Option-General Provisions................................................................... 25
20.2 Lessee Purchase Option.............................................................................................. 26
20.3 Third Party Sale Option............................................................................................. 26
ARTICLE XXI................................................................................................................... 27
21.1 [Intentionally Omitted]............................................................................................. 27
ARTICLE XXII.................................................................................................................. 27
22.1 Sale Procedure...................................................................................................... 27
22.2 Application of Proceeds of Sale..................................................................................... 29
22.3 Indemnity for Excessive Wear........................................................................................ 29
22.4 Appraisal Procedure................................................................................................. 30
22.5 Certain Obligations Continue........................................................................................ 30
ARTICLE XXIII................................................................................................................. 30
23.1 Holding Over........................................................................................................ 30
ARTICLE XXIV.................................................................................................................. 31
24.1 Risk of Loss........................................................................................................ 31
ARTICLE XXV................................................................................................................... 31
25.1 Assignment.......................................................................................................... 31
25.2 Subleases........................................................................................................... 31
ARTICLE XXVI.................................................................................................................. 32
26.1 No Waiver........................................................................................................... 32
ARTICLE XXVII................................................................................................................. 32
27.1 Acceptance of Surrender............................................................................................. 32
27.2 No Merger of Title.................................................................................................. 32
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XXVIII................................................................................................................ 33
28.1 Incorporation of Covenants.......................................................................................... 33
ARTICLE XXIX.................................................................................................................. 34
29.1 Notices............................................................................................................. 34
ARTICLE XXX................................................................................................................... 35
30.1 Miscellaneous....................................................................................................... 35
30.2 Amendments and Modifications........................................................................................ 35
30.3 Successors and Assigns.............................................................................................. 35
30.4 Headings and Table of Contents...................................................................................... 35
30.5 Counterparts........................................................................................................ 36
30.6 GOVERNING LAW....................................................................................................... 36
30.7 Calculation of Rent................................................................................................. 36
30.8 Memoranda of Lease and Lease Supplements............................................................................ 36
30.9 Allocations between the Lenders and the Holders..................................................................... 36
30.10 Limitations on Recourse............................................................................................ 36
30.11 WAIVERS OF JURY TRIAL.............................................................................................. 37
30.12 Exercise of Lessor Rights.......................................................................................... 37
30.13 Submission To Jurisdiction; Waivers................................................................................ 37
30.14 USURY SAVINGS PROVISION............................................................................................ 38
</TABLE>
iii
<PAGE>
EXHIBITS
- --------
EXHIBIT A - Lease Supplement No. ___
EXHIBIT B - Memorandum of Lease and Lease Supplement No.___
iv
<PAGE>
LEASE AGREEMENT
---------------
(Capital One Services, Inc.)
(Tax Retention Operating Lease Agreement)
THIS LEASE AGREEMENT (Capital One Services, Inc.) (Tax Retention Operating
Lease) (as amended, supplemented or modified from time to time, this "Lease"),
-----
dated as of September 3, 1999, is between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, having its principal office at 79
South Main Street, Salt Lake City, Utah 84111, not individually, but solely as
Owner Trustee under the Capital One Realty Trust 1998-1, as lessor (the
"Lessor"), and CAPITAL ONE SERVICES, INC., a Delaware corporation, having its
------
principal place of business at 2980 Fairview Park Drive, Suite 1300, Falls
Church, VA 22042, as lessee (the "Lessee").
------
W I T N E S S E T H:
- - - - - - - - - -
A. WHEREAS, subject to the terms and conditions of the Agency Agreement
(Capital One Services, Inc.), Lessor will (i) purchase or ground lease various
parcels of real property, some of which will (or may) have existing Improvements
thereon, from one or more third parties designated by Lessee and (ii) fund the
development, refurbishment and construction by the Construction Agent of
Improvements on such real property; and
B. WHEREAS, the Basic Term shall commence with respect to each
Property upon the Completion of such Property (the "Basic Term Commencement
-----------------------
Date").
- ----
C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to
lease from Lessor, each Property;
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 Definitions.
-----------
Capitalized terms used but not otherwise defined in this Lease have the
respective meanings specified in Appendix A to the Participation Agreement
----------
(Capital One Services, Inc.) of even date herewith (as such may be amended,
modified, supplemented, restated and/or replaced from time to time, the
"Participation Agreement") among the Lessee, the Construction Agent, Capital One
-----------------------
Financial Corporation, as Guarantor, First Security Bank, National Association,
not individually, except as expressly stated therein, as Owner Trustee under the
Capital One Realty Trust 1998-1, the Holders, the Lenders and the Agent.
<PAGE>
1.2 Interpretation.
--------------
The rules of usage set forth in Appendix A to the Participation Agreement
----------
shall apply to this Lease.
ARTICLE II
2.1 Property.
--------
Subject to the terms and conditions hereinafter set forth and contained in
the respective Lease Supplement relating to each Property, Lessor hereby leases
to Lessee and Lessee hereby leases from Lessor, each Property. Each Property is
(or will be) legally described in the applicable Lease Supplement.
2.2 Lease Term.
----------
The basic term of this Lease with respect to each Property (the "Basic
-----
Term") shall begin upon the Basic Term Commencement Date and shall end on the
- ----
third annual anniversary of the Initial Closing Date (the "Basic Term Expiration
---------------------
Date"), unless the Basic Term is earlier terminated or the term of this Lease is
- ----
renewed (as described below) in accordance with the provisions of this Lease.
To the extent no Default or Event of Default has occurred and is
continuing, and if Lessee has not provided written notice to Lessor at least one
hundred twenty (120) days prior to the Basic Term Expiration Date of its
determination to exercise its purchase option or sale option under Article XX
hereof, the term of this Lease for each Property shall be automatically extended
for one (1) additional term of one (1) year's duration from the Basic Term
Expiration Date (the "Renewal Term"); provided, that the expiration date for
------------ --------
such Renewal Term for each Property shall not be later than the fourth annual
anniversary of the Initial Closing Date.
2.3 Title.
-----
Each Property is leased to Lessee without any representation or warranty,
express or implied, by Lessor and subject to the rights of parties in possession
(if any), the existing state of title (including, without limitation, the
Permitted Exceptions) and all applicable Legal Requirements. Lessee shall in no
event have any recourse against Lessor for any defect in title to any Property
other than for Lessor Liens.
2.4 Lease Supplements.
-----------------
On or prior to each Basic Term Commencement Date, Lessee and Lessor shall
each execute and deliver a Lease Supplement for the Property to be leased
effective as of such Basic Term Commencement Date in substantially the form of
Exhibit A hereto.
- ---------
-2-
<PAGE>
ARTICLE III
3.1 Rent.
----
(a) Lessee shall pay Basic Rent in arrears on each Payment Date, and
on any date on which this Lease shall terminate with respect to any or all
Properties during the Term; provided, however, with respect to each
individual Property Lessee shall have no obligation to pay Basic Rent with
respect to such Property until the Basic Term has commenced with respect to
such Property.
(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 (or within the applicable grace period) to
such account or accounts at such bank or banks as Lessor shall from time to
time direct.
(c) Lessee's inability or failure to take possession of all or any
portion of any Property when delivered by Lessor, whether or not
attributable to any act or omission of Lessor, the Construction Agent or
Lessee, or for any other reason whatsoever, shall not delay or otherwise
affect Lessee's obligation to pay Rent for such Property in accordance with
the terms of this Lease.
3.2 Payment of Basic Rent.
---------------------
Basic Rent shall be paid absolutely net to Lessor or its designee, so that
this Lease shall yield to Lessor the full amount thereof, without setoff,
deduction or reduction.
3.3 Supplemental Rent.
-----------------
Lessee shall pay to Lessor or its designee or to the Person entitled
thereto any and all Supplemental Rent promptly as the same shall become due and
payable, and if Lessee fails to pay any Supplemental Rent, Lessor shall have all
rights, powers and remedies provided for herein or by law or equity or otherwise
in the case of nonpayment of Basic Rent. Lessee shall pay to Lessor, as
Supplemental Rent, among other things, on demand, to the extent permitted by
applicable Legal Requirements, (a) any and all unpaid fees, charges, payments
and other obligations (other than the obligations of Lessor to pay the principal
amount of the Loans and the Holder Amount) due and owing by Lessor under the
Credit Agreement, under the Trust Agreement and/or under any other Operative
Agreement (including specifically without limitation any amounts owing to the
Lenders under Section 2.11, Section 2.12, Section 2.13 and Section 9.5 of the
Credit Agreement and any amounts owing to the Holders under Section 3.9 or
Section 3.10 of the Trust Agreement) and (b) interest at the applicable Overdue
Rate on any installment of Basic Rent not paid when due (subject to the
applicable grace period) for the period for which the same shall be overdue and
on any payment of Supplemental Rent not paid when due or demanded by 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 Lessee's
obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of Lessee with respect to Supplemental Rent. Unless expressly
provided otherwise in this Lease, in
-3-
<PAGE>
the event of any failure on the part of Lessee to pay and discharge any
Supplemental Rent as and when due, Lessee shall also promptly pay and discharge
any fine, penalty, interest or cost which may be assessed or added for
nonpayment or late payment of such Supplemental Rent, all of which shall also
constitute Supplemental Rent. Notwithstanding the foregoing, with respect to
each individual Property, Lessee shall have no obligation to pay Supplemental
Rent with respect to such Property until the Basic Term has commenced with
respect to such Property; provided, nothing in this Section 3.3 shall excuse the
--------
Construction Agent from paying amounts (including amounts that would otherwise
constitute Supplemental Rent obligations) to the extent such amounts are payable
under the Agency Agreement prior to the Basic Term Commencement Date respecting
such Property.
3.4 Performance on a Non-Business Day.
---------------------------------
If any Basic Rent is required hereunder on a day that is not a Business
Day, then such Basic Rent shall be due on the corresponding Scheduled Interest
Payment Date. If any Supplemental Rent is required hereunder on a day that is
not a Business Day, then such Supplemental Rent shall be due on the next
succeeding Business Day.
3.5 Rent Payment Provisions.
-----------------------
Lessee shall make payment of all Basic Rent and Supplemental Rent when due
(subject to the applicable grace period) regardless of whether any of the
Operative Agreements pursuant to which same is calculated and is owing shall
have been rejected, avoided or disavowed in any bankruptcy or insolvency
proceeding involving any of the parties to any of the Operative Agreements.
Such provisions of such Operative Agreements and their related definitions are
incorporated herein by reference and shall survive any termination, amendment or
rejection of any such Operative Agreements.
ARTICLE IV
4.1 Taxes; Utility Charges.
----------------------
Lessee shall pay or cause to be paid all Impositions with respect to the
Properties and/or the use, occupancy or operation thereof and all charges for
electricity, power, gas, oil, water, telephone, sanitary sewer service and all
other rents, utilities and operating expenses of any kind or type used in or on
a Property and related real property during the Term. Upon Lessor's request,
Lessee shall provide from time to time Lessor with evidence of all such payments
referenced in the foregoing sentence. Lessee shall be entitled to receive any
credit or refund with respect to any Imposition or utility charge paid by
Lessee. Unless an Event of Default shall have occurred and be continuing, the
amount of any credit or refund received by Lessor on account of any Imposition
or utility charges paid by Lessee, net of the costs and expenses incurred by
Lessor in obtaining such credit or refund, shall be promptly paid over to
Lessee. All charges for Impositions or utilities imposed with respect to a
Property for a period during which this Lease expires or terminates shall be
adjusted and prorated on a daily basis between Lessor and Lessee, and each party
shall pay or reimburse the other for such party's pro rata share thereof.
-4-
<PAGE>
ARTICLE V
5.1 Quiet Enjoyment.
---------------
Subject to the rights of Lessor contained in Sections 17.2, 17.3 and 20.3
and the other terms of this Lease and so long as no Lease Event of Default shall
have occurred and be continuing, Lessee shall peaceably and quietly have, hold
and enjoy each Property for the applicable Term, free of any claim or other
action by Lessor or anyone rightfully claiming by, through or under Lessor
(other than Lessee) with respect to any matters arising from and after the
applicable Basic Term Commencement Date.
ARTICLE VI
6.1 Net Lease.
---------
This Lease shall constitute a net lease, and the obligations of Lessee
hereunder are absolute and unconditional. Any present or future law to the
contrary notwithstanding, this Lease shall not terminate, nor shall Lessee be
entitled to any abatement, suspension, deferment, reduction, setoff,
counterclaim, or defense with respect to the Rent, nor shall the obligations of
Lessee hereunder be affected (except as expressly herein permitted and by
performance of the obligations in connection therewith) by reason of: (i) any
damage to or destruction of any Property or any part thereof; (ii) any taking of
any Property or any part thereof or interest therein by Condemnation or
otherwise; (iii) any prohibition, limitation, restriction or prevention of
Lessee's use, occupancy or enjoyment of any Property or any part thereof, or any
interference with such use, occupancy or enjoyment by any Person or for any
other reason; (iv) any title defect, Lien or any matter affecting title to any
Property; (v) any eviction by paramount title or otherwise; (vi) any default by
Lessor hereunder; (vii) any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution or other proceeding relating to or affecting Lessor,
Lessee, any Holder or any Governmental Authority; (viii) the impossibility or
illegality of performance by Lessor, Lessee or both; (ix) any action of any
Governmental Authority; (x) Lessee's acquisition of ownership of all or part of
any Property; (xi) breach of any warranty or representation with respect to any
Property or any Operative Agreement; (xii) any defect in the condition, quality
or fitness for use of any Property or any part thereof; or (xiii) any other
cause or circumstance whether similar or dissimilar to the foregoing and whether
or not Lessee shall have notice or knowledge of any of the foregoing. The
parties intend that the obligations of Lessee hereunder shall be covenants,
agreements and obligations that are separate and independent from any
obligations of Lessor hereunder and shall continue unaffected unless such
covenants, agreements and obligations shall have been modified or terminated in
accordance with an express provision of this Lease. Lessor and Lessee
acknowledge and agree that the provisions of this Section 6.1 have been
specifically reviewed and subject to negotiation.
-5-
<PAGE>
6.2 No Termination or Abatement.
---------------------------
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 Lessor or any
Governmental Authority, or any action with respect to this Lease or any
Operative Agreement which may be taken by any trustee, receiver or liquidator of
Lessor or any Governmental Authority or by any court with respect to Lessor,
Lessee, any Holder, or any Governmental Authority. Lessee hereby waives all
right (i) to terminate or surrender this Lease (except as permitted under the
terms of the Operative Agreements) or (ii) to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with respect
to any Rent. Lessee shall remain obligated under this Lease in accordance with
its terms and 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,
Lessee shall be bound by all of the terms and conditions contained in this
Lease.
ARTICLE VII
7.1 Ownership of the Property.
-------------------------
(a) Lessor and Lessee intend that (i) for financial accounting
purposes with respect to Lessee (A) this Lease will be treated as an
"operating lease" pursuant to Statement of Financial Accounting Standards
No. 13, as amended, (B) Lessor will be treated as the owner and lessor of
each Property and (C) Lessee will be treated as the lessee of each
Property, but (ii) for federal and all state and local income tax purposes,
bankruptcy purposes, commercial law and real estate purposes and all other
purposes (A) this Lease will be treated as a financing arrangement and (B)
Lessee will be treated as the owner of the Properties and will be entitled
to all tax benefits ordinarily available to owners of property similar to
the Properties for such tax purposes.
(b) For all purposes other than as set forth in Section 7.1(a),
Lessor and Lessee intend this Lease to constitute a finance lease and not a
true lease. Lessor and Lessee further intend and agree that, for the
purpose of securing Lessee's obligations hereunder, (i) this Lease shall be
deemed to be a security agreement and financing statement within the
meaning of Article 9 of the Uniform Commercial Code respecting each of the
Properties to the extent such is personal property and an irrevocable grant
and conveyance of a lien and mortgage on each of the Properties to the
extent such is real property; (ii) the acquisition of title in each
Property referenced in Article II shall be deemed to be a grant by Lessee
to Lessor of, and Lessee hereby grants to Lessor, a lien on and security
interest, mortgage lien and deed of trust in all of Lessee's right, title
and interest in and to the Property and all proceeds (including without
limitation insurance proceeds) of the conversion, voluntary or involuntary,
of the foregoing into cash, investments, securities or other property,
whether in the form of cash, investments,
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securities or other property, and an assignment of all rents, profits and
income produced by the Property; and (iii) notifications to Persons holding
such property, and acknowledgments, receipts or confirmations from
financial intermediaries, bankers or agents (as applicable) of Lessee shall
be deemed to have been given for the purpose of perfecting such security
interest, mortgage lien and deed of trust under applicable law. Lessor and
Lessee shall promptly take such actions as may be necessary or advisable in
either party's opinion (including without limitation the filing of Uniform
Commercial Code Financing Statements, Uniform Commercial Code Fixture
Filings and memoranda of this Lease and the various Lease Supplements) to
ensure that the security interest, lien, mortgage lien and deed of trust in
each Property will be deemed to be a perfected lien and security interest
of first priority under applicable law and will be maintained as such
throughout the Term.
ARTICLE VIII
8.1 Condition of the Property.
-------------------------
LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS IS"
WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY LESSOR AND
IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY
PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS WHICH AN ACCURATE
SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS
AND (E) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF
AND/OR THE DATE OF THE APPLICABLE LEASE SUPPLEMENT. NEITHER LESSOR NOR THE
AGENT NOR ANY LENDER NOR ANY HOLDER 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, VALUE, HABITABILITY, USE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY
(OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART
THEREOF), AND NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER SHALL
BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF ANY
PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. THE LESSEE
HAS OR WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE
IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS THE LESSOR, THE AGENT,
EACH LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS
INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS
OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE
PRECEDING SENTENCE, AS BETWEEN THE LESSOR, THE
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<PAGE>
AGENT, THE LENDERS AND THE HOLDERS, ON THE ONE HAND, AND THE LESSEE, ON THE
OTHER HAND, ARE TO BE BORNE BY LESSEE.
8.2 Possession and Use of the Property.
----------------------------------
(a) At all times during the Term with respect to each Property, such
Property shall be used by Lessee in the ordinary course of its business.
Lessee shall pay, or cause to be paid, all charges and costs required in
connection with the use of the Properties as contemplated by this Lease.
Lessee shall not commit or permit any waste of the Properties or any part
thereof.
(b) The address stated in Section 29.1 of this Lease is the chief
place of business and chief executive office of Lessee (as such terms are
used in Section 9-103(3) of the Uniform Commercial Code of any applicable
jurisdiction), and Lessee will provide Lessor with prior written notice of
any change of location of its chief place of business or chief executive
office. Regarding a particular Property, each Lease Supplement correctly
identifies the initial location of the related Equipment and Improvements
and contains an accurate legal description for the related parcel of Land.
Lessee has no other places of business where the Equipment or Improvements
will be located other than those identified on the applicable Lease
Supplement.
(c) Lessee will not attach or incorporate any item of Equipment to
or in any other item of equipment or personal property or to or in any real
property (except the Land identified in the Lease Supplement in which such
Equipment is also described) in a manner that could give rise to the
assertion of any Lien on such item of Equipment by reason of such
attachment or the assertion of a claim that such item of Equipment has
become a fixture and is subject to a Lien in favor of a third party that is
prior to the Liens thereon created by the Operative Agreements.
(d) On the Basic Term Commencement Date for each Property, Lessor
and Lessee shall execute a Lease Supplement in regard to such Property
which shall contain an Equipment Schedule that has a complete description
of each item of Equipment, an Improvement Schedule that has a complete
description of each Improvement and a legal description of the Land, to be
leased hereunder as of such date. Simultaneously with the execution and
delivery of each Lease Supplement, such Equipment, Improvements and Land
shall be deemed to have been accepted by Lessee for all purposes of this
Lease and to be subject to this Lease.
(e) At all times during the Term with respect to each Property,
Lessee will comply with all obligations under and (to the extent no Event
of Default exists and provided that such exercise will not impair the value
of such Property) shall be permitted to exercise all rights and remedies
under, all operation and easement agreements and related or similar
agreements applicable to such Property.
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<PAGE>
(f) To the extent any punch list items with respect to any
particular Property are not complete as of the Basic Term Commencement Date
for such Property, Lessee shall cause such punch list items to be completed
promptly after the Basic Term Commencement Date respecting such Property.
ARTICLE IX
9.1 Compliance With Legal Requirements and Insurance Requirements.
-------------------------------------------------------------
Subject to the terms of Article XIII relating to permitted contests,
Lessee, at its sole cost and expense, shall (i) comply with all material Legal
Requirements (including without limitation all Environmental Laws), and all
Insurance Requirements relating to the Properties, including the use,
development, construction, operation, maintenance, repair, refurbishment and
restoration thereof, whether or not compliance therewith shall require
structural or extraordinary changes in the Improvements or interfere with the
use and enjoyment of the Properties, and (ii) procure, maintain and comply with
all material licenses, permits, orders, approvals, consents and other
authorizations required for the construction, use, maintenance and operation of
the Properties and for the use, development, construction, operation,
maintenance, repair and restoration of the Improvements. The Lessor agrees to
take such actions as may be reasonably requested by the Lessee in connection
with the compliance by the Lessee of its obligations under this Section 9.1.
ARTICLE X
10.1 Maintenance and Repair; Return.
------------------------------
(a) Lessee, at its sole cost and expense, shall maintain each
Property in good condition, repair and working order (ordinary wear and
tear excepted) and make all necessary repairs thereto, of every kind and
nature whatsoever, whether interior or exterior, ordinary or extraordinary,
structural or nonstructural or foreseen or unforeseen, in each case as
required by all Legal Requirements, Insurance Requirements, and
manufacturer's specifications and standards and on a basis consistent with
the operation and maintenance of properties or equipment comparable in type
and function to the applicable Property and in compliance with standard
industry practice subject, however, to the provisions of Article XV with
respect to Condemnation and Casualty.
(b) Lessee shall not use or locate any component of any Property
outside of any Approved State. Lessee shall not move or relocate any
component of any Property beyond the boundaries of the Land (comprising
part of the Property) described in the applicable Lease Supplement.
(c) If any component of any Property becomes worn out, lost,
destroyed, damaged beyond repair or otherwise permanently rendered unfit
for use and the failure to replace such component would have a Material
Adverse Effect on such Property, Lessee, at its own expense, will within a
reasonable time replace such component with a
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<PAGE>
replacement component which is free and clear of all Liens (other than
Permitted Liens) and has a value, utility and useful life at least equal to
the component replaced. All components which are added to the Property
shall immediately become the property of, and title thereto shall vest in,
Lessor, and shall be deemed incorporated in the Property and subject to the
terms of this Lease as if originally leased hereunder.
(d) Upon reasonable advance notice, Lessor and its agents shall have
the right to inspect each Property and all maintenance records with respect
thereto at any reasonable time during normal business hours but shall not,
in the absence of an Event of Default, materially disrupt the business of
Lessee.
(e) Lessee shall cause to be delivered to Lessor (at Lessee's sole
expense) any additional Appraisals (or reappraisals) as Lessor may request
if any one of Lessor, the Agent, any Lender or any Holder is required
pursuant to any applicable Legal Requirement to obtain such an Appraisal
(or reappraisal).
(f) Lessor shall under no circumstances be required to build any
improvements on any Property, make any repairs, replacements, alterations
or renewals of any nature or description to any Property, make any
expenditure whatsoever in connection with this Lease or maintain any
Property in any way. Lessor shall not be required to maintain, repair or
rebuild all or any part of any Property, and Lessee waives the right to (i)
require Lessor to maintain, repair, or rebuild all or any part of any
Property, or (ii) make repairs at the expense of Lessor pursuant to any
Legal Requirement, Insurance Requirement, contract, agreement, covenants,
condition or restriction at any time in effect.
(g) Lessee shall, upon the expiration or earlier termination of this
Lease with respect to a Property, if Lessee shall not have exercised its
Purchase Option with respect to such Property, surrender such Property to
Lessor, or the third party purchaser, as the case may be, subject to
Lessee's obligations under this Lease (including without limitation the
obligations of the Lessee at the time of such surrender under Sections 9.1,
10.1(a)-(f), 10.2, 11.1, 12.1, 22.1 and 23.1).
10.2 Environmental Inspection.
------------------------
If Lessee has not given notice of exercise of its Purchase Option on the
Expiration Date pursuant to Section 20.1, then not more than 120 days nor less
than 60 days prior to the Expiration Date, Lessee shall, at its sole cost and
expense, provide to Lessor a report by a reputable environmental consultant
selected by Lessee, which report shall be in form and substance reasonably
satisfactory to Lessor.
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ARTICLE XI
11.1 Modifications.
-------------
(a) Lessee at its sole cost and expense, at any time and from time
to time without the consent of Lessor may make alterations, renovations,
improvements and additions to the Property or any part thereof and
substitutions and replacements therefor (collectively, "Modifications"),
-------------
and Lessee shall make any and all Modifications required to be made
pursuant to any Legal Requirement; provided, that: (i) except for any
--------
Modification required to be made pursuant to a Legal Requirement, no
Modification shall materially impair the value, utility or useful life of
the Property from that which existed immediately prior to such
Modification; (ii) the Modification shall be done expeditiously and in a
good and workmanlike manner; (iii) Lessee shall comply with all material
Legal Requirements (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 adversely affected; (iv) to the extent required by
Section 14.2(a), Lessee shall maintain builders' risk insurance at all
times when a Modification is in progress; (v) subject to the terms of
Article XIII relating to permitted contests, Lessee shall pay all costs and
expenses and discharge any Liens arising with respect to the Modification;
(vi) such Modification shall comply with the requirements of this Lease
(including without limitation Sections 8.2 and 10.1); and (vii) no
Improvements shall be demolished unless Lessee shall finance the proposed
Modification outside of this lease facility. All Modifications shall
immediately and without further action upon their incorporation into the
applicable Property (1) become property of the Lessor, (2) be subject to
this Lease and (3) be titled in the name of Lessor. Lessee shall not remove
or attempt to remove any Modification from any Property. Each Ground Lease
for a Property shall expressly provide for the provisions of the foregoing
sentence. Lessee, at its own cost and expense, will pay for the repairs of
any damage to the Property caused by the removal or attempted removal of
any Modification.
(b) The construction process provided for in the Agency Agreement is
acknowledged by Lessor and the Agent to be consistent with and in
compliance with the terms and provisions of this Article XI.
ARTICLE XII
12.1 Warranty of Title.
-----------------
(a) Lessee agrees that, except as otherwise provided herein and
subject to the terms of Article XIII relating to permitted contests, 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 any 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 Agent pursuant to the
Credit Agreement, other than
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Permitted Liens and Lessor Liens. Lessee shall promptly notify Lessor in
the event it receives actual knowledge that a Lien other than a Permitted
Lien or Lessor Lien has occurred with respect to a Property, and Lessee
represents and warrants to, and covenants with, Lessor that the Liens in
favor of the Lessor created by the Operative Agreements are first priority
perfected Liens subject only to Permitted Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied, to or
for the performance by any contractor, mechanic, laborer, materialman,
supplier or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition
of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT
LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING A PROPERTY OR
ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER
LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT
THE INTEREST OF LESSOR IN AND TO ANY PROPERTY.
ARTICLE XIII
13.1 Permitted Contests Other Than in Respect of Indemnities.
-------------------------------------------------------
Except to the extent otherwise provided for in Section 13 of the
Participation Agreement, Lessee, on its own or on Lessor's behalf but at
Lessee's sole cost and expense, may contest, by appropriate administrative or
judicial proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Legal Requirement, or
utility charges payable pursuant to Section 4.1 or any Lien, attachment, levy,
encumbrance or encroachment, and Lessor agrees not to pay, settle or otherwise
compromise any such item, provided that (a) the commencement and continuation of
such proceedings shall suspend the collection of any such contested amount from,
and suspend the enforcement thereof against, the applicable Properties, Lessor,
each Holder, the Agent and each Lender; (b) there shall not be imposed a Lien
(other than Permitted Liens) on any Property and no part of any Property nor any
Rent would be in any danger of being sold, forfeited, lost or deferred; (c) at
no time during the permitted contest shall there be a risk of the imposition of
criminal liability or material civil liability on Lessor, any Holder, the Agent
or any Lender for failure to comply therewith; and (d) in the event that, at any
time, there shall be a material risk of extending the application of such item
beyond the end of the Term, then Lessee shall deliver to Lessor an Officer's
Certificate certifying as to the matters set forth in clauses (a), (b) and (c)
of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
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ARTICLE XIV
14.1 Public Liability and Workers' Compensation Insurance.
----------------------------------------------------
During the Term for each Property, Lessee shall procure and carry, at
Lessee's sole cost and expense, commercial general liability and umbrella
liability insurance for claims for injuries or death sustained by persons or
damage to property while on the Properties or the premises where the Equipment
is located and such other public liability coverages as are then customarily
carried by similarly situated companies conducting business similar to that
conducted by Lessee. Such insurance shall be on terms and in amounts that are
no less favorable than insurance maintained by Lessee with respect to similar
properties and equipment that it owns and are then carried by similarly situated
companies conducting business similar to that conducted by Lessee, and in no
event shall have a minimum combined single limit per occurrence coverage (i) for
commercial general liability of less than $1,000,000 and (ii) for umbrella
liability of less than $50,000,000. The policies shall name the Lessee as the
insured and shall be endorsed to name Lessor, the Holders, the Agent and the
Lenders as additional insureds. The policies shall also specifically provide
that such policies shall be considered primary insurance which shall apply to
any loss or claim before any contribution by any insurance which Lessor, any
Holder, the Agent or any Lender may have in force. Lessee shall, in the
operation of the Properties, comply with applicable workers' compensation laws
and protect Lessor, each Holder, the Agent and each Lender against any liability
under such laws.
14.2 Permanent Hazard and Other Insurance.
------------------------------------
(a) During the Term for each Property, Lessee shall keep each of the
Properties insured against loss or damage by fire and other risks and shall
maintain builders' risk insurance during construction of any Improvements
or Modifications in amounts no less than the Termination Value from time to
time and on terms that (a) are no less favorable than insurance covering
other similar properties owned by Lessee and (b) are then carried by
similarly situated companies conducting business similar to that conducted
by Lessee. The policies shall name the Lessee as the insured and shall be
endorsed to name Lessor as an additional insured and loss payee and the
Agent, on behalf of the Holders and the Lenders to the extent of their
respective interests, as mortgagee and an additional named insured and loss
payee; provided, so long as no Lease Event of Default exists, any loss
--------
payable under the insurance policies required by this Section for losses up
to $1,000,000 will be paid to Lessee.
(b) If, during the Term with respect to a Property the area in which
such Property is located is designated a "flood-prone" area pursuant to the
Flood Disaster Protection Act of 1973, or any amendments or supplements
thereto or is in a zone designated A or V, then Lessee shall comply with
the National Flood Insurance Program as set forth in the Flood Disaster
Protection Act of 1973. In addition, Lessee will fully comply with the
requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as each may be amended from time to time,
and with any
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other Legal Requirement, concerning flood insurance to the extent that it
applies to any such Property.
14.3 Coverage.
--------
(a) As of the date of this Lease and annually thereafter during the
Term, Lessee shall furnish Lessor and the Agent with certificates prepared
by the insurers or insurance broker of Lessee showing the insurance
required under Sections 14.1 and 14.2 to be in effect, naming (except with
respect to workers' compensation insurance) Lessor, the Holders, the Agent
and the Lender as additional insureds and loss payees and evidencing the
other requirements of this Article XIV. All such insurance shall be at the
cost and expense of Lessee (or the Lessee's Contractors with respect to
insurance required to be maintained by such Contractors) and provided by
nationally recognized, financially sound insurance companies having an A-
X11 or better rating by Best's Key Rating Guide. Such certificates shall
include a provision for thirty (30) days' advance written notice by the
insurer to Lessor and the Agent in the event of cancellation or material
alteration of such insurance. If a Lease Event of Default has occurred and
is continuing and Lessor so requests, Lessee shall deliver to Lessor copies
of all insurance policies required by Sections 14.1 and 14.2.
(b) Lessee agrees that the insurance policy or policies required by
Sections 14.1, 14.2(a) and 14.2(b) shall include an appropriate clause
pursuant to which any such policy shall provide that it will not be
invalidated should Lessee or any Contractor, as the case may be, waive, at
any time, any or all rights of recovery against any party for losses
covered by such policy or due to any breach of warranty, fraud, action,
inaction or misrepresentation by Lessee or any Person acting on behalf of
Lessee. Lessee hereby waives any and all such rights against the Lessor,
the Holders, the Agent and the Lenders to the extent of payments made to
any such Person under any such policy.
(c) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Article XIV, except that Lessor may carry
separate liability insurance at Lessor's sole cost so long as (i) Lessee's
insurance is designated as primary and in no event excess or contributory
to any insurance Lessor may have in force which would apply to a loss
covered under Lessee's policy and (ii) each such insurance policy will not
cause Lessee's insurance required under this Article XIV to be subject to a
coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for the
insurance required by Section 14.1 and Section 14.2, shall renew or replace
each policy prior to the expiration date thereof or otherwise maintain the
coverage required by such Sections without any lapse in coverage.
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ARTICLE XV
15.1 Casualty and Condemnation.
-------------------------
(a) Subject to the provisions of this Article XV and Article XVI (in
the event Lessee delivers, or is obligated to deliver or is deemed to have
delivered, a Termination Notice), and prior to the occurrence and
continuation of a Lease Event of Default, Lessee shall be entitled to
receive (and Lessor hereby irrevocably assigns to Lessee all of Lessor's
right, title and interest in) any award, compensation or insurance proceeds
under Sections 14.2(a) or (b) hereof to which Lessee or Lessor may become
entitled by reason of their respective interests in a Property (i) if all
or a portion of such Property is damaged or destroyed in whole or in part
by a Casualty or (ii) if the use, access, occupancy, easement rights or
title to such Property or any part thereof is the subject of a
Condemnation; provided, however, if a Lease Event of Default shall have
-------- -------
occurred and be continuing or if such award, compensation or insurance
proceeds shall exceed $1,000,000, then such award, compensation or
insurance proceeds shall be paid directly to Lessor or, if received by
Lessee, shall be held in trust for Lessor, and shall be paid over by Lessee
to Lessor and held in accordance with the terms of this paragraph (a). All
amounts held by Lessor hereunder on account of any award, compensation or
insurance proceeds either paid directly to Lessor or turned over to Lessor
shall be held as security for the performance of Lessee's obligations
hereunder and when all such obligations of Lessee with respect to such
matters have been satisfied, all amounts so held by Lessor shall be paid
over to Lessee.
(b) 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 Lessee's reasonable request, and at Lessee's
sole cost and expense, Lessor and the Agent shall participate in any such
proceeding, action, negotiation, prosecution or adjustment. Lessor and
Lessee agree that this Lease shall control the rights of Lessor and Lessee
in and to any such award, compensation or insurance payment.
(c) If Lessee shall receive notice of a Casualty or a possible
Condemnation of a Property or any interest therein where damage to the
affected Property is estimated to equal or exceed Twenty-Five percent (25%)
of the Property Cost of such Property, Lessee shall give notice thereof to
the Lessor and to the Agent promptly after the receipt of such notice. In
such event or in the event that a condemnation award or other compensation
or insurance proceeds in excess of $15,000,000 are received by Lessee or
Lessor in respect of any Casualty or Condemnation, then Lessee shall be
deemed to have delivered a Termination Notice and the provisions of
Sections 16.1 and 16.2 shall apply.
(d) In the event of a Casualty or a Condemnation (regardless of
whether notice thereof must be given pursuant to paragraph (c)), this Lease
shall terminate with respect to the applicable Property in accordance with
Section 16.1 if Lessee, within thirty (30) days after such occurrence,
delivers to Lessor and the Agent a notice to such effect.
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(e) If pursuant to this Section 15.1 this Lease shall continue in
full force and effect following a Casualty or Condemnation with respect to
the affected Property, Lessee shall, at its sole cost and expense and
using, if available, the proceeds of any award, compensation or insurance
with respect to such Casualty or Condemnation (including, without
limitation, any such award, compensation or insurance which has been
received by the Agent and which should be turned over to Lessee pursuant to
the terms of the Operative Agreements, and if not available or sufficient,
using its own funds), promptly and diligently repair any damage to the
applicable Property caused by such Casualty or Condemnation in conformity
with the requirements of Sections 10.1 and 11.1, using the as-built Plans
and Specifications or manufacturer's specifications for the applicable
Improvements or Equipment (as modified to give effect to any subsequent
Modifications, any Condemnation affecting the Property and all applicable
Legal Requirements), so as to restore the applicable Property to
substantially the same condition, operation, function and value as existed
immediately prior to such Casualty or Condemnation. In such event, title to
the applicable Property shall remain with Lessor.
(f) In no event shall a Casualty or Condemnation with respect to
which this Lease remains in full force and effect under this Section 15.1
affect Lessee's obligations to pay Rent pursuant to Section 3.1.
(g) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(e), if during the Term with respect to a Property a
Casualty occurs with respect to such Property or Lessee receives notice of
a Condemnation with respect to such Property, and following such Casualty
or Condemnation, the applicable Property cannot reasonably be restored,
repaired or replaced on or before the earlier of the 180th day prior to the
Expiration Date or the date nine (9) months after the occurrence of such
Casualty or Condemnation to the substantially same condition as existed
immediately prior to such Casualty or Condemnation or on or before such day
such Property is not in fact so restored, repaired or replaced, then Lessee
shall be required to exercise its Purchase Option for such Property on the
next Payment Date (notwithstanding the limits on such exercise contained in
Section 20.2) and pay Lessor the Termination Value for such Property;
provided, if any Default or Event of Default has occurred and is
--------
continuing, Lessee shall also promptly (and in any event within three (3)
Business Days) pay Lessor any award, compensation or insurance proceeds
received on account of any Casualty or Condemnation with respect to any
Property; provided, further, that no Default or Event of Default has
occurred and is continuing, any Excess Proceeds shall be paid to Lessee. If
a Default has occurred and is continuing and any Loans, Holder Funding or
other amounts are owing with respect thereto, then any Excess Proceeds (to
the extent of any such Loans, Holder Funding or other amounts owing with
respect thereto) shall be paid to the Lessor.
(h) The provisions of Section 15.1(a) through 15.1(g) shall not apply
to any Property until after the Basic Term commences with respect to such
Property.
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<PAGE>
15.2 Environmental Matters.
---------------------
Promptly upon Lessee's actual knowledge of the presence of Hazardous
Substances in any portion of any Property or Properties in concentrations and
conditions that constitute an Environmental Violation and which, in the
reasonable opinion of Lessee, the cost to undertake any legally required
response, clean up, remedial or other action will or might result in a cost to
Lessee of more than $15,000, Lessee shall notify Lessor in writing of such
condition. In the event of any Environmental Violation (regardless of whether
notice thereof must be given), Lessee shall, not later than thirty (30) days
after Lessee has actual knowledge of such Environmental Violation, either
deliver to Lessor a Termination Notice with respect to the applicable Property
or Properties pursuant to Section 16.1, if applicable, or, at Lessee's sole cost
and expense, promptly and diligently undertake and complete any response, clean
up, remedial or other action (including without limitation, the pursuit by
Lessee of appropriate action against any off-site or third party source for
contamination) necessary to remove, cleanup or remediate the Environmental
Violation in accordance with all Environmental Laws. If Lessee does not deliver
a Termination Notice with respect to such Property pursuant to Section 16.1,
Lessee shall, upon completion of remedial action by Lessee, cause to be prepared
by a reputable environmental consultant acceptable to Lessor a report describing
the Environmental Violation and the actions taken by Lessee (or its agents) in
response to such Environmental Violation, and a statement by the consultant that
the Environmental Violation has been remedied in full compliance with applicable
Environmental Law. Not less than sixty (60) days prior to any time that Lessee
elects to remarket any Property pursuant to Section 20.1 hereof or any other
provision of any Operative Agreement, Lessee shall deliver a Phase I
environmental survey respecting such Property satisfactory in form and substance
to the Lessor. Notwithstanding any other provision of any Operative Agreement,
if Lessee fails to comply with the foregoing obligation regarding the Phase I
environmental survey, Lessee shall be obligated to purchase such Property for
its Termination Value and shall not be permitted to exercise (and Lessor shall
have no obligation to honor any such exercise) any rights under any Operative
Agreement regarding a sale of such Property to a Person other than Lessee or any
Affiliate of Lessee.
15.3 Notice of Environmental Matters.
-------------------------------
Promptly, but in any event within five (5) days from the date Lessee has
actual knowledge thereof, Lessee shall provide to 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 any Property or
Properties. All such notices shall describe in reasonable detail the nature of
the claim, action or proceeding and Lessee's proposed response thereto. In
addition, Lessee shall provide to Lessor, within five (5) Business Days of
receipt, copies of all material written communications with any Governmental
Authority relating to any Environmental Law in connection with any Property.
Lessee shall also promptly provide such detailed reports of any such material
environmental claims as may reasonably be requested by Lessor.
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<PAGE>
ARTICLE XVI
16.1 Termination Upon Certain Events.
-------------------------------
If any of the following occur: (i) Lessee has delivered a notice pursuant
to Section 15.1(d), or is deemed to have delivered such notice pursuant to
Section 15.1(c), then following the applicable Casualty or Condemnation this
Lease shall terminate with respect to the affected Property, or (ii) Lessee has
delivered notice pursuant to the second sentence of Section 15.2 that, due to
the occurrence of an Environmental Violation, this Lease shall terminate with
respect to the affected Property, then Lessee shall be obligated to deliver,
within thirty (30) days of its receipt of notice of the applicable Condemnation
or the occurrence of the applicable Casualty or Environmental Violation, a
written notice to the Lessor in the form described in Section 16.2(a) (a
"Termination Notice") of the termination of this Lease with respect to the
------------------
applicable Property.
16.2 Procedures.
----------
(a) A Termination Notice shall contain: (i) notice of termination of
this Lease with respect to the affected Property on a Payment Date not more
than sixty (60) days after Lessor's receipt of such Termination Notice (the
"Termination Date"); and (ii) a binding and irrevocable agreement of Lessee
----------------
to pay the Termination Value for the applicable Property and purchase such
Property on such Termination Date.
(b) On each Termination Date, Lessee shall pay to Lessor the
Termination Value for the applicable Property, and Lessor shall convey such
Property or the remaining portion thereof, if any, to Lessee (or Lessee's
designee), all in accordance with Section 20.2.
ARTICLE XVII
17.1 Lease Events of Default.
-----------------------
If any one or more of the following events (each a "Lease Event of
--------------
Default") shall occur:
- -------
(a) Lessee shall fail to make payment of (i) any Basic Rent (except
as set forth in clause (ii)) within five (5) days after the same has become
due and payable or (ii) any Termination Value, on the date any such payment
is due, or any payment of Basic Rent or Supplemental Rent due on the due
date of any such payment of Termination Value, or any amount due on the
Expiration Date;
(b) Lessee shall fail to make payment of any Supplemental Rent
(other than Supplemental Rent referred to in Section 17(a)(ii)) within five
(5) days after notice that such payment is due and payable or the Guarantor
shall fail to make any payment of any
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<PAGE>
amount under any Operative Agreement which has become due and payable
(subject to any applicable grace period) after receipt of notice that such
payment is due;
(c) Lessee shall fail to maintain insurance as required by Article
XIV of this Lease;
(d) Lessee shall fail to observe or perform any material term,
covenant or condition of Lessee under this Lease (including without
limitation the Incorporated Covenants) or any other Operative Agreement to
which Lessee is a party other than those set forth in Sections 17.1(a), (b)
or (c) hereof, or the Guarantor shall fail to observe or perform any term,
covenant, obligation or condition of the Guarantor under any Operative
Agreement other than those set forth in Section 17.1(b) hereof, or any
representation or warranty made by Lessee or the Guarantor set forth in
this Lease (including without limitation the Incorporated Representations
and Warranties) or in any other Operative Agreement or in any document
entered into in connection herewith or therewith or in any document,
certificate or financial or other statement delivered in connection
herewith or therewith shall be false or inaccurate in any material way,
and, to the extent such failure, misrepresentation or breach of warranty is
capable of being cured, such failure, misrepresentation or breach of
warranty shall remain uncured for a period of fifteen (15) days after the
Lessee or the Guarantor has reason to know or notice thereof; provided,
that if such failure, misrepresentation or breach is not capable of being
cured or if there is no cure period for breach of the Incorporated
Representations and Warranties or Incorporated Covenants in the Capital One
Credit Agreement or any New Facility the grace period referred to in this
subclause (d) shall not apply;
(e) An Agency Agreement Event of Default shall have occurred and be
continuing;
(f) [Intentionally Omitted]
(g) [Intentionally Omitted];
(h) The liquidation or dissolution of the Construction Agent or any
Credit Party, or the suspension of the business of the Construction Agent
or any Credit Party, or the filing by the Construction Agent or any Credit
Party of a voluntary petition or an answer seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
United States Bankruptcy Code, as amended, or under any other insolvency
act or law, state or federal, now or hereafter existing, or any other
action of the Construction Agent or any Credit Party indicating its consent
to, approval of or acquiescence in, any such petition or proceeding; the
application by the Construction Agent or any Credit Party for, or the
appointment by consent or acquiescence of the Construction Agent or any
Credit Party of a receiver, a trustee or a custodian of the Construction
Agent or any Credit Party for all or a substantial part of its property;
the making by the Construction Agent or any Credit Party of any assignment
for the benefit of creditors; the inability of the Construction Agent or
any Credit Party or the admission
-19-
<PAGE>
by the Construction Agent or any Credit Party in writing of its inability
to pay its debts as they mature; or the Construction Agent or any Credit
Party taking any corporate action to authorize any of the foregoing;
(i) The filing of an involuntary petition against the Construction
Agent or any Credit Party in bankruptcy or seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
United States Bankruptcy Code, as amended, or under any other insolvency
act or law, state or federal, now or hereafter existing; or the involuntary
appointment of a receiver, a trustee or a custodian of the Construction
Agent or any Credit Party for all or a substantial part of its property; or
the issuance of a warrant of attachment, execution or similar process
against any substantial part of the property of the Construction Agent or
any Credit Party, and the continuance of any of such events for ninety (90)
days undismissed or undischarged;
(j) The adjudication of the Construction Agent or any Credit Party
as bankrupt or insolvent;
(k) The entering of any order in any proceedings against the
Construction Agent or any Credit Party decreeing the dissolution,
divestiture or split-up of the Construction Agent or any Credit Party, and
such order remains in effect for more than sixty (60) days;
(l) Any material report, certificate, financial statement or other
instrument delivered to Lessor by or on behalf of the Construction Agent or
any Credit Party pursuant to the terms of this Lease or any other Operative
Agreement is false or misleading in any material respect when made or
delivered;
(m) Any Capital One Credit Agreement Event of Default (other than a
Capital One Credit Agreement Event of Default attributable solely to
Capital One, F.S.B.) or an event of default under any New Facility (other
than an event of default under such New Facility attributable solely to
Capital One, F.S.B.) shall have occurred and be continuing and shall not
have been waived by the Majority Lenders;
(n) The Construction Agent or any Credit Party or any Subsidiary of
the Construction Agent or any Credit Party shall default (beyond applicable
periods of grace and/or notice and cure) in the payment when due of any
principal of or interest on any Indebtedness having an outstanding
principal amount of at least $50,000,000; or any other event or condition
shall occur which results in a default of any such Indebtedness or enables
the holder of any such Indebtedness or any Person acting on such holder's
behalf to accelerate the maturity thereof;
(o) Any Operative Agreement shall cease to be in full force and
effect;
(p) The Guarantor shall default in the due performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to the
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<PAGE>
guaranty set forth in Section 8B of the Participation Agreement or if any
material provision of the guaranty set forth in Section 8B of the
Participation Agreement shall cease to be in full force and effect; or
(q) Any default or event of default under that certain Lease
Agreement (Capital One Realty, Inc.) (Tax Retention Operating Lease) dated
as of September 3, 1999 between First Security Bank, National Association,
not individually, but solely as Owner Trustee under the Capital One Realty
Trust 1998-1, as lessor and Capital One Realty, Inc., as lessee, shall have
occurred and be continuing and shall not have been waived;
then, in any such event Lessor may, in addition to the other rights
and remedies provided for in this Article XVII and in Section 18.1,
terminate this Lease by giving Lessee five (5) days notice of such
termination, and this Lease shall terminate, and all rights of Lessee under
this Lease shall cease. Lessee shall, to the fullest extent permitted by
law, pay as Supplemental Rent all costs and expenses incurred by or on
behalf of Lessor, including without limitation reasonable fees and expenses
of counsel, as a result of any Lease Event of Default hereunder.
17.2 Surrender of Possession.
-----------------------
If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessee shall, upon thirty (30) days written notice, surrender to Lessor
possession of the Properties. Lessor may enter upon and repossess the
Properties by such means as are available at law or in equity, and may remove
Lessee and all other Persons and any and all personal property and Lessee's
equipment and personalty and severable Modifications from the Properties.
Lessor shall have no liability by reason of any such entry, repossession or
removal performed in accordance with applicable law. Upon the written demand of
Lessor, Lessee shall return the Properties promptly to Lessor, in the manner and
condition required by, and otherwise in accordance with the provisions of,
Section 22.1(c) hereof.
17.3 Reletting.
---------
If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessor may, but shall be under no obligation to, relet any or all of the
Properties, for the account of Lessee or otherwise, for such term or terms
(which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may determine, and
Lessor may collect, receive and retain the rents resulting from such reletting.
Lessor shall not be liable to Lessee for any failure to relet any Property or
for any failure to collect any rent due upon such reletting.
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<PAGE>
17.4 Damages.
-------
Neither (a) the termination of this Lease as to all or any of the
Properties pursuant to Section 17.1; (b) the repossession of all or any of the
Properties; nor (c) the failure of Lessor to relet all or any of the Properties,
the reletting of all or any portion thereof, nor the failure of Lessor to
collect or receive any rentals due upon any such reletting, shall relieve Lessee
of its liabilities and obligations hereunder, all of which shall survive any
such termination, repossession or reletting. If any Lease Event of Default
shall have occurred and be continuing and notwithstanding any termination of
this Lease pursuant to Section 17.1, Lessee shall forthwith pay to Lessor all
Rent and other sums due and payable hereunder to and including the date of such
termination. Thereafter, on the days on which the Basic Rent or Supplemental
Rent, as applicable, are payable under this Lease or would have been payable
under this Lease if the same had not been terminated pursuant to Section 17.1
and until the end of the Term hereof or what would have been the Term in the
absence of such termination, Lessee shall pay Lessor, as current liquidated
damages (it being agreed that it would be impossible accurately to determine
actual damages) an amount equal to the Basic Rent and Supplemental Rent that are
payable under this Lease or would have been payable by Lessee hereunder if this
Lease had not been terminated pursuant to Section 17.1, less the net proceeds,
if any, which are actually received by Lessor with respect to the period in
question of any reletting of any Property or any portion thereof; provided that
--------
Lessee's obligation to make payments of Basic Rent and Supplemental Rent under
this Section 17.4 shall continue only so long as Lessor shall not have received
the amounts specified in Section 17.6. In calculating the amount of such net
proceeds from reletting, there shall be deducted all of Lessor's, any Holder's,
the Agent's and any Lender's reasonable expenses in connection therewith,
including repossession costs, brokerage or sales commissions, fees and expenses
for counsel and any necessary repair or alteration costs and expenses incurred
in preparation for such reletting. To the extent Lessor receives any damages
pursuant to this Section 17.4, such amounts shall be regarded as amounts paid on
account of Rent. Lessee specifically acknowledges and agrees that its
obligations under this Section 17.4 shall be absolute and unconditional under
any and all circumstances and shall be paid and/or performed, as the case may
be, without notice or demand and without any abatement, reduction, diminution,
setoff, defense, counterclaim or recoupment whatsoever.
17.5 Power of Sale.
-------------
Without limiting any other remedies set forth in this Lease, in the event
that a court of competent jurisdiction rules that this Lease constitutes a
mortgage, deed of trust or other secured financing as is the intent of the
parties, then the Lessor and the Lessee agree that the Lessee has granted,
pursuant to Section 7.1(b) hereof and each Lease Supplement, a Lien against the
Properties WITH POWER OF SALE, and that, upon the occurrence and during the
continuance of any Lease Event of Default, the Lessor shall have the power and
authority, to the extent provided by law, after prior notice and lapse of such
time as may be required by law, to foreclose its interest (or cause such
interest to be foreclosed) in all or any part of the Properties.
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<PAGE>
17.6 Final Liquidated Damages.
------------------------
If a Lease Event of Default shall have occurred and be continuing, whether
or not this Lease shall have been terminated pursuant to Section 17.1 and
whether or not Lessor shall have collected any current liquidated damages
pursuant to Section 17.4, Lessor shall have the right to recover, by demand to
Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for
final liquidated damages, but exclusive of the indemnities payable under Section
13 of the Participation Agreement, and in lieu of all current liquidated damages
beyond the date of such demand (it being agreed that it would be impossible
accurately to determine actual damages) the Termination Value. Upon payment of
the amount specified pursuant to the first sentence of this Section 17.6, Lessee
shall be entitled to receive from Lessor, either at Lessee's request or upon
Lessor's election, in either case at Lessee's cost, an assignment of Lessor's
entire right, title and interest in and to the Properties, the Improvements,
Fixtures, Modifications and Equipment and any insurance or condemnation proceeds
in connection therewith, in each case in recordable form and otherwise in
conformity with local custom and free and clear of the Lien of this Lease
(including the release of any memorandum of Lease and Lease Supplement recorded
in connection therewith) and any Lessor Liens. The Properties shall be conveyed
to Lessee "AS IS" and in their then present physical condition. If any statute
or rule of law shall limit the amount of such final liquidated damages to less
than the amount agreed upon, Lessor shall be entitled to the maximum amount
allowable under such statute or rule of law; provided, however, Lessee shall not
-------- -------
be entitled to receive an assignment of Lessor's interest in the Properties, the
Improvements, Fixtures, Modifications or Equipment or documents unless Lessee
shall have paid in full the Termination Value. Lessee specifically acknowledges
and agrees that its obligations under this Section 17.4 shall be absolute and
unconditional under any and all circumstances and shall be paid and/or
performed, as the case may be, without notice or demand and without any
abatement, reduction, diminution, setoff, defense, counterclaim or recoupment
whatsoever.
17.7 Lessee's Purchase Option During Default.
---------------------------------------
If Lessee exercises its option to purchase a Property in accordance with
Section 20.2 (without regard to the limitation contained in the first sentence
of Section 20.2 regarding the absence of Lease Events of Default) within five
(5) days of the occurrence of a Lease Event of Default, the purchase of the
applicable Property within such five (5) day period shall be deemed to have
cured such Lease Event of Default to the extent such Lease Event of Default is
no longer continuing with respect to any other Property remaining subject to
this Lease after purchase of the Property in connection with the exercise of the
purchase option.
17.8 Waiver of Certain Rights.
------------------------
If this Lease shall be terminated pursuant to Section 17.1, 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 possession; (c) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt; and
(d) any other rights which might otherwise limit or modify any of Lessor's
rights or remedies under this Article XVII.
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<PAGE>
17.9 Assignment of Rights Under Contracts.
------------------------------------
If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
Lessee shall upon Lessor's demand immediately assign, transfer and set over to
Lessor all of Lessee's right, title and interest in and to each agreement
executed by Lessee in connection with the purchase, construction, development,
use or operation of the Properties (including, without limitation, all right,
title and interest of Lessee with respect to all warranty, performance, service
and indemnity provisions), as and to the extent that the same relate to the
purchase, construction, use and operation of the Properties.
17.10 Remedies Cumulative.
-------------------
The remedies herein provided shall be cumulative and in addition to (and
not in limitation of) any other remedies available at law, equity or otherwise,
including, without limitation, any mortgage foreclosure remedies.
ARTICLE XVIII
18.1 Lessor's Right to Cure Lessee's Lease Defaults.
----------------------------------------------
Lessor, without waiving or releasing any obligation or Lease Event of
Default, may (but shall be under no obligation to) remedy any Lease Event of
Default for the account and at the sole cost and expense of Lessee, including
the failure by Lessee to maintain the insurance required by Article XIV, and
may, to the fullest extent permitted by law, and notwithstanding any right of
quiet enjoyment in favor of Lessee, enter upon any Property, or real property
owned or leased by Lessee and take all such action thereon as may be necessary
or appropriate therefor. No such entry shall be deemed an eviction of any
lessee. All out-of-pocket costs and expenses so incurred (including without
limitation 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 Lessor,
shall be paid by Lessee to Lessor on demand.
ARTICLE XIX
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option.
---------------------------------------------------------------
Subject to Section 19.2, in connection with any termination of this Lease
with respect to the Property pursuant to the terms of Section 16.2, or in
connection with Lessee's exercise of its Purchase Option, upon the date on which
this Lease is to terminate with respect to the Property, and upon tender by
Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as applicable,
Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's
cost and expense an assignment of Lessor's entire interest in the Property, in
each case in recordable form and
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<PAGE>
otherwise in conformity with local custom and free and clear of any Lessor Liens
attributable to Lessor but without any other warranties (of title or otherwise)
from the Lessor. The Property shall be conveyed to Lessee "AS IS" "WHERE IS" and
in then present physical condition.
19.2 No Purchase or Termination With Respect to Less than All of a
-------------------------------------------------------------
Property.
- --------
Lessee shall not be entitled to exercise its Purchase Option or the Sale
Option separately with respect to any Property consisting of Land, Equipment
and/or Improvements but shall be required to exercise its Purchase Option or the
Sale Option with respect to an entire Property.
ARTICLE XX
20.1 Purchase Option or Sale Option-General Provisions.
-------------------------------------------------
Not less than 120 days and no more than 180 days prior to the Expiration
Date or any Payment Date after the Basic Term has commenced for all Properties,
Lessee may give Lessor and Agent irrevocable written notice (the "Election
--------
Notice") that Lessee is electing to exercise either (a) the option to purchase
- ------
all the Properties on the Expiration Date or on the Payment Date specified in
the Election Notice or, in accordance with the Individual Property Sale
Requirements, the option to purchase one or more, but less than all, the
Properties on the Payment Date specified in the Election Notice for such
purchase (the "Purchase Option") or (b) with respect to an Election Notice given
---------------
in connection with the Expiration Date only, the option to remarket all, but not
less than all, the Properties to a Person other than Lessee or any Affiliate of
Lessee and cause a sale of such Properties to occur on the Expiration Date
pursuant to the terms of Section 22.1 (the "Sale Option"). Regarding the
-----------
purchase of one or more, but less than all, the Properties, at Lessee's option
and without the consent of any Financing Party, Lessee may provide irrevocable
written notice to Lessor not less than one hundred twenty (120) days and no more
than one hundred eighty days prior to any Payment Date that Lessee desires to
purchase one or more, but less than all, of the Properties, if (i) the Lessee
shall have provided an Appraisal demonstrating that the Properties remaining in
the Trust and leased to Lessee pursuant to this Lease and subject to the
guaranty by Capital One Financial Corporation shall have a Fair Market Sale
Value of 75% or more of the Property Cost allocable to such remaining Properties
and (ii) on the date of such Election Notice and at the time of sale to Lessee
of such Property, no Default or Event of Default shall have occurred and be
continuing (other than those that will be cured by the payment of the
Termination Value for such Property pursuant to Section 17.7) (the terms
referenced in the foregoing subsections (i) and (ii) may be referred to as the
"Individual Property Sale Requirements"). To the extent the Individual Property
-------------------------------------
Sale Requirements are satisfied, Lessor shall sell such Property to Lessee. If
Lessee does not give an Election Notice indicating the Purchase Option or the
Sale Option at least 120 days and not more than 180 days prior to the Expiration
Date, then, unless such Expiration Date is the final Expiration Date to which
the Term may be extended, the Term of this Lease shall be extended in accordance
with Section 2.2 hereof; if such Expiration Date is the final Expiration Date,
then Lessee shall be deemed to have elected the Purchase Option with respect to
all the Properties. If Lessee shall elect the Sale Option and fail to cause the
Properties to be sold or surrendered to Lessor at
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<PAGE>
Lessor's option in accordance with the terms of Section 22.1 on the Expiration
Date, then Lessee shall be deemed to have elected to exercise the Purchase
Option (on the Sale Date) as set forth above. If Lessee shall elect (or is
deemed to have elected) to exercise the Purchase Option, then Lessee shall pay
to Lessor on the date on which such purchase is to occur an amount equal to the
Termination Value for all of the Properties (which the parties do not intend to
be a "bargain" purchase), and, upon receipt of such amount, Lessor shall
transfer to Lessee all of Lessor's right, title and interest in and to the
Properties in accordance with Section 20.2.
20.2 Lessee Purchase Option.
----------------------
Provided no Default or Event of Default shall have occurred and be
continuing (subject to Section 17.7) and provided that the Election Notice has
been appropriately given specifying the Purchase Option, Lessee shall purchase
all of the Properties (or, if applicable, and upon satisfaction of all
Individual Property Sale Requirements, one or more, but less than all, of the
Properties pursuant to a notice provided in accordance with Section 20.1) on the
Expiration Date or Payment Date (all as specified in the Election Notice) at a
price equal to the Termination Value for such Properties (which the parties do
not intend to be a "bargain" purchase price).
Subject to Section 19.2, in connection with any termination of this Lease
with respect to any Property pursuant to the terms of Section 16.2, or in
connection with Lessee's exercise of its Purchase Option, upon the date on which
this Lease is to terminate with respect to a Property or all of the Properties,
and upon tender by Lessee of the amounts set forth in Section 16.2(b) or this
Section 20.2, as applicable, Lessor shall execute, acknowledge (where required)
and deliver to Lessee, at Lessee's cost and expense, each of the following: (i)
a special or limited warranty Deed or a Bargain and Sale Deed conveying the
Property (to the extent it is real property) to Lessee free and clear of the
Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (ii)
a Bill of Sale conveying the Property (to the extent it is personal property) to
Lessee free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens; (iii) any real estate tax affidavit or other
document required by law to be executed and filed in order to record the Deed;
and (iv) a FIRPTA affidavit. The applicable Property, together with any
insurance or condemnation proceeds with respect to such Property, shall be
conveyed to Lessee "AS IS" "WHERE IS" and in then present physical condition.
If any Property is the subject of remediation efforts respecting Hazardous
Substances at the Expiration Date which could materially and adversely impact
the Fair Market Sales Value of such Property, then Lessee shall be obligated to
repurchase each such Property pursuant to Section 20.2.
20.3 Third Party Sale Option.
-----------------------
(a) Provided no Default or Event of Default shall have occurred and
be continuing and provided that the Election Notice has been appropriately
given specifying the Sale Option, Lessee shall undertake to cause a sale of
the Properties on the Expiration Date (all as specified in the Election
Notice) in accordance with the provisions of Section 22.1 hereof.
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(b) In the event the Lessee exercises the Sale Option then, as soon
as practicable and in all events prior to the Expiration Date, the Lessee
at its expense shall cause to be delivered to Lessor an environmental site
assessment or an update to a prior environmental site assessment for each
of the Properties recently prepared (no later than 30 days old) by an
independent recognized professional acceptable to Lessor and the Agent and
in form, scope and content satisfactory to Lessor and the Agent. In the
event that Lessor and the Agent shall not have received such environmental
assessment by the Expiration Date or in the event that such environmental
assessment shall reveal the existence of any material violation of
Environmental Laws, other material Environmental Violation or potential
material Environmental Violation (with materiality determined in each case
in Lessor's sole discretion), then Lessee on the Expiration Date shall pay
to Lessor an amount equal to the Termination Value for all of the
Properties and any and all other amounts due and owing hereunder. Upon
receipt of such payment and all other amounts due under the Lease, Lessor
shall transfer to Lessee all of Lessor's right, title and interest in and
to the Properties in accordance with Section 19.1.
ARTICLE XXI
21.1 [Intentionally Omitted]
ARTICLE XXII
22.1 Sale Procedure.
--------------
(a) During the Marketing Period, Lessee, on behalf of the Lessor,
shall obtain bids for the cash purchase of the Properties in connection
with a sale to one or more purchasers to be consummated on the Expiration
Date (the "Sale Date") for the highest price available, shall notify Lessor
---------
promptly of the name and address of each prospective purchaser and the cash
price which each prospective purchaser shall have offered to pay for each
such Property and shall provide Lessor with such additional information
about the bids and the bid solicitation procedure as Lessor may reasonably
request from time to time. All such prospective purchasers must be Persons
other than Lessee or any Affiliate of Lessee. On the Sale Date unless such
amounts have been otherwise paid at such time, Lessee shall pay (or cause
to be paid) to Lessor the sum of all costs and expenses referred to in
clause FIRST of Section 22.2, all Rent and all other amounts then due and
payable or accrued under this Lease and/or any other Operative Agreement.
Lessor may reject any and all bids and may assume sole responsibility
for obtaining bids by giving Lessee written notice to that effect;
provided, however, that notwithstanding the foregoing, Lessor may not
-------- -------
reject the bids submitted by the Lessee if such bids, in the aggregate, are
greater than or equal to the sum of the Limited Recourse Amount for the
Properties, plus all costs and expenses referred to in clause FIRST of
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Section 22.2 and represent bona fide offers from one or more third party
purchasers. If the Lessor rejects any and all bids pursuant to this Section
22.1 or if there are no bids, Lessee shall surrender, or cause to be
surrendered, each of the Properties in accordance with the terms and
conditions of Section 10.1.
Unless Lessor shall have elected to retain the Properties pursuant to
the provisions of the final sentence of the preceding paragraph, Lessee
shall arrange for Lessor to sell the Properties free and clear of the Lien
of this Lease and any Lessor Liens attributable to it, without recourse or
warranty (of title or otherwise), for cash on the Sale Date to the
purchaser or purchasers identified by Lessee or Lessor, as the case may be;
provided, however, solely as to Lessor or the Trust Company, in its
-------- -------
individual capacity, any Lessor Lien shall not constitute a Lessor Lien so
long as Lessor or the Trust Company, in its individual capacity, is
diligently contesting such Lessor Lien by appropriate proceedings. To
effect such transfer and assignment, Lessor shall execute, acknowledge
(where required) and deliver to the appropriate purchaser each of the
following: (i) a special or limited warranty Deed conveying the Properties
(to the extent they are real property) to the appropriate purchaser free
and clear of the Lien of this Lease, the Lien of the Credit Documents and
any Lessor Liens; (ii) a Bill of Sale conveying the Properties (to the
extent it is personal property) to the appropriate purchaser free and clear
of the Lien of this Lease, the Lien of the Credit Documents and any Lessor
Liens; (iii) any real estate tax affidavit or other document required by
law to be executed and filed in order to record the Deed; and (iv) a FIRPTA
affidavit. Lessee shall surrender the Properties so sold or subject to such
documents to each purchaser in the condition specified in Section 10.1.
Lessee shall not take or fail to take any action which would have the
effect of unreasonably discouraging bona fide third party bids for any
Property. If each of the Properties is not either (i) sold on the Sale Date
in accordance with the terms of this Section 22.1, or (ii) retained by the
Lessor pursuant to the second paragraph of this Section 22.1(a), then the
Lessee shall be deemed to have elected the Purchase Option pursuant to
Section 20.1.
(b) If the Properties are sold on a Sale Date to one or more third
party purchasers in accordance with the terms of Section 22.1(a) and the
aggregate purchase price paid for the Properties is less than the sum of
the aggregate Property Cost for the Properties (hereinafter such difference
shall be referred to as the "Deficiency Balance"), then the Lessee hereby
------------------
unconditionally promises to pay to the Lessor on the Sale Date all Rent
(other than the Termination Value and the Maximum Residual Guarantee
Amount) and all other amounts then due and owing pursuant to the Operative
Agreements and the lesser of (i) the Deficiency Balance, or (ii) the
Maximum Residual Guarantee Amount for all of the Properties. If the
Properties are retained by the Lessor pursuant to an affirmative election
made by the Lessor pursuant to the provisions of Section 22.1(a), then the
Lessee hereby unconditionally promises to pay to the Lessor on the Sale
Date all Rent (other than the Termination Value and the Maximum Residual
Guarantee Amount) and all other amounts then due and owing pursuant to the
Operative Agreements and an amount equal to the Maximum Residual Guarantee
Amount for the Properties.
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(c) In the event that the Properties are either sold to one or more
third party purchasers on the Sale Date or retained by the Lessor in
connection with an affirmative election made by the Lessor pursuant to the
provisions of Section 22.1(a), then in either case on the applicable Sale
Date, to the extent in Lessee's possession or reasonable control, the
Lessee shall provide Lessor or such third party purchaser with (i) all
permits, certificates of occupancy, governmental licenses and
authorizations necessary to use and operate each such Property for its
intended purposes, (ii) such easements, licenses, rights-of-way and other
rights and privileges in the nature of an easement as are reasonably
necessary or desirable in connection with the use, repair, access to or
maintenance of each such Property for its intended purpose or otherwise as
the Lessor shall reasonably request, and (iii) a services agreement
covering such services as Lessor or such third party purchaser may request
in order to use and operate each such Property for its intended purposes at
such rates (not in excess of arm's-length fair market rates) as shall be
acceptable to Lessee and Lessor or such third party purchaser. All
assignments, licenses, easements, agreements and other deliveries required
by clauses (i) and (ii) of this paragraph (c) shall be in form reasonably
satisfactory to the Lessor or such third party purchaser, as applicable,
and shall be fully assignable (including both primary assignments and
assignments given in the nature of security) without payment of any fee,
cost or other charge.
22.2 Application of Proceeds of Sale.
-------------------------------
The Lessor shall apply the proceeds of sale of any Property in the
following order of priority:
(i) FIRST, to pay or to reimburse Lessor for the payment of all
-----
reasonable costs and expenses incurred by Lessor in connection with the
sale;
(ii) SECOND, so long as the Credit Agreement is in effect and
------
any Holder Fundings or any amount is owing to the Holders under any
Operative Agreement, to the Agent to be applied pursuant to inter-creditor
provisions between the Lenders and the Holders contained in the Operative
Agreements; and
(iii) THIRD, to the Lessee.
-----
22.3 Indemnity for Excessive Wear.
----------------------------
If the proceeds of the sale described in Section 22.1 with respect to the
Properties, less all expenses incurred by Lessor in connection with such sale,
shall be less than the Limited Recourse Amount with respect to the Properties,
and at the time of such sale it shall have been reasonably determined (pursuant
to the Appraisal Procedure) that the Fair Market Sales Value of the Properties,
shall have been impaired by greater than expected wear and tear during the term
of the Lease, Lessee shall pay to Lessor within ten (10) days after receipt of
Lessor's written statement (i) the amount of such excess wear and tear
determined by the Appraisal Procedure or (ii) the amount of the Net Sale
Proceeds Shortfall, whichever amount is less.
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22.4 Appraisal Procedure.
-------------------
For determining the Fair Market Sales Value of the Properties or any other
amount which may, pursuant to any provision of any Operative Agreement, be
determined by an appraisal procedure, Lessor and Lessee shall use the following
procedure (the "Appraisal Procedure"). Lessor and Lessee shall endeavor to
-------------------
reach a mutual agreement as to such amount for a period of ten (10) days from
commencement of the Appraisal Procedure under the applicable section of the
Lease, and if they cannot agree within ten (10) days, then two qualified
appraisers, one chosen by Lessee and one chosen by Lessor, shall mutually agree
thereupon, but if either party shall fail to choose an appraiser within twenty
(20) days after notice from the other party of the selection of its appraiser,
then the appraisal by such appointed appraiser shall be binding on Lessee and
Lessor. If the two appraisers cannot agree within twenty (20) days after both
shall have been appointed, then a third appraiser shall be selected by the two
appraisers or, failing agreement as to such third appraiser within (30) days
after both shall have been appointed, by the American Arbitration Association.
The decisions of the three appraisers shall be given within twenty (20) days of
the appointment of the third appraiser and the decision of the appraiser most
different from the average of the other two shall be discarded and such average
shall be binding on Lessor and Lessee; provided that if the highest appraisal
--------
and the lowest appraisal are equidistant from the third appraisal, the third
appraisal shall be binding on Lessor and Lessee. The fees and expenses of the
appraiser appointed by Lessee shall be paid by Lessee; the fees and expenses of
the appraiser appointed by Lessor shall be paid by Lessor (such fees and
expenses not being indemnified pursuant to Section 13 of the Participation
Agreement); and the fees and expenses of the third appraiser shall be divided
equally between Lessee and Lessor.
22.5 Certain Obligations Continue.
----------------------------
During the Marketing Period, the obligation of Lessee to pay Rent with
respect to the Properties (including the installment of Basic Rent due on the
Expiration Date) shall continue undiminished until payment in full to Lessor of
the sale proceeds, if any, the Maximum Residual Guarantee Amount or portion
thereof payable under Section 22.1(b), the amount due under Section 22.3, if
any, and all other amounts due to Lessor with respect to all Properties. Lessor
shall have the right, but shall be under no duty, to solicit bids, to inquire
into the efforts of Lessee to obtain bids or otherwise to take action in
connection with any such sale, other than as expressly provided in this Article
XXII.
ARTICLE XXIII
23.1 Holding Over.
------------
If Lessee shall for any reason remain in possession of a Property after the
expiration or earlier termination of this Lease as to such Property (unless such
Property is conveyed to Lessee), such possession shall be as a tenancy at
sufferance during which time Lessee shall continue to pay Supplemental Rent that
would be payable by Lessee hereunder were the Lease
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then in full force and effect with respect to the Property and Lessee shall
continue to pay Basic Rent at 110% of the Basic Rent that would otherwise be due
and payable at such time. Such Basic Rent shall be payable from time to time
upon demand by Lessor and such additional 10% amount shall be applied by the
Lessor to the payment of the Loans pursuant to the Credit Agreement and the
Holder Fundings pursuant to the Trust Agreement pro rata between the Loans and
the Holder Fundings. During any period of tenancy at sufferance, Lessee shall,
subject to the second preceding sentence, be obligated to perform and observe
all of the terms, covenants and conditions of this Lease, but shall have no
rights hereunder other than the right, to the extent given by law to tenants at
sufferance, to continue their occupancy and use of such Property. Nothing
contained in this Article XXIII shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease as to any Property (unless such Property is conveyed
to Lessee) and nothing contained herein shall be read or construed as preventing
Lessor from maintaining a suit for possession of such Property or exercising any
other remedy available to Lessor at law or in equity.
ARTICLE XXIV
24.1 Risk of Loss.
-------------
During the Term, unless Lessee shall not be in actual possession of the
Property in question solely by reason of Lessor's exercise of its remedies of
dispossession under Article XVII, the risk of loss or decrease in the enjoyment
and beneficial use of such Property as a result of the damage or destruction
thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is
assumed by Lessee, and Lessor shall in no event be answerable or accountable
therefor.
ARTICLE XXV
25.1 Assignment.
----------
(a) Lessee may not assign this Lease or any of its rights or
obligations hereunder in whole or in part to any Person other than COFC or
a Wholly-Owned Subsidiary of COFC without the prior written consent of the
Agent and the Lessor.
(b) No assignment (referenced in this Section 25.1 or otherwise) or
other relinquishment of possession to any Property shall in any way
discharge or diminish any of the obligations of Lessee to Lessor hereunder
and Lessee shall remain directly and primarily liable under this Lease as
to any assignment regarding this Lease.
25.2 Subleases.
---------
(a) Promptly following the execution and delivery of any sublease
permitted by this Article XXV, Lessee shall notify Lessor and the Agent of
the execution of such
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sublease. As of the date of each Lease Supplement, Lessee shall lease the
respective Properties described in such Lease Supplement from Lessor, and
there shall be no existing tenant respecting such Property other than the
Lessee, except to the extent such sublease is permitted under subsection
(b) of this Section 25.2.
(b) Upon written notice to the Financing Parties and subject to the
provisions of Section 25.2(c), Lessee may sublet any Property or portion
thereof (i) to any Person so long as the sublease shall be expressly
subject and subordinate to this Lease, the term of the sublease does not
extend beyond the Term of this Lease and the sublease is on fair market
terms and at a fair market rental, or (ii) to COFC or a Wholly-Owned
Subsidiary of COFC or to an Affiliate or Subsidiary of the Lessee. No
other subleases shall be permitted unless consented to in writing by the
Lessor.
(c) No sublease (referenced in this Section 25.2 or otherwise) or
other relinquishment of possession to any Property shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder and
Lessee shall remain directly and primarily liable under this Lease as to
the Property, or portion thereof, so sublet.
ARTICLE XXVI
26.1 No Waiver.
---------
No failure by Lessor or 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.
ARTICLE XXVII
27.1 Acceptance of Surrender.
-----------------------
No surrender to Lessor of this Lease or of all or any portion of any
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 Lessor and the Agent
and, prior to the payment or performance of all obligations under the Credit
Documents, the Agent, and no act by Lessor or the Agent or any representative or
agent of Lessor or the Agent, other than a written acceptance, shall constitute
an acceptance of any such surrender.
27.2 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
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part, (a) this Lease or the leasehold estate created hereby or any interest in
this Lease or such leasehold estate, (b) any right, title or interest in any
Property, (c) any Notes, or (d) a beneficial interest in Lessor.
ARTICLE XXVIII
28.1 Incorporation of Covenants.
--------------------------
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of May 25, 1999 (the "Capital One Credit Agreement") among
COFC, Capital One Bank and Capital One, F.S.B., as borrowers, The Chase
Manhattan Bank, as Administrative Agent and the other financial institutions
party thereto. Further reference is made to the representations and warranties
of the Guarantor contained in Section 7 of the Capital One Credit Agreement
other than the representations contained in Sections 7.04, 7.05, 7.06 and 7.13
(hereinafter referred to as the "Incorporated Representations and Warranties")
and the covenants of the Guarantor contained in Section 8 of the Capital One
Credit Agreement (hereinafter referred to as the "Incorporated Covenants"). The
----------------------
Lessee agrees with the Lessor that the Incorporated Representations and
Warranties and the Incorporated Covenants (and all other relevant provisions of
the Capital One Credit Agreement related thereto, including specifically without
limitation the defined terms contained in Section 1 thereof which are used in
the Incorporated Representations and Warranties and the Incorporated Covenants)
are hereby incorporated by reference into this Lease to the same extent and with
the same effect as if set forth fully herein and shall inure to the benefit of
the Lessor, without giving effect to any waiver, amendment, modification or
replacement of the Capital One Credit Agreement or any term or provision of the
Incorporated Representations and Warranties or the Incorporated Covenants
occurring subsequent to the date of this Lease, except to the extent otherwise
specifically provided in the following provisions of this paragraph. In the
event a waiver is granted under the Capital One Credit Agreement or an amendment
or modification is executed with respect to the Capital One Credit Agreement,
and such waiver, amendment and/or modification affects the Incorporated
Representations and Warranties or the Incorporated Covenants, then such waiver,
amendment or modification shall be effective with respect to the Incorporated
Representations and Warranties and the Incorporated Covenants as incorporated by
reference into this Lease only if consented to in writing by the Majority
Lenders. In the event of any replacement of the Capital One Credit Agreement
with a similar credit facility (the "New Facility") the representations and
------------
warranties and covenants of the Guarantor contained in the New Facility which
correspond to the representations and warranties and covenants of the Guarantor
contained in Section 7 and Section 8 of the Capital One Credit Agreement shall
become the Incorporated Representations and Warranties and the Incorporated
Covenants hereunder only if consented to in writing by the Lessor and the
Majority Lenders and, if such consent is not granted or if the Capital One
Credit Agreement is terminated and not replaced, then the representations and
warranties and covenants of the Guarantor contained in Section 7 and Section 8
of the Capital One Credit Agreement (together with any modifications or
amendments approved in accordance with this paragraph) shall continue to be the
Incorporated Representations and Warranties and the Incorporated Covenants
hereunder.
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ARTICLE XXIX
29.1 Notices.
-------
All notices required or permitted to be given under this Lease shall be in
writing. Notices may be served by certified or registered mail, postage paid
with return receipt requested; by private courier, prepaid; by telex, facsimile,
or other telecommunication device capable of transmitting or creating a written
record; or personally. Mailed notices shall be deemed delivered five days after
mailing, properly addressed. Couriered notices shall be deemed delivered when
delivered as addressed, or if the addressee refuses delivery, when presented for
delivery notwithstanding such refusal. Telex or telecommunicated notices shall
be deemed delivered when receipt is either confirmed by confirming transmission
equipment or acknowledged by the addressee or its office. Personal delivery
shall be effective when accomplished. Unless a party changes its address by
giving notice to the other party as provided herein, notices shall be delivered
to the parties at the following addresses:
If to Lessee:
Capital One Services, Inc.
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone No.: (703) 205-1000
Telecopy No.: (703) 205-1748
with a copy to:
Capital One Financial Corporation
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone No.: (703) 205-1000
Telecopy No.: (703) 205-1748
with a further copy to the Legal Department of Capital One Financial Corporation
at the immediately preceding address.
If to Lessor:
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
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Attention: Val T. Orton
Telephone No.: (801) 246-5300
Telecopy No.: (801) 246-5053
with a copy to the Agent:
Bank of America, N.A.
901 Main Street
66th Floor
Dallas, Texas 75202
Attention: Shelly K. Harper
Telephone No.: (214) 209-0567
Telecopy No.: (214) 209-0604
or such additional parties and/or other address as such party may hereafter
designate, and shall be effective upon receipt or refusal thereof.
ARTICLE XXX
30.1 Miscellaneous.
-------------
Anything contained in this Lease to the contrary notwithstanding, all
claims against and liabilities of Lessee or Lessor arising from events
commencing prior to the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination. If any provision of this Lease
shall be held to be unenforceable in any jurisdiction, such unenforceability
shall not affect the enforceability of any other provision of this Lease and
such jurisdiction or of such provision or of any other provision hereof in any
other jurisdiction.
30.2 Amendments and Modifications.
----------------------------
Neither this Lease, any Lease Supplement nor any provision hereof may be
amended, waived, discharged or terminated except by an instrument in writing in
recordable form signed by Lessor and Lessee.
30.3 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.
30.4 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.
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30.5 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.
30.6 GOVERNING LAW.
-------------
THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF VIRGINIA, EXCEPT TO THE EXTENT THAT IN SEEKING TO ENFORCE
THIS LEASE WITH RESPECT TO A PROPERTY AND TO THE EXTENT ANY OTHER RIGHTS AND
OBLIGATIONS HEREUNDER ARE REQUIRED TO BE GOVERNED UNDER THE LAWS OF THE STATE IN
WHICH SUCH PROPERTY IS LOCATED, THE LAWS OF THE STATE IN WHICH SUCH PROPERTY IS
LOCATED SHALL APPLY.
30.7 Calculation of Rent.
-------------------
All calculation of Rent payable hereunder shall be computed based on the
actual number of days elapsed over a year of 360 days.
30.8 Memoranda of Lease and Lease Supplements.
----------------------------------------
This Lease shall not be recorded; provided, Lessor and Lessee shall
--------
promptly record (a) a memorandum of this Lease or a short form Lease (in form
and substance reasonably satisfactory to Lessor) regarding each Property
promptly after the Property Closing Date with respect thereto, and (b) a
memorandum of the applicable Lease Supplement (in substantially the form of
Exhibit B attached hereto, subject to revisions to accommodate local law) or a
- ---------
short form lease (in form and substance reasonably satisfactory to Lessor)
regarding each Property promptly after the Basic Term Commencement Date with
respect to such Property, in each case in the local filing office with respect
thereto, in all cases at Lessee's cost and expense, and as required under
applicable law to sufficiently evidence this Lease or any such Lease Supplement
in the applicable real estate filing records.
30.9 Allocations between the Lenders and the Holders.
-----------------------------------------------
Notwithstanding any other term or provision of this Lease to the contrary,
the allocations of the proceeds of the Properties and any and all other Rent and
other amounts received hereunder shall be subject to the inter-creditor
provisions between the Lenders and the Holders contained in the Operative
Agreements (or as otherwise agreed among the Lenders and the Holders from time
to time).
30.10 Limitations on Recourse.
-----------------------
Notwithstanding anything contained in this Lease to the contrary, Lessee
agrees to look solely to Lessor's estate and interest in the Properties (and in
no circumstance to the Agent, the
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Lenders, the Holder or otherwise to Lessor) for the collection of any judgment
requiring the payment of money by Lessor in the event of liability by Lessor,
and no other property or assets of Lessor or any shareholder, owner or partner
(direct or indirect) in or of Lessor, or any director, officer, employee,
beneficiary, Affiliate of any of the foregoing shall be subject to levy,
execution or other enforcement procedure for the satisfaction of the remedies of
Lessee under or with respect to this Lease, the relationship of Lessor and
Lessee hereunder or Lessee's use of the Properties or any other liability of
Lessor to Lessee. Nothing in this Section shall be interpreted so as to limit
the terms of Sections 6.1 or 6.2.
30.11 WAIVERS OF JURY TRIAL.
---------------------
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE LESSOR AND THE LESSEE
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LEASE OR ANY COUNTERCLAIM THEREIN.
30.12 Exercise of Lessor Rights.
-------------------------
The Lessee hereby acknowledges and agrees that the rights and powers of the
Lessor under this Lease have been assigned to the Agent pursuant to the terms of
the Security Agreement and the other Operative Agreements.
30.13 Submission To Jurisdiction; Waivers.
-----------------------------------
Each of the parties hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Lease and the other Operative Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the
Commonwealth of Virginia, the courts of the United States of America for the
Eastern District of Virginia, and appellate courts from any thereof;
(b) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail) postage prepaid, to such party at its
address set forth in Section 29.1 or at such other address of which the parties
hereto shall have been notified pursuant thereto;
(c) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(d) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this Section 30.13 any special, exemplary or punitive damages.
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30.14 USURY SAVINGS PROVISION.
-----------------------
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT
COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE EXTENT
ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF
COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS
SECTION 30.14 SHALL APPLY. ANY SUCH RENT OR PAYMENTS SO CHARACTERIZED AS
INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE
PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH
SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR
CONTINGENCY (INCLUDING, BUT NOT LIMITED TO, PREPAYMENT OR ACCELERATION OF THE
MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR,
CHARGED, OR RECEIVED UNDER THIS LEASE OR OTHERWISE, EXCEED THE MAXIMUM
NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE
CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR
AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM
NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF
THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE
AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER
APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW
DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS
CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR
UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF
THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST,
OR REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH
AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED
TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF
THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST
WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT
INTEND TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND.
ALL INTEREST PAID OR AGREED TO BE PAID TO LESSOR SHALL, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE
FULL STATED TERM (INCLUDING ANY RENEWAL OR EXTENSION) OF THIS LEASE SO THAT THE
AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT
-38-
<PAGE>
EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.
[Signature pages follow]
-39-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed
and delivered as of the date first above written.
TWO WITNESSES: CAPITAL ONE SERVICES, INC.
1. /s/ Albert Ciafre By: /s/ Stephen Linehan
------------------------------- ------------------------------------
Print: Albert Ciafre Name: Stephen Linehan
------------------------- -----------------------------------
Title: Director of Corporate Funding
----------------------------------
2. /s/ John Stilmar
-------------------------------
Print: John Stilmar
-------------------------
TWO WITNESSES: FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
1. /s/ Arge Pavlos not individually, but solely as Owner
-------------------------------
Print: Arge Pavlos Trustee under the Capital One Realty
------------------------- Trust 1998-1, as Lessor
2. /s/ Krystal Bagshaw By: /s/ DeAnn Madsen
------------------------------- -------------------------------------
Print: Krystal Bagshaw Name: DeAnn Madsen
------------------------- -----------------------------------
Title: Assistant Trust Officer
----------------------------------
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as the date hereof
BANK OF AMERICA, N.A.,
as Agent
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
STATE OF ________________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as Owner Trustee under the Capital One Realty Trust 1998-1, on behalf
of the Owner Trustee.
/s/
[Notarial Seal] ----------------------------------------
Notary Public
My commission expires: ____________
STATE OF ________________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of CAPITAL ONE
SERVICES, INC., a Delaware corporation, on behalf of the corporation.
/s/
[Notarial Seal] ----------------------------------------
Notary Public
My commission expires: ____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of BANK OF AMERICA,
N.A., a national banking association, as Agent.
[Notarial Seal] ________________________________
Notary Public
<PAGE>
EXHIBIT A TO
THE LEASE
------------
[CONFORM TO REQUIREMENTS OF LAW]
LEASE SUPPLEMENT NO. ___
(Capital One Services, Inc.)
THIS LEASE SUPPLEMENT NO. ___ (Capital One Services, Inc.) (this "Lease
-----
Supplement") dated as of [________________] between FIRST SECURITY BANK,
- ----------
NATIONAL ASSOCIATION, not individually, but solely as Owner Trustee under the
Capital One Realty Trust 1998-1, as lessor (the "Lessor"), and CAPITAL ONE
------
SERVICES, INC., as lessee (the "Lessee").
------
WHEREAS, the Lessor is the owner or will be the owner of the Property
described on Schedule I hereto (the "Leased Property") and wishes to lease the
---------- ---------------
same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions; Rules of Usage. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Participation Agreement
----------
(Capital One Services, Inc.), dated as of September 3, 1999, among the Lessee,
the Lessor, not individually, except as expressly stated therein, but solely as
Owner Trustee under the Capital One Realty Trust 1998-1, the Holders, the
Lenders and Bank of America, N.A., as Agent for the Lenders and respecting the
Security Documents, as Agent for the Lenders and the Holders, to the extent of
their interests.
SECTION 2. The Properties. Attached hereto as Schedule I is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a
legal description of the Land for such Project attached hereto as Schedule I-C.
Effective upon the execution and delivery of this Lease Supplement by the Lessor
and the Lessee, the Leased Property shall be subject to the terms and provisions
of the Lease.
SECTION 3. Use of Property. At all times during the Term with respect to
each Property, Lessee will comply with all obligations under and (to the extent
no Event of Default exists and provided that such exercise will not impair the
value of such Property) shall be permitted to exercise all rights and remedies
under, all operation and easement agreements and related or similar agreements
applicable to such Property.
SECTION 4. Ratification; Incorporation by Reference. Except as
specifically modified hereby, the terms and provisions of the Lease and the
Operative Agreements are hereby
<PAGE>
ratified and confirmed and remain in full force and effect. The Lease is hereby
incorporated herein by reference as though restated herein in its entirety.
SECTION 5. Original Lease Supplement. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
-----------------
Counterpart"). To the extent that this Lease Supplement 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 Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF VIRGINIA.
SECTION 7. Mortgage; Power of Sale. Without limiting any other remedies
set forth in the Lease, in the event that a court of competent jurisdiction
rules that the Lease constitutes a mortgage, deed of trust or other secured
financing as is the intent of the parties, then the Lessor and the Lessee agree
that the Lessee hereby grants a Lien against the Leased Property WITH POWER OF
SALE, and that, upon the occurrence of any Lease Event of Default, the Lessor
shall have the power and authority, to the extent provided by law, after prior
notice and lapse of such time as may be required by law, to foreclose its
interest (or cause such interest to be foreclosed) in all or any part of the
Leased Property.
SECTION 8. Counterpart Execution. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
TWO WITNESSES: FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as Owner
1. __________________________ Trustee under the Capital One Realty Trust
Print:____________________ 1998-1, as Lessor
2.___________________________ By:_______________________________________
Print: Name:_____________________________________
Title:____________________________________
TWO WITNESSES: CAPITAL ONE SERVICES, INC. as Lessee
1.___________________________ By:_______________________________________
Print:_____________________ Name:_____________________________________
Title:____________________________________
2.___________________________
Print:_____________________
Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as the date hereof.
BANK OF AMERICA, N.A., as Agent
By:_______________________________________
Name:_____________________________________
Title:____________________________________
<PAGE>
[CONFORM TO STATE LAW REQUIREMENTS]
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as Owner Trustee under the Capital One Realty Trust 1998-1, on behalf
of the Owner Trustee.
[Notarial Seal] ___________________________________
Notary Public
My commission expires:____________
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of CAPITAL ONE
SERVICES, INC., a Delaware corporation, on behalf of the corporation.
[Notarial Seal] ___________________________________
Notary Public
My commission expires:____________
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of BANK OF AMERICA,
N.A., a national banking association, as Agent.
[Notarial Seal] ___________________________________
Notary Public
My commission expires:____________
<PAGE>
SCHEDULE I
TO LEASE SUPPLEMENT NO. ____
(Capital One Services, Inc.)
<PAGE>
SCHEDULE I-A
TO LEASE SUPPLEMENT NO. ____
(Capital One Services, Inc.)
(Equipment)
<PAGE>
SCHEDULE I-B
TO LEASE SUPPLEMENT NO. ____
(Capital One Services, Inc.)
(Improvements)
<PAGE>
SCHEDULE I-C
TO LEASE SUPPLEMENT NO. ____
(Capital One Services, Inc.)
(Land)
<PAGE>
EXHIBIT B TO THE LEASE
----------------------
[CONFORM TO REQUIREMENTS OF LAW]
Recordation requested by:
Moore & Van Allen, PLLC
After recordation return to:
Moore & Van Allen, PLLC (WMA)
Bank of America Corporate Center
100 North Tryon Street, Floor 47
Charlotte, NC 28202-4003
Space above this line
for Recorder's use
_______________________________
MEMORANDUM OF LEASE AGREEMENT
(TAX RETENTION OPERATING LEASE) AND
LEASE SUPPLEMENT NO. _____________
(Capital One Services, Inc.)
THIS MEMORANDUM OF LEASE AGREEMENT (TAX RETENTION OPERATING LEASE) AND
LEASE SUPPLEMENT NO. ___ (Capital One Services, Inc.) ("Memorandum"), dated as
of _____________, 199___, is by and between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not individually, but solely as
Owner Trustee under the Capital One Realty Trust 1998-1, with an office at 79
South Main Street, Salt Lake City, Utah 84111 (hereinafter referred to as
"Landlord") and CAPITAL ONE SERVICES, INC., a Delaware corporation, with an
office at 2980 Fairview Park Drive, Suite 1300, Falls Church, Virginia 22042
(hereinafter referred to as "Tenant").
WITNESSETH:
That for value received, Landlord and Tenant do hereby covenant, promise
and agree as follows:
1. Demised Premises. Landlord has leased to Tenant, and Tenant has
----------------
leased from Landlord, for the Term (as hereinafter defined), certain real
property and other property located in ________________, which is described in
the attached Exhibit A (the "Property"), pursuant to
<PAGE>
the terms of a Lease Agreement (Tax Retention Operating Lease Agreement),
between Landlord and Tenant dated September 3, 1999 (the "Lease") and a Lease
Supplement No. _____ between Landlord and Tenant dated ______________ (the
"Lease Supplement").
2. Term. The term of the Lease ("Term") commenced on _______ and shall
----
end ______________, unless the Term is extended or earlier terminated in
accordance with the provisions of the Lease.
3. Mortgage; Power of Sale. Without limiting any other remedies set
-----------------------
forth in the Lease, in the event that a court of competent jurisdiction rules
that the Lease constitutes a mortgage, deed of trust or other secured financing
as is the intent of the parties, then the Lessor and the Lessee agree that the
Lessee has granted, pursuant to the terms of the Lease and the Lease Supplement,
a Lien against the Property WITH POWER OF SALE, and that, upon the occurrence
and during the continuance of any Lease Event of Default, the Lessor shall have
the power and authority, to the extent provided by law, after prior notice and
lapse of such time as may be required by law, to foreclose its interest (or
cause such interest to be foreclosed) in all or any part of the Property.
4. Effect of Memorandum. The purpose of this instrument is to give
--------------------
notice of the Lease and the Lease Supplement and their respective terms,
covenants and conditions to the same extent as if the Lease and the Lease
Supplement were fully set forth herein. This Memorandum shall not modify in any
manner the terms, conditions or intent of the Lease or the Lease Supplement and
the parties agree that this Memorandum is not intended nor shall it be used to
interpret the Lease or the Lease Supplement or determine the intent of the
parties under the Lease or the Lease Supplement.
[The remainder of this page has been intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this instrument
as of the day and year first written.
LANDLORD: TENANT:
FIRST SECURITY BANK, CAPITAL ONE SERVICES, INC.
NATIONAL ASSOCIATION, a Delaware corporation
not individually, but solely
as Owner Trustee under the
Capital One Realty Trust 1998-1
By:___________________________ By:__________________________
Its:__________________________ Its:_________________________
<PAGE>
[CONFORM TO REQUIREMENTS OF LAW]
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as Owner Trustee under the Capital One Realty Trust 1998-1, on behalf
of the Owner Trustee.
[Notarial Seal] ________________________________________
Notary Public
My commission expires:____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of CAPITAL ONE
SERVICES, INC., a Delaware corporation, on behalf of the corporation.
[Notarial Seal] ________________________________________
Notary Public
My commission expires:____________
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 10.26
-------------
PARTICIPATION AGREEMENT
(Capital One Services, Inc.)
Dated as of September 3, 1999
among
CAPITAL ONE SERVICES, INC.,
as Construction Agent and as Lessee,
CAPITAL ONE FINANCIAL CORPORATION,
as Guarantor,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as Owner Trustee
under the Capital One Realty Trust 1998-1
THE VARIOUS BANKS AND OTHER
LENDING INSTITUTIONS WHICH ARE PARTIES HERETO
FROM TIME TO TIME,
as the Holders,
THE VARIOUS BANKS AND OTHER
LENDING INSTITUTIONS WHICH ARE PARTIES HERETO
FROM TIME TO TIME,
as the Lenders
and
BANK OF AMERICA, N.A.,
as Agent for the
Lenders and respecting
the Security Documents, as Agent for
the Lenders and the Holders,
to the extent of their interests
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 THE LOANS............................................................................................ 1
SECTION 2 HOLDER FUNDINGS...................................................................................... 2
SECTION 3 SUMMARY OF TRANSACTIONS.............................................................................. 2
3.1 Operative Agreements................................................................................. 2
--------------------
3.2 Property Purchase.................................................................................... 2
-----------------
3.3 Construction of Improvements; Lease or Disposition of Property....................................... 3
--------------------------------------------------------------
3.4 Ratable Interests of the Holders and the Lenders in the Commitments and Holder Commitments under the
-----------------------------------------------------------------------------------------------------
CORI Participation Agreement......................................................................... 3
----------------------------
SECTION 4 THE CLOSINGS......................................................................................... 3
4.1 Initial Closing Date................................................................................. 3
--------------------
4.2 Initial Closing Date; Property Closing Dates; Construction Advances.................................. 3
-------------------------------------------------------------------
SECTION 5 FUNDING OF ADVANCES; REPORTING REQUIREMENTS ON COMPLETION DATE; LESSEE DELIVERY OF NOTICES; CERTAIN
COVENANTS........................................................................................................ 4
5.1 General............................................................................................. 4
-------
5.2 Procedures for Funding.............................................................................. 5
----------------------
5.3 Conditions to the Holders' and the Lenders' Obligations to Advance Funds for the Acquisition of
----------------------------------------------------------------------------------------------------
Property......................................................................................... 6
--------
5.4 Conditions to the Holders' and the Lenders' Obligations to Make Construction Advances for the
----------------------------------------------------------------------------------------------------
Ongoing Construction on any Property Prior to the Construction Period Termination Date........... 9
--------------------------------------------------------------------------------------
5.5 Additional Reporting and Delivery Requirements on Completion Date Respecting Each Property.......... 10
------------------------------------------------------------------------------------------
5.6 Construction Agent Delivery of Construction Budget Modifications.................................... 10
----------------------------------------------------------------
5.7 Maintenance of the Lessee as a Wholly-Owned Entity.................................................. 11
--------------------------------------------------
5.8 Unilateral Right to Increase the Holder Commitments and the Lender Commitments...................... 11
------------------------------------------------------------------------------
5.9 Borrower's Right to Increase the Commitments Under the CORI Credit Agreement and the Holder
----------------------------------------------------------------------------------------------------
Commitments Allocable to the CORI Trust Estate................................................... 11
----------------------------------------------
5.10 Additional Holder Representatives; Lessee's Right to Replace Holder................................ 11
------------------------------------------------------------------
SECTION 6 CONDITIONS OF THE INITIAL CLOSING.................................................................. 12
6.1 Conditions to the Lessor's and the Holders' Obligations............................................ 12
-------------------------------------------------------
6.2 Conditions to the Lessee's Obligations............................................................. 14
--------------------------------------
6.3 Conditions to the Agent's Obligations.............................................................. 15
------------------------------------
SECTION 7 REPRESENTATIONS AND WARRANTIES ON THE INITIAL CLOSING DATE......................................... 15
7.1 Representations and Warranties of the Holders...................................................... 15
---------------------------------------------
7.2 Representations and Warranties of the Borrower..................................................... 17
----------------------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
7.3 Representations and Warranties of the Construction Agent and the Credit Parties..................... 20
-------------------------------------------------------------------------------
7.4 Representations and Warranties of the Agent......................................................... 22
-------------------------------------------
SECTION 8 REPRESENTATIONS AND WARRANTIES ON FUNDING DATES..................................................... 23
8.1 Representations and Warranties on Property Closing Dates............................................ 23
--------------------------------------------------------
8.2 Representations and Warranties Upon Initial Construction Advances................................... 24
-----------------------------------------------------------------
8.3 Representations and Warranties Upon the Date of Each Construction Advance That Is Not An Initial
----------------------------------------------------------------------------------------------------
Advance........................................................................................ 26
-------
SECTION 8B. GUARANTY............................................................................................ 27
8B.1. Guaranty of Payment and Performance................................................................. 27
-----------------------------------
8B.2. Obligations Unconditional........................................................................... 28
-------------------------
8B.3. Modifications....................................................................................... 29
-------------
8B.4. Waiver of Rights.................................................................................... 29
----------------
8B.5. Reinstatement....................................................................................... 30
-------------
8B.6. Remedies............................................................................................ 30
--------
8B.7. Limitation of Guaranty.............................................................................. 30
----------------------
8B.8. Payment of Amounts to the Agent..................................................................... 30
-------------------------------
8B.9. Denial or Disaffirmance of Guaranty................................................................. 31
-----------------------------------
SECTION 9 PAYMENT OF CERTAIN EXPENSES......................................................................... 31
9.1 Transaction Expenses................................................................................ 31
--------------------
9.2 [Reserved].......................................................................................... 32
--------
9.3 Certain Fees and Expenses........................................................................... 32
-------------------------
9.4 Facility Fee........................................................................................ 33
------------
SECTION 10 OTHER COVENANTS AND AGREEMENTS...................................................................... 33
10.1 Cooperation with the Construction Agent or the Lessee............................................... 33
-----------------------------------------------------
10.2 Covenants of the Owner Trustee and the Holders...................................................... 33
----------------------------------------------
10.3 Credit Party Covenants, Consent and Acknowledgment.................................................. 35
--------------------------------------------------
10.4 Sharing of Certain Payments......................................................................... 36
---------------------------
10.5 Grant of Easements, etc............................................................................. 37
------------------------
10.6 Appointment by Holders and Owner Trustee............................................................ 37
----------------------------------------
SECTION 11 CREDIT AGREEMENT AND TRUST AGREEMENT................................................................ 38
11.1 Construction Agent's and Lessee's Credit Agreement Rights........................................... 38
---------------------------------------------------------
11.2 Construction Agent's and Lessee's Trust Agreement Rights............................................ 39
--------------------------------------------------------
SECTION 12 TRANSFER OF INTEREST................................................................................ 39
12.1 Restrictions on Transfer............................................................................ 39
------------------------
12.2 Effect of Transfer.................................................................................. 40
------------------
SECTION 13 INDEMNIFICATION..................................................................................... 40
13.1 General Indemnity................................................................................... 40
-----------------
13.2 General Tax Indemnity............................................................................... 43
---------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
13.3. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC.............................. 47
----------------------------------------------------------------------
13.4. Additional Provisions Regarding Environmental Indemnification....................................... 48
-------------------------------------------------------------
13.5. Additional Provisions Regarding Indemnification..................................................... 48
-----------------------------------------------
13.6. Indemnifications Provided by the Owner Trustee in Favor of the Other Indemnified Persons............ 48
----------------------------------------------------------------------------------------
SECTION 14 MISCELLANEOUS....................................................................................... 49
14.1 Survival of Agreements.............................................................................. 49
----------------------
14.2 No Broker, etc...................................................................................... 50
--------------
14.3 Notices............................................................................................. 50
-------
14.4 Counterparts........................................................................................ 51
------------
14.5 Amendments and Termination.......................................................................... 52
--------------------------
14.6 Headings, etc....................................................................................... 52
--------------
14.7 Parties in Interest................................................................................. 52
-------------------
14.8 GOVERNING LAW; WAIVERS OF JURY TRIAL................................................................ 52
------------------------------------
14.9 Severability........................................................................................ 52
------------
14.10 Liability Limited................................................................................... 52
-----------------
14.11 Rights of the Credit Parties........................................................................ 54
----------------------------
14.12 Further Assurances.................................................................................. 54
------------------
14.13 Calculations under Operative Agreements............................................................. 54
---------------------------------------
14.14 Confidentiality..................................................................................... 55
---------------
</TABLE>
iii
<PAGE>
EXHIBITS
- --------
A - Forms of Requisition - Sections 4.2 and 5.2
B - Officer's Certificate - Section 5.6
C - Legal Opinion of Lessee's Counsel - Section 6.1(c)
D - Officer's Certificate - Section 6.1(g)
E - Officer's Certificate - Section 6.1(h)
F - Officer's Certificate - Section 6.2(d)
G - Officer's Certificate - Section 6.2(e)
H - Legal Opinion - Section 6.2(f)
I - Description of Material Litigation
J - Confidentiality Agreement
Appendix A Rules of Usage and Definitions
iv
<PAGE>
PARTICIPATION AGREEMENT
(Capital One Services, Inc.)
THIS PARTICIPATION AGREEMENT (Capital One Services, Inc.), dated as of
September 3, 1999 (as amended or supplemented from time to time, this
"Agreement") is by and among CAPITAL ONE SERVICES, INC., a Delaware corporation
("Lessee" or the "Construction Agent"); CAPITAL ONE FINANCIAL CORPORATION, a
Delaware corporation, as guarantor ("Guarantor"); FIRST SECURITY BANK, NATIONAL
---------
ASSOCIATION, a national banking association, not individually (in its individual
capacity, the "Trust Company"), except as expressly stated herein, but solely as
-------------
Owner Trustee under the Capital One Realty Trust 1998-1 (the "Owner Trustee",
-------------
the "Borrower" or the "Lessor"); the various banks and other lending
-------- ------
institutions which are parties hereto from time to time as holders of
certificates issued with respect to the Capital One Realty Trust 1998-1 (subject
to the definition of Holders in Appendix A hereto, individually, a "Holder" and
---------- ------
collectively, the "Holders"); the various banks and other lending institutions
-------
which are parties hereto from time to time as lenders (subject to the definition
of Lenders in Appendix A hereto, individually, a "Lender" and collectively, the
---------- ------
"Lenders"); and BANK OF AMERICA, N.A., a national banking association, as the
-------
agent for the Lenders and respecting the Security Documents, as the agent for
the Lenders and the Holders, to the extent of their interests (in such capacity,
the "Agent"). Capitalized terms used but not otherwise defined in this
-----
Agreement shall have the meanings set forth in Appendix A hereto.
This Agreement relates to the Lease, the COSI Trust Estate and the
Advances, Commitments and Holder Commitments related thereto.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
SECTION 1 THE LOANS.
The Lenders have agreed to make loans to the Lessor from time to time in an
aggregate principal amount of up to the aggregate amount of the Commitments of
the Lenders in order for the Lessor to acquire the Properties and certain
Improvements and to develop and construct certain Improvements in accordance
with the Agency Agreement and the terms and provisions hereof, and in
consideration of the receipt of proceeds of the Loans, the Lessor will issue the
Notes. The Loans shall be made and the Notes shall be issued pursuant to the
Credit Agreement. Pursuant to Section 5 of this Agreement and Section 2 of the
Credit Agreement, the Loans will be made to the Lessor from time to time at the
request of the Construction Agent in consideration for the Construction Agent
agreeing for the benefit of the Lessor, pursuant to the Agency Agreement, to
acquire the Properties, to acquire the Equipment, to construct certain
Improvements and to cause the Lessee to lease the Properties, each in accordance
with the Agency Agreement and the other Operative Agreements. The Loans and the
obligations of the Lessor under the Credit Agreement shall be secured by the
Collateral.
<PAGE>
SECTION 2 HOLDER FUNDINGS.
Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto on each date Advances made in accordance with
Section 5 hereof, each Holder shall make a Holder Funding on a pro rata basis to
the Lessor with respect to the Capital One Realty Trust 1998-1 based on its
Holder Commitment in an amount in immediately available funds such that the
aggregate of all Holder Fundings shall be three percent (3%) of the amount of
the Advance being funded on such date; provided, no Holder shall be obligated
for any Holder Funding in excess of its pro rata share of the Available Holder
Commitment; provided, further, that the initial Advance hereunder shall consist
of Holder Fundings in an amount equal to $861,617 and Loans in an amount equal
to $19,525,613. The aggregate amount of Holder Fundings shall be up to the
aggregate amount of the Holder Commitments. No prepayment or any other payment
shall be permitted such that the aggregate outstanding Holder Fundings on the
date of such payment or prepayment are less than 3% of the aggregate outstanding
amount of Advances made as of such date, except as provided in Section 8 of the
Credit Agreement. The representations, warranties, covenants and agreements of
the Holders herein and in the other Operative Agreements are several, and not
joint or joint and several.
SECTION 3 SUMMARY OF TRANSACTIONS.
3.1 OPERATIVE AGREEMENTS.
---------------------
On the date hereof, each of the respective parties hereto and thereto shall
execute and deliver this Agreement, the Lease, the Agency Agreement, the Credit
Agreement, the Trust Agreement, the Security Agreement and such other documents,
instruments, certificates and opinions of counsel as agreed to by the parties
hereto.
3.2 PROPERTY PURCHASE.
-----------------
On each Property Closing Date and subject to the terms and conditions of
this Agreement (a) the Holders will each make a Holder Funding in accordance
with Sections 2 and 5 of this Agreement and the terms and provisions of the
Trust Agreement, (b) the Lenders will each make Loans in accordance with
Sections 1 and 5 of this Agreement and the terms and provisions of the Credit
Agreement, (c) the Lessor will purchase, or lease pursuant to a Ground Lease,
the applicable Property, each to be within an Approved State, identified by the
Construction Agent, in each case pursuant to a Deed and/or Bill of Sale or a
Ground Lease, as the case may be, and grant the Agent a lien on such Property by
execution of the required Security Documents, and (d) if the Property Closing
Date for such Property is also the Basic Term Commencement Date for such
Property, the Agent, the Lessee and the Lessor shall execute and deliver a Lease
Supplement relating to such Property.
2
<PAGE>
3.3 CONSTRUCTION OF IMPROVEMENTS; LEASE OR DISPOSITION OF PROPERTY.
--------------------------------------------------------------
Construction Advances will be made with respect to particular Improvements
to be constructed and with respect to ongoing construction of particular
Improvements, in each case, pursuant to the terms and conditions of this
Agreement and the Agency Agreement. The Construction Agent will act as a
construction agent on behalf of the Lessor respecting the construction of such
Improvements and the expenditures of the Construction Advances related thereto.
The Construction Agent shall promptly notify the Lessor upon Completion of the
Improvements and the Lessee shall commence to pay Basic Rent as of the Basic
Term Commencement Date.
3.4 RATABLE INTERESTS OF THE HOLDERS AND THE LENDERS IN THE COMMITMENTS
-------------------------------------------------------------------
AND HOLDER COMMITMENTS UNDER THE CORI PARTICIPATION AGREEMENT.
-------------------------------------------------------------
Each Holder and Lender agrees at all times (a) (i) that each Tranche A
Lender shall hold the same ratable portion of the aggregate Lender Commitment
for Tranche A Loans as such Tranche A Lender holds with respect to the aggregate
Lender Commitment for Tranche A Loans as defined in the CORI Participation
Agreement, (ii) that each Tranche B Lender shall hold the same ratable portion
of the aggregate Lender Commitment for Tranche B Loans as such Tranche B Lender
holds with respect to the aggregate Lender Commitment for Tranche B Loans as
defined in the CORI Participation Agreement, and (iii) that each Holder shall
hold the same ratable portion of the aggregate Holder Commitment as such Holder
holds with respect to the aggregate Holder Commitment as defined in the CORI
Participation Agreement, and (b) to make advances consistent with such committed
amounts referenced in Section 3.4(a) in accordance with the requirements of the
Operative Agreements, as defined in Appendix A hereto, and in accordance with
the requirements of the Operative Agreements, as defined in Appendix A to the
CORI Participation Agreement.
SECTION 4 THE CLOSINGS.
4.1 INITIAL CLOSING DATE.
--------------------
All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC,
Charlotte, North Carolina, or at such other location as may be determined by the
Lessor, the Agent and the Lessee.
4.2 INITIAL CLOSING DATE; PROPERTY CLOSING DATES; CONSTRUCTION ADVANCES.
-------------------------------------------------------------------
The Construction Agent shall deliver to the Lessor and the Agent a
requisition (a "Requisition"), in the form attached hereto as Exhibit A or in
---------
such other form as is reasonably satisfactory to the Lessor and the Agent, in
connection with (a) the Initial Closing Date relating to the amounts specified
in the second proviso to the first sentence of Section 2 hereof, the Transaction
Expenses and other fees, expenses and disbursements payable by the Lessor
pursuant to Section 9.1(a); and (b) each Property Closing Date relating to each
Acquisition Advance pursuant to
3
<PAGE>
Sections 5.3 and 9.1(b); and (c) each date of a Construction Advance pursuant to
Sections 5.4 and 9.1(b). Notwithstanding the foregoing, the Lenders and the
Holders may, in their sole discretion, make Advances pursuant to or in
connection with Article IX and Section 13.6 without a Requisition; provided,
--------
however, the failure of such amounts so funded to be referenced in a Requisition
- -------
shall not preclude the Lessee from later contesting the reasonableness of the
payment of such amounts, and any amounts required to be refunded by the Lessor
or any third party following a successful contest shall be available for future
Advances to be made in accordance with the provisions of the Operative
Agreements.
SECTION 5 FUNDING OF ADVANCES; REPORTING REQUIREMENTS ON COMPLETION DATE;
LESSEE DELIVERY OF NOTICES; CERTAIN COVENANTS.
5.1 GENERAL.
-------
(a) To the extent funds have been made available to the Lessor as
Loans by the Lenders and Holder Fundings by the Holders, the Lessor will
use such funds from time to time in accordance with the terms and
conditions of this Agreement and the other Operative Agreements (i) to pay
interest regarding the Loans relating to a Property and to pay the Holder
Yield regarding the Holder Fundings relating to a Property, in each case to
the extent accrued under the Credit Agreement or Trust Agreement (as the
case may be) during the period prior to the Basic Term Commencement Date
with respect to such Property, (ii) at the direction of the Construction
Agent to acquire the Properties in accordance with the terms of this
Agreement, the Agency Agreement and the other Operative Agreements, (iii)
to make Advances to the Construction Agent to permit the development,
construction, modification, design, and renovation, as applicable, of
Improvements in accordance with the terms of the Agency Agreement, and the
other Operative Agreements, and (iv) to pay Transaction Expenses and
disbursements payable by the Lessor under Article IX and Section 13.6.
(b) In lieu of the payment of interest on the Loans and Holder Yield
on the Holder Fundings on any Scheduled Interest Payment Date with respect
to any Property during the period prior to the Basic Term Commencement Date
with respect to such Property and subject to Section 5.8, (i) each Lender's
Loan shall automatically be increased by the amount of interest accrued and
unpaid on such Loan for such period (except to the extent that at any time
such increase would cause such Lender's Loan to exceed such Lender's
Available Commitment, in which case the Lessee shall pay such excess amount
to such Lender in immediately available funds on the Basic Term
Commencement Date, plus interest thereon at the Overdue Rate, and (ii) each
Holder's Holder Funding shall automatically be increased by the amount of
Holder Yield accrued and unpaid on such Holder Funding for such period
(except to the extent that at any time such increase would cause the Holder
Funding of such Holder to exceed such Holder's Available Holder Commitment,
in which case the Lessee shall pay such excess amount to such Holder in
immediately available funds on the Basic Term Commencement Date, plus
interest thereon at the Overdue Rate). Such increases in a Lender's Loan
and a Holder's Holder Funding shall occur without any disbursement of funds
by any Person.
4
<PAGE>
5.2 PROCEDURES FOR FUNDING.
----------------------
(a) The Construction Agent shall designate the date for Advances
hereunder in accordance with the terms and provisions hereof; provided,
however, it is understood and agreed that no more than two Advances may be
requested during any calendar month and the Lenders and the Holders may, in
their sole discretion, fund Transaction Expenses, fees, expenses and other
disbursements payable by the Lessor pursuant to or in connection with
Article IX and Section 13.6 regardless whether the Construction Agent
provides such designation with respect thereto; and provided, further, not
more than one of such Advances may be a Eurodollar Loan. Not less than (i)
three (3) Business Days' prior to the Initial Closing Date and (ii) three
(3) Business Days prior to the date on which any Construction or
Acquisition Advance is to be made, the Construction Agent shall deliver to
the Agent, (A) with respect to the Initial Closing Date and each
Acquisition Advance, a Requisition as described in Section 4.2 hereof and
(B) with respect to each Construction Advance, a Requisition identifying
(among other things) the Property to which such Construction Advance
relates.
(b) Each Requisition shall: (i) be irrevocable, (ii) request funds in
an amount that is not in excess of the total aggregate of the Available
Commitments plus the Available Holder Commitments at such time, and (iii)
request that the Holders make a Holder Funding and that the Lenders make
Loans to the Lessor for the payment of the Property Acquisition Costs (in
the case of an Acquisition Advance) or other Property Costs (in the case of
a Construction Advance) that have previously been incurred and were not
subject to a prior Requisition, in each case as specified in the
Requisition.
(c) Subject to the satisfaction of the conditions precedent set forth
in Sections 5.3, 5.4 or 5.5, as applicable, on each Property Closing Date
or the date on which the Construction Advance is to be made, as applicable,
and further subject to the second proviso to the first sentence of Section
2 hereof respecting the initial Advance to be made hereunder, (i) the
Lenders shall make Loans to the Lessor in an aggregate amount equal to 97%
times the sum of (w) the Requested Funds specified in any Requisition and
(x) any additional amount of Transaction Expenses or other costs as
referenced in Article IX and any additional amount respecting any indemnity
payment as referenced in Section 13.6 (unless any such funding of
Transaction Expenses or any indemnity payment is declined in writing by
each Lender and each Holder (such decision to be in the sole discretion of
each Lender and each Holder)), ratably between the Tranche A Lenders and
the Tranche B Lenders with the Tranche A Lenders funding eighty-six percent
(86%) of the Requested Funds and the Tranche B Lenders funding eleven
percent (11%) of the Requested Funds), up to an aggregate principal amount
equal to the Available Commitments, (ii) each Holder shall make a pro rata
Holder Funding based on its Holder Commitment in an amount such that the
aggregate of all Holder Fundings at such time shall be 3% times the sum of
(y) the Requested Funds specified in such Requisition and (z) any
additional amount of Transaction Expenses or other costs as referenced in
Article IX and any additional amount respecting any indemnity payment as
referenced in Section 13.6 (unless any such funding of Transaction Expenses
or any indemnity payment is declined
5
<PAGE>
in writing by each Lender and each Holder (such decision to be in the sole
discretion of each Lender and each Holder)), up to the aggregate advanced
amount equal to the aggregate of the Available Holder Commitments and
provided no such Holder Funding shall exceed such Holder's pro rata share
of the Available Holder Commitments; and (iii) the total amount of such
Loans and Holder Fundings made on such date shall (a) be used by the Lessor
to pay Property Acquisition Costs including Transaction Expenses and other
costs and indemnity payments within three (3) Business Days of the receipt
by the Lessor of such Advance (it being understood and agreed that the
first Advance shall include an amount necessary to cover costs incurred
prior to the Initial Closing Date in connection with the Land and
Improvements owned or ground leased by the Borrower and located in
Hillsborough County, Florida) or (b) be advanced by the Lessor on the date
of such Advance to the Construction Agent or the Lessee to pay Property
Costs, as applicable.
(d) With respect to an Advance obtained by the Lessor to pay for
Property Acquisition Costs and/or Transaction Expenses or other costs
payable under Article IX or Section 13.6 hereof and not expended by Lessor
for such purpose on the date of such Advance, such amounts shall be held by
the Lessor (or the Agent on behalf of the Lessor) until the applicable
Property Closing Date or, if such Property Closing Date does not occur
within three (3) Business Days of the date of the Lessor's receipt of such
Advance, shall be applied to repay the applicable Advance to the Lenders
and the Holders and, subject to the terms hereof, and of the Credit
Agreement and the Trust Agreement, shall remain available for future
Advances. Any such amounts held by the Lessor (or the Agent on behalf of
the Lessor) shall be subject to the lien of the Security Agreement.
5.3 CONDITIONS TO THE HOLDERS' AND THE LENDERS' OBLIGATIONS TO ADVANCE
------------------------------------------------------------------
FUNDS FOR THE ACQUISITION OF PROPERTY.
--------------------------------------
The obligations of the Holders to make a Holder Funding, and of the Lenders
to make Loans to the Lessor, (i) on the Initial Closing Date to pay Transaction
Expenses, fees, expenses and other disbursements payable by the Lessor under
Article IX of this Agreement and (ii) on a Property Closing Date for the purpose
of providing funds to the Lessor necessary to pay the Transaction Expenses,
fees, expenses and other disbursements payable by the Lessor under Article IX of
this Agreement and to acquire a Property (an "Acquisition Advance") in each case
are subject to the satisfaction or waiver of the following conditions precedent:
(a) the correctness in all material respects on such Property Closing
Date of the representations and warranties (including without limitation
the Incorporated Representations and Warranties) of the Lessor, the
Construction Agent, the Lessee and the Holders contained herein and in each
of the other Operative Agreements;
(b) the performance in all material respects by the Construction
Agent and the Lessee of their respective agreements contained herein and in
the other Operative Agreements and to be performed by them on or prior to
each Property Closing Date;
6
<PAGE>
(c) the Agent shall have received a fully executed counterpart copy
of the Requisition, appropriately completed;
(d) title to each Property being acquired on such Property Closing
Date shall conform to the representations and warranties set forth in
Section 8.1(c) hereof;
(e) the Construction Agent shall have delivered to the Lessor a copy
of the Deed with respect to the Land and existing Improvements and a copy
of the Bill of Sale with respect to the Equipment, respecting such of the
foregoing as are being acquired on such Property Closing Date, and such
Land and existing Improvements shall be located in an Approved State;
(f) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Advance requested by such Requisition;
(g) the Construction Agent shall have delivered to the Agent, title
insurance commitments to issue policies in favor of the Lessor and the
Agent from a title insurance company and in form and substance acceptable
to the Agent, with such title exceptions thereto as are acceptable to the
Agent;
(h) the Construction Agent shall have delivered to the Agent and the
Lessor an environmental site assessment prepared by an independent
recognized professional acceptable to the Agent and the Lessor and in a
form and substance that is acceptable to the Agent and the Lessor;
(i) the Construction Agent shall have delivered to the Agent a survey
prepared by an independent recognized professional acceptable to the Agent
and in a form and substance acceptable to the Agent;
(j) the Construction Agent shall have caused to be delivered to the
Agent and the Lessor (i) a legal opinion (in form and substance
satisfactory to the Agent) from counsel located in the state where the
Property is located and (ii) a good standing certificate for the
Construction Agent from the appropriate officer of the state in which the
Property is located;
(k) the Lessor and the Agent shall be satisfied, in their discretion,
that the acquisition and/or holding of the Property and the execution of
the Mortgage Instrument and the other Security Documents will not adversely
affect the rights of the Lessor, the Holders, the Agent or the Lenders
under or with respect to the Operative Agreements;
(l) the Lessor shall have delivered to the Agent and there shall have
been recorded by the Agent a Mortgage Instrument and the Lender Financing
Statements
7
<PAGE>
respecting such Property in a form acceptable to the Agent and all
necessary recording fees, documentary stamp taxes and similar amounts shall
have been paid;
(m) the Construction Agent shall have delivered to the Agent with
respect to each Property, a Lease Supplement and a memorandum regarding the
Lease and such Lease Supplement (such memorandum to be substantially in the
form attached as Exhibit B to the Lease and in form suitable for
recording); provided, such items shall be delivered pursuant to this
--------
Section 5.3(m) on the Property Closing Date for such Property only if the
Basic Term Commencement Date for such Property shall also occur on such
Property Closing Date;
(n) the Construction Agent shall have delivered to the Agent with
respect to each Property or the acquisition of personal property and/or
fixtures in accordance with the Operative Agreements, Lessor Financing
Statements executed by the Lessee and the Lessor;
(o) (i) with respect to each Acquisition Advance, the Available
Commitment and the Available Holder Commitment (after deducting the
Unfunded Amount) will be sufficient to acquire the Property and to pay
interest regarding the Loans and the Holder Yield regarding the Holder
Fundings relating to all Properties to the extent accrued under the Credit
Agreement and the Trust Agreement, as the case may be, during the period
prior to the Basic Term Commencement Date with respect to such Properties;
and (ii) based upon the construction schedule relating to any Construction
Period Property, there is sufficient time for Completion of such
Construction Period Property to occur on or prior to the Construction
Period Termination Date;
(p) if the Property is subject to a Ground Lease the Construction
Agent shall have caused a lease memorandum (in form and substance
satisfactory to the Agent) to be delivered to the Agent for such Ground
Lease;
(q) Counsel for the ground lessor of each Property subject to a
Ground Lease shall have issued to the Lessee, the Holders, the Lenders and
the Agent its opinion (in form and substance satisfactory to the Agent);
(r) the Construction Agent shall have delivered to the Agent a
preliminary construction budget (the "Construction Budget") for the
Improvements (if any) to be constructed on such Property;
(s) the Construction Agent shall have provided evidence of general
and excess liability insurance with respect to such Property as provided in
the Lease; and
(t) in their sole and absolute discretion, the Lenders and the
Holders shall have agreed to accept, and to fund the respective Loans and
Holder Fundings regarding, the particular property then under consideration
as a Property; provided, however, it is hereby understood and agreed that
-------- -------
that certain office building to be constructed at 8705 Henderson
8
<PAGE>
Road, Tampa, Florida 33634, its respective interest in the related 5-story
parking garage and the related ground lease for the real property at such
location is an acceptable Property.
5.4 CONDITIONS TO THE HOLDERS' AND THE LENDERS' OBLIGATIONS TO MAKE
---------------------------------------------------------------
CONSTRUCTION ADVANCES FOR THE ONGOING CONSTRUCTION ON ANY PROPERTY
------------------------------------------------------------------
PRIOR TO THE CONSTRUCTION PERIOD TERMINATION DATE.
--------------------------------------------------
The obligations of the Holders to make a Holder Funding, and the Lenders to
make Loans, to the Lessor, (i) in connection with all requests for Advances
subsequent to the acquisition of a Property (and to pay the Transaction
Expenses, fees, expense and other disbursements payable by the Lessor under
Article IX of this Agreement in connection therewith) and, (ii) to pay the
Holder Yield regarding the Holder Fundings relating to a Property and interest
regarding the Loans relating to a Property, in each case regarding such Holder
Yield and Interest to the extent accrued and payable under the Credit Agreement
or Trust Agreement (as the case may be), during the period prior to the Basic
Term Commencement Date with respect to such Property, are subject to the
satisfaction or waiver of the following conditions precedent:
(a) the correctness in all material respects on such date of the
representations and warranties (including without limitation the
Incorporated Representations and Warranties) of the Lessor, the
Construction Agent, the Lessee and the Holders contained herein and in each
of the other Operative Agreements;
(b) the performance in all material respects by the Construction
Agent and the Lessee of their respective agreements contained herein and in
the other Operative Agreements and to be performed by them on or prior to
each such date;
(c) the Agent shall have received a fully executed counterpart of the
Requisition, appropriately completed;
(d) (i) based upon the applicable Construction Budget, the Available
Commitments and the Available Holder Commitment (after deducting the
Unfunded Amount) will be sufficient to complete the Improvements including
interest on Loans and yield on Holder Fundings related thereto prior to the
Basic Term Commencement Date for such Property; and (ii) based upon the
construction schedule relating to any Construction Period Property, there
is sufficient time for Completion of such Construction Period Property to
occur on or prior to the Construction Period Termination Date;
(e) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Construction Advance requested by such
Requisition;
(f) the title insurance policy delivered in connection with the
requirements of Section 5.3(g) shall provide for (or shall be endorsed to
provide for) insurance in an amount at least equal to the maximum total
Property Cost indicated by the Construction Budget
9
<PAGE>
referred to in subparagraph (d) above and there shall be no title change or
exception objectionable to the Agent;
(g) the Construction Agent or Lessee shall have delivered to the
Agent copies of the Plans and Specifications for the applicable
Improvements; and
(h) the Construction Agent or Lessee shall have caused an Appraisal
regarding such Property on an as-built basis to be provided to the Agent
from an appraiser selected by the Agent, which Appraisal (including the
cost of Equipment located at such Property) shall indicate that the Fair
Market Sale Value of the Property as of the Property Completion Date shall
be at least equal to 75% of the Property Cost for such Property.
5.5 ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE
-----------------------------------------------------------------
RESPECTING EACH PROPERTY.
-------------------------
On the Completion Date for each Property, the Construction Agent shall
deliver to the Agent (with a copy to counsel for the Agent) an Officer's
Certificate in the form attached hereto as Exhibit B specifying (a) the
---------
Completion Date for the construction of Improvements at the Property and (b) the
aggregate Property Cost for the Property. Such Officer's Certificate shall also
include, in form reasonably acceptable to the Agent, detailed, itemized
documentation supporting the asserted Property Cost figures and a certification
to the effect that all Improvements have been made in accordance with all
applicable material Legal Requirements, in a good and workmanlike manner in
accordance with the Plans and Specifications and otherwise in full compliance
with the standards and practices of the Construction Agent with respect to
properties and improvements owned by the Construction Agent. The Agent shall
have the right to contest the information contained in such Officer's
Certificate. Furthermore, on the Completion Date for each Property, the
Construction Agent shall deliver or cause to be delivered to the Agent (unless
previously delivered to the Agent) originals of the following, each of which
shall be in form reasonably acceptable to the Agent: (u) an as-built survey for
the applicable Property; (v) insurance certificates respecting the Property as
required hereunder and under the Lease Agreement; (w) a Lease Supplement, (x) a
memorandum of the Lease and such Lease Supplement (in form suitable for
recording), and (y) Lessor Financing Statements executed by the Lessee and the
Lessor. In addition, as of the Completion Date for such Property the
Construction Agent covenants and agrees that the recording fees, documentary
stamp taxes or similar amounts required to be paid in connection with the
related Mortgage Instrument shall be paid (or shall have been paid) in an amount
required by applicable law.
5.6 CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET MODIFICATIONS.
-----------------------------------------------------------------
The Construction Agent covenants and agrees to deliver to the Agent each
month notification of any modification to any Construction Budget regarding each
Property if such modification increases the cost to construct such Property;
provided, no Construction Budget shall be increased unless (a) the title
insurance policies referenced in Section 5.3(g) are also modified or endorsed,
if necessary, to provide for insurance in an amount that satisfies the
requirements of
10
<PAGE>
Section 5.4(f) of this Agreement, and (b) after giving effect to any such
amendment the Construction Budget remains in compliance with the requirements of
Section 5.4(d) and 5.4(h) of this Agreement.
5.7 MAINTENANCE OF THE LESSEE AS A WHOLLY-OWNED ENTITY.
---------------------------------------------------
From the Initial Closing Date and thereafter until such time as all
obligations of all Credit Parties under the Operative Agreements have been
satisfied and performed in full, Capital One Financial Corporation shall retain
the Lessee as a Wholly-Owned Entity.
5.8 UNILATERAL RIGHT TO INCREASE THE HOLDER COMMITMENTS AND THE LENDER
------------------------------------------------------------------
COMMITMENTS.
------------
Notwithstanding any other provision of any Operative Agreement or any
objection by any Person (including without limitation any objection by any
Credit Party), (a) each Holder, in its sole discretion, may unilaterally elect
to increase its Holder Commitment in order to fund amounts due and owing
pursuant to Article IX and/or Section 13.6 and (b) each Lender, in its sole
discretion, may unilaterally elect to increase its Lender Commitment in order to
fund amounts due and owing pursuant to Article IX and/or Section 13.6.
5.9 BORROWER'S RIGHT TO INCREASE THE COMMITMENTS UNDER THE CORI CREDIT
------------------------------------------------------------------
AGREEMENT AND THE HOLDER COMMITMENTS ALLOCABLE TO THE CORI TRUST
----------------------------------------------------------------
ESTATE.
------
The parties hereto hereby acknowledge and agree that, so long as no Default
or Event of Default shall have occurred and be continuing, the Borrower may, at
any one time during the Commitment Period upon five (5) Business Days written
notice to the Agent, increase the Commitments under that certain Credit
Agreement (Capital One Realty, Inc.) dated as of the Initial Closing Date among
the Borrower, the several Lenders, Partners thereto from time to time and Bank
of America, N.A., as Administrative Agent to up to $115,400,000 and the Holder
Commitments allocable to the CORI Trust Estate to up to $4,600,000; provided,
--------
however, that such increase shall only be effective if the Agent has received
- -------
(i) pursuant to Section 2.5(a) of the Credit Agreement notice of a corresponding
reduction in the Commitments thereunder and (ii) pursuant to the Trust
Agreement, notice of a corresponding reduction in Holder Commitments allocable
to the COSI Trust Estate.
5.10 ADDITIONAL HOLDER REPRESENTATIONS; LESSEE'S RIGHT TO REPLACE HOLDER.
-------------------------------------------------------------------
(a) At the reasonable written request of the Lessee, each of the
Holders hereby agrees to use commercially reasonable efforts to provide
additional representations and warranties (in addition to the
representations and warranties set forth in Section 7.1(j)) concerning the
nature and type of financing of Holder Fundings made by each such Holder;
provided, in no
--------
event shall any Holder be obligated (under this Section 5.10 or otherwise)
to provide any representation or warranty regarding the ultimate financial
or
11
<PAGE>
accounting treatment accorded to, or tax characterization of, any such
Holder Fundings, nor shall the Lessee be entitled to rely on any such
representation or warranty made by any Holder.
(b) In the event that any Holder is unable to make a representation,
as described in Section 5.10(a) to the reasonable satisfaction of the
Lessee, the Lessee shall have the right, subject to the repayment in full
of all Advances and all other amounts due such Holder (including all
amounts due to such Person in its capacity as a Lender), to replace such
Holder by requiring such Holder to assign, without recourse, its interests,
rights (except for rights to be indemnified for actions taken while a party
hereunder) and obligations under the Operative Agreements (including,
without limitation the Trust Agreement) in accordance with the procedure
set forth in Section 3.11(c) of the Trust Agreement; provided, to the
--------
extent such Holder is also a Lender, the Lessee shall also cause such
Lender to assign, without recourse, its interests, rights (except for
rights to be indemnified for actions taken while a party hereunder) and
obligations under the Operative Agreements (including, without limitation,
the Credit Agreement) in accordance with the procedure set forth in Section
2.14(b) of the Credit Agreement.
SECTION 6 CONDITIONS OF THE INITIAL CLOSING.
6.1 CONDITIONS TO THE LESSOR'S AND THE HOLDERS' OBLIGATIONS.
-------------------------------------------------------
The obligations of the Lessor and the Holders to consummate the
transactions contemplated by this Agreement, including the obligation to execute
and deliver the applicable Operative Agreements to which each is a party on the
Initial Closing Date, are subject to (i) the accuracy and correctness on the
Initial Closing Date of the representations and warranties of the other parties
hereto contained herein, (ii) the accuracy and correctness on the Initial
Closing Date of the representations and warranties of the other parties hereto
contained in any other Operative Agreement or certificate delivered pursuant
hereto or thereto, (iii) the performance by the other parties hereto of their
respective agreements contained herein and in the other Operative Agreements and
to be performed by them on or prior to the Initial Closing Date and (iv) the
satisfaction or waiver by the Lessor and the Holders of all of the following
conditions on or prior to the Initial Closing Date:
(a) Each of the Operative Agreements to be entered into on the
Initial Closing Date shall have been duly authorized, executed and
delivered by the parties thereto, other than the Lessor, and shall be in
full force and effect, and no Default or Event of Default shall exist
thereunder (both before and after giving effect to the transactions
contemplated by the Operative Agreements), and the Lessor shall have
received a fully executed copy of each of the Operative Agreements (other
than the Notes of which it shall have received specimens). The Operative
Agreements (or memoranda thereof), any supplements thereto and any
financing statements and fixture filings in connection therewith required
under the Uniform Commercial Code shall have been filed or shall be
promptly filed, if necessary, in such manner as to enable the Lessee's
counsel to render its opinion referred to in Section 6.1(c) hereof;
12
<PAGE>
(b) All taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements shall have been paid or provisions for such payment shall have
been made to the satisfaction of the Lessor and the Agent;
(c) Counsel for the Lessee acceptable to the other parties hereto
shall have issued to the Lessor, the Agent, the Lenders and the Holders its
opinion in the form attached hereto as Exhibit C or in such other form as
---------
is reasonably acceptable to such parties;
(d) All necessary (or in the reasonable opinion of the Agent or its
counsel, advisable) Governmental Actions, in each case required by any law
or regulation enacted, imposed or adopted on or after the date hereof or by
any change in fact or circumstances since the date hereof, shall have been
obtained or made and be in full force and effect unless the failure to
obtain such item would not have a Material Adverse Effect;
(e) No action or proceeding shall have been instituted, nor shall any
action or proceeding be overtly threatened, before any Governmental
Authority, nor shall any order, judgment or decree have been issued or
proposed to be issued by any Governmental Authority or to set aside,
restrain, enjoin or prevent the full performance of this Agreement, any
other Operative Agreement or any transaction contemplated hereby or thereby
which is reasonably likely to have a Material Adverse Effect;
(f) In the reasonable opinion of the Lessor, the Agent, the Holders
and their counsel, the transactions contemplated by the Operative
Agreements do not and will not violate any Legal Requirements and do not
and will not subject the Lessor, the Lenders, the Agent or the Holders to
any adverse regulatory prohibitions or constraints;
(g) The Lessor, the Agent and the Holders shall each have received an
Officer's Certificate, dated as of the Initial Closing Date, of each Credit
Party in the form attached hereto as Exhibit D or in such other form as is
---------
reasonably acceptable to such parties stating that (i) each and every
representation and warranty of such Credit Party contained in the Operative
Agreements to which it is a party is true and correct in all material
respects on and as of the Initial Closing Date; (ii) no Default or Event of
Default has occurred and is continuing under any Operative Agreement; (iii)
each Operative Agreement to which such Credit Party is a party is in full
force and effect with respect to it; and (iv) such Credit Party has
performed and complied with all covenants, agreements and conditions
contained herein or in any Operative Agreement required to be performed or
complied with by it on or prior to the Initial Closing Date;
(h) The Lessor, the Agent and the Holders shall each have received
(i) a certificate of the Secretary or an Assistant Secretary of each Credit
Party in the form attached hereto as Exhibit E or in such other form as is
---------
reasonably acceptable to such parties attaching and certifying as to (1)
the resolutions of its Board of Directors duly authorizing the execution,
delivery and performance by such Credit Party of each of the Operative
13
<PAGE>
Agreements to which it is or will be a party, (2) its certificate of
incorporation and by-laws, in each case certified as of a recent date by
the Secretary of State of the state of its incorporation and (3) the
incumbency and signature of persons authorized to execute and deliver on
its behalf the Operative Agreements to which it is a party and (ii) a good
standing certificate from the appropriate officer of each Credit Party's
state of incorporation or formation and the state where such Credit Party's
principal place of business is located as to its good standing in such
state(s); and
(i) As of the Initial Closing Date, there shall not have occurred any
material adverse change in the consolidated assets, liabilities,
operations, business or financial condition of the Guarantor and its
Subsidiaries, taken as a whole, from that set forth in the consolidated
financial statements of the Guarantor dated March 31, 1999.
6.2 CONDITIONS TO THE LESSEE'S OBLIGATIONS.
--------------------------------------
The obligation of the Lessee to consummate the transactions contemplated by
this Agreement, including the obligation to execute and deliver the Operative
Agreements to which it is a party on the Initial Closing Date, is subject to (i)
the accuracy and correctness on the Initial Closing Date of the representations
and warranties of the other parties hereto contained herein, (ii) the accuracy
and correctness on the Initial Closing Date of the representations and
warranties of the other parties hereto contained in any other Operative
Agreement or certificate delivered pursuant hereto or thereto, (iii) the
performance by the other parties hereto of their respective agreements contained
herein and in the other Operative Agreements, in each case to be performed by
them on or prior to the Initial Closing Date, and (iv) the satisfaction or
waiver by the Lessee of all of the following conditions on or prior to the
Initial Closing Date:
(a) In the reasonable opinion of the Lessee and its counsel, the
transactions contemplated by the Operative Agreements do not violate any
material Legal Requirements and shall not subject Lessee to any adverse
regulatory prohibitions or constraints, in each case enacted, imposed,
adopted or proposed since the date hereof;
(b) 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 or to set aside, restrain, enjoin or
prevent the full performance of this Agreement, any other Operative
Agreement or any transaction contemplated hereby or thereby which is
reasonably likely to have a Material Adverse Effect;
(c) Each of the Operative Agreements shall have been duly authorized,
executed and delivered by the parties thereto, other than the Lessee, and
shall be in full force and effect, and no Default, other than Defaults of
the Lessee, shall exist thereunder, and the Lessee shall have received a
fully executed copy of each of the Operative Agreements;
(d) The Lessee and the Agent shall have received an Officer's
Certificate of the Lessor dated as of such Closing Date in the form
attached hereto as Exhibit F or in
---------
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other form as is reasonably acceptable to Lessee and the Agent, stating
that (i) each and every representation and warranty of the Lessor contained
in the Operative Agreements to which it is a party is true and correct on
and as of the Initial Closing Date; (ii) each Operative Agreement to which
the Lessor is a party is in full force and effect with respect to it, and
(iii) the Lessor has duly performed and complied with all covenants,
agreements and conditions contained herein or in any Operative Agreement
required to be performed or complied with by it on or prior to the Initial
Closing Date;
(e) The Lessee and the Agent shall have received (i) a certificate of
the Secretary, an Assistant Secretary, Trust Officer or Vice President of
the Trust Company in the form attached hereto as Exhibit G or in such other
---------
form as is reasonably acceptable to Lessee and the Agent, attaching and
certifying as to (A) the signing resolutions, (B) its articles of
incorporation or other equivalent charter documents, as the case may be,
certified as of a recent date by an appropriate officer of the Trust
Company, (C) its by-laws and (D) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Operative Agreements to
which it is a party and (ii) a good standing certificate from the Office of
the Comptroller of the Currency regarding the Trust Company; and
(f) Counsel for the Lessor acceptable to the other parties hereto
shall have issued to the Lessee, the Holders, the Lenders and the Agent its
opinion in the form attached hereto as Exhibit H or in such other form as
---------
is reasonably acceptable to such parties.
6.3 Conditions to the Agent's Obligations.
-------------------------------------
The obligation of the Agent to consummate the transactions contemplated by
this Agreement on the Initial Closing Date, including the obligation to execute
and deliver each of the Operative Agreements to which it is a party on the
Initial Closing Date, is subject to (i) the accuracy and correctness on the
Initial Closing Date of the representations and warranties of the other parties
hereto contained herein, (ii) the accuracy and correctness on the Initial
Closing Date of the representations and warranties of the other parties hereto
contained in any other Operative Agreement or certificate delivered pursuant
hereto or thereto, (iii) the performance by the other parties hereto of their
respective agreements contained herein and in the other Operative Agreements, in
each case to be performed by them on or prior to the Initial Closing Date, and
(iv) the receipt by the Agent of the items required to be delivered to the Agent
pursuant to this Section 6.
SECTION 7 REPRESENTATIONS AND WARRANTIES ON THE INITIAL CLOSING DATE.
7.1 Representations and Warranties of the Holders.
---------------------------------------------
Effective as of the Initial Closing Date, each Holder severally as to
itself, and not jointly, represents and warrants to each of the other parties
hereto that:
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(a) It is duly organized, validly existing and in good standing under
the laws of the United States of America or the jurisdiction of its
formation or organization and has the power and authority to carry on its
business as now conducted and to enter into and perform its obligations
under each Operative Agreement to which it is or is to be a party and each
other agreement, instrument and document to be executed and delivered by it
on or before each Closing Date in connection with or as contemplated by
each such Operative Agreement to which it is or will be a party;
(b) The execution, delivery and performance of each Operative
Agreement to which it is or will be a party have been duly authorized by
all necessary action on its part and neither the execution and delivery
thereof, nor the consummation of the transactions contemplated thereby, nor
compliance by it with any of the terms and provisions thereof (i) requires
or will require any approval of the partners or stockholders of, or
approval or consent of any trustee or holder of any indebtedness or
obligations of, the Holder which have not been obtained, (ii) contravenes
or will contravene any Legal Requirement applicable to or binding on it
(except no representation or warranty is made as to any Legal Requirement
to which it may be subject solely as a result of the activities of the
Lessee) as of the date hereof, (iii) does or will contravene or result in
any breach of or constitute any default under, or result in the creation of
any Lien upon any Property or any of the Improvements (other than Liens
created by the Operative Agreements) under its certificate of incorporation
or other equivalent charter documents, as the case may be, or any material
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement or other agreement or instrument to
which it is a party or by which it or its properties is bound or affected
or (iv) does or will require any Governmental Action by any Governmental
Authority (other than arising solely by reason of the business, condition
or activities of the Lessee or any Affiliate thereof or the construction or
use of the Properties or the Improvements);
(c) Each Operative Agreement to which it is or will be a party has
been, or will be, duly executed and delivered by it and constitutes, or
upon execution and delivery will constitute, a legal, valid and binding
obligation enforceable against it in accordance with the terms thereof;
(d) To its knowledge, there is no action or proceeding pending or
threatened against it before any Governmental Authority that questions the
validity or enforceability of any Operative Agreement to which it is or
will become a party or that, if adversely determined, would materially and
adversely affect its ability to perform its obligations under the Operative
Agreements to which it is a party;
(e) It has not assigned or transferred any of its right, title or
interest in or under the Lease except in accordance with the Operative
Agreements;
(f) [Reserved];
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(g) It is not a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of
1935, as amended, or a "public utility" within the meaning of the Federal
Power Act, as amended. It is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended;
(h) Except as otherwise contemplated by the Operative Agreements, it
shall not, nor shall it direct the Lessor to, use the proceeds of any Loan
or Holder Funding for any purpose other than purchase and/or lease of the
Properties, the construction of Improvements, the payment of the
Transaction Expenses and the fees, expenses and other disbursements
referenced in Sections 9.1 or 13.6 of this Agreement and the payment of the
interest regarding the Loans and the Holder Yield regarding the Holder
Fundings which accrues prior to the Rent Commencement Date with respect to
the Property; and
(i) It is acquiring its interest in the COSI Trust Estate for its own
account for investment and not with a view to any distribution. Neither it
nor anyone authorized to act on its behalf has taken or will take any
action which would subject the issuance or sale of any interest in the
Property, the COSI Trust Estate or the Lease to the registration
requirements of Section 5 of the Securities Act. No representation or
warranty contained in this Section 7.1(i) shall include or cover any action
or inaction of the Lessee or any Affiliate thereof whether or not
purportedly on behalf of the Holders, the Borrower or any of their
Affiliates; and
(j) It has not and will not (i) finance Holder Advances with
nonrecourse debt that is collateralized by a Lien on the Construction
Period Properties, the Properties, or the Lease or cashflows therefrom; or
(ii) obtain a residual guarantee on the Holder Advances through a letter of
credit or other form of guarantee.
7.2 Representations and Warranties of the Borrower.
----------------------------------------------
Effective as of the Initial Closing Date, Trust Company in its individual
capacity and as the Borrower, as indicated, represents and warrants to each of
the other parties hereto as follows, provided, that the representations in the
following paragraphs (h), (i), (j) and (k) are made solely in its capacity as
the Borrower:
(a) It is a national banking association and is duly organized and
validly existing and in good standing under the laws of the United States
of America and has the power and authority to enter into and perform its
obligations under the Trust Agreement and (assuming due authorization,
execution and delivery of the Trust Agreement by the Holders) has the
corporate and trust power and authority to act as the Owner Trustee and to
enter into and perform the obligations under each of the other Operative
Agreements to which Trust Company or the Owner Trustee, as the case may be,
is or will be a party and each other agreement, instrument and document to
be executed and delivered by it on or
17
<PAGE>
before such Closing Date in connection with or as contemplated by each such
Operative Agreement to which Trust Company or the Owner Trustee, as the
case may be, is or will be a party;
(b) The execution, delivery and performance of each Operative
Agreement to which it is or will be a party, either in its individual
capacity or (assuming due authorization, execution and delivery of the
Trust Agreement by the Holders) as the Owner Trustee, as the case may be,
has been duly authorized by all necessary action on its part and neither
the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will require any approval or
consent of any trustee or holders of any of its indebtedness or
obligations, (ii) does or will contravene any current law, governmental
rule or regulation relating to its banking or trust powers, (iii) does or
will contravene or result in any breach of or constitute any default under,
or result in the creation of any Lien upon any of its property under, (A)
its charter or by-laws, or (B) any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, bank loan or credit agreement or
other agreement or instrument to which it is a party or by which it or its
properties may be bound or affected, which contravention, breach, default
or Lien under clause (B) would materially and adversely affect its ability,
in its individual capacity or as Owner Trustee, to perform its obligations
under the Operative Agreements to which it is a party or (iv) does or will
require any Governmental Action by any Governmental Authority regulating
its banking or trust powers;
(c) The Trust Agreement and, assuming the Trust Agreement is the
legal, valid and binding obligation of the Holders, each other Operative
Agreement to which Trust Company or the Owner Trustee, as the case may be,
is or will be a party have been, or on or before such Closing Date will be,
duly executed and delivered by Trust Company or the Owner Trustee, as the
case may be, and the Trust Agreement and each such other Operative
Agreement to which Trust Company or the Owner Trustee, as the case may be,
is a party constitutes, or upon execution and delivery will constitute, a
legal, valid and binding obligation enforceable against Trust Company or
the Owner Trustee, as the case may be, in accordance with the terms
thereof;
(d) There is no action or proceeding pending or, to its knowledge,
threatened to which it is or will be a party, either in its individual
capacity or as the Owner Trustee, before any Governmental Authority that,
if adversely determined, would materially and adversely affect its ability,
in its individual capacity or as Owner Trustee, to perform its obligations
under the Operative Agreements to which it is a party or would question the
validity or enforceability of any of the Operative Agreements to which it
is or will become a party;
(e) It has not assigned or transferred any of its right, title or
interest in or under the Lease or the Agency Agreement except in accordance
with the Operative Agreements;
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(f) No Default or Event of Default under the Operative Agreements
attributable to it has occurred and is continuing;
(g) Except as otherwise contemplated in the Operative Agreements, the
proceeds of the Loans and Holder Fundings shall not be applied by the Owner
Trustee for any purpose other than the payment of Transaction Expenses and
the fees, expenses and other disbursements referenced in Sections 9.1(a),
9.1(b) and 13.6 of this Agreement, the purchase and/or lease of the
Properties, the acquisition of the Equipment, the construction of
Improvements and the payment of interest regarding the Loans and the
payment of the Holder Yield regarding the Holder Fundings, in each case to
the extent accrued under the Credit Agreement or Trust Agreement (as the
case may be) during the period prior to the Basic Term Commencement Date
with respect to a particular Property;
(h) Neither the Owner Trustee nor any Person authorized by the Owner
Trustee to act on its behalf has offered or sold any interest in the COSI
Trust Estate or the Notes, or in any similar security relating to a
Property, or in any security the offering of which for the purposes of the
Securities Act would be deemed to be part of the same offering as the
offering of the aforementioned securities to, or solicited any offer to
acquire any of the same from, any Person other than, in the case of the
Notes, the Agent, and neither the Owner Trustee nor any Person authorized
by the Owner Trustee to act on its behalf will take any action which would
subject, as a direct result of such action alone, the issuance or sale of
any interest in the COSI Trust Estate or the Notes to the provisions of
Section 5 of the Securities Act or require the qualification of any
Operative Agreement under the Trust Indenture Act of 1939, as amended;
(i) The Owner Trustee's chief place of business, chief executive
office and office where the documents, accounts and records relating to the
transactions contemplated by this Agreement and each other Operative
Agreement are kept are located at 79 South Main Street, Salt Lake City,
Utah 84111;
(j) The Owner Trustee is not engaged principally in, and does not
have as one of its important activities, the business of extending credit
for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System of the United States), and no part of the proceeds of the Loans or
the Holder Fundings will be used by it to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock or for any purpose that violates, or is
inconsistent with, the provisions of Regulations G, T, U, or X of the Board
of Governors of the Federal Reserve System of the United States; and
(k) The Owner Trustee is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act.
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7.3 Representations and Warranties of the Construction Agent and the
----------------------------------------------------------------
Credit Parties.
--------------
Effective as of the Initial Closing Date and the Basic Term Commencement
Date, as applicable, respecting each applicable Property, the Construction Agent
and each Credit Party, unless otherwise specified hereunder, represents and
warrants, as to itself, to each of the other parties hereto that:
(a) With respect to the Guarantor, the Incorporated Representations
and Warranties are true and correct and the Guarantor has delivered to each
of the Lenders and Holders the financial statements referred to in Section
8.01 of the Capital One Credit Agreement.
(b) The execution and delivery by the Construction Agent or such
Credit Party of this Agreement and the other Operative Agreements to which
the Construction Agent or such Credit Party is a party and the performance
by the Construction Agent or such Credit Party of its respective
obligations under this Agreement and the other Operative Agreements is
within the corporate powers of the Construction Agent or such Credit Party,
has been duly authorized by all necessary corporate action on the part of
the Construction Agent or such Credit Party (including any necessary
shareholder action), has received all necessary governmental approval, and
does not and will not (i) violate any material provision of applicable Law,
decree, judgment or award which is binding on the Construction Agent or
such Credit Party or any of their Subsidiaries unless such violation would
not have a Material Adverse Effect, (ii) contravene or conflict with, or
result in a breach of, any provision of the Certificate of Incorporation,
By-Laws or other organizational documents of the Construction Agent or such
Credit Party or any of their Subsidiaries or of any agreement, indenture,
instrument or other document which is binding on the Construction Agent or
such Credit Party or any of their Subsidiaries unless such conflict or
breach would not have a Material Adverse Effect or (iii) result in, or
require, the creation or imposition of any Lien (other than pursuant to the
terms of the Operative Agreements) on any asset of the Construction Agent
or such Credit Party or any of their Subsidiaries.
(c) This Agreement is, and upon the execution and delivery thereof
the other Operative Agreements will be, the legal, valid and binding
obligation of the Construction Agent or such Credit Party that is a party
thereto, enforceable against the Construction Agent or such Credit Party
that is a party thereto in accordance with their terms, except (i) as may
be limited by bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (ii) such enforceability
may be limited by the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Construction Agent or such Credit Party has executed
the various Operative Agreements required to be executed as of such date.
(d) [Intentionally Omitted].
20
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(e) No Governmental Action by any Governmental Authority or
authorization, registration, consent, approval, waiver, notice or other
action by, to or of any other Person is required to authorize or is
required in connection with (i) the Construction Agent's or such Credit
Party's execution, delivery or performance of any Operative Agreement or
(ii) the legality, validity, binding effect or enforceability of any
Operative Agreement on the Construction Agent or such Credit Party that is
a party thereto, in each case, except those which have been obtained or
where failure to obtain would not cause a Material Adverse Effect.
(f) Upon the execution and delivery of each Lease Supplement to the
Lease, (i) the Lessee will have unconditionally accepted the Property
subject to the Lease Supplement and will have a valid and subsisting
leasehold interest in the Property, subject only to the Permitted
Exceptions, and (ii) no offset will exist with respect to any Rent or other
sums payable under the Lease.
(g) Except as otherwise contemplated by the Operative Agreements, the
Construction Agent shall not use the proceeds of any Holder Funding or Loan
for any purpose other than the purchase of the Properties, the acquisition
of the Equipment and the construction of Improvements.
(h) All information heretofore or contemporaneously herewith
furnished by any Credit Party or any of their Subsidiaries to the Agent,
the Owner Trustee, any Lender or any Holder for purposes of or in
connection with this Agreement and the transactions contemplated hereby is,
and all information hereafter furnished by or on behalf of any Credit Party
or any of their Subsidiaries to the Agent, the Owner Trustee, any Lender or
any Holder pursuant hereto or in connection herewith will be, true and
accurate (when taken as a whole) in every material respect on the date as
of which such information is dated or certified, and such information,
taken as a whole, does not and will not omit to state any material fact
necessary to make such information, taken as a whole, not misleading.
(i) Each Credit Party has (i) initiated a review and assessment of
all areas within its and each of its Subsidiaries' business and operations
that would be adversely affected by the "Year 2000 Problem" (that is, the
risk that computer applications used by such Credit Party or any of its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to, in and following the Year
2000), (ii) developed a plan for addressing the Year 2000 Problem on a
timely basis and (iii) initiated implementation of that plan. Based on the
foregoing, each Credit Party believes that any reprogramming or
replacements required to permit the proper functioning, prior to, in and
following the Year 2000, of (i) such Credit Party's material computer
systems and (ii) material equipment of such Credit Party containing
embedded microchips (including systems and equipment supplied by others or
with which such Credit Party's systems interface) and the verification of
all such systems and equipment, as so reprogrammed or replaced, as the case
may be, will be completed by September 1, 1999, except to the extent the
failure to so complete such reprogramming or replacement
21
<PAGE>
could not reasonably be expected to have a Material Adverse Effect. Each
Credit Party believes that any reprogramming or replacements required to
permit the proper functioning in and following the Year 2000 of its
computer systems and any necessary equipment of such Credit Party
containing embedded microchips and the testing of all such systems and
equipment as so reprogrammed or replaced will be completed in a manner and
to the extent that any failure by such Credit Party to complete any such
reprogramming, replacement or testing will not result in a Default or could
not reasonably be expected to have a Material Adverse Effect.
7.4 Representations and Warranties of the Agent.
-------------------------------------------
Effective as of the Initial Closing Date, the Agent represents and warrants
to each of the other parties hereto that:
(a) It is a national banking association duly organized and validly
existing under the laws of the United States of America and has the full
power and authority to enter into and perform its obligations under this
Agreement and each other Operative Agreement to which it is or will be a
party;
(b) This Agreement and each other Operative Agreement to which it is
a party have been, or when executed and delivered will be, duly authorized
by all necessary corporate action on the part of the Agent and have been,
or on such Closing Date will have been, duly executed and delivered by the
Agent and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, are, or upon execution
and delivery thereof will be, legal, valid and binding obligations of the
Agent, enforceable against it in accordance with their respective terms;
(c) The execution, delivery and performance by the Agent of this
Agreement and each other Operative Agreement to which it is or will be a
party are not, and will not be, inconsistent with the articles of
incorporation or by-laws or other charter documents of the Agent, do not
and will not contravene any applicable Law of the State of Texas or of the
United States of America governing its activities and will not contravene
any provision of, or constitute a default under any indenture, mortgage,
contract or other instrument of which it is a party or by which it or its
properties are bound, or require any consent or approval of any
Governmental Authority under any applicable law, rule or regulation of the
State of Texas or any federal law, rule or regulation of the United States
of America governing its activities; and
(d) Except as otherwise contemplated by the Operative Agreements, the
Agent shall not, nor shall it direct the Lessor to, use the proceeds of any
Loan for any purpose other than the purchase of the Properties, the
acquisition of Equipment, the construction of Improvements and the payment
of Transaction Expenses, interest regarding the Loans which accrue under
the Credit Agreement during the period prior to the Basic Term Commencement
Date with respect to a particular Property and other uses authorized under
the Operative Agreements.
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SECTION 8 REPRESENTATIONS AND WARRANTIES ON FUNDING DATES.
8.1 Representations and Warranties on Property Closing Dates.
--------------------------------------------------------
The Construction Agent and each Credit Party hereby represents and warrants
as to itself as of each Property Closing Date as follows:
(a) The representations and warranties (including the Incorporated
Representations and Warranties in the case of the Guarantor) of the
Construction Agent or such Credit Party set forth in the Operative
Agreements are true and correct in all material respects on and as of such
Property Closing Date as if made on and as of such date. The Construction
Agent or such Credit Party is in all material respects in compliance with
its respective obligations under the Operative Agreements and there exists
no Default or Event of Default under any of the Operative Agreements which
is continuing and which has not been cured within any cure period expressly
granted under the terms of the applicable Operative Agreement. No Default
or Event of Default will occur under any of the Operative Agreements as a
result of, or after giving effect to, the Advance requested by the
Requisition on such Property Closing Date;
(b) The Properties to be acquired or leased pursuant to a Ground
Lease are being acquired or ground leased at a price that is not in excess
of fair market value or fair market rental value, as the case may be, and
such Properties consist of (i) unimproved Land, or (ii) Land and existing
Improvements thereon which Improvements are either suitable for occupancy
at the time of acquisition or will be renovated and/or modified in
accordance with the terms of this Agreement. Each of the Properties is
located at the location set forth on the applicable Requisition, all of
which are in one of the Approved States;
(c) Upon the acquisition of each Property on such Property Closing
Date, and at all times thereafter, the Lessor will have good and marketable
fee simple title to such Property, or, if such Property is the subject of a
Ground Lease, the Lessor will have a lessee's interest enforceable against
the ground lessor of such Property in accordance with the terms of such
Ground Lease, subject only to Permitted Liens;
(d) The execution and delivery of each Operative Agreement delivered
by the Construction Agent or such Credit Party on such Property Closing
Date and the performance of the obligations of the Construction Agent or
such Credit Party under each Operative Agreement have been duly authorized
by all requisite corporate action of the Construction Agent or such Credit
Party, as applicable;
(e) Each Operative Agreement delivered on such Property Closing Date
by the Construction Agent or such Credit Party has been duly executed and
delivered by the Construction Agent or such Credit Party;
23
<PAGE>
(f) Each Operative Agreement delivered by the Construction Agent or
such Credit Party on such Property Closing Date is a legal, valid and
binding obligation of the Construction Agent or such Credit Party,
enforceable against the Construction Agent or such Credit Party, in
accordance with its respective terms, except (i) as may be limited by
bankruptcy, insolvency, receivership, conservatorship, reorganization,
moratorium or similar laws of general applicability affecting the
enforcement of creditors' rights and (ii) such enforceability may be
limited by the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law);
(g) No portion of any Property being acquired by the Lessor on such
Property Closing Date is located in an area identified as a special flood
hazard area by the Federal Emergency Management Agency or other applicable
agency, or if any such Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or
other applicable agency, then flood insurance has been obtained for such
Property in accordance with Section 14.2(b) of the Lease and in accordance
with the National Flood Insurance Act of 1968, as amended;
(h) The Construction Agent has obtained insurance coverage for each
Property being acquired by the Lessor on such Property Closing Date which
meet the requirements of the Lease and all of such coverage is in full
force and effect;
(i) Each Property being acquired by the Lessor on such Property
Closing Date complies with all Legal Requirements (including, without
limitation, all zoning and land use laws and Environmental Laws), except to
the extent that failure to comply therewith would not, individually or in
the aggregate, have a Material Adverse Effect; and
(j) All utility services and facilities necessary for the
construction of the Improvements existing on, or to be constructed after,
such Property Closing Date (including, without limitation, gas, electrical,
water and sewage services and facilities) are available at the boundaries
of the real property upon which such Improvements exist or will be
constructed on each such Property prior to the Completion Date for such
Property.
8.2 Representations and Warranties Upon Initial Construction Advances.
-----------------------------------------------------------------
The Construction Agent and each Credit Party hereby represents and warrants
as to itself as of each date on which an Initial Construction Advance is made as
follows:
(a) The representations and warranties (including the Incorporated
Representations and Warranties in the case of the Guarantor) of the
Construction Agent or such Credit Party set forth in the Operative
Agreements are true and correct in all material respects on and as of the
date of such Initial Construction Advance as if made on and as of such
date. The Construction Agent or such Credit Party is in all material
respects in compliance with its respective obligations under the Operative
Agreements and there exists no Default or Event of Default under any of the
Operative Agreements. No Default or
24
<PAGE>
Event of Default will occur under any of the Operative Agreements as a
result of, or after giving effect to, the Advance requested by the
Requisition on such date;
(b) The Lessor has good and marketable fee simple title to each
Property, or, if such Property is the subject of a Ground Lease, the Lessor
has a lessee's interest enforceable against the ground lessor in accordance
with the terms of such Ground Lease, subject only to Permitted Liens;
(c) [Intentionally Omitted]
(d) All consents, licenses, permits, authorizations, assignments and
building permits required as of the date on which such Advance is made by
all material Legal Requirements or pursuant to the terms of any contract,
indenture, instrument or agreement for construction, completion, occupancy,
operation, leasing or subleasing of each Property with respect to which an
Advance is being made have been obtained and are in full force and effect,
except to the extent that the failure to so obtain would not, individually
or in the aggregate, have a Material Adverse Effect;
(e) The Construction Agent has obtained insurance coverage covering
the Property which is the subject of such Advance which meets the
requirements of Section 2.6 of the Agency Agreement before commencing
construction, repairs or modifications, as the case may be, and such
coverage is in full force and effect;
(f) The Improvements which are the subject of the Advance, as
improved in accordance with the Plans and Specifications, will comply as of
the applicable Completion Date with all material Legal Requirements and
Insurance Requirements (including, without limitation, all zoning and land
use laws and Environmental Laws), except to the extent the failure to
comply therewith would not, individually or in the aggregate, have a
Material Adverse Effect. The Plans and Specifications have been or will be
prepared in accordance with all applicable Legal Requirements (including,
without limitation, all applicable Environmental Laws and building,
planning, zoning and fire codes), except to the extent the failure to
comply therewith would not, individually or in the aggregate, have a
Material Adverse Effect, and upon completion of such Improvements in
accordance with the Plans and Specifications, such Improvements will not
encroach in any manner onto any adjoining land (except as permitted by
express written easements) and such Improvements and the use thereof by the
Lessee and its agents, assignees, employees, invitees, lessees, licensees
and tenants will comply as of the applicable Completion Date in all
respects with all applicable Legal Requirements (including, without
limitation, all applicable Environmental Laws and building, planning,
zoning and fire codes), except to the extent the failure to comply
therewith would not, individually or in the aggregate, have a Material
Adverse Effect. Upon completion of such Improvements in accordance with the
Plans and Specifications, (i) there will be no material defects to such
Improvements including, without limitation, the plumbing, heating, air
conditioning and electrical systems thereof and (ii) all water, sewer,
electric, gas, telephone and drainage facilities and all other utilities
required to adequately service such Improvements for their intended use
will be available pursuant to adequate
25
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permits (including any that may be required under applicable Environmental
Laws), except to the extent that failure to obtain any such permit would
not, individually or in the aggregate, have a Material Adverse Effect.
There is no action, suit or proceeding (including any proceeding in
condemnation or eminent domain or under any Environmental Law) pending or,
to the best knowledge of the Lessee or the Construction Agent, overtly
threatened which adversely affects the title to, or the use, operation or
value of, such Properties. No fire or other casualty with respect to such
Properties has occurred which fire or other casualty has had a Material
Adverse Effect. All utilities serving the related Properties, or proposed
to serve the related Properties in accordance with the Plans and
Specifications, are located in (and in the future will be located in) and
vehicular access to such Improvements is provided by (or will be provided
by), either public rights-of-way abutting the related Property or
Appurtenant Rights. All licenses, approvals, authorizations, consents,
permits (including, without limitation, building, demolition and
environmental permits, licenses, approvals, authorizations and consents),
easements and rights-of-way, including proof of dedication, required for
(i) the use, treatment, storage, transport, disposal or disposition of any
Hazardous Substance on, at, under or from the real property underlying such
Improvements during the construction of such Improvements and the use and
operation of such Improvements following such construction, (ii) the
construction of such Improvements in accordance with the Plans and
Specifications and the Agency Agreement and (iii) the use and operation of
such Improvements following such construction with the applicable Equipment
which such Improvements support for the purposes for which they were
intended have either been obtained from the appropriate Governmental
Authorities having jurisdiction or from private parties, as the case may
be, or will be 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; and
(g) All conditions precedent contained in this Agreement and in the
other Operative Agreements relating to the initial Advance to the
Construction Agent of funds for the purpose of commencing construction,
repairs or modifications on any Property have been substantially satisfied.
8.3 Representations and Warranties Upon the Date of Each Construction
-----------------------------------------------------------------
Advance That Is Not An Initial Advance.
---------------------------------------
The Construction Agent and each Credit Party hereby represents and warrants
as to itself as of each date on which a Construction Advance is made, when such
Advance is not an Initial Construction Advance, as follows:
(a) The representations and warranties of the Construction Agent or
such Credit Party set forth in the Operative Agreements (including the
representations and warranties set forth in Section 8.2 and, in the case of
the Guarantor, the Incorporated Representations and Warranties) are true
and correct in all material respects on and as of the date of such
Construction Advance as if made on and as of such date. The Construction
Agent or such Credit Party is in all material respects in compliance with
its respective obligations
26
<PAGE>
under the Operative Agreements and there exists no Default or Event of
Default under any of the Operative Agreements which is continuing and which
has not been cured within any cure period expressly granted under the terms
of the applicable Operative Agreement. No Default or Event of Default will
occur under any of the Operative Agreements as a result of, or after giving
effect to, the Advance requested by the Requisition on such date;
(b) 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
material Legal Requirements, except to the extent noncompliance with any
Legal Requirements would not, individually or in the aggregate, have a
Material Adverse Effect;
(c) All consents, licenses, permits, authorizations, assignments
and building permits required as of the date on which such Advance is made
by all material Legal Requirements or pursuant to the terms of any
contract, indenture, instrument or agreement for construction, completion,
occupancy, operation, leasing or subleasing of each Property have been
obtained and are in full force and effect except to the extent the failure
to so obtain would not, individually or in the aggregate, have a Material
Adverse Effect;
(d) When completed, the Improvements shall be wholly within any
building restriction lines (unless consented to by applicable Government
Authorities), however established; and
(i) Assuming that the applicable UCC Financing Statements and
Mortgage Instruments have been filed in the filing offices designated by
the Lessee or the Construction Agent, the Advance is secured by the Liens
of the Security Agreement and such Mortgage Instruments, and (ii) there
have been no Liens against the applicable Improvements since the filing of
the Lender Financing Statements and such Mortgage Instruments other than
Permitted Liens.
The Construction Agent and each Credit Party further acknowledges that upon
the acceptance and use of the funds by the Construction Agent or the Lessee, as
the case may be, on behalf of the Lessor that all such representations and
warranties remain true and correct on the date of such Advance and that all
consents and approvals have been obtained prior to the date of such Advance.
SECTION 8B. GUARANTY
8B.1. Guaranty of Payment and Performance.
-----------------------------------
Subject to Section 8B.7, the Guarantor hereby unconditionally and
irrevocably guarantees to each Financing Party the prompt payment and
performance of the Company Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise) or when such
is otherwise to be performed; provided, notwithstanding the foregoing, the
--------
obligations of the Guarantor under this Section 8B shall not constitute a direct
guaranty of the indebtedness of
27
<PAGE>
the Lessor evidenced by the Notes but rather a guaranty of the Company
Obligations arising under the Operative Agreements. This Section 8B is a
guaranty of payment and performance and not of collection and is a continuing
guaranty and shall apply to all Company Obligations whenever arising. The
exercise of any rights granted to the Financing Parties under this Section 8B
shall be in accordance with the provisions of Section 10.2(j) and 10.6.
8B.2. Obligations Unconditional.
-------------------------
The Guarantor agrees that the obligations of the Guarantor hereunder are
irrevocable, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Operative Agreements, or
any other agreement or instrument referred to therein, or any substitution,
release or exchange of any other guarantee of or security for any of the Company
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety, guarantor or
co-obligor, it being the intent of this Section 8B.2 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. The Guarantor agrees that this Section 8B may be enforced by the
Financing Parties without the necessity at any time of resorting to or
exhausting any other security or collateral and without the necessity at any
time of having recourse to the Notes, the Certificates or any other of the
Operative Agreements or any collateral, if any, hereafter securing the Company
Obligations or otherwise and the Guarantor hereby waives the right to require
the Financing Parties to proceed against the Construction Agent, the Lessee or
any other Person (including without limitation a co-guarantor) or to require the
Financing Parties to pursue any other remedy or enforce any other right. The
Guarantor further agrees that it hereby waives any and all right of subrogation,
indemnity, reimbursement or contribution against the Lessee and the Construction
Agent or any other guarantor of the Company Obligations for amounts paid under
this Section 8B until such time as the Loans, Holder Fundings, accrued but
unpaid interest, accrued but unpaid Holder Yield and all other amounts owing
under the Operative Agreements have been paid in full. Without limiting the
generality of the waiver provisions of this Section 8B, the Guarantor hereby
waives any rights to require the Financing Parties to proceed against the
Construction Agent, the Lessee or any co-guarantor or to require Lessor to
pursue any other remedy or enforce any other right, including without
limitation, any and all rights under N.C. Gen. Stat. (S) 26-7 through 26-9. The
Guarantor further agrees that nothing contained herein shall prevent the
Financing Parties from suing on any Operative Agreement or foreclosing any
security interest in or Lien on any collateral, if any, securing the Company
Obligations or from exercising any other rights available to it under any
Operative Agreement, or any other instrument of security, if any, and the
exercise of any of the aforesaid rights and the completion of any foreclosure
proceedings shall not constitute a discharge of the Guarantor's obligations
hereunder; it being the purpose and intent of the Guarantor that its obligations
hereunder shall be absolute, independent and unconditional under any and all
circumstances; provided that any amounts due under this Section 8B which are
--------
paid to or for the benefit of any Financing Party shall reduce the Company
Obligations by a corresponding amount (unless required to be rescinded at a
later date). Neither any Guarantor's obligations under this Section 8B nor any
remedy for the enforcement thereof shall be impaired, modified, changed or
released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of the Construction Agent or the Lessee
or by reason of the bankruptcy or insolvency of
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<PAGE>
the Construction Agent or the Lessee. The Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Company Obligations
and notice of or proof of reliance by any Financing Party upon this Section 8B
or acceptance of this Section 8B. The Company Obligations shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Section 8B. All dealings between the
Construction Agent, the Lessee and the Guarantor, on the one hand, and the
Financing Parties, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon this Section 8B.
8B.3. Modifications.
-------------
The Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Company Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) no Financing Party shall have
any obligation to protect, perfect, secure or insure any such security
interests, liens or encumbrances now or hereafter held, if any, for the Company
Obligations or the properties subject thereto; (c) the time or place of payment
of the Company Obligations may be changed or extended, in whole or in part, to a
time certain or otherwise, and may be renewed or accelerated, in whole or in
part; (d) the Construction Agent, the Lessee and any other party liable for
payment under the Operative Agreements may be granted indulgences generally; (e)
any of the provisions of the Notes, the Certificates or any of the other
Operative Agreements may be modified, amended or waived; (f) any party
(including any co-guarantor) liable for the payment thereof may be granted
indulgences or be released; and (g) any deposit balance for the credit of the
Construction Agent, the Lessee or any other party liable for the payment of the
Company Obligations or liable upon any security therefor may be released, in
whole or in part, at, before or after the stated, extended or accelerated
maturity of the Company Obligations, all without notice to or further assent by
the Guarantor, which shall remain bound thereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration, modification,
indulgence or release.
8B.4. Waiver of Rights.
----------------
The Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Section 8B by any Financing
Party and of all extensions of credit or other Advances to the Construction
Agent and the Lessee by the Lenders pursuant to the terms of the Operative
Agreements; (b) presentment and demand for payment or performance of any of the
Company Obligations; (c) protest and notice of dishonor or of default with
respect to the Company Obligations or with respect to any security therefor; (d)
notice of any Financing Party obtaining, amending, substituting for, releasing,
waiving or modifying any security interest, lien or encumbrance, if any,
hereafter securing the Company Obligations, or any Financing Party's
subordinating, compromising, discharging or releasing such security interests,
liens or encumbrances, if any; and (e) all other notices to which the Guarantor
might otherwise be entitled. Notwithstanding anything to the contrary herein,
the Guarantor's payments hereunder shall be due five (5) Business Days after
written demand by the Agent to the Lessee or the Guarantor for such payment
(unless the Company Obligations are automatically accelerated pursuant to the
applicable
29
<PAGE>
provisions of the Operative Agreements or are deemed accelerated as provided in
Section 8B.6 in which case the Guarantor's payments shall be automatically due).
8B.5. Reinstatement.
-------------
The obligations of the Guarantor under this Section 8B shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Company Obligations is rescinded or
must be otherwise restored by any holder of any of the Company Obligations,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise, and the Guarantor agrees that it will indemnify each Financing Party
on demand for all reasonable costs and expenses (including, without limitation,
reasonable fees of counsel) incurred by any Financing Party in connection with
such rescission or restoration, including without limitation any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
8B.6. Remedies.
--------
The Guarantor agrees that, as between the Guarantor, on the one hand, and
each Financing Party, on the other hand, the Company Obligations may be declared
to be forthwith due and payable as provided in the applicable provisions of the
Operative Agreements (and shall be deemed to have become automatically due and
payable on an Event of Default specified in Section 17.1(h), (i) or (j) of the
Lease) notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing such Company Obligations from becoming automatically
due and payable) as against any other Person and that, in the event of such
declaration (or such Company Obligations being deemed to have become
automatically due and payable), such Company Obligations (whether or not due and
payable by any other Person) shall forthwith become due and payable by the
Guarantor in accordance with the applicable provisions of the Operative
Agreements.
8B.7. Termination of Guaranty.
-----------------------
Subject to Section 8B.5, upon the satisfaction of the Company Obligations
in full, regardless of the source of payment, the Guarantor's obligations
hereunder shall be deemed satisfied, discharged and terminated other than
indemnifications set forth herein that expressly survive.
8B.8. Payment of Amounts to the Agent.
-------------------------------
Each Financing Party hereby instructs the Guarantor, and the Guarantor
hereby acknowledges and agrees, that until such time as the Loans and the Holder
Fundings are paid in full and the Liens evidenced by the Security Agreement and
the Mortgage Instruments have been released any and all Rent (excluding Excepted
Payments which shall be payable to each Holder or other Person as appropriate)
and any and all other amounts of any kind or type under any of the Operative
Agreements due and owing or payable to any Person shall instead be paid directly
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<PAGE>
to the Agent (excluding Excepted Payments which shall be payable to each Holder
or other Person as appropriate) or as the Agent may direct from time to time for
allocation and distribution in accordance with the procedures set forth in
Section 10.4 hereof and Section 8 of the Credit Agreement.
8B.9. Denial Or Disaffirmance Of Guaranty.
-----------------------------------
Notwithstanding any provision to the contrary contained herein or in any
other Operative Agreement, the parties hereto agree that, unless released in
connection with the Operative Agreements, if the guaranty given by the Guarantor
under Section 8B of the Participation Agreement or any material provision
thereof shall cease to be in full force or effect, or the Guarantor or any
Person acting on behalf of the Guarantor shall deny or disaffirm the Guarantor's
obligations under such guaranty, then the Guarantor shall automatically, without
notice and without any further act, be deemed to be an additional construction
agent (or a co-construction agent) and/or an additional lessee (or co-lessee)
under the Operative Agreements with the Construction Agent and/or the Lessee, as
the case may be, and shall be jointly and severally liable with the Construction
Agent and/or the Lessee for the payment and performance of any obligations of
the Construction Agent and/or the Lessee under the Operative Agreements as
though the Guarantor was originally a party to such Operative Agreements in such
capacity or capacities.
SECTION 9 PAYMENT OF CERTAIN EXPENSES.
9.1 Transaction Expenses.
--------------------
(a) Lessor agrees on the Initial Closing Date, to pay, or cause to be
paid, all reasonable fees, expenses and disbursements of the various legal
counsels for the Lessor, the Lessee and the Agent in connection with the
transactions contemplated by the Operative Agreements and incurred in
connection with such Initial Closing Date, including all Transaction
Expenses (arising from the Initial Closing Date), and all other reasonable
fees, expenses and disbursements in connection with such Initial Closing
Date, including, without limitation, all fees, taxes and expenses for the
recording, registration and filing of documents; provided, however, the
Lessor shall pay such amounts described in this Section 9.1(a) only if
funds are made available by the Lenders and the Holders in an amount
sufficient to allow such payment and without regard to whether such amounts
are referenced in any Requisition; provided, the failure of such amounts so
--------
funded to be referenced in a Requisition shall not preclude the Lessee from
later contesting the reasonableness of the payment of such amounts. On the
Initial Closing Date after satisfaction of the conditions precedent for
such date (excluding the requirement that a Requisition be delivered), the
Holders shall make Holder Fundings and the Lenders shall make Loans to the
Lessor to pay for the Transaction Expenses, fees, expenses and other
disbursements referenced in this Section 9.1(a).
(b) Lessor agrees on each Property Closing Date, on the date of any
Construction Advance and on the Completion Date to pay, or cause to be
paid, all
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reasonable fees, expenses and disbursements of the various legal counsels
for the Lessor, the Lessee and the Agent in connection with the
transactions contemplated by the Operative Agreements and billed in
connection with such Advance or such Completion Date including all
Transaction Expenses, all fees, expenses and disbursements incurred with
respect to the various items referenced in Sections 5.3, 5.4, 5.5 and/or
5.6 (including without limitation any premiums for title insurance policies
and charges for any updates to such policies) and all other reasonable
fees, expenses and disbursements in connection with such Advance or such
Completion Date including, without limitation, all expenses relating to and
all fees, taxes and expenses for the recording, registration and filing of
documents; provided, however, the Lessor shall pay such amounts described
in this Section 9.1(b) only if funds are made available by the Lenders and
the Holders in an amount sufficient to allow such payment and without
regard to whether such amounts are referenced in any Requisition; provided,
--------
the failure of such amounts so funded to be referenced in a Requisition
shall not preclude the Lessee from later contesting the reasonableness of
the payment of such amounts. On each Property Closing Date, on the date of
any Construction Advance or any Completion Date, after satisfaction of the
conditions precedent for such date (excluding the requirement that a
Requisition be delivered), the Holders shall make a Holder Funding and the
Lenders shall make Loans to the Lessor to pay for the Transaction Expenses,
fees, expenses and other disbursements referenced in this Section 9.1(b).
9.2 [Reserved].
--------
9.3 Certain Fees And Expenses.
-------------------------
Lessor agrees to pay or cause to be paid (i) the initial and annual Owner
Trustee's fee and all reasonable expenses of the Owner Trustee and any necessary
co-trustees (including without limitation reasonable counsel fees and expenses)
or any successor owner trustee, for acting as owner trustee under the Trust
Agreement and (ii) all reasonable costs and expenses incurred by the Credit
Parties, the Construction Agent, the Agent, the Lenders, the Holders or the
Lessor in entering into any Lease Supplement and any future amendments or
supplements with respect to any of the Operative Agreements, whether or not such
Lease Supplement, amendments or supplements are ultimately entered into, or
giving or withholding of waivers of consents hereto or thereto, which have been
requested by the Lessor, the Holders, any Credit Party, the Construction Agent,
or the Agent; provided, however, the Lessor shall pay such amounts described in
-------- -------
this Section 9.3 only if funds are made available by the Lenders and the Holders
in an amount sufficient to allow such payment and without regard to whether such
amounts are referenced in any Requisition. Notwithstanding the foregoing, the
Lessee agrees to pay or cause to be paid any amounts referenced in the
immediately preceding sentence to the extent such amounts are due and payable
after the Construction Period Termination Date. The Lessee agrees to pay or
cause to be paid (i) all reasonable costs and expenses incurred by the Lessor,
the Holders, the Lenders or the Agent in connection with any exercise of
remedies under any Operative Agreement or any purchase of any Property by the
Lessee pursuant to Article XX of the Lease and (ii) all reasonable costs and
expenses incurred by the Credit Parties, the Construction Agent, the Agent, the
Lenders, the Holders or the Lessor in connection with any transfer or conveyance
of any Property, whether or not such transfer or conveyance is ultimately
accomplished.
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9.4 Facility Fee.
------------
The Lessor agrees to pay to the Agent for the account of the Lenders and
the Holders a facility fee (the "Facility Fee") computed at a rate per annum
equal to Applicable Percentage for the Facility Fee multiplied times the sum of
(x) the aggregate Commitments (whether used or unused) and (y) the aggregate
Holder Commitments (whether used or unused); provided, however, the Lessor shall
-------- -------
pay such amounts described in this Section 9.4 only if funds are made available
by the Lenders and the Holders in an amount sufficient to allow such payment and
without regard to whether such amounts are referenced in any Requisition.
Notwithstanding the foregoing, the Lessee agrees to pay or cause to be paid any
amounts referenced in the immediately preceding sentence to the extent such
amounts are due and payable or are outstanding after the earlier of the last
Completion Date for all Properties or the Construction Period Termination Date.
Such Facility Fee shall be calculated on the basis of 360-day year from the
actual days elapsed and shall be payable quarterly in arrears on each Facility
Fee Payment Date. If all or a portion of any such Facility Fee shall not be paid
when due, such overdue amount shall bear interest, payable on demand, at a rate
per annum equal to the ABR plus three percent (3%) from the date of such non-
payment until such amount is paid in full (after as well as before judgment).
SECTION 10 OTHER COVENANTS AND AGREEMENTS.
10.1 Cooperation With The Construction Agent Or The Lessee.
-----------------------------------------------------
The Holders, the Lessor (at the direction of the Holders) and the Agent
shall, to the extent reasonably requested by the Construction Agent or Lessee
(but without assuming additional liabilities on account thereof), cooperate with
the Construction Agent or the Lessee in connection with its covenants contained
herein including, without limitation, at any time and from time to time, upon
the request of the Construction Agent or the Lessee to promptly and duly execute
and deliver any and all such further instruments, documents and financing
statements (and continuation statements related thereto) as the Construction
Agent or the Lessee may reasonably request in order to perform such covenants.
10.2 Covenants Of The Owner Trustee And The Holders.
----------------------------------------------
Each of the Owner Trustee and the Holders hereby agree that so long as this
Agreement is in effect:
(a) The Owner Trustee (both in its trust capacity and in its
individual capacity) will not create or permit to exist at any time, and
will, at its own cost and expense, promptly take such action as may be
necessary duly to discharge, or to cause to be discharged, all Lessor Liens
on the Properties attributable to it; provided, however, that the Owner
Trustee shall not be required to so discharge any such Lessor Lien while
the same is being contested in good faith by appropriate proceedings
diligently prosecuted so long as such proceedings shall not involve any
material danger of impairment of the Liens of the Security Documents
33
<PAGE>
or of the sale, forfeiture or loss of, and shall not interfere with the use
or disposition of, any Property or title thereto or any interest therein or
the payment of Rent;
(b) Without prejudice to any right under the Trust Agreement of the
Owner Trustee to resign (subject to the requirement set forth in the Trust
Agreement that such resignation shall not be effective until a successor
shall have agreed to accept such appointment), or the Holders' rights under
the Trust Agreement to remove the institution acting as Owner Trustee
(after consent to such removal by the Agent as provided in the Trust
Agreement), each of the Holders and the Owner Trustee hereby agrees with
the Lessee and the Agent (i) not to terminate or revoke the trust created
by the Trust Agreement except as permitted by Article VIII of the Trust
Agreement, (ii) not to amend, supplement, terminate or revoke or otherwise
modify any provision of the Trust Agreement in such a manner as to
adversely affect the rights of any such party without the prior written
consent of such party and (iii) to comply with all of the terms of the
Trust Agreement, the nonperformance of which would adversely affect such
party;
(c) The Owner Trustee or any successor may resign or be removed by
the Holders as Owner Trustee, a successor Owner Trustee may be appointed
and a corporation may become the Owner Trustee under the Trust Agreement,
only in accordance with the provisions of Article IX of the Trust Agreement
and, with respect to such appointment, with the consent of the Lessee,
which consent shall not be unreasonably withheld or delayed;
(d) The Owner Trustee, in its capacity as Owner Trustee under the
Trust Agreement, and not in its individual capacity, shall not contract
for, create, incur or assume any indebtedness, or enter into any business
or other activity, other than pursuant to or under the Operative
Agreements;
(e) The Holders will not instruct the Owner Trustee to take any
action in violation of the terms of any Operative Agreement;
(f) Neither any Holder nor the Owner Trustee shall (i) commence any
case, proceeding or other action with respect to the Owner Trustee under
any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, arrangement, winding-
up, liquidation, dissolution, composition or other relief with respect to
it or its debts, or (ii) seek appointment of a receiver, trustee, custodian
or other similar official with respect to the Owner Trustee or for all or
any substantial benefit of the creditors of the Owner Trustee; and neither
any Holder nor the Owner Trustee shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in this paragraph;
(g) The Owner Trustee shall give prompt notice to the Lessee and the
Agent if the Owner Trustee's chief place of business or chief executive
office, or the office where the records concerning the accounts or contract
rights relating to the Property are kept, shall cease to be located at 79
South Main Street, Salt Lake City, Utah 84111, or if it shall change its
name;
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(h) Provided that no Lease Default or Lease Event of Default has
occurred and is continuing, the Owner Trustee shall not, without the prior
written consent of the Lessee and the Guarantor, consent to or permit any
amendment, supplement or other modification of the terms and provisions of
the Credit Agreement or the Notes;
(i) The Owner Trustee shall not consent to or permit any amendment,
supplement or other modification of the terms and provisions of any
Operative Agreement, without the prior written consent of the Agent and, so
long as no Default or Event of Default shall have occurred and be
continuing and, in the case of any amendment, supplement or other
modification of Section 8.1 of the Credit Agreement, so long as Lessee
continues to have rights in any Property, the Lessee (such consent not to
be unreasonably withheld or delayed) except as described in Section 10.5 of
this Agreement; and
(j) The Owner Trustee (i) shall take such actions and shall refrain
from taking such actions with respect to the Operative Agreements and/or
relating to the Properties and shall grant such approvals and otherwise act
or refrain from acting with respect to the Operative Agreements and/or
relating to the Properties in each case as directed in writing by the Agent
or, in connection with Section 10.5 hereof, the Lessee, notwithstanding any
contrary instruction or absence of instruction by any Holder or Holders;
and (ii) shall not take any action, grant any approvals or otherwise act
under or with respect to the Operative Agreements and/or any matters
relating to the Properties without first obtaining the prior written
consent of the Agent (and without regard to any contrary instruction or
absence of instruction by any Holder); provided, however, that
notwithstanding the foregoing provisions of this subparagraph (j) the Owner
Trustee, the Agent and the Holders each acknowledge, covenant and agree
that, with respect to all matters under the Operative Agreements that
require the consent and/or concurrence of all of the Lenders pursuant to
the terms of Section 9.1 of the Credit Agreement (the "Unanimous Vote
Matters"), neither the Owner Trustee nor the Agent shall act or refrain
from acting with respect to any Unanimous Vote Matter until such party has
received the approval of each Lender and each Holder with respect thereto.
10.3 Credit Party Covenants, Consent And Acknowledgment.
--------------------------------------------------
(a) Each Credit Party acknowledges and agrees that the Owner Trustee,
pursuant to the terms and conditions of the Security Agreement and the
Mortgage Instruments, shall create Liens respecting the various personal
property, fixtures and real property described therein in favor of the
Agent. Each Credit Party hereby irrevocably consents to the creation,
perfection and maintenance of such Liens. Each Credit Party shall, to the
extent reasonably requested by any of the other parties hereto, cooperate
with the other parties in connection with their covenants herein or in the
other Operative Agreements and shall from time to time duly execute and
deliver any and all such future instruments, documents and financing
statements (and continuation statements related thereto) as any other party
hereto may reasonably request.
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(b) Lessor hereby instructs each Credit Party, and each Credit Party
hereby acknowledges and agrees, that until such time as the Loans are paid
in full and the Liens evidenced by the Security Agreement and the Mortgage
Instruments have been released (i) any and all Rent and any and all other
amounts of any kind or type under any of the Operative Agreements due and
owing or payable to the Lessor or the Owner Trustee shall instead be paid
directly to the Agent or as the Agent may direct from time to time and (ii)
each Credit Party shall cause all notices, certificates, financial
statements, communications and other information which is delivered, or is
required to be delivered, to the Lessor, to also to be delivered at the
same time to the Agent and each Holder.
(c) No Credit Party shall consent to or permit any amendment,
supplement or other modification of the terms or provisions of any
Operative Agreement without, in each case, obtaining the prior written
consent of the Agent and, to the extent required by the proviso at the end
of Section 10.2(j) hereof, each of the Holders. The Lessee acknowledges
that the actions of the Owner Trustee are subject to the consent of the
Agent as set forth in Section 10.2(j).
(d) [Intentionally Omitted]
(e) Each Credit Party hereby covenants and agrees that, except for
amounts payable as Basic Rent and as otherwise expressly specified in the
Operative Agreements, any and all payment obligations owing from time to
time under the Operative Agreements to the Agent, any Lender or any Holder
shall (without further action) be deemed to be Supplemental Rent
obligations payable by Lessee and guaranteed by the Guarantor. Without
limitation, such obligations shall include commitment fees, unused fees,
prepayment penalties, indemnities, trustee fees and transaction expenses
incurred by the parties hereto in connection with the transactions
contemplated by the Operative Agreements.
(f) Consistent with the terms and conditions of the Security
Agreement, each of the Construction Agent and Lessee hereby covenants and
agrees, at its own cost and expense, to assemble and make available to the
Agent (on behalf of Lessor) any and all personal property components of any
and all Properties.
10.4 Sharing Of Certain Payments.
---------------------------
The parties hereto acknowledge and agree that all payments due and owing by
any Credit Party to the Lessor under the Lease or any of the other Operative
Agreements shall be made by such Credit Party directly to the Agent as more
particularly provided in Section 10.3 hereof. The Holders and the Agent, on
behalf of the Lenders, acknowledge the terms of Section 8 of the Credit
Agreement regarding the allocation of payments and other amounts made or
received from time to time under the Operative Agreements and agree, that all
such payments and amounts are to be allocated as provided in Section 8 of the
Credit Agreement. In connection therewith the Holders hereby (a) appoint the
Agent to act as collateral agent for the Holders in connection with the Lien
granted by the Security Documents to secure the Holder Amount and (b)
acknowledge and agree
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and direct that the rights and remedies of the beneficiaries of the Lien of the
Security Documents shall be exercised by the Agent on behalf of the Lenders and
the Holders as directed from time to time by the Lenders without notice to or
consent from the Holders.
10.5 Grant Of Easements, Etc.
------------------------
The Agent and the Holders hereby agree that, so long as no Event of Default
shall have occurred and be continuing, and until such time as the Agent gives
instructions to the contrary to the Owner Trustee, the Owner Trustee shall, from
time to time at the request of the Lessee, in connection with the transactions
contemplated by the Agency Agreement, the Lease or the other Operative
Agreements, (i) grant easements and other rights in the nature of easements with
respect to any Property, (ii) release existing easements or other rights in the
nature of easements which are for the benefit of any Property, (iii) execute and
deliver to any Person any instrument appropriate to confirm or effect such
grants or releases, and (iv) execute and deliver to any Person such other
documents or materials in connection with the acquisition, development or
operation of any Property, including, without limitation, reciprocal easement
agreements, operating agreements, development agreements, plats, replats or
subdivision documents; provided, that each of the agreements referred to in this
--------
Section 10.5 shall be of the type normally executed by the Lessee in the
ordinary course of the Lessee's business and shall be on commercially reasonable
terms so as not to diminish the value of any Property in any material respect.
10.6 Appointment By Holders And Owner Trustee.
----------------------------------------
Except as expressly provided in any Operative Agreement where the Owner
Trustee is required to act for or on behalf of the Holders, each Holder hereby
designates and appoints the Agent as the Agent of such Holder under this
Agreement and the other Operative Agreements, to take such action on behalf of
such Holder under the provisions of this Agreement and the other Operative
Agreements and exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement (including, without
limitation, provisions of other agreements incorporated herein by reference) and
other Operative Agreements with respect to the Lenders and as specifically
delegated to the Owner Trustee on behalf of such Holder in any Operative
Agreement. For purposes hereof, and except as expressly provided herein to the
contrary, the provisions of Section 7 of the Credit Agreement, together with
such other terms and provisions of the Credit Agreement and the other Operative
Agreements as required for the full interpretation and operation of Section 7 of
the Credit Agreement are hereby incorporated by reference as if restated herein
for the mutual benefit of the Agent and each Holder as if such Holder were a
Lender thereunder. Except as may be expressly provided to the contrary, for
purposes hereof, outstanding Holder Fundings shall be taken into account and
treated as Loans for purposes of determining Majority Lenders; provided,
however, in any case, under the Operative Agreements where the consent of the
Holder is expressly required or the Holder is entitled to take any action, such
consent shall be given or action taken, whether directly by the Holder or by the
Agent (without the requirement that the consent of any Lender be obtained or
permission for such action be granted by any Lender); and, provided, further, no
amendment to any provision expressly requiring the consent of the Holder or
permitting the Holder to take action (whether directly or through the Agent),
shall be
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effective without the written consent of the Holder. Further, the Agent shall be
entitled to take such action on behalf of the Owner Trustee as is delegated to
the Agent under any Operative Agreement (whether express or implied) as may be
reasonably incidental thereto. Each Lender hereby agrees to the provisions
contained in this Section 10.6.
SECTION 11 CREDIT AGREEMENT AND TRUST AGREEMENT.
11.1 Construction Agent's And Lessee's Credit Agreement Rights.
---------------------------------------------------------
Notwithstanding anything to the contrary contained in the Credit Agreement,
the Agent, the Lenders, the Holders, the Credit Parties and the Owner Trustee
hereby agree that, prior to the occurrence and continuation of any Default or
Event of Default, the Construction Agent and the Lessee (as designated below)
shall have the following rights:
(a) [Intentionally Omitted];
(b) the Construction Agent shall have the right to give the notice
referred to in Section 2.3 of the Credit Agreement and to designate the
account to which a borrowing under the Credit Agreement is to be credited
pursuant to Section 2.3 of the Credit Agreement;
(c) the Lessee shall have the right to terminate or reduce the
Commitments pursuant to Section 2.5(a) of the Credit Agreement;
(d) the Lessee shall have the right to exercise the conversion and
continuation options pursuant to Section 2.7 of the Credit Agreement;
(e) the Lessee shall have the right to replace any Lender pursuant to
Section 2.14(b) of the Credit Agreement;
(f) the Lessee shall have the right to approve any successor agent
pursuant to Section 7.9 of the Credit Agreement;
(g) the Lessee shall have the right to consent to any assignment by a
Lender to which the Lessor has the right to consent pursuant to Section 9.8
of the Credit Agreement;
(h) without limiting the foregoing clauses (a) through (g), and in
addition thereto, provided that no Event of Default then exists, the Lessee
shall have the right to exercise any other right of the Owner Trustee under
the Credit Agreement upon not less than five (5) Business Days' prior
written notice from the Lessee to the Owner Trustee and the Agent;
(i) [Reserved]; and
(j) the Lessee shall have the right to give the notice respecting any
prepayment of any Loan, as provided in Section 2.6(a) of the Credit
Agreement.
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11.2 Construction Agent's And Lessee's Trust Agreement Rights.
--------------------------------------------------------
Notwithstanding anything to the contrary contained in the Trust Agreement,
the Credit Parties, the Owner Trustee and the Holders hereby agree that neither
the Construction Agent nor any Credit Party controls the Lessor and, prior to
the occurrence and continuation of any Lease Default or Lease Event of Default,
the Construction Agent and the Lessee (as designated below) shall have the
following rights:
(a) [Intentionally Omitted];
(b) the Lessee shall have the right to exercise the conversion and
continuation options pursuant to Section 3.8 of the Trust Agreement;
(c) no removal of the Owner Trustee and appointment of a successor
Owner Trustee pursuant to Section 9.1 of the Trust Agreement shall be made
without the prior written consent (not to be unreasonably withheld or
delayed) of the Lessee;
(d) [Reserved]; and
(e) the Lessee shall have the right to give the notice respecting
any prepayment of any amount under any Certificate, as provided in Section
3.4(a) of the Trust Agreement.
SECTION 12 TRANSFER OF INTEREST.
12.1 Restrictions On Transfer.
------------------------
Each Lender may assign or transfer all or a portion of its interest
hereunder and under the other Operative Agreements in accordance with Section
9.8 of the Credit Agreement; provided, (i) each assignee or transferee with
--------
respect to Tranche A Loans and Tranche A Commitments must obtain the same
ratable interest in Tranche A Loans and Tranche A Commitments as defined in the
CORI Participation Agreement, and (ii) each assignee or transferee with respect
to Tranche B Loans and Tranche B Commitments must obtain the same ratable
interest in Tranche B Loans and Tranche B Commitments as defined in the CORI
Participation Agreement. The Holders may, directly or indirectly, assign, convey
or otherwise transfer any of their right, title or interest in or to the CORI
Trust Estate (together with the same ratable interest in the CORI Trust Estate)
or the Trust Agreement with the prior written consent of the Agent and, so long
as no Lease Default or Lease Event of Default shall have occurred and be
continuing and the Lessee has rights in one or more of the Properties under the
Lease, the Lessee (which consent shall not be unreasonably withheld or delayed).
The Owner Trustee may, subject to the Lien of the applicable Security Documents
but only with the prior written consent of the Agent, the Holders (which consent
may be withheld by the Agent and/or the Holders in their sole discretion) and
(provided no Default or Event of Default has occurred and is continuing) with
the consent of the Lessee, directly or indirectly, assign, convey, appoint an
agent with respect to enforcement of, or otherwise transfer any of its right,
title or interest in or to any Property, the Lease, the Trust Agreement, this
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Agreement (including, without limitation, any right to indemnification
thereunder), or any other document relating to a Property or any interest in a
Property as provided in the Trust Agreement and the Lease. The provisions of the
immediately preceding sentence shall not apply to the obligations of the Owner
Trustee to transfer Property to the Lessee or a third party purchaser pursuant
to Article XXII of the Lease upon payment for such Property in accordance with
the terms and conditions of the Lease.
12.2 Effect Of Transfer.
------------------
From and after any transfer effected in accordance with this Section 12,
the transferor shall be released, to the extent of such transfer, from its
liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor Holder shall remain liable under Article
XI of the Trust Agreement to the extent that the transferee Holder shall not
have assumed the obligations of the transferor Holder thereunder. Upon any
transfer by the Owner Trustee, a Holder or a Lender as above provided, any such
transferee shall assume the obligations of the Owner Trustee, the Lessor, the
Holder or the Lender, as the case may be, and shall be deemed an "Owner
Trustee", "Lessor", "Holder", or "Lender", as the case may be, for all purposes
of such documents and each reference herein to the transferor shall thereafter
be deemed a reference to such transferee for all purposes, except as provided in
the preceding sentence. Notwithstanding any transfer of all or a portion of the
transferor's interest as provided in this Section 12, the transferor shall be
entitled to all benefits accrued and all rights vested prior to such transfer
including, without limitation, rights to indemnification under any such
document.
SECTION 13 INDEMNIFICATION.
13.1 General Indemnity.
-----------------
Subject to and limited by in all respects the provisions of Sections 13.5
and 13.6 and whether or not any of the transactions contemplated hereby shall be
consummated, the Indemnity Provider hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person (by any third party, including Claims
arising from the negligence of an Indemnified Person (but not to the extent such
Claims arise from the gross negligence, willful misconduct or willful breach of
such Indemnified Person or are otherwise solely attributable to acts or events
occurring after the expiration of the Lease or after the transfer of all of the
Properties to the Lessee or a third party)) in any way relating to or arising or
alleged to arise out of the execution, delivery, performance or enforcement of
this Agreement, the Lease or any other Operative Agreement or on or with respect
to any Property or any component thereof, including, without limitation, Claims
in any way relating to or arising or alleged to arise out of (a) the financing,
refinancing, purchase, acceptance, rejection, ownership, design, construction,
refurbishment, development, delivery, acceptance, nondelivery, leasing,
subleasing, possession, use, operation, maintenance repair, modification,
transportation, condition, sale, return, repossession (whether by summary
proceedings or otherwise), or any other disposition of any Property or any part
thereof, including the acquisition, holding or disposition of any interest in
the
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Property, lease or agreement comprising a portion of any thereof; (b) any latent
or other defects in any Property or any portion thereof whether or not
discoverable by an Indemnified Person or the Indemnity Provider; (c) a violation
of Environmental Laws, Environmental Claims or other loss of or damage to any
property or the environment relating to the Property, the Lease, the Agency
Agreement or the Indemnity Provider; (d) the Operative Agreements, or any
transaction contemplated thereby; (e) any breach by the Indemnity Provider of
any of its representations or warranties under the Operative Agreements to which
the Indemnity Provider is a party or failure by the Indemnity Provider to
perform or observe any covenant or agreement to be performed by it under any of
the Operative Agreement; (f) the transactions contemplated hereby or by any
other Operative Agreement, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA; and (g) personal injury, death or property
damage, including Claims based on strict or absolute liability in tort.
If a written Claim is made against any Indemnified Person or if any
proceeding shall be commenced against such Indemnified Person (including a
written notice of such proceeding), for any Claim, such Indemnified Person shall
promptly notify the Indemnity Provider in writing and shall not take action with
respect to such Claim without the consent of the Indemnity Provider for thirty
(30) days after the receipt of such notice by the Indemnity Provider; provided,
however, that, in the case of any such Claim, if action shall be required by law
or regulation to be taken prior to the end of such 30-day period, such
Indemnified Person shall endeavor to, in such notice to the Indemnity Provider,
inform the Indemnity Provider of such shorter period, and no action shall be
taken with respect to such Claim without the consent of the Indemnity Provider
before 7 days before the end of such shorter period; provided, further, that the
failure of such Indemnified Person to give the notices referred to in this
sentence shall not diminish the Indemnity Provider's obligation hereunder except
to the extent such failure precludes the Indemnity Provider from contesting such
Claim.
If, within thirty (30) days of receipt of such notice from the Indemnified
Person (or such shorter period as the Indemnified Person has notified the
Indemnity Provider is required by law or regulation for the Indemnified Person
to respond to such Claim), the Indemnity Provider shall request in writing that
such Indemnified Person respond to such Claim, the Indemnified Person shall, at
the expense of the Indemnity Provider, in good faith conduct and control such
action (including, without limitation, by pursuit of appeals) (provided,
however, that (A) if such Claim, in the Indemnity Person's reasonable
discretion, can be pursued by the Indemnity Provider on behalf of or in the name
of such Indemnified Person, the Indemnified Person, at the Indemnity Provider's
request, shall allow the Indemnity Provider to conduct and control the response
to such Claim and (B) in the case of any Claim, the Indemnified Person may
request the Indemnity Provider to conduct and control the response to such Claim
(with counsel to be selected by the Indemnity Provider and consented to by such
Indemnified Person, such consent not to be unreasonably withheld; provided,
however, that any Indemnified Person may retain separate counsel at the expense
of the Indemnity Provider in the event of a conflict)) by, in the sole
discretion of the Person conducting and controlling the response to such Claim
(1) resisting payment thereof, (2) not paying the same except under protest, if
protest is necessary and proper, (3) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings,
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or (4) taking such other action as is reasonably requested by the Indemnity
Provider from time to time.
The party controlling the response to any Claim shall consult in good faith
with the non-controlling party and shall keep the non-controlling party
reasonably informed as to the conduct of the response to such Claim; provided,
that all decisions ultimately shall be made in the discretion of the controlling
party. The parties agree that an Indemnified Person may at any time decline to
take further action with respect to the response to such Claim and may settle
such Claim if such Indemnified Person shall waive its rights to any indemnity
from the Indemnity Provider that otherwise would be payable in respect of such
Claim (and any future Claim, the pursuit of which is precluded by reason of such
resolution of such Claim) and shall pay to the Indemnity Provider any amount
previously paid or advanced by the Indemnity Provider pursuant to this Section
13.1 by way of indemnification or advance for the payment of an amount regarding
such Claim.
Notwithstanding the foregoing provisions of this Section 13.1, an
Indemnified Person shall not be required to take any action and no Indemnity
Provider shall be permitted to respond to any Claim in its own name or that of
the Indemnified Person unless (A) the Indemnity Provider shall have agreed to
pay and shall pay to such Indemnified Person on demand and on an After Tax Basis
all reasonable costs, losses and expenses that such Indemnified Person actually
incurs in connection with such Claim, including, without limitation, all
reasonable legal, accounting and investigatory fees and disbursements and, if
the Indemnified Person has informed the Indemnity Provider (in its initial
notice of the Claim) that it intends to contest such Claim (whether or not the
control of the contest is then assumed by the Indemnity Provider), the Indemnity
Provider shall have agreed that the Claim is an indemnifiable Claim hereunder,
(B) in the case of a Claim that must be pursued in the name of an Indemnified
Person (or an Affiliate thereof), the amount of the potential indemnity (taking
into account all similar or logically related Claims that have been or could be
raised for which the Indemnity Provider may be liable to pay an indemnity under
this Section 13.1) exceeds $25,000, (C) the Indemnified Person shall have
reasonably determined that the action to be taken will not result in any
material danger of sale, forfeiture or loss of the Property, or any part thereof
or interest therein, will not interfere with the payment of Rent, and will not
result in risk of criminal liability, (D) if such Claim shall involve the
payment of any amount prior to the resolution of such Claim, the Indemnity
Provider shall provide to the Indemnified Person an interest-free advance in an
amount equal to the amount that the Indemnified Person is required to pay (with
no additional net after-tax cost to such Indemnified Person), (E) in the case of
a Claim that must be pursued in the name of an Indemnified Person (or an
Affiliate thereof), the Indemnity Provider shall have provided to such
Indemnified Person an opinion of independent counsel selected by the Indemnified
Person and reasonably satisfactory to the Indemnity Provider stating that a
reasonable basis exists to contest such Claim (or, in the case of an appeal of
an adverse determination, an opinion of such counsel to the effect that the
position asserted in such appeal will more likely than not prevail) and (F) no
Event of Default shall have occurred and be continuing. In no event shall an
Indemnified Person be required to appeal an adverse judicial determination to
the United States Supreme Court. In addition, an Indemnified Person shall not be
required to contest any Claim in its name (or that of an Affiliate) if the
subject matter thereof shall be of a continuing nature and shall have previously
been decided adversely by a court of competent jurisdiction pursuant to the
contest provisions of this Section 13.1, unless there shall have been a change
in law (or interpretation
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thereof) and the Indemnified Person shall have received, at the Indemnity
Provider's expense, an opinion of independent counsel selected by the
Indemnified Person and reasonably acceptable to the Indemnity Provider stating
that as a result of such change in law (or interpretation thereof), it is more
likely than not that the Indemnified Person will prevail in such contest.
13.2 General Tax Indemnity.
---------------------
(a) Subject to and limited by in all respects the provisions of
Sections 13.5 and 13.6, the Indemnity Provider shall pay and assume
liability for, and does hereby agree to indemnify, protect and defend each
Property and all Indemnified Persons, and hold them harmless against, all
Impositions on an After Tax Basis, and all payments pursuant to the
Operative Agreements shall be made free and clear of and without deduction
for any and all present and future Impositions.
(b) Notwithstanding anything to the contrary in Section 13.2(a)
hereof, the following shall be excluded from the indemnity required by
Section 13.2(a):
(i) Taxes (other than Taxes that are, or are in the nature of,
sales, use, rental, value added, transfer or property taxes) that are
imposed on a Indemnified Person (other than Lessor) by the United
States federal government that are based on or measured by the net
income (including taxes based on capital gains and minimum taxes) of
such Person; 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) Taxes (other than Taxes that are, or are in the nature of,
sales, use, rental, value added, transfer or property taxes) that are
imposed on any Indemnified Person (other than Lessor) by any state or
local jurisdiction or taxing authority within any state or local
jurisdiction and that are based upon or measured by the net income or
net receipts, except that this clause (ii) shall not apply to (and
thus shall not exclude) any such Taxes imposed on an Indemnified
Person by a state (or any local taxing authority thereof or therein)
where any Property is located, possessed or used under the Lease;
provided, that this clause (ii) 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;
(iii) any Tax to the extent it relates to any act, event or
omission that occurs after the termination of the Lease and redelivery
or sale of the property in accordance with the terms of the Lease (but
not any Tax that relates to such termination, redelivery or sale
and/or to any period prior to such termination, redelivery or sale);
and
(iv) any Taxes which are imposed on an Indemnified Person as a
result of the gross negligence or willful misconduct of such
Indemnified Person itself (as opposed to gross negligence or willful
misconduct imputed to such Indemnified
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Person), but not Taxes imposed as a result of ordinary negligence of
such Indemnified Person;
(c) (i) Subject to the terms of Section 13.2(f), the Indemnity
Provider shall pay or cause to be paid all Impositions directly to the
taxing authorities where feasible and otherwise to the Indemnified Person,
as appropriate, and the Indemnity Provider shall at its own expense, upon
such Indemnified Person's reasonable request, furnish to such Indemnified
Person copies of official receipts or other satisfactory proof evidencing
such payment.
(ii) In the case of Impositions for which no contest is
conducted pursuant to Section 13.2(f) and which the Indemnity Provider
pays directly to the taxing authorities, the Indemnity Provider shall
pay such Impositions prior to the latest time permitted by the
relevant taxing authority for timely payment. In the case of
Impositions for which the Indemnity Provider reimburses an Indemnified
Person, the Indemnity Provider shall do so within thirty (30) days
after receipt by the Indemnity Provider of demand by such Indemnified
Person describing in reasonable detail the nature of the Imposition
and the basis for the demand (including the computation of the amount
payable). In the case of Impositions for which a contest is conducted
pursuant to Section 13.2(f), the Indemnity Provider shall pay such
Impositions or reimburse such Indemnified Person for such Impositions,
to the extent not previously paid or reimbursed pursuant to subsection
(a), prior to the latest time permitted by the relevant taxing
authority for timely payment after conclusion of all contests under
Section 13.2(f).
(iii) At the Indemnity Provider's request, the amount of any
indemnification payment by the Indemnity Provider pursuant to
subsection (a) shall be verified and certified by an independent
public accounting firm mutually acceptable to the Indemnity Provider
and the Indemnified Person. The fees and expenses of such independent
public accounting firm shall be paid by the Indemnity Provider unless
such verification shall result in an adjustment in the Indemnity
Provider's favor of 15% or more of the payment as computed by the
Indemnified Person, in which case such fee shall be paid by the
Indemnified Person.
(d) The Indemnity Provider shall be responsible for preparing and
filing any real and personal property or ad valorem tax returns in respect
of each Property. In case any other report or tax return shall be required
to be made with respect to any obligations of the Indemnity Provider under
or arising out of subsection (a) and of which the Indemnity Provider has
knowledge or should have knowledge, the Indemnity Provider, at its sole
cost and expense, shall notify the relevant Indemnified Person of such
requirement and (except if such Indemnified Person notifies the Indemnity
Provider that such Indemnified Person intends to file such report or
return) (A) to the extent required or permitted by and consistent with
Legal Requirements, make and file in Indemnity Provider's name such return,
statement or report; and (B) in the case of any other such return,
statement or report required to be made in the name of such Indemnified
Person, advise such Indemnified
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<PAGE>
Person of such fact and prepare such return, statement or report for filing
by such Indemnified Person or, where such return, statement or report shall
be required to reflect items in addition to any obligations of the
Indemnity Provider under or arising out of subsection (a), provide such
Indemnified Person at the Indemnity Provider's expense with information
sufficient to permit such return, statement or report to be properly made
with respect to any obligations of the Indemnity Provider under or arising
out of subsection (a). Such Indemnified Person shall, upon the Indemnity
Provider's request and at the Indemnity Provider's expense, provide any
data maintained by such Indemnified Person (and not otherwise available to
or within the control of the Indemnity Provider) with respect to each
Property which the Indemnity Provider may reasonably require to prepare any
required tax returns or reports.
(e) As between the Indemnity Provider on one hand, and the Lessor or
the Agent, any Lender or any Holder on the other hand, the Indemnity
Provider shall be responsible for, and the Indemnity Provider shall
indemnify and hold harmless the Lessor, the Agent, the Lenders and each
Holder (without duplication of any indemnification required by subsection
(a)) on an After Tax Basis against, any obligation for United States or
foreign withholding taxes imposed in respect of the interest payable on the
Notes or with respect to Rent payments under the Lease (and, if the Lessor,
the Agent, any Lender or any Holder receives a demand for such payment from
any taxing authority, the Indemnity Provider shall discharge such demand on
behalf of the Lessor, the Agent, such Lender or such Holder); provided,
however, that the right of any Lender to make a claim for indemnification
under this Section 13.2(e) is subject to the compliance by such Lender with
the requirements of Section 2.13 of the Credit Agreement.
(f) (i) If a written Claim is made against any Indemnified Person or
if any proceeding shall be commenced against such Indemnified Person
(including a written notice of such proceeding), for any Impositions, such
Indemnified Person shall promptly notify the Indemnity Provider in writing
and shall not take action with respect to such Claim or proceeding without
the consent of the Indemnity Provider for thirty (30) days after the
receipt of such notice by the Indemnity Provider; provided, however, that,
in the case of any such Claim or proceeding, if action shall be required by
law or regulation to be taken prior to the end of such 30-day period, such
Indemnified Person shall, in such notice to the Indemnity Provider, inform
the Indemnity Provider of such shorter period, and no action shall be taken
with respect to such Claim or proceeding without the consent of the
Indemnity Provider before 7 days before the end of such shorter period;
provided, further, that the failure of such Indemnified Person to give the
notices referred to this sentence shall not diminish the Indemnity
Provider's obligation hereunder except to the extent such failure
materially precludes the Indemnity Provider from contesting such Claim.
(ii) If, within thirty (30) days of receipt of such notice
from the Indemnified Person (or such shorter period as the Indemnified
Person has notified the Indemnity Provider is required by law or
regulation for the Indemnified Person to commence such contest), the
Indemnity Provider shall request in writing that such Indemnified
Person contest such Imposition, the Indemnified Person shall, at
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the expense of the Indemnity Provider, in good faith conduct and
control such contest (including, without limitation, by pursuit of
appeals) relating to the validity, applicability or amount of such
Impositions (provided, however, that (A) if such contest involves a
tax other than a tax on net income and can be pursued independently
from any other proceeding involving a tax liability of such
Indemnified Person, the Indemnified Person, at the Indemnity
Provider's request, shall allow the Indemnity Provider (and the
Indemnity Provider shall be obligated) to conduct and control such
contest and (B) in the case of any contest, the Indemnified Person may
request the Indemnity Provider to conduct and control such contest
(with counsel to be selected by the Indemnity Provider and consented
to by such Indemnified Person, such consent not to be unreasonably
withheld; provided, however, that any Indemnified Person may retain
separate counsel at the expense of the Indemnity Provider in the event
of a conflict)) by, in the sole discretion of the Person conducting
and controlling such contest, (1) resisting payment thereof, (2) not
paying the same except under protest, if protest is necessary and
proper, (3) if the payment be made, using reasonable efforts to obtain
a refund thereof in appropriate administrative and judicial
proceedings, or (4) taking such other action as is reasonably
requested by the Indemnity Provider from time to time.
(iii) The party controlling any contest shall consult in
good faith with the non-controlling party and shall keep the non-
controlling party reasonably informed as to the conduct of such
contest; provided, that all decisions ultimately shall be made in the
sole discretion of the controlling party. The parties agree that an
Indemnified Person may at any time decline to take further action with
respect to the contest of any Imposition and may settle such contest
if such Indemnified Person shall waive its rights to any indemnity
from the Indemnity Provider that otherwise would be payable in respect
of such Claim (and any future Claim by any taxing authority, the
contest of which is precluded by reason of such resolution of such
Claim) and shall pay to the Indemnity Provider any amount previously
paid or advanced by the Indemnity Provider pursuant to this Section
13.2 by way of indemnification or advance for the payment of an
Imposition other than expenses of such contest.
(iv) Notwithstanding the foregoing provisions of this
Section 13.2, an Indemnified Person shall not be required to take any
action and no Indemnity Provider shall be permitted to contest any
Impositions in its own name or that of the Indemnified Person unless
(A) the Indemnity Provider shall have agreed to pay and shall pay to
such Indemnified Person on demand and on an After Tax Basis all
reasonable costs, losses and expenses that such Indemnified Person
actually incurs in connection with contesting such Impositions,
including, without limitation, all reasonable legal, accounting and
investigatory fees and disbursements, and, if the Indemnified Person
has informed the Indemnity Provider (in its initial notice of the
Imposition) that it intends to contest such Imposition (whether or not
the control of the contest is then assumed by the Indemnity Provider),
the Indemnity Provider shall have agreed that the Imposition is an
46
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indemnifiable Imposition hereunder, (B) in the case of a Claim that
must be pursued in the name of an Indemnified Person (or an Affiliate
thereof), 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 Indemnified Person for which the
Indemnity Provider may be liable to pay an indemnity under this
Section 13.2) exceeds $25,000, (C) the Indemnified Person shall have
reasonably determined that the action to be taken will not result in
any material danger of sale, forfeiture or loss of any Property, or
any part thereof or interest therein, will not interfere with the
payment of Rent, and will not result in risk of criminal liability,
(D) if such contest shall involve the payment of the Imposition prior
to the contest, the Indemnity Provider shall provide to the
Indemnified Person an interest-free advance in an amount equal to the
Imposition that the Indemnified Person is required to pay (with no
additional net after-tax cost to such Indemnified Person), (E) in the
case of a Claim that must be pursued in the name of an Indemnified
Person (or an Affiliate thereof), the Indemnity Provider shall have
provided to such Indemnified Person an opinion of independent tax
counsel selected by the Indemnified Person and reasonably satisfactory
to the Indemnity Provider stating that a reasonable basis exists to
contest such Claim (or, in the case of an appeal or an adverse
determination, an opinion of such counsel to the effect that the
position asserted in such appeal will more likely than not prevail)
and (F) no Default or Event of Default shall have occurred and be
continuing. In no event shall an Indemnified Person be required to
appeal an adverse judicial determination to the United States Supreme
Court. In addition, an Indemnified Person shall not be required to
contest any Claim in its name (or that of an Affiliate) if the subject
matter thereof shall be of a continuing nature and shall have
previously been decided adversely by a court of competent jurisdiction
pursuant to the contest provisions of this Section 13.2, unless there
shall have been a change in law (or interpretation thereof) and the
Indemnified Person shall have received, at the Indemnity Provider's
expense, an opinion of independent tax counsel selected by the
Indemnified Person and reasonably acceptable to the Indemnity Provider
stating that as a result of such change in law (or interpretation
thereof), it is more likely than not that the Indemnified Person will
prevail in such contest.
13.3. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY,
------------------------------------------------------------------
ETC.
---
SUBJECT TO AND LIMITED BY IN ALL RESPECTS THE PROVISIONS OF SECTION 13.5
AND 13.6 AND WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION PROVISIONS
OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING
INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER
EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS
FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR
OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY
NEGLIGENCE (WHETHER
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SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY, AND
INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE AND HARMLESS FROM
AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES, COSTS,
LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE
ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH BENEFICIARY
(IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE ACTION FOR WHICH
INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT IS SOUGHT)
ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT
LIABILITY OF ANY SUCH BENEFICIARY.
13.4. Additional Provisions Regarding Environmental Indemnification.
-------------------------------------------------------------
Each and every Indemnified Person shall at all times have the rights and
benefits, and the Indemnity Provider shall have the obligations, in each case
provided pursuant to the Operative Agreements with respect to environmental
matters, violations of any Environmental Law, any Environmental Claim or other
loss of or damage to any property or the environment relating to any Property,
the Lease, the Agency Agreement or the Indemnity Provider (including without
limitation the rights and benefits provided pursuant to Section 13.1(c).
13.5. Additional Provisions Regarding Indemnification.
-----------------------------------------------
Notwithstanding the provisions of Sections 13.1, 13.2, 13.3 and 13.4 (other
than with respect to matters concerning indemnification for pre-existing
environmental conditions and for environmental conditions arising out of the
Construction Agent's use or possession of the Property), (a) the Owner Trustee
shall be the only beneficiary of the provisions set forth in Sections 13.1,
13.2, 13.3 and 13.4 (again, subject to the immediately preceding parenthetical
phrase) with respect to each Property solely for the period prior to the
applicable Completion Date for such Property, and (b) such limited rights of
indemnification referenced in Section 13.5(a) (to the extent relating to third-
party claims) shall be limited to third-party claims caused by or resulting from
the Indemnity Provider's acts or omissions and/or all other Persons acting by,
through or under the Indemnity Provider. After the applicable Completion Date
for such Property, each Indemnified Person shall be a beneficiary of the
provisions set forth in Sections 13.1, 13.2, 13.3 and 13.4.
13.6. Indemnifications Provided by the Owner Trustee in Favor of the Other
--------------------------------------------------------------------
Indemnified Persons.
-------------------
To the extent the Indemnity Provider is not obligated to indemnify each
Indemnified Person with respect to the various matters described in this Section
13.6, the Owner Trustee shall provide such indemnities (but only to the extent
amounts sufficient to pay such indemnity are funded by the Lenders and the
Holders) in favor of each Indemnified Person in accordance with this Section
13.6 and shall pay all such amounts owed with respect to this Section 13.6 with
amounts advanced by the Lenders and the Holders (a) to the extent, but only to
the extent,
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amounts are available therefor with respect to the Available Commitments and the
Available Holder Commitments (subject to the rights of the Lenders and the
Holders to increase their respective commitment amounts in accordance with the
provisions of Section 5.8) and (b) unless each Lender and each Holder has
declined in writing to fund such amount. Notwithstanding any other provision in
any other Operative Agreement to the contrary, all amounts so advanced shall be
deemed added (ratably, based on the ratio of the Property Cost for each Property
individually to the Aggregate Property Cost of all Properties at such time) to
the Property Cost of all Properties then subject to the terms of the Operative
Agreements.
Whether or not any of the transactions contemplated hereby shall be
consummated, the Owner Trustee hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person by any third party, including without
limitation Claims arising from the negligence of an Indemnified Person (but not
to the extent such Claims arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction, as opposed to gross negligence or willful misconduct imputed to
such Indemnified Person or breach of such Indemnified Person's obligations under
this Agreement, the Lease or any other Operative Agreement) in any way relating
to or arising or alleged to arise out of the execution, delivery, performance or
enforcement of this Agreement, the Lease or any other Operative Agreement or on
or with respect to any Property or any component thereof, including without
limitation Claims in any way relating to or arising or alleged to arise out of
the matters set forth in clauses (a) through (g) of the first paragraph of
Section 13.1.
The Owner Trustee shall pay and assume liability for, and does hereby agree
to indemnify, protect and defend each Property and all Indemnified Persons, and
hold them harmless against, all Impositions on an After Tax Basis, and all
payments pursuant to the Operative Agreements shall be made free and clear of
and without deduction for any and all present and future Impositions.
Notwithstanding anything to the contrary in this paragraph, the Excluded Taxes
shall be excluded from the indemnity provisions afforded by this paragraph.
THE INDEMNITY OBLIGATIONS UNDERTAKEN BY THE OWNER TRUSTEE PURSUANT TO THIS
SECTION 13.6 ARE IN ALL RESPECTS SUBJECT TO THE LIMITATIONS ON LIABILITY
REFERENCED IN SECTION 14.10.
SECTION 14 MISCELLANEOUS.
14.1 Survival of Agreements.
----------------------
The representations, warranties, covenants, indemnities and agreements of
the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of this Agreement, the transfer of any Property to the Owner Trustee, the
acquisition of any Equipment, the construction of any Improvements, any
disposition of any interest of the Owner Trustee in any Property or any interest
of the Holders in the Owner Trust, the payment of the Notes and any disposition
thereof and shall be and continue in
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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 Agreements. Except as otherwise expressly set forth
herein or in other Operative Agreements, the indemnities of the parties provided
for in the Operative Agreements shall survive the expiration or termination of
any thereof.
14.2 No Broker, etc.
--------------
Except as expressly provided in that certain engagement letter agreement
dated as of April 13, 1999 among Bank of America, N.A., a national banking
association, which is the successor to NationsBank, N.A., BancAmerica Securities
LLC, which is the successor to NationsBanc Montgomery Securities, LLC, Capital
One Bank and Capital One Financial Corporation, 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 Agreement, 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.
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 or by
hand and any such notice shall become effective upon receipt and shall be
directed to the address of such Person as indicated:
If to the Lessee or the Construction Agent, to it at the following address:
Capital One Services, Inc.
2980 Fairview Park Drive
Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone: (703) 205-1000
Telecopy: (703) 205-1748
with a copy to :
Capital One Financial Corporation
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone: (703) 205-1000
Telecopy: (703) 205-1748
50
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If to the Guarantor, to it at the following address:
Capital One Financial Corporation
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042
Attention: Director of Capital Markets
Telephone: (703) 205-1000
Telecopy: (703) 205-1748
with a copy to the Legal Department of Capital One Financial Corporation at
the immediately preceding address.
If to the Owner Trustee, to it at the following address:
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Val T. Orton
Corporate Trust Counsel
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
If to the Holders, to each such Holder at the address set forth for such
Holder on the signature page of the Trust Agreement.
If to the Agent, to it at the following address:
Bank of America, N.A.
901 Main Street, 66th Floor
Dallas, TX 75202
Attention: Shelly Harper
Telephone: (214) 209-0567
Telecopy: (214) 209-0604
If to any Lender, to it at the address set forth for such Lender in
Schedule 1.1 of the Credit Agreement.
From time to time any party may designate a new address for purposes of
notice hereunder by notice to each of the other parties hereto.
14.4 Counterparts.
------------
This 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.
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14.5 Amendments and Termination.
--------------------------
Neither this Agreement nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified except by an instrument in writing
signed by the party against which the enforcement of the termination, amendment,
supplement, waiver or modification shall be sought. This Agreement may be
terminated by an agreement signed in writing by the Owner Trustee, the Holders,
the Lenders, each Credit Party and the Agent.
14.6 Headings, etc.
--------------
The Table of Contents and headings of the various Articles and Sections of
this Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.
14.7 Parties in Interest.
-------------------
Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.
14.8 GOVERNING LAW; WAIVERS OF JURY TRIAL.
------------------------------------
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF VIRGINIA AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN.
14.9 Severability.
------------
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
14.10 Liability Limited.
-----------------
(a) The Agent, the Credit Parties, the Lenders and the Holders each
acknowledge and agree that the Owner Trustee is (except as otherwise
expressly provided herein or therein) entering into this Agreement and the
other Operative Agreements to which it is a party (other than the Trust
Agreement and to the extent otherwise provided in
52
<PAGE>
Section 7.2 of this Agreement), solely in its capacity as trustee under the
Trust Agreement and not in its individual capacity and that Trust Company
shall not be liable or accountable under any circumstances whatsoever in
its individual capacity for or on account of any statements,
representations, warranties, covenants or obligations stated to be those of
the Owner Trustee, except for its own gross negligence or willful
misconduct and as otherwise expressly provided herein or in the other
Operative Agreements.
(b) Anything to the contrary contained in this Agreement, the Credit
Agreement, the Notes or in any other Operative Agreement notwithstanding,
neither the Lessor nor any Holder nor any officer, director, shareholder,
or partner thereof, nor any of the successors or assigns of the foregoing
(all such Persons being hereinafter referred to collectively as the
"Exculpated Persons"), shall be personally liable in any respect for any
liability or obligation hereunder or in any other Operative Agreement
including the payment of the principal of, or interest on, the Notes, or
for monetary damages for the breach of performance of any of the covenants
contained in the Credit Agreement, the Notes, this Agreement, the Security
Agreement or any of the other Operative Agreements. The Agent (for itself
and on behalf of the Lenders) agrees that, in the event the Agent or any
Lender pursues any remedies available to them under the Credit Agreement,
the Notes, this Agreement, the Security Agreement, the Mortgage Instruments
or under any other Operative Agreement, neither the Lenders nor the Agent
shall have any recourse against any Exculpated Person, for any deficiency,
loss or Claim for monetary damages or otherwise resulting therefrom and
recourse shall be had solely and exclusively against the COSI Trust Estate
and the Credit Parties (with respect to the Credit Parties' obligations
under the Lease, the Participation Agreement and the Agency Agreement); but
nothing contained herein shall be taken to prevent recourse against or the
enforcement of remedies against the COSI Trust Estate in respect of any and
all liabilities, obligations and undertakings contained herein, in the
Credit Agreement, in the Notes, in the Security Agreement, the Mortgage
Instruments or in any other Operative Agreement. Notwithstanding the
provisions of this Section, nothing in this Agreement, the Credit
Agreement, the Notes, the Security Agreement, the Mortgage Instruments or
any other Operative Agreement shall: (i) constitute a waiver, release or
discharge of any indebtedness or obligation evidenced by the Notes or
arising under this Agreement, the Security Agreement, the Mortgage
Instruments or the Credit Agreement or secured by the Security Agreement,
the Mortgage Instruments or any other Operative Agreement, but the same
shall continue until paid or discharged; (ii) relieve the Lessor or any
Exculpated Person from liability and responsibility for (but only to the
extent of the damages arising by reason of): (a) active waste knowingly
committed by the Lessor or any Exculpated Person with respect to the
Properties or (b) any fraud, gross negligence, willful misconduct or
willful breach on the part of the Lessor or any such Exculpated Person;
(iii) relieve the Lessor or any Exculpated Person from liability and
responsibility for (but only to the extent of the moneys misappropriated,
misapplied or not turned over) (a) except for Excepted Payments,
misappropriation or misapplication by the Lessor (i.e., application in a
manner contrary to any Operative Agreement) of any insurance proceeds or
condemnation award paid or delivered to the Lessor by any Person other than
the Agent, (b) except for Excepted Payments, any deposits or any escrows or
amounts owed by the Lessee under the Agency Agreement held by the Lessor or
(c) except for Excepted
53
<PAGE>
Payments, any rents or other income received by the Lessor from any Credit
Party that are not turned over to the Agent; or (iv) affect or in any way
limit the Agent's rights and remedies under any Operative Agreement with
respect to the Rents and its rights and powers thereunder or to obtain a
judgment against the Lessee's interest in the Properties or to the extent
the Lessee may be personally liable as otherwise contemplated in clauses
(ii) and (iii) of this Section.
14.11 Rights of the Credit Parties.
----------------------------
Notwithstanding any provision of the Operative Agreements, if at any time
all obligations (i) of the Owner Trustee under the Credit Agreement and the
Security Documents and (ii) of the Credit Parties under the Operative Agreements
have in each case been satisfied or discharged in full, then the Credit Parties
shall be entitled to (a) terminate the Lease and the guaranty obligations under
Section 8B (other than the obligations under Section 8B.5) and (b) receive all
amounts then held under the Operative Agreements and all proceeds with respect
to any of the Properties. Upon the termination of the Lease and the guaranty
obligations under Section 8B (other than the obligations under Section 8B.5)
pursuant to the foregoing clause (a), except as provided under Section 22.1 of
the Lease, the Lessor at the Lessee's expense shall transfer to the Lessee all
of its right, title and interest free and clear of the Lien of the Lease and all
Lessor Liens in and to any Properties then subject to the Lease and any amounts
or proceeds referred to in the foregoing clause (b) shall be paid over to the
Lessee.
14.12 Further Assurances.
------------------
The parties hereto shall promptly cause to be taken, executed, acknowledged
or delivered 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 Agreements and the transactions contemplated hereby and thereby
(including, without limitation, the preparation, execution and filing of any and
all Uniform Commercial Code financing statements and other filings or
registrations which the parties hereto may from time to time request to be filed
or effected). The Lessee, 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 Owner Trustee shall so request) as
so requested, in order to maintain and protect all security interests provided
for hereunder or under any other Operative Agreement.
14.13 Calculations under Operative Agreements.
---------------------------------------
The parties hereto agree that all calculations and numerical determinations
to be made under the Operative Agreements by the Owner Trustee shall be made by
the Agent and that such calculations and determinations shall be conclusive and
binding on the parties hereto in the absence of manifest error.
54
<PAGE>
14.14 Confidentiality.
---------------
Each of the Owner Trustee, the Holders, the Agent and the Lenders severally
hereby agrees to use reasonable efforts to keep confidential all non-public
information pertaining to any Credit Party or such Credit Party's Subsidiaries
which is provided to it by any Credit Party or such Credit Party's Subsidiaries
and which an officer of any Credit Party or any of such Credit Party's
Subsidiaries has requested in writing be kept confidential, and shall not
intentionally disclose such information to any Person except:
(a) to the extent such information is public when received by such
Person or becomes public thereafter due to the act or omission of any party
other than such Person;
(b) to the extent such information is lawfully and independently
obtained from a source other than a Credit Party or any of such Credit
Party's Affiliates and such Person neither knows or has reason to know that
such information from such source is subject to an obligation of
confidentiality or, if such information is subject to an obligation of
confidentiality, that disclosure of such information is permitted;
(c) to counsel, auditors, accountants or agents retained by any such
Person or any Affiliates of any such Person provided they agree to keep
such information confidential as if such Person or Affiliate were party to
this Agreement and to financial institution regulators, including examiners
of any Lender, the Agent or the Owner Trustee, any Holder or any Affiliate
in the course of examinations of such Persons;
(d) in connection with any litigation or the enforcement or
preservation of the rights of the Agent, the Owner Trustee, the Lessor, any
Lender or any Holder under the Operative Agreements;
(e) to the extent required by any applicable statute, rule or
regulation or court order (including, without limitation, by way of
subpoena) or pursuant to the request of any regulatory or Governmental
Authority having jurisdiction over any such Person; provided, however, that
such Person shall endeavor (if not otherwise prohibited by Law) to notify
the Lessee prior to any disclosure made pursuant to this clause (e), except
that no such Person shall be subject to any liability whatsoever for any
failure to so notify the Lessee;
(f) the Agent may disclose such information to the Lenders; or
(g) to the extent disclosure to other financial institutions or other
Persons is appropriate in connection with any proposed or actual (i)
assignment or grant of a participation by any of the Lenders of interests
in the Credit Agreement and/or any Note to such other financial
institutions or (ii) assignment by any Holder of interests in the Trust
Agreement to another Person; so long as such financial institution or other
Person first executes and delivers a "Confidentiality Agreement" in the
form attached hereto as Exhibit J.
55
<PAGE>
The obligations of any such financial institution or other Person that has
executed a Confidentiality Agreement in the form of Exhibit J hereto shall be
---------
superseded by this Section 14.14 upon the date upon which such financial
institution or other Person becomes a Lender or Holder hereunder.
[signature pages follow]
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
CAPITAL ONE SERVICES, INC., as Construction Agent
and as Lessee
By: /s/ Stephen Linehan
--------------------------------------------
Name: Stephen Linehan
-----------------------------------------
Title: Director of Corporate Funding
-----------------------------------------
CAPITAL ONE FINANCIAL CORPORATION,
as Guarantor
By: /s/ Stephen Linehan
--------------------------------------------
Name: Stephen Linehan
-----------------------------------------
Title: Director of Corporate Funding
-----------------------------------------
(Signature pages continue)
<PAGE>
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated
herein, but solely as Owner Trustee under
the Capital One Realty Trust 1998-1
By: /s/ DeAnn Madsen
--------------------------------------------
Name: DeAnn Madsen
-----------------------------------------
Title: Assistant Trust Officer
-----------------------------------------
(Signature pages continue)
<PAGE>
BANK OF AMERICA, N.A., as a Holder, as a Lender
and as Administrative Agent
By: /s/ Shelly K. Harper
--------------------------------------------
Name: Shelly K. Harper
-----------------------------------------
Title: Vice President
-----------------------------------------
(Signature pages continue)
<PAGE>
FIRST NATIONAL BANK OF CHICAGO, as a Holder and a
Lender
By: /s/ Steven D. Franklin
--------------------------------------------
Name: Steven D. Franklin
-----------------------------------------
Title: Vice President
-----------------------------------------
(Signature pages continue)
<PAGE>
BARCLAYS BANK PLC, as a Holder and a Lender
By: /s/ Richard Herder
-----------------------
Name: Richard Herder
-----------------------
Title: Director
-----------------------
(Signature pages continue)
<PAGE>
FIRST UNION NATIONAL BANK, as a Holder and a
Lender
By: /s/ Carrie H. McAllister
------------------------
Name: Carrie H. McAllister
------------------------
Title: Vice President
------------------------
(Signature pages continue)
<PAGE>
BMO GLOBAL CAPITAL SOLUTIONS, INC., as a Holder
By: /s/ Joseph A. Bliss
-----------------------
Name: Joseph A. Bliss
-----------------------
Title: Vice President
-----------------------
(Signature pages continue)
<PAGE>
BMO GLOBAL CAPITAL SOLUTIONS, INC., as a Lender
By: /s/ Joseph A. Bliss
-----------------------
Name: Joseph A. Bliss
-----------------------
Title: Vice President
-----------------------
(Signature pages continue)
<PAGE>
BANK OF MONTREAL, as a Lender
By: /s/ Kanu Modi
-----------------------
Name: Kanu Modi
-----------------------
Title: Director
-----------------------
(Signature pages continue)
<PAGE>
KBC BANK N.V., as a Lender
By: /s/ Robert Snauffer
-------------------------
Name: Robert Snauffer
-------------------------
Title: First Vice President
-------------------------
By: /s/ Robert M. Surdam, Jr.
-------------------------
Name: Robert M. Surdam, Jr.
-------------------------
Title: Vice President
-------------------------
(Signature page continues)
<PAGE>
CREDIT LYONNAIS - NY BRANCH, as a Lender
By: /s/ W. Jay Buckley
-------------------------
Name: W. Jay Buckley
-------------------------
Title: Vice President
-------------------------
(Signature pages end)
<PAGE>
EXHIBIT A
---------
REQUISITION FORM
----------------
(Capital One Services, Inc.)
(Pursuant to Sections 4.2 and 5.2 of the Participation Agreement)
Capital One Services, Inc., a Delaware corporation (the "Company") hereby
certifies as true and correct and delivers the following Requisition to First
Security Bank, National Association, not individually, except as expressly
stated in the Participation Agreement (hereinafter defined), but solely as Owner
Trustee under the Capital One Realty Trust 1998-1 ("Lessor"), the banks and
------
other lending institutions parties thereto from time to time, as the holders
(the "Holders"), the banks and other lending institutions parties thereto from
-------
time to time, as lenders (the "Lenders") and Bank of America, N.A., as
Administrative Agent for the Lenders and respecting the Security Documents, as
Administrative Agent for the Lenders and the Holders, to the extent of their
interests (the "Agent"):
-----
Reference is made herein to that certain Participation Agreement (Capital
One Services, Inc.), dated as of September 3, 1999 (as such may be amended from
time to time, the "Participation Agreement") among the Company, in its capacity
-----------------------
as Lessee and as Construction Agent, the Guarantor, the Lessor, the Holders, the
Lenders and the Agent. Capitalized terms used herein but not otherwise defined
herein shall have the meanings set forth therefor in the Participation
Agreement.
Check one:
____ INITIAL CLOSING DATE: _________________
(three Business Days prior notice required for Advance)
____ PROPERTY CLOSING DATE: _________________
(three Business Days prior notice required for Advance)
____ CONSTRUCTION ADVANCE DATE: _____________
(three Business Days prior notice required for Advance)
1. Transaction Expenses and other fees, expenses and disbursements under
Article IX of the Participation Agreement and any and all other amounts
contemplated to be financed under the Participation Agreement including
without limitation any Work, broker's fees, taxes, recording fees and the
like (with supporting invoices or closing statement attached):
Party to Whom Amount Owed
Amount is Owed (in U.S. Dollars)
-------------- ---------------
__________ __________
__________ __________
__________ __________
__________ __________
A-1
<PAGE>
______________ _______________
2. Legal Description of Land (which shall be a legal description of the Land
in connection with an Advance to pay Property Acquisition Costs and which
shall otherwise be a street address for the applicable Property): See
attached Schedule 1
----------
3. Aggregate Loans and Holder Fundings requested since the Initial Closing
Date with respect to each Property for which Advances are requested under
this Requisition (listed on a Property by Property basis), including all
amounts requested under this Requisition:
$______________ [Property]
In connection with this Requisition, the Company hereby requests that the
Lenders make Loans to the Lessor in the amount of $______________ and that the
Holders make Holder Fundings to the Lessor in the amount of $________________.
The Company hereby certifies (i) that the foregoing amounts requested do not
exceed the total aggregate of the Available Commitments plus the Available
Holder Commitments and (ii) each of the provisions of the Participation
Agreement applicable to the Loans and Holder Fundings requested hereunder have
been complied with as of the date of this Requisition.
The Company has caused this Requisition to the executed by its duly
authorized officer as of this _____ day of __________, ___.
CAPITAL ONE SERVICES, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
A-2
<PAGE>
Schedule 1
----------
Legal Description of Land
A-3
<PAGE>
EXHIBIT B
---------
CAPITAL ONE BANK
OFFICER'S CERTIFICATE
---------------------
(Pursuant to Section 5.5 of the Participation Agreement)
CAPITAL ONE SERVICES, INC., a Delaware corporation (the "Company") DOES HEREBY
CERTIFY as follows:
1. The address for the subject Property is ___________________
__________________________________.
2. The Completion Date for the construction of Improvements at the Property
occurred on ______________.
3. The aggregate Property Cost for the Property was $___________.
4. All Improvements have been made in accordance with all applicable Legal
Requirements, in a good and workmanlike manner and otherwise in full
compliance with the standards and practices of the Company with respect to
Company-owned properties and improvements.
Capitalized terms used in this Officer's Certificate and not otherwise defined
have the respective meanings ascribed thereto in the Participation Agreement
(Capital One Services, Inc.) dated as of September 3, 1999 among the Company, as
Lessee and as Construction Agent, Capital One Financial Corporation, as
Guarantor, First Security Bank, National Association, as Owner Trustee, the
various banks and other lending institutions which are parties thereto from time
to time, as Holders, the various banks and other lending institutions which are
parties thereto from time to time, as Lenders and Bank of America, N.A., as the
Administrative Agent.
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this ____ day of ______________, _____.
CAPITAL ONE SERVICES, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
B-1
<PAGE>
Schedule I
----------
B-2
<PAGE>
EXHIBIT C
---------
[Counsel Opinion for Lessee]
(Pursuant to Section 6.1(c) of the Participation Agreement)
__________ ___, 1999
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Tax Retention Operating Lease Financing Provided in favor of
Capital One Services, Inc.
Dear Sirs:
We have acted as special counsel to Capital One Services, Inc., a Delaware
corporation (the "Lessee") and Capital One Financial Corporation, a Delaware
corporation (the "Guarantor") in connection with certain transactions
contemplated by the Participation Agreement (Capital One Services, Inc.) dated
as of September 3, 1999 (the "Participation Agreement"), among the Lessee, the
Guarantor, First Security Bank, National Association, not individually, but
solely as Owner Trustee under the Capital One Realty Trust 1998-1 (the "Owner
Trustee"), the various banks and other lending institutions parties thereto from
time to time, as the holders (the "Holders), the various banks and other lending
institutions parties thereto from time to time, as the lenders (the "Lenders"),
and Bank of America, N.A., as the administrative agent for the Lenders and
respecting the Security Documents, as the administrative agent for the Lenders
and the Holders, to the extent of their interests (the "Administrative Agent").
This opinion is delivered pursuant to Section 6.1(c) of the Participation
Agreement. All capitalized terms used herein, and not otherwise defined herein,
shall have the meanings assigned thereto in Appendix A to the Participation
Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of the Operative Agreements, and such other
corporate documents and records of the Credit Parties, certificates of public
officials and representatives of the Credit Parties as to certain factual
matters, and such other instruments and documents which we have deemed necessary
or advisable to examine for the purpose of this opinion. With respect to such
examination, we have assumed (i) the statements of fact made in all such
certificates, documents and instruments are true, accurate and complete; (ii)
the due authorization, execution and delivery of the Operative Agreements by the
parties thereto other than the Credit Parties; (iii) the genuineness of all
signatures (other than the signatures of persons signing on behalf of the Credit
Parties), the authenticity and completeness of all documents, certificates,
instruments, records and corporate records submitted to us as originals and the
conformity to the original instruments of all documents
C-1
<PAGE>
submitted to us as copies, and the authenticity and completeness of the
originals of such copies; (iv) that all parties other than the Credit Parties
have all requisite corporate power and authority to execute, deliver and perform
the Operative Agreements; and (v) the enforceability of the Operative Agreements
against all parties thereto other than the Credit Parties.
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including the matters set forth in the last two paragraphs hereof, we
are of the opinion that:
(a) Each Credit Party is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation or
formation and has the power and authority to conduct its business as presently
conducted and to execute, deliver and perform its obligations under the
Operative Agreements to which it is a party. Each Credit Party is duly
qualified to do business in all jurisdictions in which its failure to so qualify
would materially impair its ability to perform its obligations under the
Operative Agreements to which it is a party or its financial position or its
business as now and now proposed to be conducted.
(b) The execution, delivery and performance by each Credit Party of the
Operative Agreements to which it is a party have been duly authorized by all
necessary corporate action on the part of such Credit Party and the Operative
Agreements to which such Credit Party is a party have been duly executed and
delivered by such Credit Party.
(c) The Operative Agreements to which each Credit Party is a party
constitute valid and binding obligations of such Credit Party enforceable
against such Credit Party in accordance with the terms thereof, subject to
bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and
similar laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
(d) The execution and delivery by each Credit Party of the Operative
Agreements to which it is a party and compliance by such Credit Party with all
of the provisions thereof do not and will not (i) contravene the provisions of,
or result in any breach of or constitute any default under, or result in the
creation of any Lien (other than Permitted Liens) upon any of its property
under, its Articles of Incorporation or By-Laws or any indenture, mortgage,
chattel mortgage, deed of trust, lease, conditional sales contract, bank loan or
credit agreement or other agreement or instrument to which such Credit Party is
a party or by which it or any of its property may be bound or affected, or (ii)
contravene any Laws or any order of any Governmental Authority applicable to or
binding on such Credit Party.
(e) No Governmental Action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery or
performance by any Credit Party of any of the Operative Agreements to which it
is a party.
(f) Except as set forth on Schedule 1 hereto, there are no actions, suits
or proceedings pending or to our knowledge, threatened against any Credit Party
in any court or before any
C-2
<PAGE>
Governmental Authority, that concern the Property or any Credit Party's interest
therein or that question the validity or enforceability of any Operative
Agreement to which such Credit Party is a party or the overall transaction
described in the Operative Agreements to which such Credit Party is a party.
(g) Neither the nature of the Property, nor any relationship between any
Credit Party and any other Person, nor any circumstance in connection with the
execution, delivery and performance of the Operative Agreements to which such
Credit Party is a party is such as to require any approval of stockholders of,
or approval or consent of any trustee or holders of indebtedness of, such Credit
Party, except for such approvals and consents which have been duly obtained and
are in full force and effect.
(h) The Security Documents which have been executed and delivered as of
the date of this opinion create, for the benefit of the holders of the Notes,
the security interest in the C Collateral described therein which by their terms
such Security Documents purports to create. Upon filing of the UCC-1 financing
statements with ________________________ [identify filing offices], the Agent
will have a perfected security interest in that portion of the Collateral which
can be perfected by such filing under Article 9 of the UCC.
(i) The Operative Agreements to which First Security Bank, National
Association, as Owner Trustee, is a party constitute are enforceable against
First Security Bank, National Association, as Owner Trustee, as the case may be,
enforceable against First Security Bank, National Association, individually or
as Owner Trustee, in accordance with the terms thereof, subject to bankruptcy,
insolvency, liquidation, reorganization, fraudulent conveyance, and similar laws
affecting creditors, rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).
(j) The execution and delivery by First Security Bank, National
Association, individually or as Owner Trustee, as the case may be, of the
Operative Agreements (other than the Trust Agreement) to which it is a party and
compliance by First Security Bank, National Association, individually or as
Owner Trustee, with all of the provisions thereof do not and will not contravene
any law, rule or regulation of ___________________.
(k) The Mortgage Instrument and UCC fixture filings relating thereto are
in proper form for recording and/or filing with the _________________ and
___________________ [identify filing offices in state], respectively.
This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters stated herein. This opinion is
based on and is limited to the laws of the ______________________, and the
federal laws of the United States of America. Insofar as the foregoing opinion
relates to matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of Lessee, the Guarantor, Bank of America,
N.A., as the Administrative Agent, the Holders, the Lenders, First Security
Bank, National Association, not individually, but solely as Owner Trustee under
the Capital One Realty Trust 1998-1 and their
C-3
<PAGE>
respective successors and assigns and may not be relied upon by any other person
other than such parties and their respective successors and assigns without the
express written consent of the undersigned. The opinions expressed herein are as
of the date hereof and we make no undertaking to amend or supplement such
opinions if facts come to our attention or changes in the current law of the
jurisdictions mentioned herein occur which could affect such opinions.
Very truly yours,
[LESSEE'S COUNSEL]
C-4
<PAGE>
Distribution List
Bank of America, N.A., as Administrative Agent
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as the Lenders.
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as the Holders.
First Security Bank, National Association, not individually, but solely as Owner
Trustee under the Capital One Realty Trust 1998-1
C-5
<PAGE>
EXHIBIT D
---------
[NAME OF CREDIT PARTY]
OFFICER'S CERTIFICATE
(Pursuant to Section 6.1(g) of the Participation Agreement)
[NAME OF CREDIT PARTY], a ________ corporation (the "Company"), DOES HEREBY
CERTIFY as follows:
1. Each and every representation and warranty of the Company contained in the
Operative Agreements to which it is a party is true and correct on and as
of the date hereof.
2. No Default or Event of Default has occurred and is continuing under any
Operative Agreement.
3. Each Operative Agreement to which the Company is a party is in full force
and effect with respect to it.
4. The Company has duly performed and complied with all covenants, agreements
and conditions contained in the Participation Agreement (hereinafter
defined) or in any Operative Agreement required to be performed or complied
with by it on or prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement (Capital One Services, Inc.) dated as of September 3, 1999 among the
Capital One Services, Inc., as Lessee and as Construction Agent, Capital One
Financial Corporation, as guarantor (the "Guarantor"), First Security Bank,
---------
National Association, not individually, but solely as owner Trustee under the
Capital One Realty Trust 1998-1, the various banks and other lending
institutions which are parties thereto from time to time, as holders (the
"Holders"), the various banks and other lending institutions which are parties
-------
thereto from time to time, as lenders (the "Lenders") and Bank of America, N.A.,
as Administrative Agent for the Lenders and respecting the Security Documents,
as Administrative Agent for the Lenders and the Holders, to the extent of their
interests (the "Agent")
-----
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this _____ day of __________, 1999.
[NAME OF CREDIT PARTY]
By:________________________________
Name:______________________________
Title:_____________________________
D-1
<PAGE>
EXHIBIT E
---------
[NAME OF CREDIT PARTY]
OFFICER'S CERTIFICATE
---------------------
(Pursuant to Section 6.1(h) of the Participation Agreement)
[NAME OF CREDIT PARTY], a __________________ corporation (the "Company")
DOES HEREBY CERTIFY as follows:
1. Attached hereto as Schedule I is a true, correct and complete copy of the
----------
resolutions of the Board of Directors of the Company duly adopted by the
Board of Directors of the Company on __________. Such resolutions have not
been amended, modified or rescinded since their date of adoption and remain
in full force and effect as of the date hereof.
2. Attached hereto as Schedule II is a true, correct and complete copy of the
-----------
Articles of Incorporation of the Company on file in the Office of
_____________. Such Articles of Incorporation have not been amended,
modified or rescinded since their date of adoption and remain in full force
and effect as of the date hereof.
3. Attached hereto as Schedule III is a true, correct and complete copy of the
------------
Bylaws of the Company. Such Bylaws have not been amended, modified or
rescinded since their date of adoption and remain in full force and effect
as of the date hereof.
4. The persons named below now hold the offices set forth opposite their
names, and the signatures opposite their names and titles are their true
and correct signatures.
Name Office Signature
---- ------ ---------
_________________ _________________ ____________________
_________________ _________________ ____________________
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly
executed and delivered as of this _____ day of ___________, 1999.
[NAME OF CREDIT PARTY]
By:________________________________
Name:______________________________
Title:_____________________________
E-1
<PAGE>
SCHEDULE I
----------
BOARD RESOLUTIONS
E-2
<PAGE>
SCHEDULE II
-----------
ARTICLES OF INCORPORATION
E-3
<PAGE>
SCHEDULE III
------------
BYLAWS
E-4
<PAGE>
EXHIBIT F
---------
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
(Pursuant to Section 6.2(d) of the Participation Agreement)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually (except with
respect to paragraph 1 below, to the extent any such representations and
warranties are made in its individual capacity) but solely as owner trustee
under the Capital One Realty Trust 1998-1 (the "Owner Trustee"), DOES HEREBY
CERTIFY as follows:
(a) Each and every representation and warranty of the Owner Trustee contained
in the Operative Agreements to which it is a party is true and correct on
and as of the date hereof.
(b) Each Operative Agreement to which the Owner Trustee is a party is in full
force and effect with respect to it.
(c) The Owner Trustee has duly performed and complied with all covenants,
agreements and conditions contained in the Participation Agreement
(hereinafter defined) or in any Operative Agreement required to be
performed or complied with by it on or prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement (Capital One Services, Inc.) dated as of September 3, 1999 among
Capital One Services, Inc., as Lessee and as Construction Agent, Capital One
Financial Corporation, as guarantor (the "Guarantor"), the Owner Trustee, the
---------
various banks and other lending institutions which are parties thereto from time
to time, as holders (the "Holders"), the various banks and other lending
-------
institutions which are parties thereto from time to time, as lenders (the
"Lenders") and Bank of America, N.A., as Administrative Agent for the Lenders
and respecting the Security Documents, as Administrative Agent for the Lenders
and the Holders, to the extent of their interests (the "Agent").
-----
IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's Certificate to
be duly executed and delivered as of this _____ day of __________ 1999.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually,
except as expressly stated herein,
but solely as Owner Trustee under
the Capital One Realty Trust 1998-1
By:________________________________
Name:______________________________
Title:_____________________________
F-1
<PAGE>
EXHIBIT G
---------
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
---------------------
(Pursuant to Section 6.2(e) of the Participation Agreement)
CERTIFICATE OF ASSISTANT SECRETARY
I, ______________________, duly elected and qualified Assistant Secretary
of the Board of Directors of First Security Bank, National Association (the
"Association"), hereby certify as follows:
1. The Association is a National Banking Association duly organized,
validly existing and in good standing under the laws of the United States. With
respect thereto the following is noted:
A. Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et
seq., the Comptroller of the Currency charters and exercises
regulatory and supervisory authority over all National Banking
Associations;
B. On December 9, 1881, the First National Bank of Ogden, Utah was
chartered as a National Banking Association under the laws of the
United States and under Charter No. 2597;
C. On October 2, 1922, in connection with a consolidation of The First
National Bank of Ogden, Ogden, Utah, and The Utah National Bank of
Ogden, Ogden, Utah, the title was changed to "The First & Utah
National Bank of Ogden"; on January 18, 1923, The First & Utah
National Bank of Ogden changed its title to "First Utah National Bank
of Ogden"; on January 19, 1926, the title was changed to "First
National Bank of Ogden"; on February 24, 1934, the title was changed
to "First Security Bank of Utah, National Association"; on June 21,
1996, the title was changed to "First Security Bank, National
Association"; and
D. First Security Bank, National Association, Ogden, Utah, continues to
hold a valid certificate to do business as a National Banking
Association.
2. The Association's Articles of Association, as amended, are in full
force and effect, and a true, correct and complete copy is attached hereto as
Schedule A and incorporated herein by reference. Said Articles were last amended
October 20, 1975, as required by law on notice at a duly called special meeting
of the shareholders of the Association.
<PAGE>
3. The Association's By-Laws, as amended, are in full force and effect;
and a true, correct and complete copy is attached hereto as Schedule B and
incorporated herein by reference. Said By-Laws, still in full force and effect,
were adopted September 17, 1942, by resolution, after proper notice of
consideration and adoption of By-Laws was given to each and every shareholder,
at a regularly called meeting of the Board of Directors with a quorum present.
4. Pursuant to the authority vested in it by an Act of Congress approved
December 23, 1913 and known as the Federal Reserve Act, as amended, the Federal
Reserve Board (now the Board of Governors of the Federal Reserve System) has
granted to the Association now known as "First Security Bank, National
Association" of Ogden, Utah, the right to act, when not in contravention of
State or local law, as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver, committee of estates of
lunatics, or in any other fiduciary capacity in which State banks, trust
companies or other corporations which come into competition with National Banks
are permitted to act under the laws of the State of Utah; and under the
provisions of applicable law, the authority so granted remains in full force and
effect.
5. Pursuant to authority vested by Act of Congress (12 U.S.C. 92a and 12
U.S.C. 481, as amended) the Comptroller of the Currency has issued Regulation 9,
as amended, dealing, in part, with the Fiduciary Powers of National Banks, said
regulation providing in subparagraph 9.7 (a) (1-2):
(1) The board of directors is responsible for the proper exercise of
fiduciary powers by the Bank. All matters pertinent thereto,
including the determination of policies, the investment and
disposition of property held in fiduciary capacity, and the direction
and review of the actions of all officers, employees, and committees
utilized by the Bank in the exercise of its fiduciary powers, are the
responsibility of the board. In discharging this responsibility, the
board of directors may assign, by action duly entered in the minutes,
the administration of such of the Bank's fiduciary powers as it may
consider proper to assign to such director(s), officer(s), employee(s)
or committee(s) as it may designate.
(2) No fiduciary account shall be accepted without the prior approval of
the board, or of the director(s), officer(s), or committee(s) to whom
the board may have designated the performance of that responsibility.
....
6. A Resolution relating to Exercise of Fiduciary Powers was adopted by
the Board of Directors at a meeting held July 26, 1994 at which time there was a
quorum present; said resolution is still in full force and effect and has not
been rescinded. Said resolution is attached hereto as Schedule C and
incorporated herein by reference.
<PAGE>
7. A Resolution relating to the Designation of Officers and Employees to
Exercise Fiduciary Powers was adopted by the Trust Policy Committee at a meeting
held February 7, 1996 at which time a quorum was present; said resolution is
still in full force and effect and has not been rescinded. Said resolution is
attached hereto as Schedule D and is incorporated herein by reference.
8. Attached hereto as Schedule E and incorporated herein by reference, is
a listing of facsimile signatures of persons authorized (herein "Authorized
Signatory or Signatories") on behalf of the Association and its Trust Group to
act in exercise of its fiduciary powers subject to the resolutions in Paragraphs
6 and 7, above.
9. The principal office of the First Security Bank, National Association,
Trust Group and of its departments, except for the St. George, Utah, Ogden,
Utah, and Provo, Utah, branch offices, is located at 79 South Main Street, Salt
Lake City, Utah 84111 and all records relating to fiduciary accounts are located
at such principal office of the Trust Group or in storage facilities within Salt
Lake County, Utah, except for those of the Ogden, Utah, St. George, Utah, and
Provo, Utah, branch offices, which are located at said office.
10. Each Authorized Signatory (i) is a duly elected or appointed, duly
qualified officer or employee of the Association; (ii) holds the office or job
title set forth below his or her name on the date hereof; (iii) and the
facsimile signature appearing opposite the name of each such officer or employee
is a true replica of his or her signature.
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Association this __________ day of _________________, ______.
(SEAL)
__________________________________
R. James Steenblik
Senior Vice President
Assistant Secretary
<PAGE>
Schedule A
----------
Articles of Association
<PAGE>
Schedule B
----------
Bylaws
<PAGE>
Schedule C
----------
Resolution Relating to
Exercise of Fiduciary Powers
<PAGE>
Schedule D
----------
Resolution Relating to the
Designation of Officers and Employees
To Exercise Fiduciary Powers
<PAGE>
Schedule E
----------
Authorized Signatory or Signatories
<PAGE>
EXHIBIT H
---------
[Owner Trustee's Outside Counsel Opinion]
(Pursuant to Section 6.2(f) of the
Participation Agreement)
__________ __, 1999
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
RE: AMENDED AND RESTATED TRUST AGREEMENT DATED AS OF SEPTEMBER 3, 1999
Dear Sirs:
We have acted as special counsel for First Security Bank, National Association,
a national banking association, in its individual capacity ("FSB") and in its
capacity as trustee (the "Owner Trustee") under the Amended and Restated Trust
Agreement dated as of September 3, 1999 (the "Trust Agreement") by and among it
and the Holders, in connection with the execution and delivery by the Owner
Trustee of the Operative Agreements to which it is a party. Except as otherwise
defined herein, the terms used herein shall have the meanings set forth in
Appendix A to the Participation Agreement (Capital One Services, Inc.) dated as
of September 3, 1999 among Capital One Services, Inc., as Lessee and as
Construction Agent, Capital One Financial Corporation, as guarantor (the
"Guarantor"), the Owner Trustee, the various banks and other lending
---------
institutions which are parties thereto from time to time, as holders (the
"Holders"), the various banks and other lending institutions which are parties
-------
thereto from time to time, as lenders (the "Lenders") and Bank of America, N.A.,
as Administrative Agent for the Lenders and respecting the Security Documents,
as Administrative Agent for the Lenders and the Holders, to the extent of their
interests (the "Agent").
-----
We have examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary or advisable for the purpose of rendering this opinion.
Based upon the foregoing, we are of the opinion that:
1. FSB is a national banking association duly organized, validly existing
and in good standing under the laws of United States of America and each of
FSB and the Owner Trustee has under the laws of the State of Utah and
federal banking law the power and authority to enter into and perform its
obligations under the Trust Agreement and each other Operative Agreement to
which it is a party.
<PAGE>
2. The Owner Trustee is the duly-appointed trustee under the Trust
Agreement.
3. The Trust Agreement has been duly authorized, executed and delivered
by one of the officers of FSB and, assuming due authorization, execution
and delivery by the Holders, is a legal, valid and binding obligation of
the Owner Trustee (and to the extent set forth therein, against FSB),
enforceable against the Owner Trustee (and to the extent set forth therein,
against FSB) in accordance with its terms, and the Trust Agreement creates
under the laws of the State of Utah for the Holders the beneficial interest
in the COSI Trust Estate it purports to create and is a valid trust under
the laws of the State of Utah.
4. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by FSB, and, assuming due authorization,
execution and delivery by the other parties thereto, are legal, valid and
binding obligations of FSB, enforceable against FSB in accordance with
their respective terms.
5. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by the Owner Trustee, and, assuming due
authorization, execution and delivery by the other parties thereto, are
legal, valid and binding obligations of the Owner Trustee, enforceable
against the Owner Trustee in accordance with their respective terms. The
Notes and the Certificates have been duly issued, executed and delivered by
the Owner Trustee, pursuant to authorization contained in the Trust
Agreement, and the Certificates are entitled to the benefits and security
afforded by the Trust Agreement in accordance with its terms and the terms
of the Trust Agreement.
6. The execution and delivery by each of FSB and the Owner Trustee of the
Trust Agreement and the Operative Agreements to which it is a party, and
compliance by FSB or Owner Trustee, as the case may be, with all of the
provisions thereof do not and will not contravene any Laws applicable to or
binding on FSB, or as Owner Trustee, or contravene the provisions of, or
constitute a default under, its charter documents or by-laws or, to our
knowledge after due inquiry, any indenture, mortgage contract or other
agreement or instrument to which FSB or Owner Trustee is a party or by
which it or any of its property may be bound or affected.
7. The execution and delivery of the Operative Agreements by each of FSB
and the Owner Trustee and the performance by each of FSB and the Owner
Trustee of their respective obligations thereunder does not require on or
prior to the date hereof the consent or approval of, the giving of notice
to, the registration or filing with, or the taking of any action in respect
of any Governmental Authority or any court.
8. Assuming that the trust created by the Trust Agreement is treated as a
grantor trust for federal income tax purposes within the contemplation of
Section 671 through 678 of the Internal Revenue Code of 1986, there are no
fees, taxes, or other charges (except taxes imposed on fees payable to the
Owner Trustee) payable to the State of Utah or any political subdivision
thereof in connection with the execution, delivery or performance by the
Owner Trustee, the Agent, the Lenders, the Lessee or the Holders, as the
case may be, of the
<PAGE>
Operative Agreements or in connection with the acquisition of any Property
by the Owner Trustee or in connection with the making by any Holder of its
investment in the Trust or its acquisition of the beneficial interest in
the COSI Trust Estate or in connection with the issuance and acquisition of
the Certificate, or the Notes, and neither the Owner Trustee, the COSI
Trust Estate nor the trust created by the Trust Agreement will be subject
to any fee, tax or other governmental charge (except taxes on fees payable
to the Owner Trustee) under the laws of the State of Utah or any political
subdivision thereof on, based on or measured by, directly or indirectly,
the gross receipts, net income or value of the COSI Trust Estate by reason
of the creation or continued existence of the trust under the terms of the
Trust Agreement pursuant to the laws of the State of Utah or the Owner
Trustee's performance of its duties under the Trust Agreement.
9. There is no fee, tax or other governmental charge under the laws of
the State of Utah or any political subdivision thereof in existence on the
date hereof on, based on or measured by any payments under the
Certificates, Notes or the beneficial interests in the COSI Trust Estate,
by reason of the creation of the trust under the Trust Agreement pursuant
to the laws of the State of Utah or the Owner Trustee's performance of its
duties under the Trust Agreement within the State of Utah.
10. Upon the filing of the financing statement on form UCC-1 in the form
attached hereto as Exhibit A with the _____________, the Administrative
Agent's security interest in the COSI Trust Estate, for the benefit of the
Lenders, will be perfected, to the extent that such perfection is governed
by Article 9 of the Uniform Commercial Code as in effect in the State of
Utah (the "Utah UCC").
Your attention is directed to the Utah UCC, which provides, in part, that a
filed financing statement which does not state a maturity date or which states a
maturity date of more than five years is effective only for a period of five
years from the date of filing, unless within six months prior to the expiration
of said period a continuation statement is filed in the same office or offices
in which the original statement was filed. The continuation statement must be
signed by the secured party, identify the original statement by file number and
state that the original statement is still effective. Upon the timely filing of
a continuation statement, the effectiveness of the original financing statement
is continued for five years after the last date to which the original statement
was effective. Succeeding continuation statements may be filed in the same
manner to continue the effectiveness of the original statement.
The opinions set forth in paragraphs 3 and 4 above are subject to the
qualification that enforceability of the Trust Agreement and the other Operative
Agreements to which the Owner Trustee is a party, in accordance with their
respective terms, may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally.
We are attorneys admitted to practice in the State of Utah and in rendering the
foregoing opinions we have not passed upon, or purported to pass upon, the laws
of any jurisdictions other than the State of Utah and the federal banking law
governing the banking and trust powers of FSB.
<PAGE>
This opinion is for the sole benefit of Capital One Services, Inc., Capital One
Financial Corporation, Bank of America, N.A., as the Administrative Agent, the
Lenders, the Holders, FSB, not individually, but solely as Owner Trustee under
the Capital One Realty Trust 1998-1 and their respective successors and assigns
and may not be relied upon by any other person other than such parties and their
respective successors and assigns without the express written consent of the
undersigned. The opinions expressed herein are as of the date hereof and we
make no undertaking to amend or supplement such opinions if facts come to our
attention or changes in the current law of the jurisdictions mentioned herein
occur which could affect such opinions.
Very truly yours,
RAY, QUINNEY & NEBEKER
M. John Ashton
<PAGE>
Distribution List
-----------------
Bank of America, N.A., as Administrative Agent
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as Lenders
Capital One Services, Inc., as the Lessee and as the Construction Agent
Capital One Financial Corporation, as Guarantor
First Security Bank, National Association, not individually, but solely as Owner
Trustee under the Capital One Realty Trust 1998-1
<PAGE>
EXHIBIT I
---------
[Description of Material Litigation]
In connection with the transfer of substantially all of Signet Bank's
credit card business to Capital One Bank in November 1994, Capital One Financial
Corporation and Capital One Bank agreed to indemnify Signet Bank (which has
since been acquired by First Union Bank on November 30, 1997) for certain
liabilities incurred in litigation arising from that business, which may include
liabilities, if any, incurred in the purported class action case described
below.
During 1995, Capital One Financial Corporation and Capital One Bank became
involved in a purported class action suit relating to certain collection
practices engaged in by Signet Bank and, subsequently, by Capital One Bank. The
complaint in this case alleges that Signet Bank and/or Capital One Bank violated
a variety of California state statutes and constitutional and common law duties
by filing collection lawsuits, obtaining judgments and pursuing garnishment
proceedings in the Virginia state courts against defaulted credit card customers
who were not residents of Virginia. This case was filed in the Superior Court
of California in the County of Alameda, Southern Division, on behalf of a class
of California residents. The complaint in this case seeks unspecified statutory
damages, compensatory damages, punitive damages, restitution, attorneys' fees
and costs, a permanent injunction and other equitable relief.
In early 1997, the California court entered judgment in favor of Capital
One Bank on all of the plaintiffs' claims. The plaintiffs appealed the ruling
to the California Court of Appeal First Appellate District Division 4. In early
1999, the Court of Appeals affirmed the trial court's ruling in favor of Capital
One Bank on six counts, but reversed the trial court's ruling on two counts of
the plaintiffs' complaint. The California Supreme Court rejected Capital One
Bank's Petition for Review of the remaining two counts and remitted them to the
trial court. The Bank intends to petition for further appellate review of the
ruling on the two remaining counts.
Because no specific measure of damages is demanded in the complaint of the
California case and the trial court entered judgment in favor of Capital One
Bank before the parties completed any significant discovery, an informed
assessment of the ultimate outcome of this case cannot be made at this time.
Management believes, however, that there are meritorious defenses to this
lawsuit and intends to continue to defend it vigorously.
Capital One Financial Corporation is commonly subject to various other
pending and threatened legal actions arising from the conduct of its normal
business activities. In the opinion of management, the ultimate aggregate
liability, if any, arising out of any pending or threatened action will not have
a material adverse effect on the consolidated financial condition of Capital One
Financial Corporation. At the present time, however, management is not in a
position to determine whether the resolution of pending or threatened litigation
will have a material effect on Capital One Financial Corporation's results of
operations in any future reporting period.
1
<PAGE>
EXHIBIT J
---------
[Form of Confidentiality Agreement]
______________, 1999
[Address]
Attention:
Re: Confidentiality Agreement
-------------------------
Dear __________________:
In the course of further discussions between you and Capital One Financial
Corporation and/or any one or more of its subsidiaries or affiliates
(individually and collectively, "Capital One"), you may be supplied with
materials and information concerning Capital One and its subsidiaries or
affiliates and our business, which information is non-public, confidential or
proprietary in nature ("Confidential Information"). Because the use or
disclosure of such Confidential Information would be damaging to Capital One,
Capital One is willing to supply you with such information only if you agree to
the conditions set forth in this confidentiality agreement (this "Agreement").
1. The Transaction. The services you are contemplating providing to
---------------
Capital One are in connection with those certain Participation Agreements dated
as of September 3, 1999 (together, the "Participation Agreement"), among (i)
Capital One Reality, Inc., as Construction Agent and Lessee, Capital One Bank,
as Guarantor, First Security Bank, National Association, as Owner Trustee, the
Holders named therein and the Lenders named therein and (ii) Capital One
Services, Inc., as Construction Agent and Lessee, Capital One Financial
Corporation, as Guarantor, First Security Bank, National Association, as Owner
Trustee, the Holders named therein and the Lenders named therein (the
"Transaction"). Terms used herein but not defined herein have the meanings set
forth in the respective Participation Agreements.
2. Description of Information. Confidential Information includes
--------------------------
without limitation (i) information transmitted in written, oral, magnetic or any
other medium, and (ii) all copies and reproductions, in whole or in part, of
such information and (iii) all summaries, analyses, compilations, studies, notes
or other records which contain, reflect, or are generated from such information.
Confidential Information does not include information that (w) has become part
of the public domain through no act or omission of you; (x) was lawfully
disclosed
J-1
<PAGE>
to you without restriction on disclosure by a third party; (y) was developed
independently by you; or (z) is or was lawfully and independently provided to
you prior to disclosure hereunder, from a third party who is not subject to an
obligation of confidentiality or otherwise prohibited from transmitting such
information.
3. Nondisclosure of Information. You agree that you will use the
----------------------------
Confidential Information solely for the purpose of the Transaction and, except
as provided in paragraph 7 hereof, agree to reveal the Confidential Information
only to your affiliates, subsidiaries, directors, officers, employees and agents
(collectively "Affiliates") with a need to know the Confidential Information for
the purpose of the Transaction. Except as provided in paragraph 7 hereof, you
agree not to disclose to any third party any of the Confidential Information now
or hereafter received or obtained by you without our prior written consent;
provided, however, that you may disclose any such Confidential Information to
your respective accountants, attorneys and other confidential advisors
(collectively "Advisors") who need to know such information for the purpose of
assisting you in connection with the Transaction. You agree to be responsible
for any breach of this Agreement by your Affiliates and Advisors, and you agree
that your Affiliates and Advisors will be advised by you of the confidential
nature of such information and shall agree to be bound by this Agreement.
4. Nondisclosure of Transaction. Neither you nor your Agents or
----------------------------
Advisors, without our prior written consent, will disclose to any person the
fact that Confidential Information has been provided to you or them, that
discussions or negotiations are taking place with respect to the Transaction, or
the existence, terms, conditions, or other facts of such Transaction, including
the status thereof.
5. Ownership of Information. You acknowledge and agree that any
------------------------
Confidential Information provided to you, in whatever form, is the sole property
of Capital One. Neither you nor your Affiliates or Advisors shall use any of
the Confidential Information now or hereafter received or obtained from Capital
One in furtherance of your business or the business of anyone else whether or
not in competition with Capital One, or for any other purpose whatsoever, other
than as contemplated by the Transaction. You agree that if we should request
that you destroy or return the Confidential Information, you shall return or
destroy such Confidential Information as so directed.
6. Remedies. You acknowledge that all Confidential Information is
--------
considered to be proprietary and of competitive value, and in many instances
trade secrets. You agree that because of the unique nature of the Confidential
Information any breach of this Agreement would cause Capital One irreparable
harm, and money damages and other remedies available at law in the event of a
breach would not be adequate to compensate Capital One for any such breach.
Accordingly, you agree that we shall be entitled, without the requirement of
posting a bond or other security, to equitable relief, including, without
limitation, injunctive relief and specific performance, as a remedy for any such
breach. Such relief shall be in addition to, and not in lieu of, all other
remedies available to us whether at law or in equity.
J-2
<PAGE>
7. Compelled Disclosure. If you or any of your Affiliates or
--------------------
Advisors is legally compelled (whether by deposition, interrogatory, request for
documents, subpoena, civil investigation, demand or similar process) to disclose
any of the Confidential Information (including the fact that discussions or
negotiations are taking place with respect to the Transaction) you shall use
your best efforts to notify Capital One in writing of such requirement prior to
disclosure thereof so that we may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions hereof; provided, that you
--------
shall not be subject to any liability whatsoever for any failure to so notify
Capital One.
8. No Waiver of Rights. It is understood and agreed that no failure
-------------------
or delay by Capital One in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
right, power or privilege hereunder.
9. No Representations and Warranties. You understand and acknowledge
---------------------------------
that Capital One is not making any representation or warranty, expressed or
implied, as to the accuracy or completeness of the Confidential Information and
we shall not be liable to you or to any other person resulting from the use of
the Confidential Information. Only those representations or warranties that are
made in any definitive agreement executed in connection with the Transaction,
and subject to any limitations and restrictions as may be specified in such
definitive agreement, shall have any legal effect.
10. Indemnification; Expenses. You agree to indemnify Capital One
-------------------------
for any and all losses, liabilities, obligations, damages, penalties, judgments,
suits, costs, expenses or disbursements of any kind (including, without
limitation, attorneys' fees and expenses) arising out of, or incurred by us, as
the result of a violation, breach or non-performance by you of any of the terms
of this Agreement.
11. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Virginia, shall be binding
upon you and your successors and assigns, and shall inure to the benefit of the
Capital One and its successors and assigns.
12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but which together shall
constitute one and the same instrument.
13. Facsimile Signatures. This Agreement may be executed and
--------------------
delivered by facsimile. Any facsimile signatures shall have the same legal
effect as manual signatures.
14. Term. This Agreement shall terminate on the date definitive
----
documentation is executed by you and any other appropriate parties in connection
with the Transaction.
J-3
<PAGE>
PLEASE ACKNOWLEDGE YOUR ACCEPTANCE OF THIS AGREEMENT, INCLUDING YOUR
AGREEMENT TO HOLD ALL MATTERS STRICTLY CONFIDENTIAL AS DISCUSSED HEREIN, BY
SIGNING IN THE SPACE PROVIDED BELOW.
Very truly yours,
CAPITAL ONE FINANCIAL CORPORATION
By:___________________________
Name:_________________________
Title:________________________
ACCEPTED AND AGREED TO AS OF THIS ___
DAY OF ____________, 1999
By:__________________________
J-4
<PAGE>
- --------------------------------------------------------------------------------
Appendix A
Rules of Usage and Definitions
- --------------------------------------------------------------------------------
Rules of Usage
The following rules of usage shall apply to this Appendix A and the
Operative Agreements (and each appendix, schedule, exhibit and annex to the
foregoing) unless otherwise required by the context or unless otherwise defined
therein:
(a) Except as otherwise expressly provided, any definitions set forth
herein or in any other document shall be equally applicable to the singular
and plural forms of the terms defined.
(b) Except as otherwise expressly provided, references in any
document to articles, sections, paragraphs, clauses, annexes, appendices,
schedules or exhibits are references to articles, sections, paragraphs,
clauses, annexes, appendices, schedules or exhibits in or to such document.
(c) The headings, subheadings and table of contents used in any
document are solely for convenience of reference and shall not constitute a
part of any such document nor shall they affect the meaning, construction
or effect of any provision thereof.
(d) References to any Person shall include such Person, its
successors and permitted assigns and transferees.
(e) Except as otherwise expressly provided, reference to any
agreement means such agreement as amended, modified, extended,
supplemented, restated and/or replaced from time to time in accordance with
the applicable provisions thereof.
(f) Except as otherwise expressly provided, references to any law
includes any amendment or modification to such law and any rules or
regulations issued thereunder or any law enacted in substitution or
replacement therefor.
(g) When used in any document, words such as "hereunder", "hereto",
"hereof" and "herein" and other words of like import shall, unless the
context clearly indicates to the contrary, refer to the whole of the
applicable document and not to any particular article, section, subsection,
paragraph or clause thereof.
Appendix - 1
<PAGE>
(h) References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof
the rule of ejusdem generis shall not be applicable to limit a general
statement, followed by or referable to an enumeration of specific matters,
to matters similar to those specifically mentioned.
(i) References herein to "attorney's fees", "legal fees", "costs of
counsel" or other such references shall be deemed to include the allocated
cost of in-house counsel.
(j) Each of the parties to the Operative Agreements and their counsel
have reviewed and revised, or requested revisions to, the Operative
Agreements, and the usual rule of construction that any ambiguities are to
be resolved against the drafting party shall be inapplicable in the
construing and interpretation of the Operative Agreements and any
amendments or exhibits thereto.
(k) Capitalized terms used in any Operative Agreements which are not
defined in this Appendix A but are defined in another Operative Agreement
----------
shall have the meaning so ascribed to such term in the applicable Operative
Agreement.
Definitions
"ABR" shall mean, for any day, a rate per annum equal to the greater of (a)
the Prime Lending Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Lending Rate" shall mean the rate which the Administrative Agent
------------------
announces from time to time as its prime lending rate as in effect from time to
time. The Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. Any Lender
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate. The Prime Lending Rate shall change automatically and
without notice from time to time as and when the prime lending rate of the
Administrative Agent changes. "Federal Funds Effective Rate" shall mean, for
----------------------------
any period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight Federal funds
transactions with members or the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it. Any change in the ABR due to a change in the Prime Lending Rate
or the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Lending Rate or the
Federal Funds Effective Rate, respectively.
"ABR Holder Funding" shall mean a Holder Funding bearing a Holder Yield
based on the ABR.
Appendix - 2
<PAGE>
"ABR Loans" shall mean Loans the rate of interest applicable to which is
based upon the ABR.
"Acceleration" shall have the meaning given to such term in Section 6 of
the Credit Agreement.
"acquire" or "purchase" shall mean, with respect to any Property, the
acquisition or purchase of such Property by the Lessor from any Person.
"Acquisition Advance" shall have the meaning given to such term in Section
5.3 of the Participation Agreement.
"Administration Fee" shall mean a construction administration fee payable
to the Agent pursuant to Section 9.5 of the Participation Agreement.
"Advance" shall mean a Construction Advance or an Acquisition Advance.
"Affiliate" shall mean, with respect to any Person, any Person or group
acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of a Person, whether through the
ownership of voting securities or by contract or otherwise.
"After Tax Basis" shall mean, 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 calculated at the then maximum
marginal rates generally applicable to Persons of the same type as the
recipients (less any tax savings realized as a result of the payment of the
indemnified amount) with respect to the receipt by the recipient of such
amounts, such increased payment (as so reduced) is equal to the payment
otherwise required to be made.
"Agency Agreement" shall mean the Agency Agreement (Capital One Services,
Inc.), dated as of the Initial Closing Date between the Construction Agent and
the Lessor.
"Agency Agreement Event of Default" shall mean an "Event of Default" as
defined in Section 5.1 of the Agency Agreement.
"Agent" or "Administrative Agent" shall mean Bank of America, N.A., as
Administrative Agent for the Lenders pursuant to the Credit Agreement, or any
successor agent appointed in accordance with the terms of the Credit Agreement
and respecting the Security Documents, for the Lenders and the Holders, to the
extent of their interests.
Appendix - 3
<PAGE>
"Applicable Percentage" shall mean with respect to the applicable Level
Status, the applicable rate per annum set forth opposite such Level Status:
<TABLE>
<CAPTION>
========================================================================================================
Applicable Percentage Applicable Percentage
Level Status for for
Eurodollar Loans Facility Fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Level I Status .375% .125%
- --------------------------------------------------------------------------------------------------------
Level II Status .55% .15%
- --------------------------------------------------------------------------------------------------------
Level III Status .675% .175%
- --------------------------------------------------------------------------------------------------------
Level IV Status 1.10% .25%
- --------------------------------------------------------------------------------------------------------
Level V Status 1.725% .375%
- --------------------------------------------------------------------------------------------------------
========================================================================================================
</TABLE>
Changes in the Applicable Percentage resulting from changes in the Debt Rating
shall become effective on the date on which such Debt Rating is announced to the
public by S&P, Moody's or Fitch, as applicable, and shall remain in effect until
the next change in such Debt Rating; provided, that, until the effectiveness of
--------
any change in the Applicable Percentage based upon a Debt Rating announced after
the Initial Closing Date, Level III Status shall apply.
"Appraisal" shall mean, with respect to any Property, an appraisal to be
delivered in connection with the Participation Agreement or in accordance with
the terms of the Lease, in each case prepared by a reputable appraiser
reasonably acceptable to the Agent, which in the judgment of counsel to the
Agent, complies with all of the provisions of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, the rules and regulations
adopted pursuant thereto, and all other applicable Legal Requirements.
"Appraisal Procedure" shall have the meaning given such term in Section
22.4 of the Lease.
"Approved State" means Florida, Washington and any other state within the
continental United States proposed by the Lessee and consented to in writing by
the Agent.
"Appurtenant Rights" shall mean (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 underlying the Improvements or the Improvements, including, without
limitation, the use of any streets, ways, alleys, 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 such Land or the
Improvements.
"Assignment and Acceptance" shall mean the Assignment and Acceptance in the
form attached to the Credit Agreement as Exhibit B.
---------
Appendix - 4
<PAGE>
"Available Commitment" shall mean, as to any Lender at any time, an amount
equal to the excess, if any, of (a) the amount of such Lender's Commitment over
(b) the aggregate principal amount of all Loans made by such Lender as of such
date after giving effect to any repayments pursuant to Section 5.2(d) of the
Participation Agreement (but without giving effect to any other repayments or
prepayments of any Loans hereunder).
"Available Holder Commitments" shall mean an amount equal to the excess, if
any, of (i) the amount of the Holder Commitments over (ii) the aggregate amount
of the Holder Fundings made since the Initial Closing Date after giving effect
to any repayments pursuant to Section 5.2(d) of the Participation Agreement (but
without giving effect to any other repayments or prepayments of any Holder
Fundings).
"Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled
"Bankruptcy," as now or hereafter in effect or any successor thereto.
"Basic Rent" shall mean, the sum of (i) the Loan Basic Rent and (ii) the
Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is
due.
"Basic Term" shall have the meaning specified in Section 2.2 of the Lease.
"Basic Term Commencement Date" shall have the meaning specified in the
recitals to of the Lease.
"Basic Term Expiration Date" shall have the meaning specified in Section
2.2 of the Lease.
"Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and
substance satisfactory to the Holders, the Agent and the Owner Trustee.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Borrowing Date" shall mean any Business Day specified in a notice
delivered pursuant to Section 2.3 of the Credit Agreement as a date on which the
Lessor requests the Lenders to make Loans hereunder.
"Budgeted Total Loan Property Cost" shall mean, at any date of
determination with respect to any Construction Period Property, an amount equal
to the aggregate amount which the Construction Agent in good faith expects to be
expended in order to achieve Completion with respect to such Property, including
interest on Loans and yield on Holder Fundings through the Basic Term
Commencement Date respecting such Construction Period Property.
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in Dallas, Texas or New York, New York are authorized
or required by law to close; provided, however, that when used in connection
-------- -------
with a Eurodollar Loan, the term "Business
Appendix - 5
<PAGE>
Day" shall also exclude any day on which banks are not open for dealings in
dollar deposits in the London interbank market.
"Capital One Bank" shall mean Capital One Bank, a Virginia banking
corporation, and its successors and permitted assigns.
"Capital One Credit Agreement" shall have the meaning given such term in
Section 28.1 of the Lease.
"Capital One Credit Agreement Event of Default" shall mean the Event of
Default under Section 9 of the Capital One Credit Agreement.
"Capitalized Lease" shall mean, as applied to any Person, any lease of
property (whether real, personal, tangible, intangible or mixed of such Person)
by such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"Casualty" shall mean any damage or destruction of all or any portion of
the Property as a result of a fire or other casualty.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. (S)(S) 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986.
"Certificate" shall mean a Certificate (Capital One Services, Inc.) in
favor of each Holder regarding the Holder Commitment of such Holder issued
pursuant to the terms and conditions of the Trust Agreement in favor of each
Holder.
"Claims" shall mean any and all obligations, liabilities, losses, actions,
suits, penalties, claims, demands, costs and expenses (including, without
limitation, reasonable attorney's fees and expenses) of any nature whatsoever.
"Closing Date" shall mean the Initial Closing Date and each Property
Closing Date.
"Capital One Realty Trust 1998-1" shall mean the grantor trust created
pursuant to the terms and conditions of the Trust Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute hereto.
"COFC" shall mean Capital One Financial Corporation, a Delaware
corporation, and its successors and assigns.
"Collateral" shall mean all assets of the Lessor, now owned or hereafter
acquired, upon which a lien is purported to be created by the Security
Documents.
Appendix - 6
<PAGE>
"Commitment" shall mean, as to any Lender, the obligation of such Lender to
make the portion of the Loans to the Lessor in an aggregate principal amount at
any time outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule 1.1 of the Credit Agreement, as such amount may be increased or
reduced from time to time in accordance with the provisions of the Credit
Agreement.
"Commitment Percentage" shall mean, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Loans then outstanding constitutes of the aggregate principal amount of all of
the Loans then outstanding), and such Commitment Percentage shall take into
account both the Lender's Tranche A Commitment and the Lender's Tranche B
Commitment.
"Commitment Period" shall mean the period from and including the Initial
Closing Date to and including the Construction Period Termination Date, or such
earlier date as the Commitments shall terminate as provided in the Credit
Agreement.
"Company Obligations" shall mean the obligations of CORI, in any and all
capacities under and with respect to the Operative Agreements and each Property.
"Completion" shall mean, with respect to a Property, such time as
substantial completion of the Improvements on such Property has been achieved in
accordance with the Plans and Specifications, the Agency Agreement and/or the
Lease, and in compliance with all material Legal Requirements and Insurance
Requirements and a certificate of occupancy has been issued with respect to such
Property by the appropriate governmental entity. If the Lessor purchases a
Property that includes existing Improvements that are to be immediately occupied
by the Lessee, the date of Completion for such Property shall be the Property
Closing Date.
"Completion Date" shall mean, with respect to a Property, the date on which
Completion for such Property has occurred.
"Condemnation" shall mean any taking or sale of the use, access, occupancy,
easement rights or title to any 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, any Property
or alter the pedestrian or vehicular traffic flow to any Property so as to
result in a 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.
"Contractor" shall mean each entity with whom the Construction Agent or the
Lessee contracts to construct any Improvements or any portion thereof on the
Property.
"Construction Advance" shall mean an advance of funds to pay Property Costs
pursuant to Section 5.4 of the Participation Agreement.
Appendix - 7
<PAGE>
"Construction Agent" shall mean Capital One Services, Inc., a Delaware
corporation, as construction agent under the Agency Agreement.
"Construction Agent Options" shall have the meaning given to such term in
Section 2.1(c) of the Agency Agreement.
"Construction Budget" shall mean the cost of constructing and developing
any Improvements as determined by the Construction Agent in its reasonable, good
faith judgment.
"Construction Commencement Date" shall mean, with respect to Improvements,
the date on which construction of such Improvements commences pursuant to the
Agency Agreement.
"Construction Contract" shall mean any contract entered into between the
Construction Agent or the Lessee with a Contractor for the construction of
Improvements or any portion thereof on the Property.
"Construction Loan" shall mean any Loan made in connection with a
Construction Advance, including Loans to pay interest thereon.
"Construction Loan Property Cost" shall mean with respect to each
Construction Period Property at the date of determination, an amount equal to
(a) the aggregate principal amount of Construction Loans made on or prior to
such date with respect to the Property minus (b) the aggregate principal amount
-----
of prepayments or repayments of the Loans allocated to reduce the Construction
Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit
Agreement.
"Construction Period" shall mean, with respect to a Property, the period
commencing on the Construction Commencement Date for such Property and ending on
the Completion Date for such Property.
"Construction Period Property" means, at any date of determination, any
Property as to which the Basic Term has not commenced on or prior to such date.
"Construction Period Termination Date" shall mean the earlier of (i) the
date that the Commitments have been terminated in their entirety in accordance
with the terms of Section 2.5(a) of the Credit Agreement, or (ii) the third
anniversary of the Initial Closing Date.
"Contingent Obligation" shall mean, as applied to any Person, any
agreement, undertaking or arrangement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes or is contingently liable upon, the obligation or liability
of any other Person or agrees to maintain the net worth or working capital or
other financial condition of any other Person, or otherwise assures any creditor
of such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or application for a letter of
credit (or similar instrument which is issued upon the
Appendix - 8
<PAGE>
application of such Person or upon which such Person becomes an account party or
for which such Person is in any way liable), but excluding the endorsement of
instruments for deposit or collection in the ordinary course of business.
"Control" shall mean (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 and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Co-Owner Trustee" shall have the meaning specified in Section 9.2 of the
Trust Agreement.
"CORI" shall mean Capital One Realty, Inc., a Delaware corporation, and its
successors and permitted assigns.
"CORI Participation Agreement" shall have the meaning given to such term in
Section 1.1 of the Trust Agreement.
"CORI Trust Estate" shall have the meaning given to such term in Section
2.2 of the Trust Agreement.
"COSI" shall mean Capital One Services, Inc., a Delaware corporation, and
its successors and permitted assigns.
"COSI Participation Agreement" shall have the meaning given to such term in
Section 1.1 of the Trust Agreement.
"COSI Trust Estate" shall have the meaning given to such term in Section
2.2 of the Trust Agreement.
"Credit Agreement" shall mean the Credit Agreement (Capital One Services,
Inc.), dated as of the Initial Closing Date, among the Lessor, the Agent and the
Lenders, as specified therein.
"Credit Agreement Default" shall mean any event or condition which, with
the lapse of time or the giving of notice, or both, would constitute a Credit
Agreement Event of Default.
"Credit Agreement Event of Default" shall mean any event or condition
defined as an "Event of Default" in Section 6 of the Credit Agreement.
"Credit Documents" shall mean the Credit Agreement, the Notes and the
Security Documents.
"Credit Parties" shall mean the Lessee and the Guarantor.
Appendix - 9
<PAGE>
"Debt Rating" shall mean, as of any date of determination thereof, the
ratings most recently published by the Rating Agencies relating to the
unsecured, unsupported senior long-term debt obligations of the Guarantor.
"Deed" shall mean a warranty deed regarding the Land and/or Improvements in
form and substance satisfactory to the Holders, the Agent and the Owner Trustee.
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall have the meaning given to such term in Section
9.1 of the Credit Agreement.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Election Notice" shall have the meaning given to such term in Section 20.1
of the Lease.
"Employee Benefit Plan" or "Plan" shall mean an employee benefit plan
(within the meaning of Section 3(3) of ERISA, including any Multiemployer Plan),
or any "plan" as defined in Section 4975(e)(1) of the Code and as interpreted by
the Internal Revenue Service and the Department of Labor in rules, regulations,
releases or bulletins in effect on any Closing Date.
"Environmental Claims" shall mean any investigation, notice, violation,
demand, allegation, action, suit, injunction, judgment, order, consent decree,
penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection with, an actual or
alleged violation of, any Environmental Law, (b) in connection with any
Hazardous Substance, (c) from any abatement, removal, remedial, corrective, or
other response action in connection with a Hazardous Substance, Environmental
Law, or other order of a Tribunal or (d) from any actual or alleged damage,
injury, threat, or harm to health, safety, natural resources, or the
environment.
"Environmental Laws" shall mean any Law, permit, consent, approval,
license, award, or other authorization or requirement of any Tribunal relating
to emissions, discharges, releases, threatened releases of any Hazardous
Substance into ambient air, surface water, ground water, publicly owned
treatment works, septic system, or land, or otherwise relating to the handling,
storage, treatment, generation, use, or disposal of Hazardous Substances,
pollution or to the protection of health or the environment, including without
limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901, et seq., and state statutes analogous thereto.
"Environmental Violation" shall mean any activity, occurrence or condition
that violates or threatens (if the threat requires remediation under any
Environmental Law and is not remediated during any grace period allowed under
such Environmental Law) to violate or results in or threatens (if the threat
requires remediation under any Environmental Law and is not remediated during
any grace period allowed under such Environmental Law) to result in
noncompliance with any Environmental Law.
Appendiix - 10
<PAGE>
"Equipment" shall mean equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired using the proceeds of the Loans or the Holder Fundings by the
Construction Agent, the Lessee or the Lessor as specified or described in either
a requisition or a Lease Supplement, whether or not now or subsequently attached
to, contained in or used or usable in any way in connection with any operation
of any Improvements or other improvements to real property, including but
without limiting the generality of the foregoing, all equipment described in the
Appraisal including, without limitation, all heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilation, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment, escalators,
elevators, loading and unloading equipment and systems, cleaning systems
(including window cleaning apparatus), telephones, communication systems
(including satellite dishes and antennae), televisions, computers, sprinkler
systems and other fire prevention and extinguishing apparatus and materials,
security systems, motors, engines, machinery, pipes, pumps, tanks, conduits,
appliances, fittings and fixtures of every kind and description.
"Equipment Schedule" shall mean (a) each Equipment Schedule attached to the
applicable Requisition and (b) each Equipment Schedule attached to the
applicable Lease Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean each entity required to be aggregated with the
Construction Agent or any Credit Party pursuant to the requirements of Section
414(b) or (c) of the Code.
"Eurocurrency Reserve Requirements" shall mean for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed or eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Holder Funding" shall mean a Holder Funding bearing a Holder
Yield based on the Eurodollar Rate.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean for the Interest Period for each Eurodollar
Loan or Eurodollar Holder Funding comprising part of the same borrowing or
advance (including conversions, extensions and renewals), a per annum interest
rate equal to the per annum rate determined by the Administrative Agent on the
basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day of such
Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) two (2) Business Days before the first day of such Interest Period
(provided that, if at least two such offered rates
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Appendix - 11
<PAGE>
appear on the Reuters Screen LIBO Page, the rate in respect of such Interest
Period will be the arithmetic mean of such offered rates). As used herein,
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks) ("RMMRS"). In the event the RMMRS is not then quoting such
offered rates, "Eurodollar Rate" shall mean for the Interest Period for each
Eurodollar Loan or Eurodollar Holder Funding comprising part of the same
borrowing or advance (including conversions, extensions and renewals), the
average (rounded upward to the nearest one-sixteenth (1/16) of one percent) per
annum rate of interest determined by the office of the Administrative Agent
(each such determination to be conclusive and binding) as of two Business Days
prior to the first day of such Interest Period, as the effective rate at which
deposits in immediately available funds in U.S. dollars are being, have been, or
would be offered or quoted by the Administrative Agent to major banks in the
applicable interbank market for Eurodollar deposits at any time during the
Business Day which is the second Business Day immediately preceding the first
day of such Interest Period, for a term comparable to such Interest Period and
in the amount of the requested Eurodollar Loan and Eurodollar Holder Funding. If
no such offers or quotes are generally available for such amount, then the
Administrative Agent shall be entitled to determine the Eurodollar Rate by
estimating in its reasonable judgment the per annum rate (as described above)
that would be applicable if such quote or offers were generally available.
"Event of Default" shall mean a Lease Event of Default, an Agency Agreement
Event of Default or a Credit Agreement Event of Default.
"Excepted Payments" shall mean: (a) all indemnity payments (including
indemnity payments made pursuant to Section 13 of the Participation Agreement),
whether made by adjustment to Basic Rent or otherwise, to which the Owner
Trustee, any Holder or any of their respective Affiliates, agents, officers,
directors or employees is entitled;
(b) any amounts (other than Basic Rent or Termination Value) payable under
any Operative Agreement to reimburse the Owner Trustee, any Holder or any of
their respective Affiliates (including the reasonable expenses of the Owner
Trustee, the Trust Company and the Holders incurred in connection with any such
payment) for performing or complying with any of the obligations of any Credit
Party under and as permitted by any Operative Agreement;
(c) any amount payable to a Holder by any transferee of such interest of a
Holder as the purchase price of such Holder's interest in the COSI Trust Estate
(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 Agent or any Lender;
(e) any insurance proceeds under policies maintained by the Owner Trustee
or any Holder;
Appendix - 12
<PAGE>
(f) Transaction Expenses or other amounts or expenses paid or payable to or
for the benefit of the Owner Trustee or any Holder;
(g) all right, title and interest of any Holder or the Owner Trustee to any
Property or any portion thereof or any other property to the extent any of the
foregoing has been released from the Liens of the Security Documents and the
Lease pursuant to the terms thereof;
(h) upon termination of the Credit Agreement pursuant to the terms thereof,
all remaining property covered by the Lease or Security Documents;
(i) all payments in respect of the Holder Yield;
(j) any payments in respect of interest to the extent attributable to
payments referred to in clauses (a) through (i) above; and
(k) any rights of either the Owner Trustee or Trust Company to demand,
collect, sue for or otherwise receive and enforce payment of any of the
foregoing amounts, provided that such rights shall not include the right to
terminate the Lease.
"Excepted Rights" shall mean the rights retained by the Owner Trustee
pursuant to Section 8.2(a)(i) of the Credit Agreement.
"Excess Proceeds" shall mean the excess, if any, of the aggregate of all
awards, compensation or insurance proceeds payable in connection with a Casualty
or Condemnation over the Termination Value paid by the Lessee pursuant to the
Lease with respect to such Casualty or Condemnation.
"Exculpated Persons" shall have the meaning given to such term in Section
14.10 of the Participation Agreement.
"Expiration Date" shall mean the later of (i) the Basic Term Expiration
Date and (ii) the last day of the Renewal Term.
"Expiration Date Purchase Option" shall mean the Lessee's option to
purchase all (but not less than all) of the Properties on the Expiration Date.
"Facility" shall mean a facility used for the treatment, storage or
disposal of Hazardous Substances.
"Facility Fee" shall mean that fee payable by the Lessee pursuant to
Section 9.4 of the Participation Agreement.
"Facility Fee Payment Date" shall mean the 15th day of each January, April,
July and October of each year and the last day of the Term.
Appendix - 13
<PAGE>
"Fair Market Sales Value" shall mean, with respect to any Property, the
amount, which in any event, shall not be less than zero, that would be paid in
cash in an arms-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, such Property. Fair Market Sales Value of any
Property shall be determined based on the assumption that, except for purposes
of Section 17 of the Lease, such Property is in the condition and state of
repair required under Section 10.1 of the Lease and each Credit Party is in
compliance with the other requirements of the Operative Agreements.
"Federal Funds Effective Rate" shall have the meaning given to such term in
the definition of ABR.
"Financing Parties" shall mean the Lessor, the Owner Trustee, in its trust
capacity, the Agent, the Holders and the Lenders.
"Fitch" shall mean Fitch Investors Service, Inc.
"Fixtures" shall mean 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" shall mean any event beyond the control of the
Construction Agent, other than a Casualty or Condemnation, including, but not
limited to, strikes or lockouts (but only when the Construction Agent is legally
prevented from securing replacement labor or materials as a result thereof),
adverse soil conditions, acts of God, adverse weather conditions, inability to
obtain labor or materials, governmental activities or regulations, civil
commotion and enemy action; but excluding any event, cause or condition that
results from the Construction Agent's financial condition.
"Future Amounts" shall have the meaning given to such term in Section 2.1
of the Agency Agreement.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the accounting principles board of the American
Institute of Certified Public Accountants, and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, that are applicable to the circumstances as of the date of
determination.
"Governmental Action" shall mean 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 Legal Requirement, and shall include,
without limitation, all environmental and operating permits and licenses that
are required for the full use, occupancy, zoning and operating of the Property.
Appendix - 14
<PAGE>
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Ground Lease" shall mean a ground lease (in form and substance
satisfactory to the Agent and the Holder) respecting any Property owned by the
Lessee and leased to the Lessor where such lease (i) has a 99 year term and
payments set at $1.00 per year, or (ii) is subject to such other terms and
conditions as are satisfactory to the Agent, the Lenders and the Holders.
"Guarantor" shall mean Capital One Financial Corporation, a Delaware
corporation.
"Hard Costs" shall mean all costs and expenses payable for supplies,
materials, labor and profit with respect to the Improvements under any
Construction Contract.
"Hazardous Substance" shall mean any of the following: (i) any petroleum
or petroleum product, explosives, radioactive materials, asbestos, formaldehyde,
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 determined in accordance with 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.
"Holder Funding" shall mean any advance made by any Holder to the Owner
Trustee pursuant to the terms of the Trust Agreement (solely as it relates to
the COSI Trust Estate) or the Participation Agreement.
"Holder Amount" shall mean as of any date, the aggregate amount of Holder
Fundings made by each Holder to the COSI Trust Estate pursuant to Section 2 of
the Participation Agreement and Section 3.1 of the Trust Agreement less any
payments of any Holder Fundings received by the Holders pursuant to Section 3.4
of the Trust Agreement.
"Holder Applicable Margin" shall mean (i) with respect to Eurodollar Holder
Fundings, the Applicable Percentage for Eurodollar Loans of the same Interest
Period as such Eurodollar Holder Funding, plus one percent (1.00%), or (ii) with
respect to ABR Holder Fundings, a percentage equal to the ABR plus one percent
(1.00%).
"Holder Commitments" shall mean $1,150,000 respecting the COSI Trust
Estate, provided, that the Holder Commitment of each Holder shall be as set
forth on the Holder Certificate issued in favor of such Holder pursuant to the
Trust Agreement.
"Holder Construction Property Cost" shall mean, with respect to each
Construction Period Property for which the Basic Term has not commenced, at any
date of determination, an amount equal to the outstanding Holder Fundings made
with respect thereto under the Trust Agreement.
Appendix - 15
<PAGE>
"Holder Overdue Rate" shall mean the lesser of (i) the ABR plus two percent
(2%) and (ii) the highest rate permitted by applicable law.
"Holder Property Cost" shall mean with respect to a Property an amount
equal to the outstanding Holder Fundings with respect thereto.
"Holders" shall mean Bank of America, N.A. and shall include the other
banks and other financial institutions which are from time to time holders of
Certificates in connection with the Capital One Realty Trust 1998-1.
"Holder Yield" shall mean with respect to Holder Fundings from time to time
either the Eurodollar Rate plus the Holder Applicable Margin or the ABR as
elected by the Owner Trustee from time to time with respect to such Holder
Fundings in accordance with the terms of the Trust Agreement; provided, however,
(i) upon delivery of the notice described in Section 3.7(c) of the Trust
Agreement, the outstanding Holder Fundings of each Holder shall bear a yield at
the ABR applicable from time to time from and after the dates and during the
periods specified in Section 3.7(c) of the Trust Agreement, and (ii) upon the
delivery by a Holder of the notice described in Section 3.9(d) of the Trust
Agreement, the Holder Fundings of such Holder shall bear a yield at the ABR
applicable from time to time after the dates and during the periods specified in
Section 3.9(d) of the Trust Agreement.
"Impositions" shall mean any and all liabilities, losses, expenses, costs,
charges and Liens of any kind whatsoever for fees, taxes, levies, imposts,
duties, charges, assessments or foreign withholdings ("Taxes") and all interest,
additions to tax and penalties thereon, which at any time prior to, during or
with respect to the Term or in respect of any period for which the Lessee shall
be obligated to pay Supplemental Rent, may be levied, assessed or imposed by any
Governmental Authority upon or with respect to (a) any Property or the leasing,
financing, refinancing, demolition, construction, substitution, subleasing,
assignment, control, condition, occupancy, servicing, maintenance, repair,
ownership, possession, activity conducted on, delivery, insuring, use,
operation, improvement, sale, transfer of title, return or other disposition of
such Property or any part thereof or interest therein or any rentals, receipts
or earnings arising therefrom; (b) the Notes or Certificates or any part thereof
or interest therein; or (c) the Operative Agreements, the performance thereof,
or any payment made or accrued pursuant thereto or otherwise in connection with
the transactions contemplated thereby.
"Improvements" shall mean, with respect to the construction, renovations
and/or Modifications on any Land, all buildings, structures, Fixtures, and other
improvements of every kind existing at any time and from time to time on or
under the Land purchased, leased or otherwise acquired using the proceeds of the
Loans or the Holder Fundings, 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, including
without limitation (a) any Improvements existing as of the Property Closing Date
as such Improvements may be referenced on the applicable Requisition and (b) any
Improvements made subsequent to such Property Closing Date.
Appendix - 16
<PAGE>
"Incorporated Covenants" shall have the meaning given to such term in
Section 28.1 of the Lease.
"Incorporated Representations and Warranties" shall have the meaning given
to such term in Section 28.1 of the Lease.
"Indebtedness" of a Person shall mean, without duplication, such Person's:
(i) obligations for borrowed money;
(ii) obligations representing the deferred purchase price of
Property (whether real, personal, tangible, intangible or mixed) or
services (other than accounts payable arising in the ordinary course of
such Person's business payable on terms customary in the trade);
(iii) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or hereafter
owned or acquired by such Person;
(iv) obligations which are evidenced by notes, acceptances or other
instruments;
(v) Capitalized Lease Obligations;
(vi) net liabilities under interest rate swap, exchange or cap
agreements; and
(vii) contingent obligations.
"Indemnified Person" shall mean the Lessor, the Owner Trustee, in its
individual and its trust capacity, the Agent, the Holders, the Lenders, and
their respective successors, assigns, directors, shareholders, partners,
officers, employees, agents and Affiliates.
"Indemnity Provider" shall mean, respecting each Property, the Lessee.
"Individual Property Sale Requirements" shall have the meaning given to
such term in Section 20.1 of the Lease.
"Initial Closing Date" shall mean September 3, 1999.
"Initial Construction Advance" shall mean any initial Advance to pay for:
(i) Property Costs for construction of any Improvements; and (ii) the Property
Costs of restoring or repairing any Property which is required to be restored or
repaired in accordance with Section 15.1(e) of the Lease.
"Inspector" shall mean any Person engaged by the Agent to oversee the
monitoring of the progress of any Improvements and reviewing of Requisitions and
to provide related services relating to administration of such Improvements
during the Construction Period.
Appendix - 17
<PAGE>
"Insurance Requirements" shall mean all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Agency Agreement to be maintained by the Construction Agent, and
all requirements of the issuer of any such policy and, regarding self insurance,
any other requirements of Lessee.
"Interest Period" shall mean during the Commitment Period and thereafter as to
any Eurodollar Loan or Eurodollar Holder Funding (i) with respect to the initial
Interest Period, the period beginning on the date of the first Eurodollar Loan
and Eurodollar Holder Funding and ending one (1) month, two (2) months, three
(3) months or (to the extent available to all Lenders and all Holders) six (6)
months thereafter, as selected by the Lessor (in the case of a Eurodollar Loan)
or the Owner Trustee (in the case of a Eurodollar Holder Funding) in its
applicable notice given with respect thereto and (ii) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Eurodollar Loan or Eurodollar Holder Funding and ending one (1) month, two
(2) months, three (3) months or (to the extent available to all Lenders and all
Holders) six (6) months thereafter, as selected by the Lessor by irrevocable
notice to the Agent (in the case of a Eurodollar Loan) or by the Owner Trustee
(in the case of a Eurodollar Holder Funding) in each case not less than three
(3) Business Days prior to the last day of the then current Interest Period with
respect thereto; provided, however, that all of the foregoing provisions
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relating to Interest Periods are subject to the following: (A) if any Interest
Period would end on a day which is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day (except that where the
next succeeding Business Day falls in the next succeeding calendar month, then
on the next preceding Business Day), (B) no Interest Period shall extend beyond
the Maturity Date or the Expiration Date, as the case may be, (C) where an
Interest Period begins on a day for which there is no numerically corresponding
day in the calendar month in which the Interest Period is to end, such Interest
Period shall end on the last Business Day of such calendar month, (D) there
shall not be more than four (4) Interest Periods outstanding at any one (1)
time.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"IRS" shall mean the United States Internal Revenue Service, or any
successor or analogous organization.
"Land" shall mean a parcel of real property described on (a) the
Requisition issued by the Construction Agent on the Property Closing Date
relating to such parcel and (b) the schedules to each applicable Lease
Supplement executed and delivered in accordance with the requirements of Section
2.4 of the Lease.
"Law" shall mean any statute, law, ordinance, regulation, rule, directive,
order, writ, injunction or decree of any Tribunal.
"Lease" or "Lease Agreement" shall mean the Lease Agreement (Capital One
Services, Inc.) (Tax Retention Operating Lease) dated as of the Initial Closing
Date, between the Lessor and
Appendix - 18
<PAGE>
the Lessee, together with any Lease Supplements thereto, as such Lease Agreement
may from time to time be supplemented, amended or modified in accordance with
the terms thereof.
"Lease Default" shall mean 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" shall have the meaning specified in Section 17.1
of the Lease.
"Lease Supplement" shall mean each Lease Supplement substantially in the
form of Exhibit A to the Lease, together with all attachments and schedules
thereto, as such Lease Supplement may be supplemented, amended or modified from
time to time.
"Legal Requirements" shall mean all foreign, federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Owner Trustee, the
Holders, the Lessor, any Credit Party, the Agent, any Lender or any Property,
Land, Improvement, Equipment or the taxation, demolition, construction, use or
alteration of such Improvements, whether now or hereafter enacted and in force,
including any that require repairs, modifications or alterations in or to any
Property or in any way limit the use and enjoyment thereof (including all
building, zoning and fire codes and the Americans with Disabilities Act of 1990,
42 U.S.C. (S) 12101 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 any Credit
Party affecting any Property or the Appurtenant Rights.
"Lender Commitments" shall mean $28,850,000 as such amount may be increased
or reduced from time to time pursuant to the Credit Agreement; provided if there
shall be more than one Lender, the Lender Commitment of each Lender shall be as
set forth in Schedule 1.1 to the Credit Agreement as such Schedule 1.1 may be
amended and replaced from time to time.
"Lender Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdiction in order to procure a security interest in favor of the
Agent in any Equipment or in any Improvements.
"Lenders" shall mean the several banks and other financial institutions
from time to time party to the Credit Agreement.
"Lessee" shall mean Capital One Services, Inc., a Delaware corporation.
"Lessor" shall mean the Owner Trustee, not in its individual capacity, but
as Lessor under the Lease.
"Lessor Basic Rent" shall mean the scheduled Holder Yield due on the Holder
Fundings on any Scheduled Interest Payment Date pursuant to the Trust Agreement
(but not including interest
Appendix - 19
<PAGE>
on (i) any such scheduled Holder Yield due on the Holder Fundings prior to the
Basic Term Commencement Date with respect to the Property to which such Holder
Fundings relate or (ii) overdue amounts under the Trust Agreement or otherwise).
"Lessor Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdictions in order to protect the Lessor's interest under the
Lease to the extent the Lease is a security agreement or a mortgage.
"Lessor Lien" shall mean any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against the Lessor or Trust Company,
in its individual capacity, not resulting from the transactions contemplated by
the Operative Agreements, (b) any act or omission of the Lessor or Trust
Company, in its individual capacity, which is not required by the Operative
Agreements or is in violation of any of the terms of the Operative Agreements,
(c) any claim against the Lessor or Trust Company, in its individual capacity,
with respect to Taxes or Transaction Expenses against which the Lessee is not
required to indemnify Lessor or Trust Company, in its individual capacity,
pursuant to Section 13 of the Participation Agreement or (d) any claim against
the Lessor arising out of any transfer by the Lessor of all or any portion of
the interest of the Lessor in the Properties, the COSI Trust Estate or the
Operative Agreements other than the transfer of title to or possession of any
Properties by the Lessor pursuant to and in accordance with the Lease, the
Credit Agreement, the Security Agreement or the Participation Agreement or
pursuant to the exercise of the remedies set forth in Article XVII of the Lease.
"Level Status" means the applicable Level Status set forth in the table
below (with Level Status V being the lowest Level Status and Level Status I
being the highest Level Status), it being agreed that the applicable Level
Status as of any date of determination shall be deemed to be the lowest Level
Status which includes the applicable Debt Rating by at least two of the Rating
Agencies:
<TABLE>
<CAPTION>
==========================================================================================================
Moody's Investors Standard & Poor's Fitch Investors
Level Status Service, Inc. Ratings Services Service, Inc.
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Level Status I Baa1 or higher BBB+ or higher BBB+ or higher
- ----------------------------------------------------------------------------------------------------------
Level Status II Baa2 or higher BBB or higher BBB or higher
- ----------------------------------------------------------------------------------------------------------
Level Status III Baa3 or higher BBB- or higher BBB- or higher
- ----------------------------------------------------------------------------------------------------------
Level Status IV Ba1 or higher BB+ or higher BB+ or higher
- ----------------------------------------------------------------------------------------------------------
Level Status V Below Ba1 or unrated Below BB+ or unrated Below BB+ or unrated
==========================================================================================================
</TABLE>
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien, option or charge of any kind.
Appendix - 20
<PAGE>
"Limited Recourse Amount" shall mean with respect to the Properties on an
aggregate basis, an amount equal to the sum of the Termination Values with
respect to all of the Properties on each Payment Date, less the Maximum Residual
Guarantee Amount as of such date with respect to the Properties.
"Loans" shall have the meaning given to such term in Section 2.1(a) in the
Credit Agreement and shall include both the Tranche A Loans and the Tranche B
Loans.
"Loan Basic Rent" shall mean the interest due on the Loans on any Scheduled
Interest Payment Date pursuant to the Credit Agreement (but not including
interest on (i) any such Loan prior to the Basic Term Commencement Date with
respect to the Property to which such Loan relates or (ii) any overdue amounts
under Section 2.8(c) of the Credit Agreement or otherwise).
"Loan Property Cost" shall mean, with respect to each Property at any date
of determination, an amount equal to (a) the aggregate principal amount all
Loans (including without limitation all Acquisition Loans and Construction
Loans) made on or prior to such date with respect to such Property (including
any Loans made to fund interest, Transaction Expenses and indemnity payments
prior to the Basic Term Commencement Date for each Property Date attributed or
allocated to such Property), minus (b) the aggregate amount of prepayments or
-----
repayments as the case may be of the Loans allocated to reduce the Loan Property
Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement.
"Majority Lenders" shall mean at any time, Lenders whose Loans outstanding
represent at least fifty-one percent (51%) of the aggregate Loans outstanding.
"Marketing Period" shall mean, if the Lessee has given a Sale Notice in
accordance with Section 20.1 of the Lease, the period commencing on the date
such Sale Notice is given and ending on the Expiration Date.
"Material Adverse Effect" shall, mean a material adverse effect on (a) the
business, condition (financial or otherwise), assets, liabilities or operations
of the Credit Parties and their Affiliates taken as a whole, (b) the ability of
any Credit Party to perform its respective obligations under any Operative
Agreement to which it is a party, (c) the validity or enforceability of any
Operative Agreement or the rights and remedies of the Agent, the Lenders, the
Holders, or the Lessor thereunder, (d) the validity, priority or enforceability
of any Lien on any Property created by any of the Operative Agreements, or (e)
the value, utility or useful life of any Property or the use, or ability of the
applicable Lessee to use, any Property for the purpose for which it was
intended.
"Maturity Date" shall mean the Expiration Date.
"Maximum Amount" shall mean, as of any date of payment, without
duplication, (a) one hundred percent (100%) of the cost of acquiring the Land
for all, but not less than all, the Construction Period Properties
(collectively, the "Land Cost"), plus (b) the product of eighty-nine and nine-
tenths percent (89.9%) multiplied by the following: aggregate Termination Value
for all, but not less than all, the Construction Period Properties, minus the
-----
Land Cost, minus all
-----
Appendix - 21
<PAGE>
structuring fees payable in connection with the transactions evidenced by the
Operative Agreements to Bank of America Securities LLC, Bank of America, N.A.
and/or any Affiliates of either of the foregoing, minus accrued, unpaid Holder
-----
Yield respecting any and all Construction Period Properties) minus (c) the
-----
accreted value (calculated at a rate of six and twenty-five one hundreths
percent (6.25%) per annum) of any payments previously made by the Construction
Agent or the Lessee regarding any and all Construction Period Properties and not
reimbursed minus (d) the product of ten and one-tenth percent (10.1%) multiplied
-----
by the aggregate Future Amounts deposited into escrow with the Agent pursuant to
Section 2.1 of the Agency Agreement.
"Maximum Property Cost" shall mean the aggregate amount of the Property
Costs for all Properties subject to the Lease as of the applicable determination
date (calculated without regard to the purchase or sale of any Property).
"Maximum Residual Guarantee Amount" shall mean an amount equal to the
product of the aggregate Property Cost for all of Properties times 85%.
"Modifications" shall have the meaning specified in Section 11.1(a) of the
Lease.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage Instrument" shall mean any mortgage, deed of trust or any other
instrument executed by the Owner Trustee and the Lessee in favor of the Agent
(for the benefit of the Lenders and the Holders) and evidencing a Lien on the
Property, in form and substance reasonably acceptable to the Agent.
"Multiemployer Plan" shall mean any plan described in Section 4001(a)(3) of
ERISA to which contributions are or have been made or required by the
Construction Agent or any Credit Party or any of its Subsidiaries or ERISA
Affiliates.
"Multiple Employer Plan" shall mean a plan to which the Construction Agent
or any Credit Party or any ERISA Affiliate and at least one other employer other
than an ERISA Affiliate is making or accruing an obligation to make, or has made
or accrued an obligation to make, contributions.
"Net Proceeds" shall mean all amounts paid in connection with any Casualty
or Condemnation, 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 Agent or Lessor are entitled to be reimbursed pursuant
to the Lease.
"Net Sale Proceeds Shortfall" shall mean the amount by which the proceeds
of a sale described in Section 22.1 of the Lease (net of all expenses of sale)
are less than the Limited Recourse Amount with respect to the Properties to the
extent it has been determined that the Fair Market Sales Value of the Properties
at the expiration of the term of the Lease has been impaired by greater than
expected wear and tear during the Term of the Lease.
Appendix - 22
<PAGE>
"Non-Excluded Taxes" shall have the meaning given to such term in Section
2.13 of the Credit Agreement.
"Notes" shall mean those notes issued to the Lenders pursuant to the Credit
Agreement and shall include both the Tranche A Notes and the Tranche B Notes.
"Occupational Safety and Health Law" shall mean the Occupational Safety and
Health Act of 1970 and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating or relating to, or
imposing liability or standards of conduct concerning, employee health and/or
safety, as now or at any time hereafter in effect.
"Officer's Certificate" with respect to any person shall mean a certificate
executed on behalf of such person by a Responsible Officer who has made or
caused to be made such examination or investigation as is necessary to enable
such Responsible Officer to express an informed opinion with respect to the
subject matter of such Officer's Certificate.
"Operative Agreements" shall mean the following: the Participation
Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the
Credit Agreement, the Notes, the Lease (and a memorandum thereof in a form
reasonably acceptable to the Agent), each Lease Supplement (and a memorandum
thereof in a form reasonably acceptable to the Agent), the Security Documents
and each Ground Lease.
"Overdue Interest" shall mean any interest payable pursuant to Section
2.8(b) of the Credit Agreement.
"Overdue Rate" shall mean (i) with respect to Loan Basic Rent, and any
other amount owed under or with respect to the Credit Agreement or the Security
Documents, the rate specified in Section 2.8(b) of the Credit Agreement, (ii)
with respect to Lessor Basic Rent, the Holder Yield and any other amount owed
under or with respect to the Trust Agreement, the applicable rate specified in
the Trust Agreement, and (iii) with respect to any other amount, the lesser of
the ABR plus two percent (2%) or the amount referred to in clause (y) of Section
2.8(b) of the Credit Agreement.
"Owner Trustee," "Borrower" or "Lessor" shall mean First Security Bank,
National Association, not individually, except as expressly stated in the
various Operative Agreements, but solely as Owner Trustee under the Capital One
Realty Trust 1998-1, and any successor or replacement Owner Trustee expressly
permitted under the Operative Agreements.
"Participant" shall have the meaning given to such term in Section 9.7 of
the Credit Agreement.
"Participation Agreement" shall mean the Participation Agreement (Capital
One Services, Inc.), dated as of the Initial Closing Date, among the Lessee, the
Guarantor, the Owner Trustee, not in its individual capacity except as expressly
stated therein, the Holders, the Lenders and the Agent,
Appendix - 23
<PAGE>
as such Participation Agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof or of any other
Operative Agreement.
"Payment Date" shall mean any Scheduled Interest Payment Date and any date
on which interest or Holder Yield in connection with a prepayment of principal
on the Loans or of the Holder Fundings is due under the Credit Agreement or the
Trust Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002(a) of ERISA or any successor thereto.
"Pension Plan" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan), and to which the Lessee or any ERISA Affiliate may have any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five (5) years, or by reason of being deemed to be a contributing
sponsor under section 4069 of ERISA.
"Permitted Exceptions" shall mean Liens of the types described in clauses
(i), (ii), (iii), (v) and (viii) of the definition of Permitted Liens.
"Permitted Facility" shall mean that certain 4-story office building at
8705 Henderson Road, Tampa, Florida 33634, its respective interest in the
related 5-story parking garage and the related ground lease for the real
property at such location or such other facility proposed by the Lessee and
acceptable to the Lenders and the Holders, as provided in Section 5.3(t) of the
Participation Agreement.
"Permitted Liens" shall mean:
(i) the respective rights and interests of the parties to the
Operative Agreements as provided in the Operative Agreements;
(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 13.1 of the Lease;
(iv) Liens arising by operation of law, materialmen's,
mechanics', workmen's, repairmen's, employees', carriers', warehousemen's
and other like Liens relating to the construction of the Improvements or in
connection with any Modifications or arising in the ordinary course of
business for amounts 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 13.1 of the Lease;
Appendix - 24
<PAGE>
(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 and the
Agent have been made), which bonding (or arrangements) shall comply with
applicable Legal Requirements, and shall have 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 Taxes set forth in Section 13.1 of the Lease;
(vii) Liens in favor of municipalities to the extent agreed to
by the Lessor; and
(viii) all encumbrances, exceptions, restrictions, easements,
rights of way, servitudes, encroachments and irregularities in title, other
than Liens which, in the reasonable assessment of the Agent, do not
materially impair the value or the use of the Property for its intended
purpose.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
governmental authority or any other entity.
"Plans and Specifications" shall mean, with respect to Improvements, the
plans and specifications for such Improvements to be constructed or already
existing, as such Plans and Specifications may be amended, modified or
supplemented from time to time in accordance with the terms of the Participation
Agreement.
"Prime Lending Rate" shall have the meaning given to such term in the
definition of ABR.
"Property" shall mean, with respect to each Permitted Facility that is (or
is to be) acquired, constructed and/or renovated pursuant to the terms of the
Operative Agreements, the Land and each item of Equipment and the various
Improvements, in each case located on such Land, including without limitation
each Construction Period Property and each Property for which the Basic Term has
commenced.
"Property Acquisition Cost" shall mean the cost to Lessor to purchase a
Property on a Property Closing Date.
"Property Closing Date" shall mean the date on which the Lessor purchases
or leases (pursuant to a Ground Lease) a Property or, with respect to the first
Advance, the date on which the Lessor seeks reimbursement for Property
previously purchased or leased by the Lessor.
Appendix - 25
<PAGE>
"Property Cost" shall mean with respect to a Property the aggregate amount
of the Loan Property Cost, plus the Holder Property Cost for such Property (as
such amounts shall be increased equally among all Properties respecting the
Holder Fundings and the Loans extended from time to time to pay for the
Transaction Expenses, fees, expenses and other disbursements referenced in
Article IX and indemnity payments pursuant to Section 13.6, in each case of the
Participation Agreement).
"Purchase Option" shall have the meaning given to such term in Section 20.1
of the Lease.
"Purchasing Lender" shall have the meaning given to such term in Section
9.8(a) of the Credit Agreement.
"Rating Agencies" shall mean Moody's, S&P and Fitch or, in each case, any
successor nationally recognized statistical rating organization.
"Redemption Date" shall have the meaning given to such term in Section
3.1(d) of the Trust Agreement.
"Register" shall have the meaning given to such term in Section 9.9(a) of
the Credit Agreement.
"Release" shall mean any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leek, flow, discharge, disposal or
emission of a Hazardous Substance.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Renewal Term" shall have the meaning specified in Section 2.2 of the
Lease.
"Rent" shall mean, collectively, the Basic Rent and the Supplemental Rent,
in each case payable under the Lease.
"Reportable Event" shall have the meaning specified in ERISA.
"Requested Funds" shall mean any funds requested by the Lessee or the
Construction Agent, as applicable, in accordance with Section 5 of the
Participation Agreement.
"Requirement of Law" shall mean, as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
Appendix - 26
<PAGE>
"Requisition" shall have the meaning specified in Section 4.2 of the
Participation Agreement.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, any Senior Vice President or Executive Vice
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer or any other officer with responsibility
for and knowledge of the subject matter, except that when used with respect to
the Trust Company or the Owner Trustee, "Responsible Officer" shall also include
the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust
Officer, the Controller and any Assistant Controller or any other officer of the
Trust Company or the Owner Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"S&P" shall mean Standard and Poors Rating Group, a division of McGraw
Hill, Inc.
"Sale Date" shall have the meaning given to such term in Section 22.1(a) of
the Lease.
"Sale Notice" shall mean a notice given to Lessor in connection with the
election by Lessee of its Sale Option.
"Sale Option" shall have the meaning given to such term in Section 20.1 of
the Lease.
"Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar Loan
or Eurodollar Holder Funding, the last day of the Interest Period applicable to
such Eurodollar Loan or Eurodollar Holder Funding (or respecting any Eurodollar
Loan or Eurodollar Holder Funding having an Interest Period of six (6) months,
the three (3) month anniversary of such Interest Period), (b) as to any ABR Loan
or any ABR Holder Funding, the fifteenth day of each month, unless such day is
not a Business Day and in such case on the next occurring Business Day and (c)
as to all Loans and Holder Fundings, the date of any voluntary or involuntary
payment, prepayment, return or redemption, and the Redemption Date or the
Expiration Date, as the case may be.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Agreement" shall mean the Security Agreement (Capital One
Services, Inc.), dated as of the Initial Closing Date between the Lessor and the
Agent, for the benefit of the Lenders and, respecting the Security Documents,
the Holders, as amended, supplemented or otherwise modified from time to time.
"Security Documents" shall mean the collective reference to the Security
Agreement, the Mortgage Instruments, and all other security documents hereafter
delivered to the Agent granting a lien on any asset or assets of any Person to
secure the obligations and liabilities of the Lessor under
Appendix - 27
<PAGE>
the Credit Agreement and/or under any of the other Credit Documents or to secure
any guarantee of any such obligations and liabilities.
"Soft Costs" shall mean all costs related to the development and
construction of the Improvements other than Hard Costs.
"Subsidiary" shall mean, as to any Person, any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person, or by one or
more Subsidiaries, or by such Person and one or more Subsidiaries.
"Supplemental Rent" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay to Lessor, the
Trust Company, the Holders, the Agent, the Lenders or any other Person under the
Lease or under any of the other Operative Agreements including, without
limitation, payments of the Termination Value and the Maximum Residual Guarantee
Amount and all indemnification amounts, liabilities and obligations.
"Taxes" shall have the meaning specified in the definition of Impositions.
"Term" shall mean the Basic Term (including any Renewal Term).
"Termination Date" shall have the meaning specified in Section 16.2(a) of
the Lease.
"Termination Event" shall mean (a) with respect to any Pension Plan, the
occurrence of a Reportable Event or an event described in Section 4062(e) of
ERISA, (b) the withdrawal of the Construction Agent or any Credit Party or any
ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was
a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA),
or the termination of a Multiple Employer Plan, (c) the distribution of a notice
of intent to terminate a Plan or Multiemployer Plan pursuant to Section
4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate a
Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (f) the complete or partial withdrawal of the
Construction Agent or any Credit Party or any ERISA Affiliate from a
Multiemployer Plan.
"Termination Notice" shall have the meaning specified in Section 16.1 of
the Lease.
"Termination Value" shall mean, without duplication, the sum of (a) either
(i) with respect to all Properties, an amount equal to the aggregate outstanding
Property Cost for all the Properties, in each case as of the last occurring
Payment Date, or (ii) with respect to a particular Property, an amount equal to
the product of the Termination Value of all the Properties times a fraction, the
numerator of which is the Property Cost allocable to the particular Property in
question and the denominator of which is the aggregate Property Cost for all the
Properties, in each case as of the
Appendix - 28
<PAGE>
last occurring Payment Date, plus (b) respecting the amounts described in each
of the foregoing subclause (i) or (ii), as applicable, any and all accrued and
unpaid interest on the Loans and any and all accrued and unpaid Holder Yield on
the Holder Fundings related to the applicable Property Cost plus (c) all other
Rent and other amounts then due and payable or accrued and unpaid under the
Agency Agreement, Lease and/or under any other Operative Agreement (including
without limitation all costs and expenses referred to in clause FIRST of Section
-----
22.2 of the Lease).
"Total Condemnation" shall mean a Condemnation that involves a taking of
Lessor's entire title to a Property.
"Tranche A Commitments" shall mean the obligation of the Tranche A Lenders
to make the Tranche A Loans to the Lessor in an aggregate principal amount at
any one time outstanding not to exceed the aggregate of the amounts set forth
opposite each Tranche A Lender's name on Schedule 1.1 to the Credit Agreement,
as such amount may be reduced from time to time in accordance with the
provisions of the Operative Agreements; provided no Tranche A Lender shall be
obligated to make Tranche A Loans in excess of such Tranche A Lender's share of
the Tranche A Commitments as set forth adjacent to such Tranche A Lender's name
on Schedule 1.1 to Credit Agreement.
"Tranche A Lenders" shall mean the several banks and other financial
institutions from time to time party to the Credit Agreement that commit to make
the Tranche A Loans, together with their successors and assigns.
"Tranche A Loans" shall mean the Loans made pursuant to the Tranche A
Commitment.
"Tranche A Note" shall have the meaning given to it in Section 2.2 of the
Credit Agreement.
"Tranche B Commitments" shall mean the obligation of the Tranche B Lenders
to make the Tranche B Loans to the Lessor in an aggregate principal amount at
any one time outstanding not to exceed the aggregate of the amounts set forth
opposite each Tranche B Lender's name on Schedule 1.1 to the Credit Agreement,
as such amount may be reduced from time to time in accordance with the
provisions of the Operative Agreements; provided no Tranche B Lender shall be
obligated to make Tranche B Loans in excess of such Tranche B Lender's share of
the Tranche B Commitments as set forth adjacent to such Tranche B Lender's name
on Schedule 1.1 to Credit Agreement.
"Tranche B Lenders" shall mean the several banks and other financial
institutions from time to time party to the Credit Agreement that commit to make
the Tranche B Loans, together with their successors and assigns.
"Tranche B Loan" shall mean the Loans made pursuant to the Tranche B
Commitment.
"Tranche B Note" shall have the meaning given to it in Section 2.2 of the
Credit Agreement.
Appendix - 29
<PAGE>
"Transaction Expenses" shall mean all costs and expenses incurred in
connection with the preparation, execution and delivery of the Operative
Agreements and the transactions contemplated by the Operative Agreements
including without limitation:
(a) the reasonable fees, out-of-pocket expenses and disbursements of
counsel in negotiating the terms of the Operative Agreements and the other
transaction documents, preparing for the closings 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
Agreements;
(b) any and all other reasonable fees, charges or other amounts
payable to the Lenders, Agent, the Holders, the Owner Trustee or any broker
which arises under any of the Operative Agreements;
(c) any other reasonable fee, out-of-pocket expenses, disbursement or
cost of any party to the Operative Agreements or any of the other
transaction documents; and
(d) any and all Taxes and fees incurred in recording or filing any
Operative Agreement 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 Agreement.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision agency, department,
commission, board, bureau or instrumentality of a governmental body.
"Trust Agreement" shall mean the Amended and Restated Trust Agreement dated
as of the Initial Closing Date between the Holders and the Owner Trustee.
"Trust Company" shall mean First Security Bank, National Association, in
its individual capacity, and any successor owner trustee under the Trust
Agreement in its individual capacity.
"Trust Estate" shall have the meaning specified in Section 2.2 of the Trust
Agreement.
"Type" shall mean, as to any Loan, whether it is an ABR Loan or a
Eurodollar Loan.
"UCC Financing Statements" shall mean collectively the Lender Financing
Statements and the Lessor Financing Statements.
"Unanimous Vote Matters" shall have the meaning given it in Section 10.2(j)
of the Participation Agreement.
"Unfunded Amount" shall have the meaning specified in Section 3.2 of the
Agency Agreement.
Appendix - 30
<PAGE>
"Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial Code
as in effect in any applicable jurisdiction.
"United States Bankruptcy Code" shall mean Title 11 of the United States
Code.
"Voting Power" shall mean, 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 or such Person, other than securities having such power
only by reason of the happening of a contingency.
"Wholly-Owned Entity" shall mean a Person all of the shares of capital
stock or other ownership interest of which are owned by the referenced Person
and/or one of its wholly-owned Subsidiaries or other wholly-owned entities.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Work" shall mean the furnishing of labor, materials, components,
furniture, furnishings, fixtures, appliances, machinery, equipment, tools,
power, water, fuel, lubricants, supplies, goods and/or services with respect to
any Property.
"Year 2000 Problem" shall have the meaning specified in Section 7.3(i) of
the Participation Agreement.
Appendix - 31
<PAGE>
EXHIBIT 13
selected financial and operating data
<TABLE>
<CAPTION>
Five-Year
Year Ended December 31 Compound
(Dollars in Thousands, Except Per Share Data) 1999 1998 1997 1996 1995 Growth Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income $ 1,593,484 $ 1,111,536 $ 717,985 $ 660,483 $ 457,409 43.85%
Interest expense 540,882 424,284 341,849 294,999 249,396 42.00
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income 1,052,602 687,252 376,136 365,484 208,013 44.87
Provision for loan losses 382,948 267,028 262,837 167,246 65,895 65.62
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 669,654 420,224 113,299 198,238 142,118 37.91
Non-interest income 2,372,359 1,488,283 1,069,130 763,424 553,043 42.99
Non-interest expense 2,464,996 1,464,586 876,976 713,182 497,430 45.02
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 577,017 443,921 305,453 248,480 197,731 31.49
Income taxes 213,926 168,690 116,072 93,213 71,220 32.92
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 363,091 $ 275,231 $ 189,381 $ 155,267 $ 126,511 30.68
Dividend payout ratio 5.69% 7.46% 10.90% 13.24% 12.55%
Per Common Share:(1)
Basic earnings $ 1.84 $ 1.40 $ .96 $ .78 $ .64 30.83%
Diluted earnings 1.72 1.32 .93 .77 .64 29.08
Dividends .11 .11 .11 .11 .08
Book value as of year-end 7.69 6.45 4.55 3.72 3.02
Average common shares 197,593,371 196,768,929 198,209,691 198,682,893 197,072,514
Average common and common
equivalent shares 210,682,740 208,765,296 202,952,592 201,075,699 199,176,852
- --------------------------------------------------------------------------------------------------------------------------------
Selected Average Balances:
Securities $ 2,027,051 $ 1,877,276 $ 1,650,961 $ 1,147,079 $ 962,624 100.46%
Allowance for loan losses (269,375) (214,333) (132,728) (83,573) (69,939) 32.31
Total assets 11,085,013 8,330,432 6,568,937 5,568,960 4,436,055 33.34
Interest-bearing deposits 2,760,536 1,430,042 958,885 1,046,122 769,688 137.87
Borrowings 6,078,480 5,261,588 4,440,393 3,623,104 2,952,162 21.59
Stockholders' equity 1,407,899 1,087,983 824,077 676,759 543,364 42.50
- --------------------------------------------------------------------------------------------------------------------------------
Selected Year-End Balances:
Securities $ 1,968,853 $ 2,080,980 $ 1,475,354 $ 1,358,103 $ 1,244,195
Consumer loans 9,913,549 6,157,111 4,861,687 4,343,902 2,921,679
Allowance for loan losses (342,000) (231,000) (183,000) (118,500) (72,000)
Total assets 13,336,443 9,419,403 7,078,279 6,467,445 4,759,321
Interest-bearing deposits 3,783,809 1,999,979 1,313,654 943,022 696,037
Borrowings 6,961,014 5,481,593 4,526,550 4,525,216 3,301,672
Stockholders' equity 1,515,607 1,270,406 893,259 740,391 599,191
- --------------------------------------------------------------------------------------------------------------------------------
Managed Consumer Loan Data:
Average reported loans $ 7,667,355 $ 5,348,559 $ 4,103,036 $ 3,651,908 $ 2,940,208 27.38%
Average off-balance sheet loans 10,379,558 9,860,978 8,904,146 7,616,553 6,149,070 21.56
- --------------------------------------------------------------------------------------------------------------------------------
Average total managed loans 18,046,913 15,209,537 13,007,182 11,268,461 9,089,278 23.83
Interest income 3,285,736 2,583,872 2,045,967 1,662,990 1,192,100 34.97
Year-end total managed loans 20,236,588 17,395,126 14,231,015 12,803,969 10,445,480 22.36
Year-end total accounts (000s) 23,705 16,706 11,747 8,586 6,149 36.25
Yield 17.59% 16.99% 15.73% 14.76% 13.12%
Net interest margin 10.83 9.91 8.81 8.16 6.27
Delinquency rate 5.23 4.70 6.20 6.24 4.20
Net charge-off rate 3.85 5.33 6.59 4.24 2.25
- --------------------------------------------------------------------------------------------------------------------------------
Operating Ratios:
Return on average assets 3.28% 3.30% 2.88% 2.79% 2.85%
Return on average equity 25.79 25.30 22.98 22.94 23.28
Equity to assets (average) 12.70 13.06 12.55 12.15 12.25
Allowance for loan losses to
loans as of year-end 3.45 3.75 3.76 2.73 2.86
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All periods have been restated to reflect the Company's three-for-one stock
split effective June 1, 1999.
27
<PAGE>
management's discussion and analysis of financial condition and results of
operations
INTRODUCTION
Capital One Financial Corporation (the "Corporation") is a holding company whose
subsidiaries provide a variety of products and services to consumers using its
Information-Based Strategy ("IBS"). The principal subsidiaries are Capital One
Bank (the "Bank"), which offers credit card products, and Capital One, F.S.B.
(the "Savings Bank"), which offers consumer lending products (including credit
cards) and deposit products. The Corporation and its subsidiaries are
collectively referred to as the "Company." As of December 31, 1999, the Company
had 23.7 million accounts and $20.2 billion in managed consumer loans
outstanding and was one of the largest providers of MasterCard and Visa credit
cards in the world.
The Company's profitability is affected by the net interest income and non-
interest income earned on earning assets, consumer usage patterns, credit
quality, the level of marketing expense and operating efficiency. The Company's
revenues consist primarily of interest income on consumer loans and securities,
and non-interest income consisting of servicing income on securitized loans,
fees (such as annual membership, cash advance, cross-sell, interchange,
overlimit, past-due and other fee income, collectively "fees") and gains on the
securitizations of loans. The Company's primary expenses are the costs of
funding assets, credit losses, operating expenses (including salaries and
associate benefits), marketing expenses and income taxes.
Significant marketing expenses (e.g., advertising, printing, credit bureau
costs and postage) to implement the Company's new product strategies are
incurred and expensed prior to the acquisition of new accounts while the
resulting revenues are recognized over the life of the acquired accounts.
Revenues recognized are a function of the response rate of the initial marketing
program, usage and attrition patterns, credit quality of accounts, product
pricing and effectiveness of account management programs.
EARNINGS SUMMARY
The following discussion provides a summary of 1999 results compared to 1998
results and 1998 results compared to 1997 results. Each component is discussed
in further detail in subsequent sections of this analysis.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net income of $363.1 million, or $1.72 per share, for the year ended December
31, 1999, compares to net income of $275.2 million, or $1.32 per share, in 1998.
The 32% increase in net income of $87.9 million is primarily the result of an
increase in both asset and account volumes and an increase in net interest
margin. Net interest income increased $365.4 million, or 53%, as average earning
assets increased 34% and the net interest margin increased to 10.86% from 9.51%.
The provision for loan losses increased $115.9 million, or 43%, as the average
reported consumer loans increased 43%, offset by the reported net charge-off
rate decrease to 3.59% in 1999 from 4.24% in 1998. Non-interest income increased
$884.1 million, or 59%, primarily due to the increase in average managed
accounts of 42%. Increases in marketing expenses of $285.6 million, or 64%, and
salaries and benefits expense of $303.8 million, or 64%, reflect the increase in
marketing investment in existing and new product opportunities and the cost of
operations to manage the growth in the Company's accounts and products offered.
Average managed consumer loans grew 19% for the year ended December 31, 1999, to
$18.0 billion from $15.2 billion for the year ended December 31, 1998, and
average accounts grew 42% for the same period to 19.6 million from 13.8 million
as a result of the continued success of the Company's marketing and account
management strategies.
[CHART]
<TABLE>
<CAPTION>
net income chart
(in millions)
<S> <C>
97 $189
98 $275
99 $363
</TABLE>
[CHART]
<TABLE>
<CAPTION>
return on average equity
(in percentages)
<S> <C>
97 23
98 25
99 26
</TABLE>
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net income of $275.2 million, or $1.32 per share, for the year ended December
31, 1998, compares to net income of $189.4 million, or $.93 per share, in 1997.
The 45% increase in net income of $85.9 million is primarily the result of an
increase in both asset and account volumes and an increase in net interest
margin. Net interest income
28
<PAGE>
increased $311.1 million, or 83%, as average earning assets increased 26% and
the net interest margin increased to 9.51% from 6.54%. The provision for loan
losses increased $4.2 million, or 2%, as the reported charge-off rate decreased
to 4.24% in 1998 from 4.83% in 1997, offset by average reported consumer loans
increasing 30%. Non-interest income increased $419.2 million, or 39%, primarily
due to the increase in average managed accounts of 39%. Increases in marketing
expenses of $221.4 million, or 98%, and salaries and benefits expense of $187.1
million, or 65% reflect the increase in marketing investment in existing and new
product opportunities and the cost of operations to manage the growth in the
Company's accounts and products offered. Average managed consumer loans grew 17%
for the year ended December 31, 1998, to $15.2 billion from $13.0 billion for
the year ended December 31, 1997, and average accounts grew 39% for the same
period to 13.8 million from 9.9 million as a result of the continued success of
the Company's marketing and account management strategies.
MANAGED CONSUMER LOAN PORTFOLIO
The Company analyzes its financial performance on a managed consumer loan
portfolio basis. Managed consumer loan data adds back the effect of off-balance
sheet consumer loans. The Company also evaluates its interest rate exposure on a
managed portfolio basis.
The Company's managed consumer loan portfolio is comprised of reported and
off-balance sheet loans. Off-balance sheet loans are those which have been
securitized and accounted for as sales in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"), and are
not assets of the Company. Therefore, those loans are not shown on the balance
sheet.
Table 1 summarizes the Company's managed consumer loan portfolio.
table 1: MANAGED CONSUMER LOAN PORTFOLIO
<TABLE>
<CAPTION>
Year Ended December 31 (In Thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year-End Balances:
Reported consumer loans $ 9,913,549 $ 6,157,111 $ 4,861,687 $ 4,343,902 $ 2,921,679
Off-balance sheet consumer loans 10,323,039 11,238,015 9,369,328 8,460,067 7,523,801
- ------------------------------------------------------------------------------------------------------------------------------
Total managed consumer loan portfolio $ 20,236,588 $ 17,395,126 $ 14,231,015 $ 12,803,969 $ 10,445,480
- ------------------------------------------------------------------------------------------------------------------------------
Average Balances:
Reported consumer loans $ 7,667,355 $ 5,348,559 $ 4,103,036 $ 3,651,908 $ 2,940,208
Off-balance sheet consumer loans 10,379,558 9,860,978 8,904,146 7,616,553 6,149,070
- ------------------------------------------------------------------------------------------------------------------------------
Total managed consumer loan portfolio $ 18,046,913 $ 15,209,537 $ 13,007,182 $ 11,268,461 $ 9,089,278
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Since 1990, the Company has actively engaged in consumer loan
securitization transactions. Securitization involves the transfer by the Company
of a pool of loan receivables to an entity created for securitizations,
generally a trust or other special purpose entity ("the trusts"). The credit
quality of the receivables is supported by credit enhancements, which may be in
various forms including a letter of credit, a cash collateral guaranty or
account, or a subordinated interest in the receivables in the pool. Certificates
($10.3 billion outstanding as of December 31, 1999) representing undivided
ownership interests in the receivables are sold to the public through an
underwritten offering or to private investors in private placement transactions.
The Company receives the proceeds of the sale.
[CHART]
<TABLE>
<CAPTION>
managed loans
(in billions)
<S> <C>
95 $10.4
96 $12.8
97 $14.2
98 $17.4
99 $20.2
</TABLE>
29
<PAGE>
The Company retains an interest in the trusts ("seller's interest") equal
to the amount of the receivables transferred to the trust in excess of the
principal balance of the certificates. The Company's interest in the trusts
varies as the amount of the excess receivables in the trusts fluctuates as the
accountholders make principal payments and incur new charges on the selected
accounts. The securitization generally results in the removal of the
receivables, other than the seller's interest, from the Company's balance sheet
for financial and regulatory accounting purposes.
The Company's relationship with its customers is not affected by the
securitization. The Company acts as a servicing agent and receives a fee.
Collections received from securitized receivables are used to pay interest
to certificateholders, servicing and other fees, and are available to absorb the
investors' share of credit losses. Amounts collected in excess of that needed to
pay the above amounts are remitted to the Company, as described in Servicing and
Securitizations Income.
Certificateholders in the Company's securitization program are generally
entitled to receive principal payments either through monthly payments during an
amortization period or in one lump sum after an accumulation period.
Amortization may begin sooner in certain circumstances, including if the
annualized portfolio yield (consisting, generally, of interest and fees) for a
three-month period drops below the sum of the certificate rate payable to
investors, loan servicing fees and net credit losses during the period.
Prior to the commencement of the amortization or accumulation period, all
principal payments received on the trusts' receivables are reinvested in new
receivables to maintain the principal balance of certificates. During the
amortization period, the investors' share of principal payments is paid to the
certificateholders until they are paid in full. During the accumulation period,
the investors' share of principal payments is paid into a principal funding
account designed to accumulate amounts so that the certificates can be paid in
full on the expected final payment date.
Table 2 indicates the impact of the consumer loan securitizations on
average earning assets, net interest margin and loan yield for the periods
presented. The Company intends to continue to securitize consumer loans.
[CHART]
<TABLE>
<CAPTION>
managed net interest margin
(in percentages)
<S> <C>
97 8.81
98 9.91
99 10.83
</TABLE>
[CHART]
<TABLE>
<CAPTION>
managed loan yield
(in percentages)
<S> <C>
97 15.73
98 16.99
99 17.59
</TABLE>
table 2: OPERATING DATA AND RATIOS
<TABLE>
<CAPTION>
Year Ended December 31 (Dollars in Thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reported:
Average earning assets $ 9,694,406 $ 7,225,835 $ 5,753,997
Net interest margin 10.86% 9.51% 6.54%
Loan yield 19.33 18.75 15.11
- ------------------------------------------------------------------------------------------------------------
Managed:
Average earning assets $ 20,073,964 $ 17,086,813 $ 14,658,143
Net interest margin 10.83% 9.91% 8.81%
Loan yield 17.59 16.99 15.73
- ------------------------------------------------------------------------------------------------------------
</TABLE>
RISK ADJUSTED REVENUE AND MARGIN
The Company's products are designed with the objective of maximizing revenue for
the level of risk undertaken. Management believes that comparable measures for
external analysis are the risk adjusted revenue and risk adjusted margin of the
managed portfolio. Risk adjusted revenue is defined as net interest income and
non-interest income less net charge-offs. Risk adjusted margin measures risk
adjusted revenue as a percent-
30
<PAGE>
age of average earning assets. It considers not only the loan yield and net
interest margin, but also the fee income associated with these products. By
deducting net charge-offs, consideration is given to the risk inherent in these
differing products.
[CHART]
<TABLE>
<CAPTION>
managed revenue
(in billions)
<S> <C>
97 $2.1
98 $2.8
99 $3.8
</TABLE>
The Company markets its card products to specifically targeted consumer
populations. The terms of each card product are actively managed in an effort to
maximize return at the consumer level, reflecting the risk and expected
performance of the account. For example, card product terms typically include
the ability to reprice individual accounts upwards or downwards based on the
consumer's performance. In addition, since 1998, the Company has aggressively
marketed low non-introductory rate cards to consumers with the best established
credit profiles to take advantage of the favorable risk return characteristics
of this consumer type. Industry competitors have continuously solicited the
Company's customers with similar interest rate strategies. Management believes
the competition has put, and will continue to put, additional pressure on the
Company's pricing strategies.
[CHART]
<TABLE>
<CAPTION>
managed risk
adjusted revenue
(in billions)
<S> <C>
97 $1.2
98 $1.9
99 $3.1
</TABLE>
[CHART]
<TABLE>
<CAPTION>
managed risk
adjusted margin
(in percentages)
<S> <C>
97 8.26
98 11.41
99 15.69
</TABLE>
By applying its IBS and in response to dynamic competitive pressures, the
Company also targets a significant amount of its marketing expense to other
credit card product opportunities. Examples of such products include secured
cards and other customized card products including affinity and co-branded
cards, student cards and other cards targeted to certain markets that are
underserved by the Company's competitors. These products do not have a
significant, immediate impact on managed loan balances; rather they typically
consist of lower credit limit accounts and balances that build over time. The
terms of these customized card products tend to include annual membership fees
and higher annual finance charge rates. The profile of the consumers targeted
for these products, in some cases, may also tend to result in higher account
delinquency rates and consequently higher past-due and overlimit fees as a
percentage of loan receivables outstanding than the low non-introductory rate
products.
Table 3 provides income statement data and ratios for the Company's managed
consumer loan portfolio. The causes of increases and decreases in the various
components of risk adjusted revenue are discussed in further detail in
subsequent sections of this analysis.
table 3: MANAGED RISK ADJUSTED REVENUE
<TABLE>
<CAPTION>
Year Ended December 31 (Dollars in Thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Managed Income Statement:
Net interest income $ 2,174,726 $ 1,692,894 $ 1,292,315
Non-interest income 1,668,381 1,066,413 775,516
Net charge-offs (694,073) (810,306) (856,704)
- ---------------------------------------------------------------------------------------------------------------
Risk adjusted revenue $ 3,149,034 $ 1,949,001 $ 1,211,127
- ---------------------------------------------------------------------------------------------------------------
Ratios:/(1)/
Net interest margin 10.83% 9.91% 8.81%
Non-interest income 8.31 6.24 5.29
Net charge-offs (3.45) (4.74) (5.84)
- ---------------------------------------------------------------------------------------------------------------
Risk adjusted margin 15.69% 11.41% 8.26%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As a percentage of average managed earning assets.
31
<PAGE>
NET INTEREST INCOME
Net interest income is interest and past-due fees earned from the Company's
consumer loans and securities less interest expense on borrowings, which include
interest-bearing deposits, other borrowings and borrowings from senior and
deposit notes.
Reported net interest income for the year ended December 31, 1999, was $1.1
billion compared to $687.3 million for 1998, representing an increase of $365.4
million, or 53%. Net interest income increased as a result of both growth in
earning assets and an increase in the net interest margin. Average earning
assets increased 34% for the year ended December 31, 1999, to $9.7 billion from
$7.2 billion for the year ended December 31, 1998. The reported net interest
margin increased to 10.86% in 1999, from 9.51% in 1998 primarily attributable to
a 58 basis point increase in the yield on consumer loans to 19.33% for the year
ended December 31, 1999, from 18.75% for the year ended December 31, 1998. The
yield on consumer loans increased primarily due to an increase in the amount and
frequency of past-due fees as compared to the prior year, continued growth in
the Company's portfolio of higher yielding products and repricings of low
introductory rate loans during late 1998 and early 1999.
The managed net interest margin for the year ended December 31, 1999,
increased to 10.83% from 9.91% for the year ended December 31, 1998. This
increase was primarily the result of a 60 basis point increase in consumer loan
yield for the year ended December 31, 1999, as well as a decrease of 26 basis
points in borrowing costs to 5.79% in 1999, from 6.05% in 1998. The increase in
consumer loan yield to 17.59% for the year ended December 31, 1999, from 16.99%
in 1998 principally reflected increases in the amount and frequency of past-due
fees and growth in higher yielding loans.
Reported net interest income for the year ended December 31, 1998 was
$687.3 million, compared to $376.1 million for 1997, representing an increase of
$311.1 million, or 83%. Net interest income increased as a result of growth in
earning assets and an increase in the net interest margin. Average earning
assets increased 26% for the year ended December 31, 1998, to $7.2 billion from
$5.8 billion for 1997. The reported net interest margin increased to 9.51% in
1998, from 6.54% in 1997 and was primarily attributable to a 364 basis point
increase in the yield on consumer loans to 18.75% for the year ended December
31, 1998, from 15.11% for the year ended December 31, 1997. The yield on
consumer loans increased primarily due to an increase in the amount and
frequency of past-due fees as compared to the prior year. In addition, the
Company's continued shift to higher yielding products, offset by growth in low
non-introductory rate products, contributed to the increase in yield on consumer
loans during the same periods.
The managed net interest margin for the year ended December 31, 1998,
increased to 9.91% from 8.81% for the year ended December 31, 1997. This
increase was primarily the result of a 126 basis point increase in consumer loan
yield for the year ended December 31, 1998, offset by an increase of nine basis
points in borrowing costs for the same period, as compared to 1997. The increase
in consumer loan yield to 16.99% for the year ended December 31, 1998, from
15.73% in 1997 principally reflected increases in the amount and frequency of
past-due fees and growth in higher yielding loans. The average rate paid on
borrowed funds increased slightly reflecting the Company's shift to more fixed
rate funding to match the increase in fixed rate consumer loan products.
Table 4 provides average balance sheet data, an analysis of net interest
income, net interest spread (the difference between the yield on earning assets
and the cost of interest-bearing liabilities) and net interest margin for each
of the years ended December 31, 1999, 1998 and 1997.
32
<PAGE>
table 4: STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997
- ------------------------------------------------------------------ ------------------------------- ------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(Dollars in Thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets
Consumer loans(1) $ 7,667,355 $ 1,482,371 19.33% $5,348,559 $ 1,003,122 18.75% $ 4,103,036 $ 619,785 15.11%
Securities available for sale 1,852,826 105,438 5.69 1,628,164 94,436 5.80 1,289,592 78,542 6.09
Other 174,225 5,675 3.26 249,112 13,978 5.61 361,369 19,658 5.44
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 9,694,406 $ 1,593,484 16.44% 7,225,835 $ 1,111,536 15.38% 5,753,997 $ 717,985 12.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 17,046 4,385 (2,636)
Allowance for loan losses (269,375) (214,333) (132,728)
Premises and equipment, net 366,709 201,173 181,610
Other 1,276,227 1,113,372 768,694
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $11,085,013 $8,330,432 $ 6,568,937
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Equity:
Interest-bearing liabilities
Deposits $ 2,760,536 $ 137,792 4.99% $1,430,042 $ 67,479 4.72% $ 958,885 $ 41,932 4.37%
Other borrowings 1,687,042 100,392 5.95 1,473,949 96,130 6.52 721,405 46,068 6.39
Senior and deposit notes 4,391,438 302,698 6.89 3,787,639 260,675 6.88 3,718,988 253,849 6.83
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,839,016 $ 540,882 6.12% 6,691,630 $ 424,284 6.34% 5,399,278 $ 341,849 6.33%
Other 838,098 550,819 345,582
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,677,114 7,242,449 5,744,860
Equity 1,407,899 1,087,983 824,077
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $11,085,013 $8,330,432 $ 6,568,937
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest spread 10.32% 9.04% 6.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income to average
earning assets 16.44 15.38 12.48
Interest expense to average
earning assets 5.58 5.87 5.94
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest margin 10.86% 9.51% 6.54%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Interest income includes past-due fees on loans of approximately $478,918,
$301,979 and $132,297 for the years ended December 31, 1999, 1998 and 1997,
respectively.
33
<PAGE>
INTEREST VARIANCE ANALYSIS
Net interest income is affected by changes in the average interest rate earned
on earning assets and the average interest rate paid on interest-bearing
liabilities. In addition, net interest income is affected by changes in the
volume of earning assets and interest-bearing liabilities. Table 5 sets forth
the dollar amount of the increases (decreases) in interest income and interest
expense resulting from changes in the volume of earning assets and
interest-bearing liabilities and from changes in yields and rates.
table 5: INTEREST VARIANCE ANALYSIS
<TABLE>
<CAPTION>
Year Ended December 31 1999 vs. 1998 1998 vs. 1997
- ------------------------------------------------------------------------------------- -----------------------------------------
Increase Change Due to/(1)/ Increase Change Due to/(1)/
(In Thousands) (Decrease) Volume Yield/Rate (Decrease) Volume Yield/Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Consumer loans $ 479,249 $ 447,414 $ 31,835 $ 383,337 $ 213,453 $ 169,884
Securities available for sale 11,002 12,814 (1,812) 15,894 19,789 (3,895)
Other (8,303) (3,466) (4,837) (5,680) (6,281) 601
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest income 481,948 401,413 80,535 393,551 206,040 187,511
- ---------------------------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits 70,313 66,199 4,114 25,547 22,007 3,540
Other borrowings 4,262 13,140 (8,878) 50,062 49,060 1,002
Senior and deposit notes 42,023 41,619 404 6,826 4,713 2,113
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest expense 116,598 131,870 (15,272) 82,435 81,941 494
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income/(1)/ $ 365,350 $ 258,291 $ 107,059 $ 311,116 $ 111,967 $ 199,149
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The change in interest due to both volume and yield/rates has been allocated
in proportion to the relationship of the absolute dollar amounts of the
change in each. The changes in income and expense are calculated
independently for each line in the table. The totals for the volume and
yield/rate columns are not the sum of the individual lines.
SERVICING AND SECURITIZATIONS INCOME
In accordance with SFAS 125, the Company records gains or losses on the
securitizations of consumer loan receivables on the date of sale based on the
estimated fair value of assets sold and retained and liabilities incurred in the
sale. Gains represent the present value of estimated excess cash flows the
Company has retained over the estimated outstanding period of the receivables
and are included in servicing and securitizations income. This excess cash flow
essentially represents an "interest only" ("I/O") strip, consisting of the
excess of finance charges and past-due fees over the sum of the return paid to
certificateholders, estimated contractual servicing fees and credit losses.
However, exposure to credit losses on the securitized loans is contractually
limited to these cash flows.
Servicing and securitizations income increased $397.3 million, or 50%, to
$1.2 billion for the year ended December 31, 1999, from $789.8 million in 1998.
This increase was primarily due to a decrease in net charge-offs on such loans
as a result of improved general economic trends in consumer credit, increased
purchase volume, membership and overlimit fees, as well as a slight increase in
average off-balance sheet consumer loans.
Servicing and securitizations income increased $107.5 million, or 16%, to
$789.8 million for the year ended December 31, 1998, from $682.3 million for
1997. This increase was primarily due to an increase of 11% in average off-
balance sheet consumer loans. Also contributing to this increase were decreased
charge-offs on such loans as a result of improving consumer credit.
Certain estimates inherent in the determination of the fair value of the
I/O strip are influenced by factors outside the Company's control, and as a
result, such estimates could materially change in the near term. Any future
gains that will be recognized in accordance with SFAS 125 will be dependent on
the timing and amount of future securitizations. The Company
34
<PAGE>
will continuously assess the performance of new and existing securitization
transactions as estimates of future cash flows change.
OTHER NON-INTEREST INCOME
Interchange income increased $57.8 million, or 67%, to $144.3 million for the
year ended December 31, 1999, from $86.5 million in 1998. Service charges and
other fees increased to $1.0 billion, or 70%, for the year ended December 31,
1999 compared to $612.0 million for the year ended December 31, 1998. These
increases were primarily due to a 42% increase in the average number of accounts
for the year ended December 31, 1999, from 1998, an increase in purchase volume,
an increase in interchange rates received by the Company and a shift to more
fee-intensive products.
Interchange income increased $37.5 million, or 76%, to $86.5 million for
the year ended December 31, 1998, from $49.0 million in 1997. Service charges
and other fees increased to $612.0 million, or 81%, for the year ended December
31, 1998 compared to $337.8 million for the year ended December 31, 1997. These
increases were due to a 39% increase in the average number of accounts for the
year ended December 31, 1998, from 1997, an increase in charge volume, a shift
to more fee-intensive products and changes in the terms of overlimit fees
charged.
NON-INTEREST EXPENSE
Non-interest expense for the year ended December 31, 1999, increased $1.0
billion, or 68%, to $2.5 billion from $1.5 billion for the year ended December
31, 1998. Contributing to the increase in non-interest expense were marketing
expenses which increased $285.6 million, or 64%, to $731.9 million in 1999, from
$446.3 million in 1998. The increase in marketing expenses during 1999 reflects
the Company's continued identification of and investments in opportunities for
growth. Salaries and associate benefits increased $303.8 million, or 64%, to
$780.2 million in 1999, from $476.4 million in 1998, as the Company added
approximately 5,000 associates to our staffing levels to manage the growth in
the Company's accounts. All other non-interest expenses increased $411.0
million, or 76%, to $952.9 million for the year ended December 31, 1999, from
$541.9 million in 1998. The increase in other non-interest expense, as well as
the increase in salaries and associate benefits, was primarily a result of a 42%
increase in the average number of accounts for the year ended December 31, 1999
and the Company's continued exploration and testing of new products and markets.
[CHART]
<TABLE>
<CAPTION>
marketing investment
(in millions)
<S> <C>
97 $225
98 $446
99 $732
</TABLE>
Non-interest expense for the year ended December 31, 1998 increased $587.6
million, or 67%, to $1.5 billion from $877.0 million for the year ended December
31, 1997. Contributing to the increase in non-interest expense were marketing
expenses which increased $221.4 million, or 98%, to $446.3 million in 1998, from
$224.8 million in 1997. The increase in marketing expenses during 1998 reflects
the Company's continued identification of and investments in opportunities for
growth. Salaries and associate benefits increased $187.1 million, or 65%, to
$476.4 million in 1998 from $289.3 million in 1997, as the Company added
approximately 4,500 associates to manage the growth in the Company's accounts.
This increase also reflects an additional $45.3 million in compensation expense
associated with the Company's associate stock plans compared to the prior year.
All other non-interest expenses increased $179.1 million, or 49%, to $541.9
million for the year ended December 31, 1998 from $362.8 million in 1997. The
increase in other non-interest expenses was primarily the result of a 39%
increase in the average number of accounts for the year ended December 31, 1998.
INCOME TAXES
The Company's income tax rate was 37%, 38% and 38%, for the years ended December
31, 1999, 1998 and 1997, respectively. The effective rate includes both state
and federal income tax components.
ASSET QUALITY
The asset quality of a portfolio is generally a function of the initial
underwriting criteria used, levels of competition, account
35
<PAGE>
management activities and demographic concentration, as well as general economic
conditions. The seasoning of the accounts is also an important factor as
accounts tend to exhibit a rising trend of delinquency and credit losses as they
season. As of December 31, 1999 and 1998, 60% and 59% of managed accounts,
respectively, representing 51% of the total managed loan balance, were less than
eighteen months old. Accordingly, it is likely that the Company's managed loan
portfolio could experience increased levels of delinquency and credit losses as
the average age of the Company's accounts increases.
Changes in the rates of delinquency and credit losses can also result from
a shift in the product mix. As discussed in "Risk Adjusted Revenue and Margin,"
certain other customized card products have, in some cases, higher delinquency
and higher charge-off rates. In the case of secured card loans, collateral, in
the form of cash deposits, reduces any ultimate charge-offs. The costs
associated with higher delinquency and charge-off rates are considered in the
pricing of individual products.
During 1999, general economic conditions for consumer credit remained
stable as industry levels of charge-offs (including bankruptcies) and
delinquencies both decreased. These trends have positively impacted the
Company's 1999 results.
DELINQUENCIES
Table 6 shows the Company's consumer loan delinquency trends for the years
presented on a reported and managed basis. The entire balance of an account is
contractually delinquent if the minimum payment is not received by the payment
due date. Delinquencies not only have the potential to impact earnings if the
account charges off, they also are costly in terms of the personnel and other
resources dedicated to resolving the delinquencies.
The 30-plus day delinquency rate for the reported consumer loan portfolio
increased to 5.92% as of December 31, 1999, from 4.70% as of December 31, 1998.
The 30-plus day delinquency rate for the managed consumer loan portfolio was
5.23% as of December 31, 1999, up from 4.70% as of December 31, 1998.
[CHART]
<TABLE>
<CAPTION>
managed 30+ day delinquency rate
(in percentages)
<S> <C>
97 6.20
98 4.70
99 5.23
</TABLE>
[CHART]
<TABLE>
<CAPTION>
managed net charge-off rate
(in percentages)
<S> <C>
97 6.59
98 5.33
99 3.85
</TABLE>
table 6: DELINQUENCIES
<TABLE>
<CAPTION>
December 31 1999 1998 1997 1996 1995
- ----------------------------------------- -------------------- ------------------ ----------------- -------------------
% of % of % of % of % of
Total Total Total Total Total
(Dollars in Thousands) Loans Loans Loans Loans Loans Loans Loans Loans Loans Loans
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reported:
Loans outstanding $ 9,913,549 100.00% $ 6,157,111 100.00% $ 4,861,687 100.00% $ 4,343,902 100.00% $ 2,921,679 100.00%
Loans delinquent:
30-59 days 236,868 2.39 123,162 2.00 104,216 2.14 96,819 2.23 65,711 2.25
60-89 days 129,251 1.30 67,504 1.10 64,217 1.32 55,679 1.28 38,311 1.31
90 or more days 220,513 2.23 98,798 1.60 99,667 2.05 111,791 2.57 79,694 2.73
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 586,632 5.92% $ 289,464 4.70% $ 268,100 5.51% $ 264,289 6.08% $ 183,716 6.29%
- -----------------------------------------------------------------------------------------------------------------------------------
Managed:
Loans outstanding $20,236,588 100.00% $17,395,126 100.00% $14,231,015 100.00% $12,803,969 100.00% $10,445,480 100.00%
Loans delinquent:
30-59 days 416,829 2.06 329,239 1.89 327,407 2.30 279,787 2.19 165,306 1.58
60-89 days 238,476 1.18 182,982 1.05 213,726 1.50 162,668 1.27 92,665 .89
90 or more days 403,464 1.99 305,589 1.76 340,887 2.40 356,700 2.78 181,243 1.73
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 1,058,769 5.23% $ 817,810 4.70% $ 882,020 6.20% $ 799,155 6.24% $ 439,214 4.20%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
NET CHARGE-OFFS
Net charge-offs include the principal amount of losses (excluding accrued and
unpaid finance charges, fees and fraud losses) less current period recoveries.
The Company charges off credit card loans (net of any collateral) at 180 days
past due date.
For the year ended December 31, 1999, the mamaged net charge-off rate
decreased 148 basis points to 3.85%. For the year ended December 31, 1999, the
reported net charge-off rate decreased 65 basis points to 3.59%. The decreases
in managed and reported net charge-off rates were the result of improved general
economic trends in consumer credit performance as well as improved recovery
efforts. The impact was less apparent in the reported net charge-offs due to
changes in the composition of the reported portfolio compared to the off-balance
sheet portfolio. Table 7 shows the Company's net charge-offs for the years
presented on a reported and managed basis.
The Company's objective is to optimize the profitability of each account
within acceptable risk characteristics. The Company takes measures as necessary,
including requiring collateral on certain accounts and other marketing and
account management techniques, to maintain the Company's credit quality
standards and to manage the risk of loss on existing accounts. See "Risk
Adjusted Revenue and Margin" for further discussion.
table 7: NET CHARGE-OFFS
<TABLE>
<CAPTION>
Year Ended December 31 (Dollars in Thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reported:
Average loans outstanding $ 7,667,355 $ 5,348,559 $ 4,103,036 $ 3,651,908 $ 2,940,208
Net charge-offs 275,470 226,531 198,192 132,590 59,618
Net charge-offs as a percentage of
average loans outstanding 3.59% 4.24% 4.83% 3.63% 2.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Managed:
Average loans outstanding $ 18,046,913 $ 15,209,537 $13,007,182 $ 11,268,461 $ 9,089,278
Net charge-offs 694,073 810,306 856,704 477,732 204,828
Net charge-offs as a percentage of
average loans outstanding 3.85% 5.33% 6.59% 4.24% 2.25%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at an amount estimated to be
sufficient to absorb probable future losses, net of recoveries (including
recovery of collateral), inherent in the existing reported loan portfolio. The
provision for loan losses is the periodic cost of maintaining an adequate
allowance. Management believes that the allowance for loan losses is adequate to
cover anticipated losses in the reported homogeneous consumer loan portfolio
under current conditions. There can be no assurance as to future credit losses
that may be incurred in connection with the Company's consumer loan portfolio,
nor can there be any assurance that the loan loss allowance that has been
established by the Company will be sufficient to absorb such future credit
losses. The allowance is a general allowance applicable to the entire reported
homogeneous consumer loan portfolio, including the Company's international
portfolio which to date has performed with relatively lower loss and delinquency
rates than the overall portfolio.
The amount of allowance necessary is determined primarily based on a
migration analysis of delinquent and current accounts. In evaluating the
sufficiency of the allowance for loan losses, management also takes into
consideration the following factors: recent trends in delinquencies and charge-
offs including bankrupt, deceased and recovered amounts; historical trends in
loan volume; forecasting uncertainties and size of credit risks; the degree of
risk inherent in the composition of the loan portfolio; economic conditions;
credit evaluations and underwriting policies. Additional information on the
Company's
37
<PAGE>
allowance for loan loss policy can be found in Note A to the Consolidated
Financial statements.
Table 8 sets forth the activity in the allowance for loan losses for the
periods indicated. See "Asset Quality," "Delinquencies" and "Net Charge-Offs"
for a more complete analysis of asset quality.
table 8 SUMMARY OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Year Ended December 31 (Dollars In Thousands) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 231,000 $ 183,000 $ 118,500 $ 72,000 $ 68,516
Provision for loan losses 382,948 267,028 262,837 167,246 65,895
Acquisitions/other 3,522 7,503 (2,770) (18,887) (11,504)
Charge-offs (400,143) (294,295) (223,029) (115,159) (64,260)
Recoveries 124,673 67,764 27,462 13,300 13,353
- ------------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (275,470) (226,531) (195,567) (101,859) (50,907)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 342,000 $ 231,000 $ 183,000 $ 118,500 $ 72,000
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses to loans at the end of year 3.45% 3.75% 3.76% 2.73% 2.86%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the year ended December 31, 1999, the provision for loan losses
increased to $382.9 million or 43%, from the 1998 provision for loan losses of
$267.0 million as average reported loans increased 43%. The Company increased
the allowance for loan losses by $111.0 million during 1999 due to the
increase in the delinquency rate, the growth in the reported loans and the
increase in the dollar amount of net charge-offs.
For the year ended December 31,1998, the provision for loan losses
increased to $267.0 million, or 2%, from the 1997 provision for loan losses of
$262.8 million as average reported loans increased by 30%, offset by general
improvements in consumer credit performance. The company increased the
allowance for loan losses by $48.0 million during 1998 primarily due to the
growth in reported loans.
FUNDING
The Company has established access to a wide range of domestic funding
alternatives, in addition to securitization of its consumer loans. The Company
primarily issues senior unsecured debt of the Bank through its $8 billion bank
note program, of which $3.6 billion was outstanding as of December 31, 1999,
with original terms of one to ten years. During 1999, the bank continued to
expand its fixed income investor base by launching $925 million of benchmark
underwritten senior note transactions. The Corporation continued to access the
capital markets with a $225 million seven-year senior note.
Internationally, the Company has funding programs designed for foreign
investors or to raise funds in foreign currencies. The Company has accessed the
international securitization market for a number of years with both US$ and
foreign denominated transactions. Both of the Company's committed revolving
credit facilities offer foreign currency funding options. The Bank has
established a $1.0 billion Euro Medium Term Note program that is targeted to
non-U.S. investors. The Company funds its foreign assets by directly or
synthetically borrowing or securitizing in the local currency to mitigate the
financial statement effect of currency transaction.
[GRAPH OMITTED]
38
<PAGE>
The Company has significantly expanded its retail deposit gathering efforts
through both direct and broker marketing channels. The Company uses its IBS
capabilities to test and market a variety of retail deposit origination
strategies, including the Internet, as well as to develop customized account
management programs. As of December 31, 1999, the Company had $3.8 billion in
interest-bearing deposits, with maturities up to ten years.
Table 9 reflects the costs of other borrowings of the Company as of and for
each of the years ended December 31, 1999, 1998 and 1997.
table 9: SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Maximum
Outstanding Outstanding Average Year-End
as of any as of Average Interest Interest
(Dollars in Thousands) Month-End Year-End Outstanding Rate Rate
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
Federal funds purchased
and resale agreements $ 1,491,463 $ 1,240,000 $ 1,046,475 5.33% 5.84%
Other 193,697 97,498 175,593 8.42 3.97
- -------------------------------------------------------------------------------------------------------
Total $ 1,337,498 $ 1,222,068 5.77% 5.70%
- -------------------------------------------------------------------------------------------------------
1998
Federal funds purchased
and resale agreements $ 1,451,029 $ 1,227,000 $ 1,169,952 6.09% 5.53%
Other 417,279 417,279 206,204 8.44 6.58
- -------------------------------------------------------------------------------------------------------
Total $ 1,644,279 $ 1,376,156 6.44% 5.80%
- -------------------------------------------------------------------------------------------------------
1997
Federal funds purchased
and resale agreements $ 999,200 $ 705,863 $ 503,843 5.54% 5.75%
Other 160,144 90,249 128,033 8.71 7.09
- -------------------------------------------------------------------------------------------------------
Total $ 796,112 $ 631,876 6.18% 5.90%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Table 10 shows the maturities of certificates of deposit in denominations
of $100,000 or greater (large denomination CDs) as of December 31, 1999.
table 10: MATURITIES OF DOMESTIC LARGE
DENOMINATION CERTIFICATES -- $100,000 OR MORE
December 31, 1999 (Dollars in Thousands) Balance Percent
- -----------------------------------------------------------------------------
3 months or less $ 205,630 19.11%
Over 3 through 6 months 106,435 9.89
Over 6 through 12 months 254,858 23.68
Over 12 months 509,153 47.32
- -----------------------------------------------------------------------------
Total $ 1,076,076 100.00%
- -----------------------------------------------------------------------------
Additional information regarding funding can be found in Note E to the
Consolidated Financial Statements.
LIQUIDITY
Liquidity refers to the Company's ability to meet its cash needs. The Company
meets its cash requirements by securitizing assets, gathering deposits and
issuing debt. As discussed in "Managed Consumer Loan Portfolio," a significant
source of liquidity for the Company has been the securitization of consumer
loans. Maturity terms of the existing securitizations vary from 2000 to 2008 and
typically have accumulation periods during which principal payments are
aggregated to make payments to investors. As payments on the loans are
accumulated and are no longer reinvested in new loans, the Company's funding
requirements for such new loans increase accordingly. The
39
<PAGE>
occurrence of certain events may cause the securitization transactions to
amortize earlier than scheduled, which would accelerate the need for funding.
Table 11 shows the amounts of investor principal from off-balance sheet
securitized consumer loans that are expected to amortize, or be otherwise paid
over the periods indicated, based on outstanding securitized consumer loans as
of January 1, 2000. As of December 31, 1999 and 1998, 51% and 65%, respectively,
of the Company's total managed loans were securitized.
table 11: SECURITIZATIONS -- AMORTIZATION TABLE
<TABLE>
<CAPTION>
(Dollars in Thousands) 2000 2001 2002 2003 2004-2008
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 10,319,400 $ 8,125,365 $ 6,062,870 $ 4,108,738 $ 3,248,517
Less repayment amounts (2,194,035) (2,062,495) (1,954,132) (860,221) (3,248,517)
- ----------------------------------------------------------------------------------------------------------------
Balance at end of year $ 8,125,365 $ 6,062,870 $ 4,108,738 $ 3,248,517 $ --
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
As such amounts amortize or are otherwise paid, the Company believes it can
securitize consumer loans, purchase federal funds and establish other funding
sources to fund the amortization or other payment of the securitizations in the
future, although no assurance can be given to that effect. Additionally, the
Company maintains a portfolio of high-quality securities such as U.S. Treasuries
and other U.S. government obligations, commercial paper, interest-bearing
deposits with other banks, federal funds and other cash equivalents in order to
provide adequate liquidity and to meet its ongoing cash needs. As of December
31, 1999, the Company had $2.0 billion of such securities.
Liability liquidity is measured by the Company's ability to obtain borrowed
funds in the financial markets in adequate amounts and at favorable rates. As of
December 31, 1999, the Company, the Bank and the Savings Bank collectively had
over $1.6 billion in unused commitments, under its credit facilities, available
for liquidity needs.
CAPITAL ADEQUACY
The Bank and the Savings Bank are subject to capital adequacy guidelines adopted
by the Federal Reserve Board (the "Federal Reserve") and the Office of Thrift
Supervision (the "OTS") (collectively, the "regulators"), respectively. The
capital adequacy guidelines and the regulatory framework for prompt corrective
action require the Bank and the Savings Bank to maintain specific capital levels
based upon quantitative measures of their assets, liabilities and off-balance
sheet items.
The most recent notifications received from the regulators categorized the
Bank and the Savings Bank as "well-capitalized." As of December 31, 1999, there
are no conditions or events since the notifications discussed above that
management believes have changed either the Bank or the Savings Bank's capital
category.
During 1996, the Bank received regulatory approval and established a branch
office in the United Kingdom. In connection with such approval, the Company
committed to the Federal Reserve that, for so long as the Bank maintains a
branch in the United Kingdom, the Company will maintain a minimum Tier 1
Leverage ratio of 3.0%. As of December 31, 1999 and 1998, the Company's Tier 1
Leverage ratio was 12.79% and 13.49%, respectively.
Additional information regarding capital adequacy can be found in Note J to
the Consolidated Financial Statements.
DIVIDEND POLICY
Although the Company expects to reinvest a substantial portion of its earnings
in its business, the Company intends to continue to pay regular quarterly cash
dividends on the Common Stock. The declaration and payment of dividends, as well
as the amount thereof, is subject to the discretion of the Board of Directors of
the Company and will depend upon the Company's results of operations, financial
condition, cash requirements, future prospects and other factors deemed relevant
by the Board of Directors. Accordingly, there can be no assurance that the
Corporation will declare and pay any dividends. As a holding company, the
ability of the Company to pay dividends is dependent upon the receipt of
dividends or other payments from its subsidiaries. Applicable banking
regulations and provisions that may be contained in borrowing agreements of the
Company or
40
<PAGE>
its subsidiaries may restrict the ability of the Company's subsidiaries to pay
dividends to the Corporation or the ability of the Corporation to pay dividends
to its stockholders.
OFF-BALANCE SHEET RISK
The Company is subject to off-balance sheet risk in the normal course of
business including commitments to extend credit, reduce the interest rate
sensitivity of its securitization transactions and its off-balance sheet
financial instruments. The Company enters into interest rate swap agreements in
the management of its interest rate exposure. The Company also enters into
forward foreign currency exchange contracts and currency swaps to reduce its
sensitivity to changing foreign currency exchange rates. These off-balance sheet
financial instruments involve elements of credit, interest rate or foreign
currency exchange rate risk in excess of the amount recognized on the balance
sheet. These instruments also present the Company with certain credit, market,
legal and operational risks. The Company has established credit policies for
off-balance sheet instruments as it has for on-balance sheet instruments.
Additional information regarding off-balance sheet financial instruments
can be found in Note N to the Consolidated Financial Statements.
INTEREST RATE SENSITIVITY
Interest rate sensitivity refers to the change in earnings that may result from
changes in the level of interest rates. To the extent that managed interest
income and expense do not respond equally to changes in interest rates, or that
all rates do not change uniformly, earnings could be affected. The Company's
managed net interest income is affected by changes in short-term interest rates,
primarily the London InterBank Offering Rate, as a result of its issuance of
interest-bearing deposits, variable rate loans and variable rate
securitizations. The Company manages and mitigates its interest rate sensitivity
through several techniques which include, but are not limited to, changing the
maturity, repricing and distribution of assets and liabilities and entering into
interest rate swaps.
The Company measures exposure to its interest rate risk through the use of
a simulation model. The model generates a distribution of possible twelve-month
managed net interest income outcomes based on (i) a set of plausible interest
rate scenarios, as determined by management based upon historical trends and
market expectations, (ii) all existing financial instruments, including swaps,
and (iii) an estimate of ongoing business activity over the coming twelve
months. The Company's asset/liability management policy requires that based on
this distribution there be at least a 95% probability that managed net interest
income achieved over the coming twelve months will be no more than 3% below the
mean managed net interest income of the distribution. As of December 31, 1999,
the Company was in compliance with the policy; more than 99% of the outcomes
generated by the model produced a managed net interest income of no more than
1.3% below the mean outcome. The interest rate scenarios evaluated as of
December 31, 1999 included scenarios in which short-term interest rates rose in
excess of 400 basis points or fell by as much as 175 basis points over twelve
months.
The analysis does not consider the effects of the changed level of overall
economic activity associated with various interest rate scenarios. Further, in
the event of a rate change of large magnitude, management would likely take
actions to further mitigate its exposure to any adverse impact. For example,
management may reprice interest rates on outstanding credit card loans subject
to the right of the consumers in certain states to reject such repricing by
giving timely written notice to the Company and thereby relinquishing charging
privileges. However, the repricing of credit card loans may be limited by
competitive factors as well as certain legal constraints.
Interest rate sensitivity at a point in time can also be analyzed by
measuring the mismatch in balances of earning assets and interest-bearing
liabilities that are subject to repricing in future periods.
Table 12 reflects the interest rate repricing schedule for earning assets
and interest-bearing liabilities as of December 31, 1999.
SUBSEQUENT EVENTS
On February 22, 2000, the Company's Board of Directors approved the repurchase
of up to 10,000,000 shares of the Company's common stock over the next two
years, in addition to the 2,250,000 shares then remaining under the Company's
repurchase programs approved in 1997 and 1998. As of February 29, 2000, the
Company had 10,846,400 shares available for repurchase under these programs.
41
<PAGE>
table 12: INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
Within *180 Days- *1 Year- Over
As of December 31, 1999 Subject to Repricing (Dollars in Millions) 180 Days 1 Year 5 Years 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earning assets:
Interest-bearing deposits at other banks $ 112
Securities available for sale 246 $ 210 $ 1,025 $ 375
Consumer loans 4,632 7 5,275
- ----------------------------------------------------------------------------------------------------------------------------
Total earning assets 4,990 217 6,300 375
Interest-bearing liabilities:
Interest-bearing deposits 1,406 717 1,598 63
Other borrowings 2,715 65
Senior notes 631 135 2,709 706
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,752 917 4,307 769
Non-rate related assets (1,137)
- ----------------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap 238 (700) 1,993 (1,531)
Impact of swaps 1,930 (287) (1,350) (293)
Impact of consumer loan securitizations (5,018) (274) 5,893 (601)
- ----------------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap adjusted for impact
of securitizations and swaps $ (2,850) $(1,261) $ 6,536 $ (2,425)
Adjusted gap as a percentage of managed assets -12.06% -5.33% 27.65% -10.26%
- ----------------------------------------------------------------------------------------------------------------------------
Adjusted cumulative gap $ (2,850) $(4,111) $ 2,425 $ --
Adjusted cumulative gap as a percentage
of managed assets -12.06% -17.39% 10.26% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
BUSINESS OUTLOOK
Earnings, Goals and Strategies
This business outlook section summarizes the Company's expectations for earnings
for the year ending December 31, 2000, and its primary goals and strategies for
continued growth. The statements contained in this section are based on
management's current expectations. Certain statements are forward looking and,
therefore, actual results could differ materially. Factors, which could
materially influence results, are set forth throughout this section and in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 (Part
I, Item 1, Risk Factors).
The Company has set targets, dependent on the factors set forth below, to
achieve a 25% return on equity in 2000 and to increase its earnings per share in
2000 by approximately 30% over 1999 earnings per share. As discussed elsewhere
in this report and below, the Company's actual earnings are a function of its
revenues (net interest income and non-interest income on its earning assets),
consumer usage and payment patterns, credit quality of its earning assets (which
affects fees and charge-offs), marketing expenses and operating expenses.
Product and Market Opportunities
The Company's strategy for future growth has been, and is expected to continue
to be, to apply its proprietary IBS to its lending business as well as to other
businesses, both financial and non-financial, including telecommunications and
Internet services. The Company will seek to identify new product opportunities
and to make informed investment decisions regarding new and existing products.
The Company's lending and other financial and non-financial products are subject
to competitive pressures, which management anticipates will increase as these
markets mature.
Lending
Lending includes credit card and other consumer lending products, including
automobile financing. Credit card opportunities include, and are expected to
continue to include, a wide variety of highly customized products with interest
rates, credit lines and other features specifically tailored for numerous
consumer populations. The Company expects continued growth across a broad
spectrum of new and existing customized products, which are distinguished by a
varied range of credit lines, pricing structures and other characteristics. For
example, the Company's low non-introductory rate products, which are marketed to
consumers
* Asterisks are equal to the greater than sign.
42
<PAGE>
with the best established credit profiles, are characterized by higher credit
lines, lower yields and an expectation of lower delinquencies and credit losses
than the traditional low introductory rate balance transfer products. On the
other hand, certain other customized card products are characterized by lower
credit lines, higher yields (including fees) and in some cases, higher
delinquencies and credit losses than the Company's traditional products. These
products also involve higher operational costs but exhibit better response
rates, less adverse selection, less attrition and a greater ability to reprice
than the Company's traditional introductory rate products. More importantly, as
a whole, all of these customized products continue to have less volatile returns
than the traditional products in recent market conditions.
Telecommunications
The Company markets telecommunications services through its subsidiary America
One Communications, Inc. ("America One"). In the first half of 1999, America
One's primary business, the reselling of analog and digital wireless services
through direct marketing channels, began experiencing significant competitive
pressures in its core wireless markets. In response to these changing market
conditions, the Company decreased its marketing investment in America One during
the second half of 1999 and has been testing wireless products and services in
other markets that are not being adequately served by the major
telecommunications competitors. Management remains optimistic that, over time,
its strategy can be successful in the wireless telecommunications industry.
Accordingly, marketing investment may increase in the future.
International Expansion
The Company has expanded its existing operations outside of the United States
and has experienced growth in the number of accounts and loan balances in its
international business. To date, the Company's principal operations outside of
the United States have been in the United Kingdom, with additional operations in
Canada. To support the continued growth of its United Kingdom business and any
future business in Europe, the Company opened a new operations center in
Nottingham, England in July 1998 and expanded it in early 1999. The Company
anticipates entering and doing business in additional countries from time to
time as opportunities arise.
The Company will continue to apply its IBS in an effort to balance the mix
of credit card products with other financial and non-financial products and
services to optimize profitability within the context of acceptable risk. The
Company's growth through expansion and product diversification will be affected
by the ability to internally build or acquire the necessary operational and
organizational infrastructure, recruit experienced personnel, fund these new
businesses and manage expenses. Although management believes it has the
personnel, financial resources and business strategy necessary for continued
success, there can be no assurance that the Company's results of operations and
financial condition in the future will reflect its historical financial
performance.
Marketing Investment
The Company expects its 2000 marketing expenses to exceed 1999's expense level,
as the Company continues to invest in its various credit card products and
services, brand development and other financial and non-financial products and
services. Increasing marketing expenses have historically led to the growth of
accounts and revenues that, in turn, have enabled the Company to meet or exceed
its earnings per share and return on equity targets for the last five years. The
Company cautions, however, that an increase in marketing expenses does not
necessarily equate to a comparable increase in outstanding balances or accounts
based on historical results. As the Company's portfolio continues to grow,
generating balances and accounts to offset attrition requires increasing amounts
of marketing. Intense competition in the credit card market has resulted in a
decrease in credit card response rates and has reduced the productivity of
marketing dollars invested in that line of business. In addition, the cost to
acquire new accounts varies across product lines and is expected to rise as the
Company moves beyond the domestic card business. With competition affecting the
profitability of traditional introductory rate card products, the Company has
been allocating, and expects to continue to allocate, a greater portion of its
marketing expense to other customized credit card products and other financial
and non-financial products. For example, the cost to acquire an America One
wireless account traditionally has included the cost of providing a free phone
to the customer, and consequently has been substantially more than the cost to
acquire a credit card account. The Company intends to continue a flexible
approach in its allocation of marketing expenses. The Company is also developing
a brand marketing strategy to supplement current strategies and is investigating
opportunities on the Internet. The actual amount of marketing investment is
subject to a variety of external and internal factors, such as competition in
the consumer credit and wireless service industries, general economic conditions
affecting consumer credit performance, the asset quality of the Company's
portfolio and the identification of market opportunities across product lines
that exceed the Company's targeted rates of return on investment.
The amount of marketing expense allocated to various products or businesses
will influence the characteristics of the Company's portfolio as various
products or businesses are
43
<PAGE>
characterized by different account growth, loan growth and asset quality
characteristics. The Company currently expects continued strong account growth
and loan growth in 2000. Actual growth, however, may vary significantly
depending on the Company's actual product mix and the level of attrition on the
Company's managed portfolio, which is primarily affected by competitive
pressures.
Impact of Delinquencies, Charge-Offs and Attrition
The Company's earnings are particularly sensitive to delinquencies and
charge-offs on the Company's portfolio and to the level of attrition due to
competition in the credit card industry. As delinquency levels fluctuate, the
resulting amount of past-due and overlimit fees, which are significant sources
of revenue for the Company, will also fluctuate. Further, the timing of revenues
from increasing or decreasing delinquencies precedes the related impact of
higher or lower charge-offs that ultimately result from varying levels of
delinquencies. Delinquencies and net charge-offs are impacted by general
economic trends in consumer credit performance, including bankruptcies, the
degree of seasoning of the Company's portfolio and the product mix.
As of December 31, 1999, the Company had the lowest net charge-off rate
among the top ten credit card issuers in the United States. However, management
expects delinquencies to increase moderately through 2000 and that, as a result,
charge-offs will also increase in 2000. Management cautions that delinquency and
charge-off levels are not always predictable and may vary from projections. In
the case of an economic downturn or recession, delinquencies and charge-offs are
likely to increase more quickly. In addition, competition in the credit card
industry, as measured by the volume of mail solicitations, declined in 1999 but
remains very high. Competition can affect the Company's earnings by increasing
attrition of the Company's outstanding loans (thereby reducing interest and fee
income) and by making it more difficult to retain and attract more profitable
customers.
The Year 2000 Issue
The year 2000 problem is a result of computer systems using two digits rather
than four digits to define an applicable year. The Company uses a significant
number of internal computer software programs and operating systems across its
entire organization. In addition, the Company depends on its external business
vendors to provide external services for its operations. As of February 29,
2000, the Company had not experienced material difficulties with either our
internal systems or vendors arising from the advent of the year 2000. The
Company will continue to monitor its systems and address any issues that might
arise. As of December 31, 1999, the Company had spent approximately $14.5
million for remediation of year 2000 issues. The Company expects to spend an
additional $500,000 in 2000 to continue to monitor its systems for year 2000
compliance.
Cautionary Factors
The Company's strategies and objectives outlined above, and the other
forward-looking statements contained in this section, involve a number of risks
and uncertainties. The Company cautions readers that any forward-looking
information is not a guarantee of future performance and that actual results
could differ materially. In addition to the factors discussed above, among the
other factors that could cause actual results to differ materially are the
following: continued intense competition from numerous providers of products and
services which compete with the Company's businesses; with respect to financial
and other products, changes in the Company's aggregate accounts or consumer loan
balances and the growth rate thereof, including changes resulting from factors
such as shifting product mix, amount of actual marketing expenses made by the
Company and attrition of accounts and loan balances; an increase in credit
losses (including increases due to a worsening of general economic conditions);
the ability of the Company to continue to securitize its credit cards and
consumer loans and to otherwise access the capital markets at attractive rates
and terms to fund its operations and future growth; difficulties or delays in
the development, production, testing and marketing of new products or services;
losses associated with new products or services or expansion internationally;
financial, legal, regulatory or other difficulties that may affect investment
in, or the overall performance of, a product or business, including changes in
existing laws to regulate further the credit card and consumer loan industry and
the financial services industry, in general (including the flexibility of
financial services companies to use and share data); the amount of, and rate of
growth in, the Company's expenses (including salaries and associate benefits and
marketing expenses) as the Company's business develops or changes or as it
expands into new market areas; the availability of capital necessary to fund the
Company's new businesses; the ability of the Company to build the operational
and organizational infrastructure necessary to engage in new businesses or to
expand internationally; the ability of the Company to recruit experienced
personnel to assist in the management and operations of new products and
services; and other factors listed from time to time in the Company's SEC
reports, including, but not limited to, the Annual Report on Form 10-K for the
year ended December 31, 1999 (Part I, Item 1, Risk Factors).
44
<PAGE>
selected quarterly financial data
<TABLE>
<CAPTION>
1999
-----------------------------------------------------
Fourth Third Second First
(Unaudited) Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations:
(In Thousands)
Interest income $450,604 $412,036 $377,773 $353,071
Interest expense 154,798 135,807 128,288 121,989
- -------------------------------------------------------------------------------------------------------
Net interest income 295,806 276,229 249,485 231,082
Provision for loan losses 120,000 114,061 74,301 74,586
- -------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 175,806 162,168 175,184 156,496
Non-interest income 654,623 621,063 572,047 524,626
Non-interest expense 681,185 629,421 606,137 548,253
- -------------------------------------------------------------------------------------------------------
Income before income taxes 149,244 153,810 141,094 132,869
Income taxes 51,372 58,448 53,616 50,490
- -------------------------------------------------------------------------------------------------------
Net income $ 97,872 $ 95,362 $ 87,478 $ 82,379
- -------------------------------------------------------------------------------------------------------
Per Common Share:/(1)/
Basic earnings $ .50 $ .48 $ .44 $ .42
Diluted earnings .47 .45 .41 .39
Dividends .03 .03 .03 .03
Market prices
High 54 27/32 57 3/4 60 1/6 51 25/64
Low 35 7/8 35 4/5 46 36 5/16
- -------------------------------------------------------------------------------------------------------
Average common shares (000s) 197,252 197,423 197,643 197,239
Average common and common
equivalent shares (000s) 210,284 210,142 211,499 209,991
- -------------------------------------------------------------------------------------------------------
Average Balance Sheet Data:
(In Millions)
Consumer loans $ 8,620 $ 7,791 $ 7,406 $ 6,832
Allowance for loan losses (312) (273) (254) (239)
Securities 2,348 1,898 1,831 2,047
Other assets 1,728 1,803 1,663 1,511
- -------------------------------------------------------------------------------------------------------
Total assets $ 12,384 $ 11,219 $ 10,646 $ 10,151
- -------------------------------------------------------------------------------------------------------
Interest-bearing deposits $ 3,649 $ 3,002 $ 2,271 $ 2,101
Other borrowings 2,038 1,333 1,600 1,778
Senior and deposit notes 4,259 4,494 4,621 4,190
Other liabilities 945 929 780 780
Stockholders' equity 1,493 1,461 1,374 1,302
- -------------------------------------------------------------------------------------------------------
Total liabilities and equity $ 12,384 $ 11,219 $ 10,646 $ 10,151
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1998
-----------------------------------------------------
Fourth Third Second First
(Unaudited) Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations:
(In Thousands)
Interest income $298,947 $283,109 $271,438 $258,042
Interest expense 117,601 107,984 103,599 95,100
- -------------------------------------------------------------------------------------------------------
Net interest income 181,346 175,125 167,839 162,942
Provision for loan losses 54,580 67,569 59,013 85,866
- -------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 126,766 107,556 108,826 77,076
Non-interest income 456,476 386,955 328,953 315,899
Non-interest expense 466,034 381,598 329,951 287,003
- -------------------------------------------------------------------------------------------------------
Income before income taxes 117,208 112,913 107,828 105,972
Income taxes 44,539 42,907 40,975 40,269
- -------------------------------------------------------------------------------------------------------
Net income $ 72,669 $ 70,006 $ 66,853 $ 65,703
- -------------------------------------------------------------------------------------------------------
Per Common Share:(1)
Basic earnings $ .37 $ .36 $ .34 $ .33
Diluted earnings .35 .33 .32 .32
Dividends .03 .03 .03 .03
Market prices
High 41 13/16 43 5/16 41 4/5 27 5/16
Low 17 1/4 27 2/3 27 7/16 16 7/8
- -------------------------------------------------------------------------------------------------------
Average common shares (000s) 196,990 197,178 196,611 196,284
Average common and common
equivalent shares (000s) 209,056 210,035 208,582 205,245
- -------------------------------------------------------------------------------------------------------
Average Balance Sheet Data:
(In Millions)
Consumer loans $ 5,758 $ 5,623 $ 5,213 $ 4,786
Allowance for loan losses (231) (216) (213) (197)
Securities 2,155 1,626 1,826 1,922
Other assets 1,511 1,473 1,280 1,025
- -------------------------------------------------------------------------------------------------------
Total assets $ 9,193 $ 8,506 $ 8,106 $ 7,536
- -------------------------------------------------------------------------------------------------------
Interest-bearing deposits $ 1,886 $ 1,369 $ 1,193 $ 1,266
Other borrowings 1,704 1,594 1,417 1,175
Senior and deposit notes 3,742 3,819 3,906 3,683
Other liabilities 649 575 553 462
Stockholders' equity 1,212 1,149 1,037 950
- -------------------------------------------------------------------------------------------------------
Total liabilities and equity $ 9,193 $ 8,506 $ 8,106 $ 7,536
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) All periods have been restated to reflect the Company's three-for-one
stock split effective June 1, 1999.
The above schedule is a tabulation of the Company's unaudited quarterly results
for the years ended December 31, 1999 and 1998. The Company's common shares are
traded on the New York Stock Exchange under the symbol COF. In addition, shares
may be traded in the over-the-counter stock market. There were 9,738 and 9,692
common stockholders of record as of December 31, 1999 and 1998, respectively.
45
<PAGE>
management's report on consolidated financial statements and internal controls
over financial reporting
The Management of Capital One Financial Corporation is responsible for the
preparation, integrity and fair presentation of the financial statements and
footnotes contained in this Annual Report. The Consolidated Financial Statements
have been prepared in accordance with accounting principles generally accepted
in the United States and are free of material misstatement. The Company also
prepared other information included in this Annual Report and is responsible for
its accuracy and consistency with the financial statements. In situations where
financial information must be based upon estimates and judgments, they represent
the best estimates and judgments of Management.
The Consolidated Financial Statements have been audited by the Company's
independent auditors, Ernst & Young LLP, whose independent professional opinion
appears separately. Their audit provides an objective assessment of the degree
to which the Company's Management meets its responsibility for financial
reporting. Their opinion on the financial statements is based on auditing
procedures, which include reviewing accounting systems and internal controls and
performing selected tests of transactions and records as they deem appropriate.
These auditing procedures are designed to provide reasonable assurance that the
financial statements are free of material misstatement.
Management depends on its accounting systems and internal controls in
meeting its responsibilities for reliable financial statements. In Management's
opinion, these systems and controls provide reasonable assurance that assets are
safeguarded and that transactions are properly recorded and executed in
accordance with Management's authorizations. As an integral part of these
systems and controls, the Company maintains a professional staff of internal
auditors that conducts operational and special audits and coordinates audit
coverage with the independent auditors.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with the internal auditors, the independent
auditors and Management to review the work of each and ensure that each is
properly discharging its responsibilities. The independent auditors have free
access to the Committee to discuss the results of their audit work and their
evaluations of the adequacy of accounting systems and internal controls and the
quality of financial reporting.
There are inherent limitations in the effectiveness of internal controls,
including the possibility of human error or the circumvention or overriding of
controls. Accordingly, even effective internal controls can provide only
reasonable assurance with respect to reliability of financial statements and
safeguarding of assets. Furthermore, because of changes in conditions, internal
control effectiveness may vary over time.
The Company assessed its internal controls over financial reporting as of
December 31, 1999, in relation to the criteria described in the "Internal
Control-Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, the Company
believes that as of December 31, 1999, in all material respects, the Company
maintained effective internal controls over financial reporting.
/s/ Richard D. Fairbank /s/ Nigel W. Morris /s/ David M. Willey
Richard D. Fairbank Nigel W. Morris David M. Willey
Chairman and Chief President and Chief Senior Vice President, Corporate
Executive Officer Operating Officer Financial Management
46
<PAGE>
report of independent auditors
THE BOARD OF DIRECTORS AND STOCKHOLDERS CAPITAL ONE FINANCIAL CORPORATION
We have audited the accompanying consolidated balance sheets of Capital One
Financial Corporation as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Capital One
Financial Corporation at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernest & Young LLP
McLean, Virginia
January 18, 2000
47
<PAGE>
consolidated balance sheets
<TABLE>
<CAPTION>
December 31 (Dollars in Thousands, Except Per Share Data) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 134,065 $ 15,974
Federal funds sold and resale agreements 261,800
Interest-bearing deposits at other banks 112,432 22,393
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 246,497 300,167
Securities available for sale 1,856,421 1,796,787
Consumer loans 9,913,549 6,157,111
Less: Allowance for loan losses (342,000) (231,000)
- -------------------------------------------------------------------------------------------------------------------------------
Net loans 9,571,549 5,926,111
Premises and equipment, net 470,732 242,147
Interest receivable 64,637 52,917
Accounts receivable from securitizations 661,922 833,143
Other 464,685 268,131
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $ 13,336,443 $ 9,419,403
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Interest-bearing deposits $ 3,783,809 $ 1,999,979
Other borrowings 2,780,466 1,742,200
Senior notes 4,180,548 3,739,393
Interest payable 116,405 91,637
Other 959,608 575,788
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 11,820,836 8,148,997
- -------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $.01 per share; authorized
50,000,000 shares, none issued or outstanding
Common stock, par value $.01 per share; authorized
300,000,000 shares, 199,670,421 and 199,670,376
issued as of December 31, 1999 and 1998, respectively 1,997 1,997
Paid-in capital, net 613,590 598,167
Retained earnings 1,022,296 679,838
Cumulative other comprehensive income (31,262) 60,655
Less: Treasury stock, at cost; 2,624,006 and 2,690,910 shares
as of December 31, 1999 and 1998, respectively (91,014) (70,251)
- -------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,515,607 1,270,406
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 13,336,443 $ 9,419,403
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
48
<PAGE>
consolidated statements of income
<TABLE>
<CAPTION>
Year Ended December 31 (In Thousands, Except Per Share Data) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Consumer loans, including fees $ 1,482,371 $ 1,003,122 $ 619,785
Securities available for sale 105,438 94,436 78,542
Other 5,675 13,978 19,658
- ----------------------------------------------------------------------------------------------------------------------
Total interest income 1,593,484 1,111,536 717,985
- ----------------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits 137,792 67,479 41,932
Other borrowings 100,392 96,130 46,068
Senior and deposit notes 302,698 260,675 253,849
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 540,882 424,284 341,849
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 1,052,602 687,252 376,136
Provision for loan losses 382,948 267,028 262,837
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 669,654 420,224 113,299
- ----------------------------------------------------------------------------------------------------------------------
Non-Interest Income:
Servicing and securitizations 1,187,098 789,844 682,345
Service charges and other fees 1,040,944 611,958 337,755
Interchange 144,317 86,481 49,030
- ----------------------------------------------------------------------------------------------------------------------
Total non-interest income 2,372,359 1,488,283 1,069,130
- ----------------------------------------------------------------------------------------------------------------------
Non-Interest Expense:
Salaries and associate benefits 780,160 476,389 289,322
Marketing 731,898 446,264 224,819
Communications and data processing 264,897 150,220 98,135
Supplies and equipment 181,663 112,101 82,874
Occupancy 72,275 45,337 37,548
Other 434,103 234,275 144,278
- ----------------------------------------------------------------------------------------------------------------------
Total non-interest expense 2,464,996 1,464,586 876,976
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 577,017 443,921 305,453
Income taxes 213,926 168,690 116,072
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 363,091 $ 275,231 $ 189,381
- ----------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.84 $ 1.40 $ 0.96
- ----------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.72 $ 1.32 $ 0.93
- ----------------------------------------------------------------------------------------------------------------------
Dividends paid per share $ 0.11 $ 0.11 $ 0.11
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
49
<PAGE>
consolidated statements of changes
in stockholders' equity
<TABLE>
<CAPTION>
Cumulative
Common Stock Other Total
--------------------- Paid-In Retained Comprehensive Treasury Stockholders'
(Dollars in Thousands, Except Per Share Data) Shares Amount Capital, Net Earnings Income Stock Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 198,975,783 $ 1,990 $ 480,056 $ 256,397 $ 1,948 $ 740,391
Comprehensive income:
Net income 189,381 189,381
Other comprehensive income,
net of income tax:
Unrealized gains on securities,
net of income taxes of $481 532 532
Foreign currency
translation adjustments 59 59
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income 591 591
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 189,972
Cash dividends -- $.11 per share (20,638) (20,638)
Purchases of treasury stock $(52,314) (52,314)
Issuances of common stock 305,400 3 2,753 2,201 4,957
Exercise of stock options 390,870 4 2,612 1,466 4,082
Common stock issuable
under incentive plan 24,772 24,772
Other items, net (363) 2,037 2,037
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 199,671,690 1,997 512,230 425,140 2,539 (48,647) 893,259
Comprehensive income:
Net income 275,231 275,231
Other comprehensive income,
net of income tax:
Unrealized gains on securities,
net of income taxes of $37,170 60,648 60,648
Foreign currency translation
adjustments (2,532) (2,532)
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income 58,116 58,116
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 333,347
Cash dividends -- $.11 per share (20,533) (20,533)
Purchases of treasury stock (91,672) (91,672)
Issuances of common stock 35,381 26,745 62,126
Exercise of stock options 4,500 (23,683) 43,323 19,640
Common stock issuable
under incentive plan 70,038 70,038
Other items, net (5,814) 4,201 4,201
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 199,670,376 1,997 598,167 679,838 60,655 (70,251) 1,270,406
Comprehensive income:
Net income 363,091 363,091
Other comprehensive income,
net of income tax:
Unrealized losses on securities,
net of income tax benefit
of $58,759 (95,868) (95,868)
Foreign currency
translation adjustments 3,951 3,951
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (91,917) (91,917)
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 271,174
Cash dividends -- $.11 per share (20,653) (20,653)
Purchases of treasury stock 107,104) (107,104)
Issuances of common stock (1,628) 9,833 8,205
Exercise of stock options (38,422) 76,508 38,086
Common stock issuable
under incentive plan 49,236 49,236
Other items, net 45 6,237 20 6,257
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 199,670,421 $ 1,997 $ 613,590 $1,022,296 $ (31,262) $(91,014) $1,515,607
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
50
<PAGE>
consolidated statements of cash flows
<TABLE>
<CAPTION>
Year Ended December 31 (In Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 363,091 $ 275,231 $ 189,381
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 382,948 267,028 262,837
Depreciation and amortization, net 172,623 108,173 72,674
Stock compensation plans 49,236 70,056 24,878
(Increase) decrease in interest receivable (11,720) (141) 26,707
Decrease (increase) in accounts receivable from securitizations 65,208 (133,771) (86,261)
Increase in other assets (157,685) (121,951) (49,964)
Increase (decrease) in interest payable 24,768 22,667 (11,914)
Increase in other liabilities 383,820 293,266 97,914
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,272,289 780,558 526,252
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Purchases of securities available for sale (871,355) (1,251,713) (1,275,900)
Proceeds from sales of securities available for sale 719,161 112,277 483,592
Proceeds from maturities of securities available for sale 42,995 606,532 450,787
Proceeds from securitizations of consumer loans 2,586,517 4,616,972 2,114,695
Net increase in consumer loans (6,763,580) (6,144,640) (2,875,908)
Recoveries of loans previously charged off 124,673 67,764 27,462
Additions of premises and equipment, net (350,987) (153,024) (51,602)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (4,512,576) (2,145,832) (1,126,874)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Net increase in interest-bearing deposits 1,783,830 686,325 370,632
Net increase in other borrowings 1,038,010 735,288 362,557
Issuances of senior and deposit notes 1,453,059 1,323,700 529,977
Maturities of senior and deposit notes (1,012,639) (1,218,162) (891,436)
Dividends paid (20,653) (20,533) (20,638)
Purchases of treasury stock (107,104) (91,672) (52,314)
Net proceeds from issuances of common stock 14,028 12,143 6,509
Proceeds from exercise of stock options 38,086 629 4,082
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,186,617 1,427,718 309,369
- ----------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (53,670) 62,444 (291,253)
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 300,167 237,723 528,976
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 246,497 $ 300,167 $ 237,723
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
51
<PAGE>
notes to consolidated financial statements
(Currencies in Thousands, Except Per Share Data)
note a
================================================================================
SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
The Consolidated Financial Statements include the accounts of Capital One
Financial Corporation (the "Corporation") and its subsidiaries. The Corporation
is a holding company whose subsidiaries provide a variety of products and
services to consumers. The principal subsidiaries are Capital One Bank (the
"Bank"), which offers credit card products, and Capital One, F.S.B. (the
"Savings Bank"), which offers consumer lending products (including credit cards)
and deposit products. The Corporation and its subsidiaries are collectively
referred to as the "Company."
The accompanying Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") that require
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from these estimates. All significant intercompany balances and transactions
have been eliminated. Certain prior years' amounts have been reclassified to
conform to the 1999 presentation.
On April 29, 1999, the Company's Board of Directors approved a three-for-
one split of the common stock of the Corporation. The stock split was effected
through a 200 percent stock distribution on June 1, 1999 to stockholders of
record on May 20, 1999. For periods prior to the effective date of the stock
split, outstanding shares and per share data contained in this report have been
restated to reflect the impact of the stock split.
The following is a summary of the significant accounting policies used in
preparation of the accompanying Consolidated Financial Statements.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, federal funds sold
and resale agreements and interest-bearing deposits at other banks. Cash paid
for interest for the years ended December 31, 1999, 1998 and 1997, was $516,114,
$401,095 and $353,763, respectively. Cash paid for income taxes for the years
ended December 31, 1999, 1998 and 1997, was $216,438, $202,112 and $131,052,
respectively.
Securities Available for Sale
Debt securities for which the Company does not have the positive intent and
ability to hold to maturity are classified as securities available for sale.
These securities are stated at fair value, with the unrealized gains and losses,
net of tax, reported as a component of cumulative other comprehensive income.
The amortized cost of debt securities is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization or accretion is
included in other interest income.
Consumer Loans
The Company recognizes finance charges and fee income on loans according to the
contractual provisions of the credit agreements. When, based on historic
performance of the portfolio, payment in full of finance charge and fee income
is not expected, the estimated uncollectible portion of previously accrued
amounts are reversed against current period income. Annual membership fees and
direct loan origination costs are deferred and amortized over one year on a
straight-line basis. Deferred fees (net of deferred costs) were $243,172 and
$140,242 as of December 31, 1999 and 1998, respectively. The Company charges off
credit card loans (net of any collateral) at 180 days past due. Bankrupt
consumers' accounts are generally charged off within thirty days of receipt of
the bankruptcy petition.
Allowance for Loan Losses
The allowance for loan losses is maintained at the amount estimated to be
sufficient to absorb probable future losses, net of recoveries (including
recovery of collateral), inherent in the existing reported portfolio. The
provision for loan losses is the periodic cost of maintaining an adequate
allowance. The amount of allowance necessary is determined primarily based on a
migration analysis of delinquent and current accounts. In evaluating the
sufficiency of the allowance for loan losses, management also takes into
consideration the following factors: recent trends in delinquencies and
charge-offs including bankrupt, deceased and recovered amounts; historical
trends in loan volume; forecasting uncertainties and size of credit risks; the
degree of risk inherent in the composition of the loan portfolio; economic
conditions; credit evaluations and underwriting policies.
52
<PAGE>
Securitizations
The Company records gains or losses on the securitization of consumer loan
receivables on the date of sale based on the estimated fair value of assets sold
and retained and liabilities incurred in the sale. Gains represent the present
value of estimated cash flows the Company has retained over the estimated
outstanding period of the receivables. This excess cash flow essentially
represents an "interest only"("I/O") strip, consisting of the excess of finance
charges and past-due fees over the sum of the return paid to certificateholders,
estimated contractual servicing fees and credit losses. The I/O strip is carried
at fair value in accounts receivable from securitizations, with changes in the
fair value reported as a component of cumulative other comprehensive income.
Certain estimates inherent in the determination of the fair value of the I/O
strip are influenced by factors outside the Company's control, and as a result,
such estimates could materially change in the near term. The gains on
securitizations are included in servicing and securitizations income.
Off-Balance Sheet Financial Instruments
The nature and composition of the Company's assets and liabilities and
off-balance sheet items expose the Company to interest rate risk. The Company's
foreign currency denominated assets and liabilities expose it to foreign
currency exchange rate risk. To mitigate these risks, the Company uses certain
types of derivative financial instruments. The Company enters into interest rate
swap agreements ("interest rate swaps") in the management of its interest rate
exposure. All of the Company's interest rate swaps are designated and effective
as hedges of specific existing or anticipated assets or liabilities. The Company
enters into forward foreign currency exchange contracts ("f/x contracts") and
currency swaps to reduce its sensitivity to changing foreign currency exchange
rates. All of the Company's f/x contracts and currency swaps are designated and
effective as hedges of specific assets or liabilities. The Company does not hold
or issue derivative financial instruments for trading purposes.
Swap agreements involve the periodic exchange of payments over the life of
the agreements. Amounts paid or received on interest rate and currency swaps are
recorded on an accrual basis as an adjustment to the related income or expense
of the item to which the agreements are designated. As of December 31, 1999 and
1998, the related amounts payable to counterparties were $4,748 and $2,463,
respectively. Changes in the fair value of interest rate swaps are not reflected
in the accompanying financial statements, where designated to existing or
anticipated assets or liabilities and where swaps effectively modify or reduce
interest rate sensitivity.
F/x contracts represent an agreement to exchange a specified notional
amount of two different currencies at a specified exchange rate on a specified
future date. Changes in the fair value of f/x contracts and currency swaps are
recorded in the period in which they occur as foreign currency gains or losses
in other non-interest income, effectively offsetting the related gains or losses
on the items to which they are designated.
Realized and unrealized gains or losses at the time of termination, sale or
repayment of a derivative contract are recorded in a manner consistent with its
original designation. Amounts are deferred and amortized as an adjustment to the
related income or expense over the original period of exposure, provided the
designated asset or liability continues to exist, or in the case of anticipated
transactions, is probable of occurring. Realized and unrealized changes in the
fair value of swaps or f/x contracts, designated with items that no longer exist
or are no longer probable of occurring, are recorded as a component of the gain
or loss arising from the disposition of the designated item.
Interest rate and foreign currency exchange rate risk management contracts
are generally expressed in notional principal or contract amounts that are much
larger than the amounts potentially at risk for nonperformance by
counterparties. In the event of nonperformance by the counterparties, the
Company's credit exposure on derivative financial instruments is equal to the
gross unrealized gains on the outstanding contracts. At December 31, 1999, the
gross unrealized gains in the portfolio were $83,314. The Company actively
monitors the credit ratings of its counterparties. Under the terms of certain
swaps, each party may be required to pledge collateral if the market value of
the swaps exceeds an amount set forth in the agreement or in the event of a
change in its credit rating. At December 31, 1999, $58,717 of such collateral
has been pledged to the Company.
53
<PAGE>
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization expense are computed generally by
the straight-line method over the estimated useful lives of the assets. Useful
lives for premises and equipment are as follows: buildings and improvements --
5-39 years; furniture and equipment -- 3-10 years; computers and software -- 3
years.
Marketing
The Company expenses marketing costs as incurred.
Credit Card Fraud Losses
The Company experiences fraud losses from the unauthorized use of credit cards.
Transactions suspected of being fraudulent are charged to non-interest expense
after a sixty-day investigation period.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Comprehensive Income
As of December 31, 1999, cumulative other comprehensive income, net of tax,
consisted of $32,608 in net unrealized losses on securities and $1,346 in
foreign currency translation adjustments. As of December 31, 1998 and 1997,
cumulative other comprehensive income, net of tax, consisted of $63,260 and
$2,612 in net unrealized gains on securities and $(2,605) and $(73) in foreign
currency translation adjustments, respectively. As of December 31, 1999,
substantially all of the net unrealized loss on securities was comprised of
gross unrealized losses.
Segments
The Company maintains three distinct business segments: lending,
telecommunications and "other." The lending segment is comprised primarily of
credit card lending activities. The telecommunications segment consists
primarily of direct marketing wireless service. "Other" consists of various
non-lending new business initiatives, none of which exceed the quantitative
thresholds for reportable segments in Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131").
The accounting policies of these reportable segments are the same as those
described above. Management measures the performance of its business segments on
a managed basis and makes resource allocation decisions based upon several
factors, including income before taxes, less indirect expenses. Lending is the
Company's only reportable business segment, based on the definitions provided in
SFAS 131. Substantially all of the Company's reported assets, revenues and
income are derived from the lending segment in all periods presented.
All revenue is generated from external customers and is predominantly
derived in the United States. Revenues and operating losses from international
operations comprised less than 6% and 7% of total managed revenues and operating
income, respectively, for the year ended December 31, 1999.
Recent Accounting Pronouncements
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133" ("SFAS 137"), which defers the effective date of SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (together
"SFAS 133 as amended") to all fiscal quarters of all fiscal years beginning
after June 15, 2000. SFAS 133 as amended will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through earnings. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The adoption of SFAS 133 as amended is not expected to
have a material effect on the results of the Company's operations.
54
<PAGE>
note b
================================================================================
SECURITIES AVAILABLE FOR SALE
Securities available for sale as of December 31, 1999, 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
Maturity Schedule
--------------------------------------------------------------------------------
Market Amortized
1 Year 1-5 5-10 Over 10 Value Cost
or Less Years Years Years Totals Totals
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999
Commercial paper $ 24,927 $ 24,927 $ 24,927
U.S. Treasury and other U.S.
government agency obligations 437,697 $ 1,014,335 1,452,032 1,471,783
Collateralized mortgage obligations $ 37,421 $ 299,846 337,267 345,619
Mortgage backed securities 5,293 13,828 19,121 19,426
Other 19,443 1,361 441 1,829 23,074 23,254
- ------------------------------------------------------------------------------------------------------------------------
Total $ 482,067 $ 1,020,989 $ 51,690 $ 301,675 $ 1,856,421 $ 1,885,009
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1998
Commercial paper $ 117,395 $ 117,395 $ 117,395
U.S. Treasury and other U.S.
government agency obligations 125,831 $ 1,072,109 $ 17,051 1,214,991 1,196,313
Collateralized mortgage obligations 25,877 $ 401,443 427,320 426,485
Mortgage backed securities 8,337 7,265 15,602 15,210
Other 76 1,360 589 19,454 21,479 21,356
- ------------------------------------------------------------------------------------------------------------------------
Total $ 243,302 $ 1,081,806 $ 43,517 $ 428,162 $ 1,796,787 $ 1,776,759
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1997
Commercial paper $ 187,145 $ 187,145 $ 187,145
U.S. Treasury and other U.S.
government agency obligations 400,929 $ 589,899 $ 2,506 993,334 989,707
Collateralized mortgage obligations $ 18,969 18,969 18,629
Mortgage backed securities 13,278 9,960 23,238 22,966
Other 330 526 19,128 19,984 20,008
- ------------------------------------------------------------------------------------------------------------------------
Total $ 588,074 $ 603,507 $ 3,032 $ 48,057 $ 1,242,670 $ 1,238,455
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Weighted Average Yields
--------------------------------------------------
1 Year 1-5 5-10 Over 10
or Less Years Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1999
Commercial paper 6.19%
U.S. Treasury and other U.S.
government agency obligations 5.77 5.69%
Collateralized mortgage obligations 6.18% 5.98%
Mortgage backed securities 5.05 6.62
Other 6.32 3.87 6.45 6.89
- ------------------------------------------------------------------------------------------
Total 5.81% 5.69% 6.30% 5.99%
- ------------------------------------------------------------------------------------------
</TABLE>
Weighted average yields were determined based on amortized cost.
55
<PAGE>
note c
==============================================================================
ALLOWANCE FOR LOAN LOSSES
The following is a summary of changes in the allowance for loan losses:
Year Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------
Balance at beginning
of year $ 231,000 $ 183,000 $ 118,500
Provision for loan losses 382,948 267,028 262,837
Acquisitions/other 3,522 7,503 (2,770)
Charge-offs (400,143) (294,295) (223,029)
Recoveries 124,673 67,764 27,462
- ------------------------------------------------------------------------------
Net charge-offs (275,470) (226,531) (195,567)
- ------------------------------------------------------------------------------
Balance at end of year $ 342,000 $ 231,000 $ 183,000
- ------------------------------------------------------------------------------
note d
==============================================================================
PREMISES AND EQUIPMENT
Premises and equipment as of December 31, 1999 and 1998 were as follows:
December 31, 1999 1998
- ------------------------------------------------------------------------------
Land $ 10,168 $ 10,168
Buildings and improvements 197,434 126,205
Furniture and equipment 448,742 254,070
Computer software 86,626 41,084
In process 54,874 23,325
- ------------------------------------------------------------------------------
797,844 454,852
Less: Accumulated depreciation
and amortization (327,112) (212,705)
- ------------------------------------------------------------------------------
Total premises and equipment, net $ 470,732 $ 242,147
- ------------------------------------------------------------------------------
Depreciation and amortization expense was $122,778, $75,005 and $63,537,
for the years ended December 31, 1999, 1998 and 1997, respectively.
note e
==============================================================================
BORROWINGS
Borrowings as of December 31, 1999 and 1998 were as follows:
1999 1998
--------------------- --------------------
Weighted Weighted
Average Average
Outstanding Rate Outstanding Rate
- ------------------------------------------------------------------------------
Interest-bearing
Deposits $ 3,783,809 5.34% $ 1,999,979 4.77%
- ------------------------------------------------------------------------------
Other borrowings
Secured
borrowings $ 1,344,790 6.65%
Junior subordinated
capital income
securities 98,178 7.76 $ 97,921 6.77%
Federal funds
purchased
and resale
agreements 1,240,000 5.84 1,227,000 5.53
Other short-term
borrowings 97,498 3.97 417,279 6.58
- ------------------------------------------------------------------------------
Total $ 2,780,466 $ 1,742,200
- ------------------------------------------------------------------------------
Senior Notes
Bank -- fixed rate $ 3,409,652 6.71% $ 3,268,182 6.29%
Bank --
variable rate 221,999 6.74 146,998 5.89
Corporation 548,897 7.20 324,213 7.17
- ------------------------------------------------------------------------------
Total $ 4,180,548 $ 3,739,393
- ------------------------------------------------------------------------------
Interest-bearing Deposits
As of December 31, 1999, the aggregate amount of interest-bearing deposits with
accounts equal to or exceeding $100 was $1,076,076.
Secured Borrowings
In November 1999, the Bank entered into an agreement to transfer a pool of
consumer loans totaling up to $500,000. Proceeds from the transfer were recorded
as a secured borrowing. The facility accrues interest based on commercial paper
rates and matures in 2000; however, it may be extended for additional one-year
periods through 2008. The outstanding balance on the secured borrowing at
December 31, 1999, was $245,625.
56
<PAGE>
In October 1999, the Bank entered into a (pounds)750,000 revolving credit
facility collateralized by a security interest in certain consumer loans of the
Company. Interest on the facility is based on commercial paper rates or London
InterBank Offering Rates ("LIBOR"). The facility matures in 2000. At December
31, 1999, (pound)500,000 ($809,100 equivalent) was outstanding under the
facility.
In May 1999, Summit Acceptance Corporation, a subsidiary of the Company,
entered into an agreement to transfer a pool of consumer loans totaling
$350,000. Proceeds from the transfer were recorded as a secured borrowing.
Principal payments on the borrowing are based on principal collections net of
losses on the transferred consumer loans. The borrowing accrues interest based
on commercial paper rates and matures on June 15, 2006 or earlier depending upon
the repayment of the underlying consumer loans. At December 31, 1999, $290,065
of the secured borrowing was outstanding.
Junior Subordinated Capital Income Securities
In January 1997, Capital One Capital I, a subsidiary of the Bank created as a
Delaware statutory business trust, issued $100,000 aggregate amount of Floating
Rate Junior Subordinated Capital Income Securities that mature on February 1,
2027. The securities represent a preferred beneficial interest in the assets of
the trust.
Other Short-Term Borrowings
In May 1999, the Company entered into a four-year, $1,200,000 unsecured
revolving credit arrangement (the "Credit Facility"). The Credit Facility is
comprised of two tranches: a $810,000 Tranche A facility available to the Bank
and the Savings Bank, including an option for up to $250,000 in multicurrency
availability, and a $390,000 Tranche B facility available to the Corporation,
the Bank and the Savings Bank, including an option for up to $150,000 in
multicurrency availability. Each tranche under the facility is structured as a
four-year commitment and is available for general corporate purposes. All
borrowings under the Credit Facility are based on varying terms of LIBOR. The
Bank has irrevocably undertaken to honor any demand by the lenders to repay any
borrowings which are due and payable by the Savings Bank but have not been paid.
Any borrowings under the Credit Facility will mature on May 24, 2003; however,
the final maturity of each tranche may be extended for three additional one-year
periods with the lenders' consent. As of December 31, 1999 and 1998, the Company
had no outstandings under the Credit Facility or its predecessor facility.
In August 1997, the Company entered into a three-year, $350,000 equivalent
unsecured revolving credit arrangement (the "UK/Canada Facility"), which is
being used to finance the Company's expansion in the United Kingdom and Canada.
The UK/Canada Facility is comprised of two tranches: a Tranche A facility in the
amount of (pound)156,458 ($249,800 equivalent based on the exchange rate at
closing) and a Tranche B facility in the amount of C$139,609 ($100,200
equivalent based on the exchange rate at closing). An amount of (pound)34,574 or
C$76,910 ($55,200 equivalent based on the exchange rates at closing) may be
transferred between the Tranche A facility and the Tranche B facility,
respectively, upon the request of the Company. In the second quarter of 1998,
the Company requested the transfer of the (pound)34,574 from the Tranche A
facility to the Tranche B facility. Each tranche under the facility is
structured as a three-year commitment. All borrowings under the UK/Canada
Facility are based on varying terms of LIBOR. The Corporation serves as the
guarantor of all borrowings under the UK/Canada Facility. There were no
outstandings under the UK/Canada Facility as of December 31, 1999. As of
December 31, 1998, the Company had a total of $166,345 outstanding under the
UK/Canada Facility ($66,400 under Tranche A and $99,945 under Tranche B).
Bank Notes
Under the Company's bank note program, the Bank from time to time may issue
senior bank notes at fixed or variable rates tied to LIBOR with maturities from
30 days to 30 years. The aggregate principal amount available for issuance under
the program is $8,000,000 (of which, up to $200,000 may be subordinated bank
notes). There were no subordinated bank notes issued or outstanding as of
December 31, 1999 and 1998.
The Bank has established a program for the issuance of debt instruments to
be offered outside of the United States. Under this program, the Bank from time
to time may issue instruments in the aggregate principal amount of $1,000,000
equivalent outstanding at any one time ($5,000 outstanding as of December 31,
1999 and 1998). Instruments under this program may be denominated in any
currency or currencies.
The Corporation has three shelf registration statements under which the
Corporation from time to time may offer and sell (i) senior or subordinated debt
securities, consisting of debentures, notes and/or other unsecured evidences,
(ii) preferred stock, which may be issued in the form of depository shares
evidenced by depository receipts and (iii) common stock.
57
<PAGE>
The amount of securities registered is limited to a $1,550,000 aggregate public
offering price or its equivalent (based on the applicable exchange rate at the
time of sale) in one or more foreign currencies, currency units or composite
currencies as shall be designated by the Corporation. At December 31, 1999, the
Corporation had existing unsecured senior debt outstanding under the shelf
registrations of $550,000 including $125,000 maturing in 2003, $225,000 maturing
in 2006, and $200,000 maturing in 2008.
Interest-bearing deposits, other borrowings and senior notes as of December
31, 1999, mature as follows:
<TABLE>
<CAPTION>
Interest-bearing Other
Deposits Borrowings Senior Notes Total
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 $ 2,122,572 $ 2,317,706 $ 765,716 $ 5,205,994
2001 574,853 263,021 899,136 1,737,010
2002 283,163 56,151 565,000 904,314
2003 266,803 46,459 949,874 1,263,136
2004 473,345 295,000 768,345
Thereafter 63,073 97,129 705,822 866,024
- ----------------------------------------------------------------------------
Total $ 3,783,809 $ 2,780,466 $ 4,180,548 $ 10,744,823
- ----------------------------------------------------------------------------
</TABLE>
note f
================================================================================
ASSOCIATE BENEFIT AND STOCK PLANS
The Company sponsors a contributory Associate Savings Plan in which
substantially all full-time and certain part-time associates are eligible to
participate. The Company makes contributions to each eligible employee's
account, matches a portion of associate contributions and makes discretionary
contributions based upon the Company meeting a certain earnings per share
target. The Company's contributions to this plan were $27,157, $16,357 and
$10,264 for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company has five stock-based compensation plans. The Company applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related Interpretations in accounting for its stock-
based compensation plans. In accordance with APB 25, no compensation cost has
been recognized for the Company's fixed stock options, since the exercise price
of all options equals or exceeds the market price of the underlying stock on the
date of grant, nor for the Associate Stock Purchase Plan (the "Purchase Plan"),
which is considered to be noncompensatory. For the performance-based option
grants discussed below, compensation cost is measured as the difference between
the exercise price and the target stock price required for vesting and is
recognized over the estimated vesting period. The Company recognized $44,542,
$70,038 and $24,772 of compensation cost relating to its associate stock plans
for the years ended December 31, 1999, 1998 and 1997, respectively.
On April 29, 1999, the Company's Board of Directors approved a three-for-
one stock split of the common stock of the Corporation. The stock split was
effected through a 200 percent stock distribution on June 1, 1999, to the
stockholders of record on May 20, 1999. Consistent with the terms of the
Company's stock-based compensation plans, the number of shares subject to the
plans and the respective exercise prices have been adjusted accordingly and are
reflected herein for all periods presented.
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123")
requires, for companies electing to continue to follow the recognition
provisions of APB 25, pro forma information regarding net income and earnings
per share, as if the recognition provisions of SFAS 123 were adopted for stock
options granted subsequent to December 31, 1994. For purposes of pro forma
disclosure, the fair value of the options was estimated at the date of grant
using a Black-Scholes option-pricing model with the weighted average assumptions
described below and is amortized to expense over the options' vesting period.
Year Ended December 31, 1999 1998 1997
- -------------------------------------------------------------
Assumptions
Dividend yield .24% .32% .82%
Volatility factors of
expected market
price of stock 45% 40% 40%
Risk-free interest rate 5.29% 5.44% 6.27%
Expected option lives
(in years) 5.4 5.2 4.5
Pro Forma Information
Net income $325,701 $287,637 $186,003
Basic earnings per share $ 1.65 $ 1.46 $ 0.94
Diluted earnings per share $ 1.55 $ 1.38 $ 0.92
Under the 1994 Stock Incentive Plan, the Company has reserved 43,112,640
common shares as of December 31, 1999, for issuance in the form of incentive
stock options, nonstatutory stock options, stock appreciation rights, restricted
stock and incentive stock. The exercise price of each stock option issued to
58
<PAGE>
date equals or exceeds the market price of the Company's stock on the date of
grant. Each option's maximum term is ten years. The number of shares available
for future grants was 2,191,884, 2,178,669 and 293,442 as of December 31, 1999,
1998 and 1997, respectively. Other than the performance-based options discussed
below, options generally vest annually over three to five years and expire
beginning November 2004.
In April 1999, the Company established the 1999 Stock Incentive Plan. Under
the plan, the Company has reserved 600,000 common shares for issuance in the
form of nonstatutory stock options. The exercise price of each stock option
equals or exceeds the market price of the Company's stock on the date of grant.
The maximum term of each option is ten years. The number of shares available for
future grant was 283,800 as of December 31, 1999. All options granted under the
plan to date were granted on April 29, 1999 and expire on April 29, 2009. These
options vested immediately upon the optionee's execution of an intellectual
property protection agreement with the Company.
In April 1999, the Company's Board of Directors approved a stock option
grant to senior management ("EntrepreneurGrant IV"). This grant was composed of
7,636,107 options to certain key managers (including 1,884,435 options to the
Company's Chief Executive Officer ["CEO"] and Chief Operating Officer ["COO"])
with an exercise price equal to the fair market value on the date of grant. The
CEO and COO gave up their salaries for the year 2001 and their annual cash
incentives, annual option grants and Senior Executive Retirement Plan
contributions for the years 2000 and 2001 in exchange for their
EntrepreneurGrant IV options. Other members of senior management gave up all
potential annual stock option grants for 1999 and 2000 in exchange for this one-
time grant. All options under this grant will vest on April 29, 2008, or earlier
if the common stock's fair market value is at or above $100 per share for at
least ten trading days in any thirty consecutive calendar day period on or
before June 15, 2002, or upon a change of control of the Company. These options
will expire on April 29, 2009.
In April 1998, upon stockholder approval, a 1997 stock option grant to
senior management ("EntrepreneurGrant II") became effective at the December 18,
1997 market price of $16.25 per share. This grant included 3,429,663
performance-based options granted to certain key managers (including 2,057,265
options to the Company's CEO and COO), which vested in April 1998 when the
market price of the Company's stock remained at or above $28.00 for at least ten
trading days in a thirty consecutive calendar day period. The grant also
included 671,700 options which vest in full, regardless of the stock price, on
December 18, 2000, or immediately upon a change in control of the Company.
In April 1999 and 1998, the Company granted 1,045,362 and 1,335,252
options, respectively, to all associates not granted options in the
EntrepreneurGrant II or EntrepreneurGrant IV. Certain associates were granted
options in exchange for giving up future compensation. Other associates were
granted a set number of options. These options were granted at the then market
price of $56.46 and $31.71 per share, respectively, and vest, in full, on April
29, 2002 and April 30, 2001, respectively, or immediately upon a change in
control of the Company.
In June 1998, the Company's Board of Directors approved a grant to
executive officers ("EntrepreneurGrant III"). This grant consisted of 2,611,896
performance-based options granted to certain key managers (including 2,000,040
options to the Company's CEO and COO), which were approved by the stockholders
in April 1999, at the then market price of $33.77 per share. The Company's CEO
and COO gave up 300,000 and 200,010 vested options (valued at $8,760 in total),
respectively, in exchange for their EntrepreneurGrant III options. Other
executive officers gave up future cash compensation for each of the next three
years in exchange for the options. All options made under this grant will vest
if the Company's stock reaches $58.33 per share for at least ten trading days in
a thirty consecutive calendar day period by June 11, 2001, or immediately upon a
change in control of the Company.
In April 1996, upon stockholder approval, a 1995 stock option grant to the
Company's CEO and COO became effective. This grant was for performance-based
options to purchase 7,500,000 common shares at the September 15, 1995, market
price of $9.73 per share. Vesting of the options was dependent on the fair
market value of the common stock remaining at or above specified levels for at
least ten trading days in any thirty consecutive calendar day period. Fifty
percent of the options vested in January 1997 when the Company's stock reached
$12.50 per share; 25% vested in October 1997 when the stock reached $14.58 per
share; and the remaining 25% vested in January 1998 when the stock reached
$16.67 per share.
59
<PAGE>
The Company maintains two non-associate directors stock incentive plans,
the 1995 Non-Employee Directors Stock Incentive Plan and the 1999 Non-Employee
Directors Stock Incentive Plan. The 1995 plan originally authorized 1,500,000
shares of the Company's common stock for the automatic grant of restricted stock
and stock options to eligible members of the Company's Board of Directors.
However, in April 1999, the Company terminated the 1995 plan. The options vest
after one year and their maximum term is ten years. The exercise price of each
option equals the market price of the Company's stock on the date of grant. As
of December 31, 1999, there was no outstanding restricted stock under this plan.
In April 1999, the Company established the 1999 Non-Employee Directors
Stock Incentive Plan. The plan authorizes a maximum of 525,000 shares of the
Company's common stock for the grant of nonstatutory stock options to eligible
members of the Company's Board of Directors. In April 1999, all non-employee
directors of the Company were given the option to receive performance-based
options under this plan in lieu of their annual cash retainer and their time-
vesting options for each of 1999, 2000 and 2001. As a result, 497,490
performance-based options were granted to certain non-employee directors of the
Company. The options vest in full if, on or before June 15, 2002, the market
value of the Company's stock equals or exceeds $100 per share for ten trading
days in a thirty consecutive calendar day period. All options vest immediately
upon a change of control of the Company. As of December 31, 1999, 27,510 shares
were available for grant under this plan. All options under this plan have a
maximum term of ten years. The exercise price of each option equals or exceeds
the market price of the Company's stock on the date of grant.
A summary of the status of the Company's options as of December 31, 1999,
1998 and 1997, and changes for the years then ended is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
(000s) Per Share (000s) Per Share (000s) Per Share
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 29,139 $ 15.99 21,375 $ 9.22 17,682 $ 7.97
Granted 10,541 55.71 10,350 27.97 4,770 13.63
Exercised (2,111) 11.44 (2,226) 6.76 (645) 6.92
Canceled (511) 38.17 (360) 17.32 (432) 10.05
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 37,058 $ 27.24 29,139 $ 15.99 21,375 $ 9.22
- ----------------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 19,635 $ 12.16 17,898 $ 10.16 11,445 $ 8.14
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted-average fair value of
options granted during the year $ 25.92 $ 11.82 $ 5.34
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about options outstanding as of
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- --------------------------------
Number Weighted-Average Weighted-Average Number Weighted-Average
Outstanding Remaining Exercise Price Exercisable Exercise Price
Range of Exercise Prices (000s) Contractual Life Per Share (000s) Per Share
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4.31-D$6.46 4,639 4.89 years $ 5.39 4,639 $ 5.39
$6.47-D$9.70 416 6.09 8.17 416 8.17
$9.71-D$14.56 11,001 6.11 10.50 9,958 10.23
$14.57-D$21.85 4,321 7.96 16.07 3,276 16.10
$21.86-D$32.79 1,331 8.39 31.66 174 31.47
$32.80-D$49.20 5,816 8.84 37.17 813 36.84
$49.21-D$60.00 9,534 9.35 56.41 359 56.42
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
Under the Company's Purchase Plan, associates of the Company are eligible
to purchase common stock through monthly salary deductions of a maximum of 15%
and a minimum of 1% of monthly base pay. To date, the amounts deducted are
applied to the purchase of unissued common or treasury stock of the Company at
85% of the current market price. Shares may also be acquired on the market. An
aggregate of 3,000,000 common shares has been authorized for issuance under the
Purchase Plan, of which 1,379,037 shares were available for issuance as of
December 31, 1999.
On November 16, 1995, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of common stock.
As amended, each Right entitles a registered holder to purchase from the Company
one three-hundredth of a share of the Company's authorized Cumulative
Participating Junior Preferred Stock (the "Junior Preferred Shares") at a price
of $200 per one three-hundredth of a share, subject to adjustment. The Company
has reserved 1,000,000 shares of its authorized preferred stock for the Junior
Preferred Shares. Because of the nature of the Junior Preferred Shares' dividend
and liquidation rights, the value of the one three-hundredth interest in a
Junior Preferred Share purchasable upon exercise of each Right should
approximate the value of one share of common stock. Initially, the Rights are
not exercisable and trade automatically with the common stock. However, the
Rights generally become exercisable and separate certificates representing the
Rights will be distributed, if any person or group acquires 15% or more of the
Company's outstanding common stock or a tender offer or exchange offer is
announced for the Company's common stock. Upon such event, provisions would also
be made so that each holder of a Right, other than the acquiring person or
group, may exercise the Right and buy common stock with a market value of twice
the $200 exercise price. The Rights expire on November 29, 2005, unless earlier
redeemed by the Company at $0.01 per Right prior to the time any person or group
acquires 15% of the outstanding common stock. Until the Rights become
exercisable, the Rights have no dilutive effect on earnings per share.
In July 1997, the Company's Board of Directors voted to repurchase up to
six million shares of the Company's common stock to mitigate the dilutive impact
of shares issuable under its benefit plans, including its Purchase Plan,
dividend reinvestment plan and stock incentive plans. In July 1998, the
Company's Board of Directors voted to increase this amount by an additional 4.5
million shares of the Company's common stock. For the years ended December 31,
1999, 1998 and 1997, the Company repurchased 2,250,000, 2,687,400 and 3,955,923
shares, respectively, under this program. Certain treasury shares have been
reissued in connection with the Company's benefit plans.
note g
===================================================================
OTHER NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Professional services $ 145,398 $ 66,591 $ 47,671
Collections 101,000 59,503 23,216
Bankcard association
assessments 33,301 23,163 16,074
Fraud losses 22,476 10,278 16,749
Other 131,928 74,740 40,568
- -------------------------------------------------------------------
Total $ 434,103 $ 234,275 $ 144,278
- -------------------------------------------------------------------
</TABLE>
61
<PAGE>
note h
===============================================================================
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 1999 and
1998, were as follows:
<TABLE>
<CAPTION>
December 31, 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 117,375 $ 75,738
Finance charge, fee and other
income receivables 111,599 57,913
Stock incentive plan 51,680 35,949
State taxes, net of federal benefit 15,131 7,310
Other 43,495 24,770
- ------------------------------------------------------------------------------
Subtotal 339,280 201,680
Valuation allowance (20,763) (14,168)
- ------------------------------------------------------------------------------
Total deferred tax assets 318,517 187,512
Deferred tax liabilities:
Securitizations 44,557 29,728
Deferred revenue 97,397 10,255
Other 17,110 7,814
- ------------------------------------------------------------------------------
Total deferred tax liabilities 159,064 47,797
- ------------------------------------------------------------------------------
Net deferred tax assets before
unrealized losses (gains) on
securities 159,453 139,715
Unrealized losses (gains) on
securities 13,369 (38,772)
- ------------------------------------------------------------------------------
Net deferred tax assets $ 172,822 $ 100,943
- ------------------------------------------------------------------------------
</TABLE>
During 1999, the Company increased its valuation allowance by $11,935 for
certain state and international loss carryforwards generated during the year.
This increase in the valuation allowance was partially offset by a decrease of
$5,340 resulting from a change in tax regulations that will allow for the
recognition of the benefits of certain acquired net operating losses.
Significant components of the provision for income taxes attributable to
continuing operations were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Federal taxes $ 232,910 $ 244,536 $ 138,877
State taxes 754 471 393
Deferred income taxes (19,738) (76,317) (23,198)
- ---------------------------------------------------------------------------
Income taxes $ 213,926 $ 168,690 $ 116,072
- ---------------------------------------------------------------------------
</TABLE>
The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rate to income tax expense was:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory
federal tax rate 35.00% 35.00% 35.00%
Other 2.07 3.00 3.00
- ------------------------------------------------------------------
Income taxes 37.07% 38.00% 38.00%
- ------------------------------------------------------------------
</TABLE>
note i
===============================================================================
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Year Ended December 31,
(Shares in Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $ 363,091 $ 275,231 $ 189,381
- ----------------------------------------------------------------------------
Denominator:
Denominator for basic
earnings per share --
Weighted-average shares 197,594 196,769 198,210
- ----------------------------------------------------------------------------
Effect of dilutive securities:
Stock options 13,089 11,990 4,734
Restricted stock 6 9
- ----------------------------------------------------------------------------
Dilutive potential
common shares 13,089 11,996 4,743
Denominator for diluted
earnings per share --
Adjusted weighted-
average shares 210,683 208,765 202,953
- ----------------------------------------------------------------------------
Basic earnings per share $ 1.84 $ 1.40 $ 0.96
- ----------------------------------------------------------------------------
Diluted earnings per share $ 1.72 $ 1.32 $ 0.93
- ----------------------------------------------------------------------------
</TABLE>
62
<PAGE>
Options to purchase approximately 5,200,000, 6,436,000 and 2,848,000 shares
of common stock during 1999, 1998 and 1997, respectively, were not included in
the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of the common shares and,
therefore, their inclusion would be antidilutive.
note j
==============================================================================
REGULATORY MATTERS
The Bank and the Savings Bank are subject to capital adequacy guidelines adopted
by the Federal Reserve Board (the "Federal Reserve") and the Office of Thrift
Supervision (the "OTS") (collectively, the "regulators"), respectively. The
capital adequacy guidelines and the regulatory framework for prompt corrective
action require the Bank and the Savings Bank to maintain specific capital levels
based upon quantitative measures of their assets, liabilities and off-balance
sheet items. The inability to meet and maintain minimum capital adequacy levels
could result in the regulators taking actions that could have a material effect
on the Company's consolidated financial statements. Additionally, the regulators
have broad discretion in applying higher capital requirements. Regulators
consider a range of factors in determining capital adequacy, such as an
institution's size, quality and stability of earnings, interest rate risk
exposure, risk diversification, management expertise, asset quality, liquidity
and internal controls.
The most recent notifications received from the regulators categorized the
Bank and the Savings Bank as "well-capitalized." To be categorized as "well-
capitalized," the Bank and the Savings Bank must maintain minimum capital ratios
as set forth in the following table. As of December 31, 1999, there were no
conditions or events since the notifications discussed above that management
believes would have changed either the Bank or the Savings Bank's capital
category.
<TABLE>
<CAPTION>
To Be "Well-
Capitalized"
Minimum For Under Prompt
Capital Corrective
Adequacy Action
Ratios Purposes Provisions
- -------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1999
Capital One Bank
Tier 1 Capital 10.64% 4.00% 6.00%
Total Capital 13.11 8.00 10.00
Tier 1 Leverage 11.13 4.00 5.00
Capital One, F.S.B.
Tier 1 Capital 9.06% 4.00% 6.00%
Total Capital 10.69 8.00 10.00
Tier 1 Leverage 8.08 4.00 5.00
- -------------------------------------------------------------------------
December 31, 1998
Capital One Bank
Tier 1 Capital 11.38% 4.00% 6.00%
Total Capital 13.88 8.00 10.00
Tier 1 Leverage 10.24 4.00 5.00
Capital One, F.S.B.
Tier 1 Capital 11.28% 4.00% 6.00%
Total Capital 13.87 12.00 10.00
Tier 1 Leverage 9.46 8.00 5.00
- -------------------------------------------------------------------------
</TABLE>
During 1996, the Bank received regulatory approval and established a branch
office in the United Kingdom. In connection with such approval, the Company
committed to the Federal Reserve that, for so long as the Bank maintains a
branch in the United Kingdom, the Company will maintain a minimum Tier 1
Leverage ratio of 3.0%. As of December 31, 1999 and 1998, the Company's Tier 1
Leverage ratio was 12.79% and 13.49%, respectively.
Additionally, certain regulatory restrictions exist that limit the ability
of the Bank and the Savings Bank to transfer funds to the Corporation. As of
December 31, 1999, retained earnings of the Bank and the Savings Bank of
$281,500 and $61,900, respectively, were available for payment of dividends to
the Corporation without prior approval by the regulators. The Savings Bank,
however, is required to give the OTS at least thirty days advance notice of any
proposed dividend and the OTS, in its discretion, may object to such dividend.
63
<PAGE>
note k
================================================================================
COMMITMENTS AND CONTINGENCIES
As of December 31, 1999, the Company had outstanding lines of credit of
approximately $55,500,000 committed to its customers. Of that total commitment,
approximately $35,300,000 was unused. While this amount represented the total
available lines of credit to customers, the Company has not experienced, and
does not anticipate, that all of its customers will exercise their entire
available line at any given point in time. The Company generally has the right
to increase, reduce, cancel, alter or amend the terms of these available lines
of credit at any time.
Certain premises and equipment are leased under agreements that expire at
various dates through 2008, without taking into consideration available renewal
options. Many of these leases provide for payment by the lessee of property
taxes, insurance premiums, cost of maintenance and other costs. In some cases,
rentals are subject to increase in relation to a cost of living index. Total
rental expense amounted to $37,685, $18,242 and $13,644 for the years ended
December 31, 1999, 1998 and 1997, respectively.
Future minimum rental commitments as of December 31, 1999, for all non-
cancelable operating leases with initial or remaining terms of one year or more
are as follows:
- ---------------------------------
2000 $ 39,379
2001 39,232
2002 36,564
2003 33,508
2004 23,787
Thereafter 112,321
- ---------------------------------
Total $ 284,791
- ---------------------------------
In 1998, the Company entered into a five-year lease of five facilities in
Tampa, Florida and Richmond, Virginia. Monthly rent on the facilities is based
on a fixed rate of 6.87% per annum applied to the cost of the buildings included
in the lease of $86.8 million. The Company has two one-year renewal options
under the terms of the lease. If, at the end of the lease term, the Company does
not purchase all of the properties, the Company would guarantee a residual value
to the lessor of up to approximately 84% of the cost of the buildings.
In 1999, the Company entered into two three-year agreements for the lease
of four facilities located in Tampa, Florida and Federal Way, Washington.
Monthly rent commences upon completion of each of the buildings and is based on
LIBOR rates applied to the funded cost of the facilities. At December 31, 1999,
one of the facilities had been completed and rent payments had commenced. The
Company has a one-year renewal option under the terms of the leases. If, at the
end of each lease term, the Company does not purchase all of the properties
under each of the leases, the Company would guarantee a residual value to the
lessor of up to approximately 85% of the cost of the buildings in that lease
agreement. The total funded amount under both agreements was $55,201 at December
31, 1999, with an aggregate commitment of up to $120 million.
In connection with the transfer of substantially all of Signet Bank's
credit card business to the Bank in November 1994, the Company and the Bank
agreed to indemnify Signet Bank (which was acquired by First Union on November
30, 1997) for certain liabilities incurred in litigation arising from that
business, which may include liabilities, if any, incurred in the purported class
action case described below.
During 1995, the Company and the Bank became involved in a purported class
action suit relating to certain collection practices engaged in by Signet Bank
and, subsequently, by the Bank. The complaint in this case alleges that Signet
Bank and/or the Bank violated a variety of California state statutes and
constitutional and common law duties by filing collection lawsuits, obtaining
judgements and pursuing garnishment proceedings in the Virginia state courts
against defaulted credit card customers who were not residents of Virginia. This
case was filed in the Superior Court of California in the County of Alameda,
Southern Division, on behalf of a class of California residents. The complaint
in this case seeks unspecified statutory damages, compensatory damages, punitive
damages, restitution, attorneys' fees and costs, a permanent injunction and
other equitable relief.
In early 1997, the California court entered judgement in favor of the Bank
on all of the plaintiffs' claims. The plaintiffs appealed the ruling to the
California Court of Appeals First Appellate District Division 4. In early 1999,
the Court of Appeals affirmed the trial court's ruling in favor of the Bank on
six counts, but reversed the trial court's ruling on two counts of the
plaintiffs' complaint. The California Supreme Court rejected the Bank's Petition
for Review of the remaining two counts and remitted them to the trial court for
further proceedings. In August 1999, the trial court denied without prejudice
plaintiffs' motion to certify a class on the one remaining common law claim. In
November 1999, the United States Supreme Court denied the
64
<PAGE>
Bank's writ of certiorari on the remaining two counts, declining to exercise its
discretionary power to review these issues.
Because no specific measure of damages is demanded in the complaint of the
California case and the trial court entered judgement in favor of the Bank
before the parties completed any significant discovery, an informed assessment
of the ultimate outcome of this case cannot be made at this time. Management
believes, however, that there are meritorious defenses to this lawsuit and
intends to defend it vigorously.
The Company is commonly subject to various other pending and threatened
legal actions arising from the conduct of its normal business activities. In the
opinion of management, the ultimate aggregate liability, if any, arising out of
any pending or threatened action will not have a material adverse effect on the
consolidated financial condition of the Company. At the present time, however,
management is not in a position to determine whether the resolution of pending
or threatened litigation will have a material effect on the Company's results of
operations in any future reporting period.
note l
================================================================================
RELATED PARTY TRANSACTIONS
In the ordinary course of business, executive officers and directors of the
Company may have consumer loans issued by the Company. Pursuant to the Company's
policy, such loans are issued on the same terms as those prevailing at the time
for comparable loans to unrelated persons and do not involve more than the
normal risk of collectibility.
note m
================================================================================
SECURITIZATIONS
The Company securitized in transactions accounted for as sales $2,586,517
($47,642 international), $4,616,972 ($245,752 international) and $2,114,695 of
consumer loan receivables for the years ended December 31, 1999, 1998 and 1997,
respectively. As of December 31, 1999, receivables under securitizations
outstanding consisted of $2,482,246 of retained ("seller's") interests and
$10,319,400 of investors' undivided interests, maturing from 2000 to 2008.
The terms of securitizations require the Company to maintain a certain
level of assets, retained by the trust, as credit support for the
securitization. These amounts are included in accounts receivable from
securitizations and were $262,819 and $263,426 as of December 31, 1999 and 1998,
respectively.
note n
================================================================================
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The Company has entered into interest rate swaps to effectively convert
certain interest rates on bank notes from variable to fixed. The pay-fixed,
receive-variable swaps, which had a notional amount totaling $157,000 as of
December 31, 1999, will mature from 2001 to 2007 to coincide with maturities of
the variable bank notes to which they are designated. The Company has also
entered into amortizing notional interest rate swaps to effectively convert
certain interest rates on fixed rate consumer loans from fixed to variable,
thereby reducing the interest rate sensitivity of loan securitizations. These
pay-fixed, receive-variable interest rate swaps, which had an amortizing
notional amount totaling $2,789,000 as of December 31, 1999, will fully amortize
between 2004 and 2006 to coincide with the estimated attrition of the fixed rate
consumer loans to which they are designated. The Company also had a pay-fixed,
receive-variable interest rate swap with an amortizing notional amount of
C$208,000, which will amortize through 2003 to coincide with the estimated
attrition of the fixed rate Canadian dollar consumer loans to which it is
designated.
The Company has also entered into currency swaps that effectively convert
fixed rate pound sterling interest receipts to fixed rate U.S. dollar interest
receipts on pound sterling denominated assets. These currency swaps had notional
amounts totaling $260,000 as of December 31, 1999, and mature from 2001 to 2005,
coinciding with the repayment of the assets to which they are designated.
The Company has entered into f/x contracts to reduce the Company's
sensitivity to foreign currency exchange rate changes on its foreign currency
denominated assets and liabilities. As of December 31, 1999, the Company had f/x
contracts with notional amounts totaling $1,058,000 that mature in 2000 to
coincide with the repayment of the assets to which they are designated.
65
<PAGE>
note o
================================================================================
SIGNIFICANT CONCENTRATION OF CREDIT RISK
The Company is active in originating consumer loans, primarily in the United
States. The Company reviews each potential customer's credit application and
evaluates the applicant's financial history and ability and willingness to
repay. Loans are made primarily on an unsecured basis; however, certain loans
require collateral in the form of cash deposits. International consumer loans
are originated primarily in Canada and the United Kingdom. The geographic
distribution of the Company's consumer loans was as follows:
<TABLE>
<CAPTION>
December 31, 1999 1998
- --------------------------------------------- --------------------------
Percentage Percentage
Geographic Region: Loans of Total Loans of Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
South $ 6,751,599 33.36% $ 5,868,386 33.74%
West 4,037,714 19.95 3,609,952 20.75
Northeast 3,362,044 16.62 3,032,061 17.43
Midwest 3,644,444 18.01 2,992,334 17.20
International 2,440,787 12.06 1,892,393 10.88
- --------------------------------------------------------------------------------
20,236,588 100.00% 17,395,126 100.00%
Less securitized
balances (10,323,039) (11,238,015)
- --------------------------------------------------------------------------------
Total $ 9,913,549 $ 6,157,111
- --------------------------------------------------------------------------------
</TABLE>
note p
================================================================================
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discloses the fair value of financial instruments as of December
31, 1999 and 1998, whether or not recognized in the balance sheets. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. As required
under GAAP, these disclosures exclude certain financial instruments and all
non-financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments as of December 31, 1999
and 1998:
Cash and Cash Equivalents
The carrying amounts of cash and due from banks, federal funds sold and resale
agreements and interest-bearing deposits at other banks approximated fair value.
Securities Available for Sale
The fair value of securities available for sale was determined using current
market prices. See Note B for fair values by type of security.
Consumer Loans
The net carrying amount of consumer loans, including the Company's seller's
interest in securitized consumer loan receivables, approximated fair value due
to the relatively short average life and variable interest rates on a
substantial number of these loans. This amount excluded any value related to
account relationships.
Interest Receivable
The carrying amount approximated fair value.
Accounts Receivable from Securitizations
The carrying amount approximated fair value.
Borrowings
The book value of interest-bearing deposits, secured borrowings, federal funds
purchased and resale agreements, and other short-term borrowings approximates
fair value. The fair value of the junior subordinated capital income securities
was $84,199 and $77,672 at December 31, 1999 and 1998, respectively, and is
determined based on quoted market prices. The fair value of senior notes was
$4,075,825 and $3,769,000 as of December 31, 1999 and 1998, respectively, and is
determined based on quoted market prices.
Interest Payable
The carrying amount approximated fair value.
Off-Balance Sheet Financial Instruments
The fair value was the estimated net amount that the Company would have
(paid)/received to terminate the interest rate swaps, currency swaps and f/x
contracts at the respective dates, taking into account the forward yield curve
on the swaps and the forward rates on the currency swaps and f/x contracts. As
of December 31, 1999 and 1998, the estimated fair value was $80,566 and
($64,713), respectively.
66
<PAGE>
note q
================================================================================
CAPITAL ONE FINANCIAL CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL
INFORMATION
<TABLE>
<CAPTION>
Balance Sheets at December 31, 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 5,846 $ 10,887
Investment in subsidiaries 1,428,754 1,211,255
Loans to subsidiaries(1) 609,176 375,396
Other 81,169 62,316
- -----------------------------------------------------------------------------------------------
Total assets $ 2,124,945 $ 1,659,854
- -----------------------------------------------------------------------------------------------
Liabilities:
Senior notes $ 548,897 $ 324,213
Borrowings from subsidiaries 46,802 54,200
Other 13,639 11,035
- -----------------------------------------------------------------------------------------------
Total liabilities 609,338 389,448
Stockholders' equity 1,515,607 1,270,406
- -----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,124,945 $ 1,659,854
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) As of December 31, 1999 and 1998, includes $11,350 and $108,400,
respectively, of cash invested at the Bank instead of the open market.
<TABLE>
<CAPTION>
Statements of Income for the Year Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest from temporary investments $ 32,191 $ 12,485 $ 11,352
Interest expense (41,011) (18,212) (11,067)
Dividends, principally from bank subsidiaries 220,001 260,000 228,000
Non-interest income 39 893 56
Non-interest expense (6,274) (2,700) (409)
- -----------------------------------------------------------------------------------------------
Income before income taxes and equity in
undistributed earnings of subsidiaries 204,946 252,466 227,932
Income tax benefit 5,721 2,863 25
Equity in undistributed earnings (loss)
of subsidiaries 152,424 19,902 (38,576)
- -----------------------------------------------------------------------------------------------
Net income $ 363,091 $ 275,231 $ 189,381
- -----------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows for the Year Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 363,091 $ 275,231 $ 189,381
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed (earnings) loss of subsidiaries (152,424) (19,902) 38,576
Decrease (increase) in other assets 4,236 (56,682) (2,183)
Increase in other liabilities 2,604 1,365 3,290
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 217,507 200,012 229,064
Investing Activities:
Purchases of securities available for sale (26,836)
Proceeds from maturities of securities available for sale 11,658
Increase in investment in subsidiaries (115,233) (172,119) (83,366)
Increase in loans to subsidiaries (233,780) (167,889) (102,507)
- -------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (364,191) (340,008) (185,873)
Financing Activities:
Increase in borrowings from subsidiaries (7,398) 50,900 3,300
Issuance of senior notes 224,684 199,213
Dividends paid (20,653) (20,533) (20,638)
Purchases of treasury stock (107,104) (91,672) (52,314)
Net proceeds from issuances of common stock 14,028 12,143 6,509
Proceeds from exercise of stock options 38,086 629 4,082
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 141,643 150,680 (59,061)
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (5,041) 10,684 (15,870)
Cash and cash equivalents at beginning of year 10,887 203 16,073
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,846 $ 10,887 $ 203
- -------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
directors and officers
CAPITAL ONE FINANCIAL CORPORATION
BOARD OF DIRECTORS
Richard D. Fairbank
Chairman and Chief Executive Officer
Capital One Financial Corporation
Nigel W. Morris
President and Chief Operating Officer
Capital One Financial Corporation
W. Ronald Dietz*
Managing Partner
Customer Contact Solutions, LLC
James A. Flick, Jr.*
President and Chief Executive Officer
Dome Corporation
Patrick W. Gross*
Founder and Chairman, Executive Committee
American Management Systems, Inc.
James V. Kimsey**
Founding CEO and Chairman Emeritus
America Online, Inc.
Stanley I. Westreich**
President
Westfield Realty, Inc.
*Audit Committee
**Compensation Committee
CAPITAL ONE FINANCIAL CORPORATION
EXECUTIVE OFFICERS
Richard D. Fairbank
Chairman and Chief Executive Officer
Nigel W. Morris
President and Chief Operating Officer
Marjorie M. Connelly
Sr. Vice President, Credit Card Operations
Matthew J. Cooper
Sr. Vice President, Marketing and Analysis
John G. Finneran, Jr.
Sr. Vice President, General Counsel and Corporate Secretary
Dennis H. Liberson
Sr. Vice President, Human Resources
William J. McDonald
Sr. Vice President, Brand Management
Peter A. Schnall
Sr. Vice President, Marketing and Analysis
Michael Shrader
Sr. Vice President, Sales
David M. Willey
Sr. Vice President, Corporate Financial Management
69
<PAGE>
corporate information
Corporate Office
2980 Fairview Park Drive, Suite 1300
Falls Church, VA 22042-4525
(703) 205-1000
www.capitalone.com
Annual Meeting
Thursday, April 27, 2000, 10:00 a.m. Eastern Time
Fairview Park Marriott Hotel
3111 Fairview Park Drive
Falls Church, VA 22042
Principal Financial Contact
Paul Paquin
Vice President, Investor Relations
Capital One Financial Corporation
2980 Fairview Park Drive, Suite 1300
Falls Church, VA 22042-4525
(703) 205-1039
Copies of Form 10-K filed with the Securities
and Exchange Commission are available without
charge, upon written request to Paul Paquin
at the above address.
Common Stock
Listed on New York Stock Exchange
Stock Symbol COF
Member of S&P 500
Corporate Registrar/Transfer Agent
First Chicago Trust, a division of Equiserve
P.O. Box 2500
Jersey City, NJ 07303-2500
Telephone: (800) 446-2617
Fax: (201) 222-4892
For hearing impaired: (201) 222-4955
E-mail: equiserve.com
Internet: www.equiserve.com
Independent Auditors
Ernst & Young LLP
70
<PAGE>
Exhibit 21
Significant Subsidiaries of the Company
1. Capital One Bank -- Incorporated in the Commonwealth of Virginia
2. Capital One, F.S.B. -- Federal Savings Bank
3. Capital One Services, Inc. -- Incorporated in the State of Delaware
4. America One Communications, Inc. -- Incorporated in the State of Delaware
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Capital One Financial Corporation of our report dated January 18, 2000,
included in the 1999 Annual Report to Stockholders of Capital One Financial
Corporation.
We also consent to the incorporation by reference in the following Registration
Statements of Capital One Financial Corporation of our report dated January 18,
2000, with respect to the consolidated financial statements of Capital One
Financial Corporation incorporated by reference in the Annual Report (Form 10-K)
for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Registration Statement
Number Form Description
------------------------- -------------- ---------------
<S> <C> <C>
33-80263 Form S-8 Marketing and Management
Services Agreement
33-86874 Form S-8 Employee Stock Purchase Plan
33-86876 Form S-8 Employee Savings Plan
33-86986 Form S-8 1994 Stock Incentive Plan
33-91790 Form S-8 1995 Non-Employee Directors
Stock Incentive Plan
33-97032 Form S-8 Amendment to 1994 Stock
Incentive Plan
33-99748 Form S-3 Dividend Reinvestment and
Stock Purchase Plan
333-3580 Form S-3 Debt Securities, Preferred Stock
and Common Stock in the
amount of $200 million
333-42853 Form S-8 1994 Stock Incentive Plan
333-45453 Form S-8 Associate Savings Plan
333-51639 Form S-8 1994 Stock Incentive Plan,
Tier 5 Special Option Program
333-51637 Form S-8 1994 Stock Incentive Plan
333-57317 Form S-8 1994 Stock Incentive Plan,
1998 Special Option Program
333-58577 Form S-3 Debt Securities, Preferred Stock
and Common Stock in the
amount of $500 million
333-60831 Form S-3 Acquisition of Summit
Acceptance Corporation
333-70305 Form S-8 1994 Stock Incentive Plan,
Supplemental Special
Option Program
333-78067 Form S-8 1994 Stock Incentive Plan
333-78383 Form S-8 1994 Stock Incentive Plan,
1999 Performance-Based Option
Program and Supplemental
Special Option Program
333-78609 Form S-8 1999 Stock Incentive Plan
333-78635 Form S-8 1999 Non-Employee Directors Stock
Incentive Plan
333-84693 Form S-8 1994 Stock Incentive Plan,
Supplemental Special
Option Program
333-85227 Form S-3 Debt Securities, Preferred Stock
and Common Stock in the
amount of $1 billion
333-91327 Form S-8 1994 Stock Incentive Plan
333-92345 Form S-8 1994 Stock Incentive Plan
</TABLE>
ERNST & YOUNG LLP
McLean, Virginia
March 20, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 134,065 15,974 5,039
<INT-BEARING-DEPOSITS> 112,432 22,393 59,184
<FED-FUNDS-SOLD> 0 261,800 173,500
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 1,856,421 1,796,787 1,242,670
<INVESTMENTS-CARRYING> 0 0 0
<INVESTMENTS-MARKET> 0 0 0
<LOANS> 9,913,549 6,157,111 4,861,687
<ALLOWANCE> (342,000) (231,000) (183,000)
<TOTAL-ASSETS> 13,336,443 9,419,403 7,078,279
<DEPOSITS> 3,783,809 1,999,979 1,313,654
<SHORT-TERM> 2,780,468 1,742,200 893,776
<LIABILITIES-OTHER> 1,076,013 667,425 344,816
<LONG-TERM> 4,180,547 3,739,393 3,632,774
0 0 0
0 0 0
<COMMON> 1,997 1,997 1,997
<OTHER-SE> 1,513,610 1,268,409 891,262
<TOTAL-LIABILITIES-AND-EQUITY> 13,336,443 9,419,403 7,078,279
<INTEREST-LOAN> 1,482,371 1,003,122 819,785
<INTEREST-INVEST> 0 0 0
<INTEREST-OTHER> 111,113 108,414 98,200
<INTEREST-TOTAL> 1,593,484 1,111,538 717,985
<INTEREST-DEPOSIT> 137,792 67,479 41,932
<INTEREST-EXPENSE> 540,882 424,284 341,849
<INTEREST-INCOME-NET> 1,052,602 687,252 376,136
<LOAN-LOSSES> 382,948 267,028 262,837
<SECURITIES-GAINS> 0 0 0
<EXPENSE-OTHER> 2,464,986 1,464,586 876,976
<INCOME-PRETAX> 577,017 443,921 305,453
<INCOME-PRE-EXTRAORDINARY> 577,017 443,921 305,453
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 363,051 275,231 189,381
<EPS-BASIC> 1.84 1.40 0.96
<EPS-DILUTED> 1.72 1.32 0.93
<YIELD-ACTUAL> 16.44 15.38 12.48
<LOANS-NON> 0 0 0
<LOANS-PAST> 220,513 98,798 99,667
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 231,000 183,000 118,500
<CHARGE-OFFS> (400,143) (294,295) (223,029)
<RECOVERIES> 124,673 67,764 27,462
<ALLOWANCE-CLOSE> 342,000 231,000 183,000
<ALLOWANCE-DOMESTIC> 304,380 198,419 174,659
<ALLOWANCE-FOREIGN> 37,620 32,581 8,341
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
