<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 0-26268
MINIMED INC.
(Exact Name of Registrant as Specified in its Charter)
---------------
Delaware 95-4408171
(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification No.)
12744 SAN FERNANDO ROAD, SYLMAR, CA 91342
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (818) 362-5958
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OUTSTANDING AT AUGUST 12, 1999
---------------------------- ------------------------------
<S> <C>
Common Stock, $.01 par value 30,917,189
</TABLE>
================================================================================
1
<PAGE> 2
INDEX
MINIMED INC.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Consolidated Balance Sheets (Unaudited) - January 1, 1999 and July 2, 1999 3
Consolidated Statements of Income (Unaudited) -- Three months and
six months ended July 3, 1998 and July 2, 1999 4
Consolidated Statements of Cash Flows (Unaudited) - Six months
ended July 3, 1998 and July 2, 1999 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
PART II. OTHER INFORMATION 18
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 21
INDEX TO EXHIBITS 22
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
MINIMED INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 1999 AND JULY 2, 1999
ASSETS
<TABLE>
<CAPTION>
1998 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................................................. $ 27,303,000 $165,937,000
Short-term investments ..................................................... 13,476,000 9,465,000
Accounts receivable, net of allowance for doubtful accounts of
$8,844,000 and $9,489,000 at January 1, 1999 and July 2, 1999, respectively 38,788,000 45,710,000
Inventories ................................................................ 16,860,000 19,062,000
Deferred income taxes ...................................................... 6,404,000 6,760,000
Income taxes receivable .................................................... 8,017,000
Prepaid expenses and other current assets .................................. 3,835,000 5,898,000
------------ ------------
Total current assets ........................................... 106,666,000 260,849,000
LONG-TERM INVESTMENTS ........................................................ 4,826,000 5,924,000
NOTE RECEIVABLE FROM AFFILIATE ............................................... 3,600,000 3,600,000
OTHER ASSETS ................................................................. 11,522,000 11,225,000
LAND, BUILDINGS, PROPERTY AND EQUIPMENT - Net ................................ 31,038,000 37,520,000
------------ ------------
TOTAL ........................................................................ $157,652,000 $319,118,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable ........................................... 1,101,000 882,000
Accounts payable ........................................................... 5,447,000 5,078,000
Accrued salaries and related benefits ...................................... 5,231,000 4,788,000
Accrued sales commissions .................................................. 2,260,000 773,000
Accrued warranties ......................................................... 2,828,000 2,982,000
Income taxes payable ....................................................... 1,155,000 63,000
Other accrued expenses ..................................................... 3,873,000 3,005,000
------------ ------------
Total current liabilities ....................................... 21,895,000 17,571,000
------------ ------------
Deferred income taxes ........................................................ 865,000 1,282,000
Notes payable ................................................................ 1,059,000 1,000,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; 40,000,000 shares authorized; 28,095,274 and
30,782,005 shares issued and outstanding as of January 1, 1999
and July 2, 1999, respectively ........................................... 286,000 320,000
Additional capital ........................................................ 111,683,000 267,861,000
Accumulated other comprehensive income .................................... 738,000 1,303,000
Retained earnings ......................................................... 21,126,000 29,781,000
------------ ------------
Total stockholders' equity ..................................... 133,833,000 299,265,000
------------ ------------
TOTAL ........................................................................ $157,652,000 $319,118,000
============ ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
MINIMED INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------- --------------------------------
July 3, July 2, July 3, July 2,
1998 1999 1998 1999
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
NET SALES ................................. $ 31,715,000 $ 49,083,000 $ 58,081,000 $ 89,994,000
COST OF SALES ............................. 13,656,000 16,280,000 23,440,000 30,118,000
------------ ------------ ------------ ------------
GROSS PROFIT .............................. 18,059,000 32,803,000 34,641,000 59,876,000
OPERATING EXPENSES:
Selling, general and administrative ..... 11,930,000 20,167,000 23,320,000 37,535,000
Research and development ................ 3,737,000 6,572,000 7,054,000 11,868,000
Research and development contract ....... (1,500,000) (1,500,000) (3,000,000) (3,000,000)
------------ ------------ ------------ ------------
Total operating expenses ...... 14,167,000 25,239,000 27,374,000 46,403,000
------------ ------------ ------------ ------------
OPERATING INCOME .......................... 3,892,000 7,564,000 7,267,000 13,473,000
OTHER INCOME, Including interest income ... 436,000 573,000 727,000 737,000
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ............... 4,328,000 8,137,000 7,994,000 14,210,000
PROVISION FOR INCOME TAXES ................ 1,581,000 3,264,000 2,941,000 5,555,000
------------ ------------ ------------ ------------
NET INCOME ................................ $ 2,747,000 $ 4,873,000 $ 5,053,000 $ 8,655,000
============ ============ ============ ============
BASIC EARNINGS PER SHARE .................. $ 0.10 $ 0.17 $ 0.19 $ 0.31
============ ============ ============ ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING . 26,626,000 28,455,000 26,594,000 28,301,000
============ ============ ============ ============
DILUTED EARNINGS PER SHARE ................ $ 0.10 $ 0.16 $ 0.18 $ 0.29
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 28,106,000 30,302,000 27,980,000 30,163,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
MINIMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JULY 3, 1998 AND SIX MONTHS ENDED JULY 2, 1999
<TABLE>
<CAPTION>
1998 1999
------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................... $ 5,053,000 $ 8,655,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation ........................................... 1,604,000 3,210,000
Directors' fees paid in common stock ................... -- 57,000
Deferred income taxes .................................. (625,000) (357,000)
Tax benefit from exercise of non-qualified stock options 1,150,000 11,993,000
Changes in operating assets and liabilities:
Accounts receivable, net ............................. (1,007,000) (6,922,000)
Inventories .......................................... (2,752,000) (2,202,000)
Prepaid expenses and other current assets ............ (2,314,000) (2,063,000)
Other assets ......................................... (56,000) 48,000
Accounts payable ..................................... (2,510,000) (369,000)
Income taxes receivable/payable ...................... 1,165,000 (9,109,000)
Other accrued expenses ............................... (3,617,000) (2,644,000)
------------- -------------
Net cash provided by (used in) operating activities .. (3,909,000) 297,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES -
Short-term investments ............................... 9,245,000 4,011,000
Long-term investments ................................ (1,140,000) --
Acquisition of Dartec A.B ............................ (2,580,000) --
Purchase of land, buildings, property and equipment .. (8,530,000) (9,364,000)
------------- -------------
Net cash used in investing activities ................ (3,005,000) (5,353,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Repayment of notes payable ........................... (2,905,000) (278,000)
Proceeds from public offering, net of expenses ....... -- 140,588,000
Proceeds from stock option exercises ................. 412,000 2,671,000
Proceeds from issuance of common stock under employee
stock purchase plan ............................... 467,000 825,000
------------- -------------
Net cash provided by (used in) financing activities (2,026,000) 143,806,000
------------- -------------
Effect of cumulative foreign currency translation
adjustment on cash and equivalents ................. 2,000 (116,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ........................................... (8,938,000) 138,634,000
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ................................................ 22,282,000 27,303,000
------------- -------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD ................................................ $ 13,344,000 $ 165,937,000
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest ............................................. $ 38,000 $ 2,000
Income taxes ......................................... $ 3,159,000 $ 3,621,000
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY - The Company recorded an
unrealized holding gain of $681,000 during the six months ended July 2, 1999 and
an unrealized holding loss of $1,162,000 during the six months ended July 3,
1998, net of estimated deferred income taxes on marketable securities classified
as long-term investments available for sale.
See notes to consolidated financial statements
5
<PAGE> 6
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JULY 3, 1998 AND SIX MONTHS ENDED JULY 2, 1999
The fiscal years referenced herein are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR YEAR ENDED
----------- ----------
<S> <C>
1999 December 31, 1999
1998 January 1, 1999
</TABLE>
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of MiniMed Inc.
("MiniMed" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
normal, recurring adjustments considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction with the
audited financial statements included in the Annual Report of MiniMed Inc. filed
on Form 10-K with the Securities and Exchange Commission for the year ended
January 1, 1999. The results of operations for the six months ended July 2, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1999.
NOTE 2. INCOME TAXES
Net income and earnings per share reflect income taxes which have been
recorded at the Company's estimated effective tax rate for the year. This
estimated income tax rate has been determined by giving consideration to the
pretax earnings and losses applicable to foreign and domestic tax jurisdictions.
NOTE 3. WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128), basic earnings per share for the three and six
months ended July 3, 1998 and July 2, 1999, were computed by dividing net income
by weighted average common shares outstanding during the periods presented.
Diluted earnings per share for the periods presented were computed by dividing
net income by weighted average common and common equivalent shares outstanding,
computed in accordance with the treasury stock method. The computation of basic
and diluted EPS is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JULY 3, JULY 2, JULY 3, JULY 2,
1998 1999 1998 1999
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
BASIC EPS COMPUTATION
Numerator:
Net income applicable to common stock $ 2,747,000 $ 4,873,000 $ 5,053,000 $ 8,655,000
----------- ----------- ----------- -----------
Denominator:
Weighted average common
shares outstanding ................. 26,626,000 28,455,000 26,594,000 28,301,000
----------- ----------- ----------- -----------
Basic earnings per share ............ $ 0.10 $ 0.17 $ 0.19 $ 0.31
=========== =========== =========== ===========
DILUTED EPS COMPUTATION
Numerator:
Net income applicable to common stock $ 2,747,000 $ 4,873,000 $ 5,053,000 $ 8,655,000
----------- ----------- ----------- -----------
Denominator:
Weighted average common
shares outstanding ................. 26,626,000 28,455,000 26,594,000 28,301,000
Effect of dilutive securities
Stock options .................. 1,480,000 1,847,000 1,386,000 1,862,000
----------- ----------- ----------- -----------
Diluted weighted average
shares outstanding .................. 28,106,000 30,302,000 27,980,000 30,163,000
----------- ----------- ----------- -----------
Diluted earnings per share .......... $ 0.10 $ 0.16 $ 0.18 $ 0.29
=========== =========== =========== ===========
</TABLE>
6
<PAGE> 7
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JULY 3, 1998 AND SIX MONTHS ENDED JULY 2, 1999
NOTE 4. CONSOLIDATED BALANCE SHEET COMPONENTS
Certain balance sheet components are as follows:
<TABLE>
<CAPTION>
JANUARY 1, JULY 2,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Inventories:
Raw materials ............... $ 7,064,000 $ 7,252,000
Work-in-progress ............ 3,040,000 1,760,000
Finished goods .............. 6,756,000 10,050,000
Total ....................... ------------ ------------
$ 16,860,000 $ 19,062,000
============ ============
Property, plant and equipment:
Land, buildings and
improvements .............. $ 13,244,000 $ 13,583,000
Machinery and equipment ..... 17,332,000 20,280,000
Tooling and molds ........... 2,352,000 2,574,000
Computer software ........... 1,989,000 5,497,000
Furniture and fixtures ...... 5,301,000 7,630,000
------------ ------------
40,218,000 49,564,000
Less accumulated depreciation (9,180,000) (12,044,000)
------------ ------------
Total ....................... $ 31,038,000 $ 37,520,000
============ ============
Other assets:
Technology license .......... $ 145,000 $ 120,000
Goodwill in connection with
Dartec acquisition ....... 2,670,000 2,591,000
Goodwill in connection with
DSS acquisition .......... 8,444,000 8,273,000
Other.......................... 263,000 241,000
------------ ------------
Total.......................... $ 11,522,000 $ 11,225,000
============ ============
</TABLE>
7
<PAGE> 8
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JULY 3, 1998 AND SIX MONTHS ENDED JULY 2, 1999
NOTE 5. COMPREHENSIVE INCOME
The Company's total comprehensive income is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
JULY 3, JULY 2, JULY 3, JULY 2,
1998 1999 1998 1999
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Net income .............................. $ 2,747,000 $ 4,873,000 $ 5,053,000 $ 8,655,000
Other comprehensive income (loss):
Foreign currency translation
adjustments ....................... (145,000) (62,000) 2,000 (116,000)
Unrealized gain (loss) on securities . (265,000) 784,000 (1,873,000) 1,098,000
----------- ----------- ----------- -----------
Other comprehensive income (loss),
before tax ........................ (410,000) 722,000 (1,871,000) 982,000
Income tax expense related to items of
other comprehensive income ........ (100,000) 298,000 (711,000) 417,000
----------- ----------- ----------- -----------
Other comprehensive income (loss) .... (310,000) 424,000 (1,160,000) 565,000
----------- ----------- ----------- -----------
Total comprehensive income .............. $ 2,437,000 $ 5,297,000 $ 3,893,000 $ 9,220,000
=========== =========== =========== ===========
</TABLE>
NOTE 6. CONTINGENCIES
On September 11, 1996, we filed an action against Fimed, Inc. in Los
Angeles County Superior Court seeking declaratory relief and rescission of a
distributorship agreement giving Fimed an exclusive right to distribute our
external pumps using third-party consumer financing. We alleged that Fimed
fraudulently induced us to enter into the agreement and failed to disclose
material facts. Fimed answered our complaint generally denying the allegations,
but also asserted counterclaims against us alleging breach of contract,
promissory fraud, unfair competition, intentional interference with prospective
economic advantage, defamation, libel and slander, and abuse of process and
seeking compensatory damages of $400.0 million, plus punitive damages. No
significant amount of our products has ever been sold using third-party
consumer financing, and Fimed never made any sales under the agreement. We
notified Fimed that we were seeking rescission of the agreement less than six
months after it was signed and before Fimed began marketing our products.
We believe we have meritorious defenses to the counterclaim asserted
by Fimed. We intend to prosecute our claim against Fimed and defend against the
counterclaim vigorously. Fact discovery in the litigation has been completed.
In February 1999, a hearing was held before a retired Judge who was appointed
by the court to act as an independent expert pursuant to California law to
evaluate the amount of damages, if any, sustained by Fimed. The Judge issued
his opinion on May 16, 1999. In that opinion he determined that, even if Fimed
is able to prove that we are liable for the actions it alleges, any recovery by
Fimed should be limited to its out-of-pocket expenses and the gross profit we
earned for our consumer finance sales for the period of April 17, 1996 through
June 30, 1997. We have not definitively calculated those amounts, but believe
the amounts will be immaterial. The Judge specifically stated that he did not
believe Fimed had shown the existence of lost profits damages from its proposed
business with the requisite certainty required under California law. Trial in
this matter is set for September 7, 1999. Although the findings of the
independent expert are not binding on the court they will be admissable as
evidence in the trial
In October 1998, we filed a complaint against Robert Kusher and Craig
Lowy, the former owners of HMS, in the United States District Court for the
Southern District of Florida, Ft. Lauderdale Division. The complaint alleges
that Mr. Kusher and Mr. Lowy engaged in fraudulent misrepresentation, negligent
misrepresentation and breach of contract relating to the sale of HMS to us and
specific billing practices carried on prior to the sale. We are seeking several
remedies including declaratory relief as to our rights under the acquisition
and/or indemnification for any liability arising out of these billing practices.
The allegations regarding billing practice could give rise to claims against us
by the State of Florida.
On February 9, 1999, we were served with a complaint filed in the Civil
District Court For the Parish of Orleans, State of Louisiana, by Diabetes
Resources, Inc., which is also known as Insulin Infusion Specialties, and which
we will refer to as IIS. IIS entered into an Educational Dealer Agreement with
us in July, 1997, relating to the distribution of some of our products by IIS.
We declined to renew that agreement, pursuant to its terms as of December 31,
1998. IIS is alleging that we are engaged in unfair competition, breached the
8
<PAGE> 9
agreement, violated applicable trade secret laws and defamed IIS. IIS did not
specify the amount of damages it is seeking in its complaint. We believe that we
have meritorious defenses to IIS's claims. We removed the action to Federal
Court, and filed an answer denying the material allegations, and filed a
counterclaim seeking damages for unfair trade practices. We will shortly be
filing an amended counterclaim seeking damages based on IIS's failure to pay
amounts due and owing. Trial in the matter has been set for January 24, 2000.
Discovery in this litigation is in its preliminary stages.
During the normal course of business, the Company may be subject to
litigation involving various business matters. Management believes that an
adverse outcome of any such known matters would not have a material adverse
impact on the Company.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes thereto included elsewhere in this quarterly
report. Some of the information in this quarterly report contains
forward-looking statements, including statements relating to anticipated
operating results, margins, growth, financial resources, capital requirements,
adequacy of the Company's capital resources, trends in spending on research and
development, the development of new markets, the development, regulatory
approval, manufacture, distribution, and commercial acceptance of new products,
the exercise of an option to purchase certain technologies or paid-up licenses
and new applications for our existing product lines are made pursuant to the
Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that forward-looking statements involve risks and
uncertainties which may affect our business and prospects, including changes in
economic and market conditions, acceptance of our products by the health care
and reimbursement communities, health care legislation and regulation, new
developments in diabetes therapy, administrative and regulatory approval and
related considerations, competitive developments, maintenance of strategic
alliances and other factors discussed in our filings with the Securities and
Exchange Commission.
GENERAL
Our sales and profits have been generated primarily through the sale of
external pumps and related disposable products used to deliver insulin in the
intensive management of diabetes. Additionally, through our acquisitions of Home
Medical Supply, Inc., which we call HMS, Dartec AB, a Swedish distributor which
we call Dartec, and Diabetes Support Systems, Inc., which we call DSS, we also
have broadened our product offerings to include other diabetes supplies and
pharmacy products generally used in the treatment of this disease. We distribute
these products nationally.
Product development and manufacturing operations have focused on three
product lines: external insulin pumps and related disposables, implantable
insulin pumps and continuous glucose monitoring systems. Future development of
the external pump and disposable product line will focus upon improving the
existing technology for its current use in diabetes treatment and the
utilization of this technology for the treatment of other medical conditions. On
June 15, 1999, we received FDA approval of the first generation of our
continuous glucose monitoring system. We intend to initiate sales activity for
this product line shortly, and commercialization will be subject to successful
implementation of manufacturing, sales, marketing and reimbursement plans. Sales
of the implantable pump product line have been and will continue to be limited
until full regulatory approval is obtained.
During 1999 we entered into two strategic relationships which will
affect future product development efforts. In February 1999, we entered into an
agreement with Eli Lilly and Company giving us a worldwide exclusive license to
package and sell a new formulation of Lilly's insulin lyspro for use with our
programmable insulin infusion pumps. In June 1999, we entered into agreements
with a division of Elan Corporation, PLC to manufacture and market exclusively
under our name a disposable, constant-flow infusion system developed by Elan to
deliver insulin. We will also manufacture this infusion system for Elan and
its other licensees for use with a variety of other pharmaceutical compounds.
Products related to these agreements are subject to regulatory approval.
10
<PAGE> 11
RESULTS OF OPERATIONS
The following table sets forth, for the three and six month periods
ended July 2, 1999, and July 3, 1998, the percentage relationship to net sales
of some items in our consolidated statements of income and the percentage change
in the dollar amount of these items on a comparative basis.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------------- --------------------------------------
JULY 2, JULY 3, % INCREASE JULY 2, JULY 3, % INCREASE
1999 1998 (DECREASE) 1999 1998 (DECREASE)
------- ------- ----------- ------- ------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 54.8% 100.0% 100.0% 54.9%
Cost of sales 33.2 43.1 19.2 33.5 40.4 28.5
----- ----- ---- ----- ----- ----
Gross profit 66.8 56.9 81.6 66.5 59.6 72.8
Operating expenses:
Selling, general and
administrative 41.1 37.6 69.0 41.7 40.2 61.0
Research and development 13.4 11.8 75.9 13.2 12.1 68.2
Research and development contract (3.1) (4.7) -- (3.3) (5.2) --
----- ----- ---- ----- ----- ----
Total operating expenses 51.4 44.7 78.2 51.6 47.1 69.5
----- ----- ---- ----- ----- ----
Operating income 15.4% 12.2% 94.3% 14.9% 12.5% 85.4%
===== ===== ==== ===== ===== ====
</TABLE>
The following table sets forth domestic and international net sales and
gross profits for our significant business activities for the three and six
month periods ended July 2, 1999 and July 3, 1998.
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS % OF NET SALES
----------------------------------------------- -----------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- --------------------- ------------------ -------------------
JULY 2, JULY 3, JULY 2, JULY 3, JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998 1999 1998 1999 1998
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Unaudited)
NET SALES:
Diabetes products:
External pumps and
related disposables
Domestic $ 41,424 $ 24,991 $ 75,700 $ 44,327 84.4% 78.8% 84.1% 76.3%
International 3,842 2,793 7,544 5,442 7.8 8.8 8.4 9.4
-------- -------- -------- -------- ---- ---- ---- ----
Subtotal 45,266 27,784 83,244 49,769 92.2 87.6 92.5 85.7
Implantable insulin pumps 404 108 550 339 0.8 0.3 0.6 0.6
Other diabetes supplies 2,279 1,367 3,895 2,484 4.7 4.3 4.3 4.3
-------- -------- -------- -------- ---- ---- ---- ----
Total diabetes products 47,949 29,259 87,689 52,592 97.7 92.2 97.4 90.6
Pharmacy products 1,134 2,456 2,305 5,489 2.3 7.8 2.6 9.4
-------- -------- -------- -------- ---- ---- ---- ----
Total net sales $ 49,083 $ 31,715 $ 89,994 $ 58,081 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ==== ==== ==== ====
GROSS PROFIT:
External pumps and
related disposables $ 31,824 $ 18,274 $ 58,314 $ 34,176 64.8% 57.6% 64.8% 58.8%
Implantable insulin pumps (152) (772) (351) (1,363) (0.3) (2.4) (0.4) (2.3)
Other diabetes supplies 858 415 1,248 965 1.7 1.3 1.4 1.7
-------- -------- -------- -------- ---- ---- ---- ----
Total diabetes products 32,530 17,917 59,211 33,778 66.2 56.5 65.8 58.2
Pharmacy products 273 142 665 863 0.6 0.4 0.7 1.5
-------- -------- -------- -------- ---- ---- ---- ----
Total gross profit $ 32,803 $ 18,059 $ 59,876 $ 34,641 66.8% 56.9% 66.5% 59.7%
======== ======== ======== ======== ==== ==== ==== ====
</TABLE>
NET SALES
Net sales increased 54.8% during the three months ended July 2, 1999
over the three months ended July 3, 1998 to $49,083,000 from $31,715,000, and
increased 54.9% to $89,994,000 in the first six months of 1999 from $58,081,000
for the first six months of 1998. This sales growth is principally the result of
an increase in the sales of external pumps and related disposables. In the
second quarter of 1999 sales of these products increased 62.9%, or $17,482,000
over the second quarter of 1998, and $33,475,000 or 67.3% for the first six
months of 1999 over the corresponding period of 1998. Domestic sales of these
products grew 65.8% or $16,433,000 in the second quarter of 1999 compared to the
second quarter of 1998, while international sales increased 37.6% or $1,049,000
during the same period. For the first six months of 1999, domestic sales of
external pumps and related disposable products increased by 70.8% while foreign
sales of these products increased by 38.6% over the comparable period of 1998.
The domestic net sales growth was derived primarily from increased
volume of external pumps and related disposables combined with an increase in
average prices realized on external pump sales. The higher domestic external
pump price resulted from an increase in the list price for the latest generation
external pump during the second quarter of 1998, combined with our continued
shift of sales through our direct sales organization rather than through
independent dealers, which receive discounts on these products. International
11
<PAGE> 12
sales of external pumps and related disposable products grew primarily due to
greater sales volumes of external pumps, while pricing of external pumps in the
international market in the second quarter of 1999 remained consistent with the
comparable periods of 1998. Domestic and international pricing for disposable
products did not change materially from the first six months of 1998 to the
first six months of 1999.
Sales of implantable pumps increased 274.1% or $296,000 from the second
quarter of 1998 to the second quarter of 1999, while sales of these products for
the first six months of 1999 increased 62.2% or $211,000 over the first six
months of 1998. While we have obtained regulatory approval for the implantable
pump in Europe, the special insulin utilized by the pump has not been approved
in Europe. No approvals have been obtained in the United States. Sales of
implantable pumps to date have been generated mainly in connection with clinical
trials and compassionate use of the pumps. No assurance can be given as to when
these approvals will be received, if at all.
Sales of other diabetes supplies increased by 66.7% or $912,000 from
the second quarter of 1998 to the second quarter of 1999, while sales of these
products for the first six months of 1999 increased by 56.8% or $1,411,000 over
the first six months of 1998. This increase resulted from overall market growth
combined with the addition of sales of these products by DSS, which we acquired
during the fourth quarter of 1998. Average sales prices, however, have decreased
for these products due to reimbursement trends. Pharmacy products sales
decreased by 53.8% or $1,322,000 from the second quarter of 1998 to the second
quarter of 1999, while sales of these products for the first six months of 1999
decreased by 58.0% or $3,184,000 compared to the first six months of 1998. The
pharmacy operation historically distributed products to treat a number of
medical conditions, including diabetes, HIV/AIDS and renal failure. The 1999
sales decrease resulted primarily from our continued narrowing and restructuring
of the pharmacy operations.
OPERATING RESULTS
Cost of Sales and Gross Profit--Cost of sales increased 19.2% during
the three months ended July 2, 1999 over the three months ended July 3, 1998 to
$16,280,000 from $13,656,000, and increased 28.5% to $30,118,000 from
$23,440,000 for the six months ended July 2, 1999 as compared to the six months
ended July 3, 1998. As a percentage of net sales, cost of sales in the 1999
second quarter decreased to 33.2% from 43.1% in the comparable period of 1998,
while cost of sales as a percentage of net sales for the first six months of
1999 decreased to 33.5% from 40.4% for the comparable period of 1998. Gross
margins on external pumps and disposables increased to 70.3% of pump and
disposable sales during the 1999 second quarter compared to 65.8% for this
product line during the 1998 second quarter. For the first six months of 1999
gross margins on external pumps and disposables increased to 70.1% compared to
68.7% for the comparable period in 1998. The improvement in year-to-date and
quarterly gross margins on these products was primarily the result of the
increase in average prices on external pump sales, a reduction in the cost of
certain disposable products that we purchase from contract manufacturers due to
rebates and volume discounts, and manufacturing efficiencies due to increased
volumes.
Our overall gross profits continue to be adversely impacted by the
implantable pump product line due to continued limited sales prior to full
commercial release. We sold assets and transferred technology related to this
product line on September 1, 1998 to Medical Research Group, Inc., an affiliate
which we will call MRG. MRG has assumed all manufacturing and product
development activity of the implantable pump. Implantable pump gross margins
improved during both the 1999 second quarter and the first six months of 1999
compared to the comparable periods in 1998 due to this transaction. We expect
this improvement in margins to continue in the short-term as a result of the MRG
transaction; however, in the long-term, margins may be reduced due to the
transfer of the manufacturing operation to MRG, as our role has been converted
to an exclusive distributor of this product. We are required to purchase
implantable pump units from MRG at negotiated prices, are obligated to purchase
minimum quantities and must purchase minimum quantities in future periods in
order to preserve our exclusivity. The date by which these
12
<PAGE> 13
purchase commitments must be satisfied may be extended if and to the extent MRG
fails to complete specific technology improvements to the implantable pump by
January 1, 2000. Current minimum purchase commitments for implantable pumps
based upon current prices are:
<TABLE>
<S> <C>
Through December 31, 2000 ......... $11,216,000
In 2001 ........................... 8,935,000
-----------
Total ............................. $20,151,000
===========
</TABLE>
Gross margins for other diabetes supplies increased to 37.6% of
diabetes supplies sales during the 1999 second quarter compared to 30.4% of
diabetes supplies sales during the comparable period in 1998. However, gross
margins for this product line decreased to 32.0% of diabetes supplies sales
during the first six months of 1999 compared to 38.8% of diabetes supplies sales
during the comparable period in 1998. The improvement in the 1999 second quarter
gross margins for other diabetes supplies resulted from lower costs on several
of these products due to volume rebates earned. Average sales prices of these
products continue to decline due to current reimbursement trends.
Gross profits on pharmacy products increased 92.3% to $273,000 during
the second quarter of 1999, compared to $142,000 during the second quarter of
1998. However, pharmacy products gross margins decreased 22.9% to $665,000 for
the first six months of 1999, compared to $863,000 for the first six months of
1998. These fluctuations in pharmacy products gross margins were primarily due
to our restructuring of the pharmacy operations as described above.
Operating Expenses--Selling, general and administrative expenses
increased 69.0% during the three months ended July 2, 1999 as compared to the
three months ended July 3, 1998 to $20,167,000 from $11,930,000. For the six
months ended July 2, 1999, selling, general and administrative expenses grew
61.0% to $37,535,000 from $23,320,000 for the six months ended July 3, 1998. As
a percentage of net sales, these expenses increased to 41.1% during the second
quarter of 1999 and to 41.7% during the first six months of 1999 compared to
37.6% during the second quarter of 1998 and to 40.2% for the first six months of
1998. These expenses have increased on an overall basis and as a percentage of
sales primarily due to our continued spending to support our worldwide sales
growth. These increases include variable costs related to field sales expenses,
significant increases in marketing and customer support, European expansion
through our subsidiaries and general and administrative staffing increases to
support this activity.
Research and development expenses grew 75.9% during the second quarter
of 1999 over the second quarter of 1998 to $6,572,000 from $3,737,000, with
research and development expenses increasing 68.2% to $11,868,000 for the first
six months of 1999 compared to $7,054,000 for the first six months of 1998. As a
percentage of sales, research and development expenses increased to 13.4% during
the second quarter of 1999 from 11.8% during the comparable period in 1998, and
increased to 13.2% of net sales for the first six months of 1999 compared to
12.1% during the first six months of 1998. The 1999 increase in research and
development costs resulted from greater resources directed to the development of
continuous glucose monitoring systems, start-up manufacturing operations of the
continuous glucose monitoring systems, development of future generation external
insulin pumps and related disposable products and data communication
capabilities for external pumps and continuous glucose monitoring systems. We
anticipate that research and development expenditures for future periods will
continue to increase as we commercialize new products and develop manufacturing
operations for the constant flow infusion system developed by Elan and the
Lilly insulin lyspro.
13
<PAGE> 14
During the 1998 first quarter, we signed a research and development
contract with American Medical Instruments, Inc., which we call AMI, a member of
The Marmon Group of companies. Under terms of the agreement, and subject to the
achievement of quarterly performance milestones, we can receive up to $12.0
million in funding, payable in quarterly installments of $1.5 million, for two
research and development projects. Subject to payment of royalties to AMI, we
will have the right to sell products utilizing the technology pursuant to the
agreement on a worldwide basis, with the exception of Japan. We also have the
right to either purchase the technologies developed or acquire a fully paid-up
exclusive worldwide license for these technologies, in either case at prices
ranging from an aggregate of $13.5 million to $19.0 million subject to downward
adjustment during specific periods through April 30, 2002. During the second
quarter of both 1998 and 1999, we recorded $1.5 million from this research and
development contract as a reduction of operating expenses as costs related to
completion of the contractual obligations will be included in research and
development expense.
From time to time, we invest in new and developing technologies that
may provide improvements to our core technology or that may provide additional
applications for our existing technologies and products. These investments may
be in the form of equity investments, loans, research and development
agreements, and strategic alliance or cooperation agreements. No assurance can
be given as to when these investments will provide useful new technologies or
applications, if at all. Such investments may result in losses that could
adversely affect our future earnings and results of operations.
Other--During the three and six months ended July 2, 1999 and during
the three and six months ended July 3, 1998, other income consisted primarily of
interest income generated from our cash, cash equivalents, and short-term
investment balances.
Liquidity and Capital Resources
We generated cash from operations of $297,000 during the six months
ended July 2, 1999, whereas we used cash in operations of $3,909,000 during the
six months ended July 3, 1998. Cash flow from operations improved during the
first six months of 1999 compared to the first six months of 1998 primarily due
to a reduction in cash expenditures on various accounts payable and accrued
expenses. Cash flow from operations during the first six months of 1999 improved
over 1998 due to the effect of the tax benefit realized from non-qualified stock
option exercises. These improvements in 1999 cash flow from operations were
partially offset by increases in inventory and accounts receivable balances
during the period. We continued to increase finished goods inventory levels
during the second quarter of 1999 to support the historically higher sales
volumes we have experienced in the third and fourth quarters.
Capital expenditures during the first six months of 1999 were
$9,364,000 compared to $8,530,000 during the first six months of 1998. Our 1998
and 1999 capital expenditures related primarily to building manufacturing
capacity for the continuous glucose monitoring systems, as well as other
building improvements, manufacturing expansion, research and development
engineering equipment and information systems upgrades to support growth. We
anticipate that future capital expenditures will continue to increase in support
of our new product activities, including expenditures for start-up manufacturing
operations for Elan's Medipad disposable continuous drug delivery system that we
will exclusively manufacture and distribute on a worldwide basis, and to build
the infrastructure necessary to accommodate our anticipated growth. As a result
of our contractual obligation with Elan, over the next year we will pay Elan a
minimum of $7.0 million related to license fees and purchase capital equipment
necessary to develop manufacturing capabilities for the constant-flow infusion
system developed by Elan. Additional license fees ranging between $8.0 million
and $13.0 million will be due in future periods subject to certain conditions
and attainment of certain milestones.
We received $140,588,000 during the first six months of 1999 in
connection with our recent public offering of 2,172,500 shares of our common
stock net of expenses. There were no significant equity transaction during the
first six months of 1998.
In May 1999, we entered into a financing transaction pursuant to which
we will construct a corporate headquarters, research and development and
manufacturing facility on the campus of California State University, Northridge,
the first phase of which will be financed with a $65.0 million credit
transaction. The transaction was structured as a synthetic lease financing for
this facility and, in a related transaction, we obtained a revolving line of
credit to borrow up to $15 million. Under the terms of the financing, a special
14
<PAGE> 15
purpose trust subleases the land to us and leases the improvements to us. In
connection with these financing transactions, we pledged substantially all of
our assets as collateral security, and are subject to various affirmative and
negative covenants regarding the conduct of our business. These arrangements
could adversely affect our ability to obtain additional capital or acquire
additional capital resources. The synthetic lease has a term of five years, with
two one-year renewal options. The underlying ground lease has a term of 40 years
with renewal options for up to an additional 40 years. Under these arrangements,
we are committed to annual payments ranging from $4.5 million to $5.0 million
commencing sometime during the second half of 2000. Additionally, we are
committed to payments of $400,000 during 1999 and to average annual payments in
future periods of approximately $450,000, plus periodic cost of living
adjustments, per the terms of the ground lease for the Northridge property.
These lease payments will be recorded as rent expense in future periods after
construction of our new corporate headquarters is completed. When the synthetic
lease terminates, we will be able to assume the obligations of the special
purpose trust as the lessee under the ground lease if we exercise our option to
purchase.
In the process of integrating some HMS operations, we discovered
specific business practices relating to charges billed to the State of Florida
which were implemented by prior ownership and that may result in liability.
These billing activities were related to business activities of an affiliated
pharmacy. We have received no notice of any action which is pending or
threatened against HMS in connection with the billing activities. We have
corrected the practices, notified the State of Florida of our findings and have
initiated legal action against the prior owners to seek indemnification for any
related liability that we may incur. The amount of liability, if any, cannot be
determined at this time, although we believe that indemnification for liability
would be available from the prior owners. We also are involved in other
litigation, the financial impact of which is uncertain (see notes to
consolidated financial statements.)
We received $3.0 million during the first six months of 1998 and 1999
under terms of our research and development contract with AMI. As indicated
above, we have the right to purchase the technologies developed or acquire a
fully paid-up, exclusive worldwide license for these technologies, in either
case at prices ranging from an aggregate of $13.5 million to $19.0 million,
subject to downward adjustment, during specific periods through April 30, 2002,
or may alternatively elect to pay royalties on sales of products utilizing the
technology developed pursuant to the contract. We have also entered into an
agreement by which, among other transactions, we have acquired an option to
purchase the exclusive worldwide marketing rights to a long-term glucose sensor
and related products being developed by MRG for $30.0 million within 90 days of
MRG's first successful human implant in a clinical trial performed in accordance
with applicable regulatory requirements. To retain our exclusive marketing
rights, we are required to purchase minimum quantities of some products from
MRG. We do not anticipate exercising this option prior to 2000. In the event
that we pursue either of these opportunities, additional capital resources may
be required.
Management believes that our current level of our cash and cash
equivalent and short term investments will be sufficient to meet our needs for
working capital and capital expenditures for the next twenty-four months. The
requirements for additional capital and working capital, however, are subject to
change and will depend upon numerous factors, including:
- the level of capital expenditures, especially relating to new
corporate headquarters;
- research and development activities and results;
- competitive and technological developments;
- health care reimbursement trends; and
- the availability for our acquisition of complementary additional
distribution channels, products, and technologies.
During future periods, we may require significant amounts of cash to
pursue opportunities and promote continued growth and expansion.
15
<PAGE> 16
YEAR 2000 COMPLIANCE
The Year 2000 problem refers to the potential of all electronic devices
containing microprocessors to improperly calculate dates in and beyond the year
2000. In the second quarter of 1998, we formed a Year 2000 Oversight Committee
to evaluate our position regarding Y2K. The committee consists of members
representing all of the major operating and administrative departments within
MiniMed including information technology, facilities, manufacturing, research
and development, regulatory, quality assurance, materials, finance and
accounting and legal.
The committee established an Action Plan Program to facilitate our Y2K
compliance and minimize the potential effects of Y2K on our operations. The
components of the plan include the following steps:
- assess Y2K compliance of our products;
- inventory our equipment and software, including non-information
systems equipment and software and prioritize according to
critical business functions;
- implement Y2K compliance testing and remediation according to
priorities developed;
- assess vendor and health care payor compliance;
- develop and implement policies to maintain Y2K compliance going
forward; and
- establish contingency plans.
A timetable for the completion of each of these action steps contained in the
plan has been developed by the committee. The committee meets regularly to
assess our efforts to comply with the plan and to address any outstanding Y2K
issues. The committee is also responsible for coordinating all communications
and responding to all inquiries relating to Y2K.
We have completed our evaluation of all of our current product
offerings. Such evaluation has shown that Y2K will not pose operating problems
for these products. As of the end of the second quarter of 1999, we have
completed the process of creating a master inventory of all equipment and
software vulnerable to Y2K and have identified the equipment and software
attendant to critical business processes. Remediation programs to address
problems that have been identified are under way. We have begun to remediate
non-compliant systems including manufacturing systems, information technology
systems, communication systems, security systems and personal computers. We
currently believe that we will be able to modify, replace, or mitigate our
affected systems in time to avoid any material impact on our operations.
We have initiated formal communication with our vendors to assess their
compliance with Y2K. Questionnaires have been developed and distributed to
vendors. These questionnaires, when returned by a vendor, have been evaluated to
assess the Y2K risk presented by that vendor. On site evaluations at the most
critical vendors' sites of operations are currently being conducted. We suspect
that our greatest Y2K risk will be vendor compliance. We rely on our vendors to
supply us with critical components necessary for the manufacture of our
products. We are also implementing a program to assess the Y2K compliance of
insurance companies, management service organizations, and other third-party
payors. Once both the internal and external reviews described above are
completed, we will be able to design a contingency plan to address our areas of
greatest exposure.
Our most reasonably likely worst case scenario in the event of a
failure to correct a material Y2K problem could be an interruption in, or
failure of, normal business activities. Such failures or interruptions could
materially impact our results of operations, liquidity and financial position.
Due to the general uncertainty inherent in the Y2K problem, resulting primarily
from the uncertainty of the Y2K readiness of our vendors and suppliers, we are
unable to determine at this time whether the consequences of Y2K failures will
have a material adverse impact on us. The plan, implemented by the committee, is
expected to significantly reduce both our level of uncertainty about the Y2K
problem and the possibility of significant interruptions to normal operations.
Management currently believes that the cost of Y2K assessment and
remediation will not be material. We estimate that the implementation of our Y2K
plan and remediation activities related to our internal systems and equipment
will cost approximately $1.0 million. Management currently believes that we have
adequate working capital to fund these activities.
16
<PAGE> 17
Readers are cautioned that forward looking statements contained in this
Year 2000 Compliance section should be read in conjunction with our cautionary
language in the first paragraph of Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 10.
17
<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
During the second quarter of 1999, the rights of holders of MiniMed's
common stock, par value $.01, have been modified as follows:
On May 1, 1999, MiniMed amended its Rights Agreement, dated as of July
24, 1995, between the Company and Harris Trust Company of California, as Rights
Agent. The amendment eliminated those provisions that require that certain
actions may only be taken by "Independent Directors" (as defined in the Rights
Agreement) and also changed the exercise price of a Right (as defined in the
Rights Agreement) from $65.00 to $250.00. The amendment deleting provisions
requiring that certain actions may only be taken by Independent Directors
provide stockholders with an increased ability to elect Directors who could then
redeem the Rights or amend the Rights Agreement. The increase in the exercise
price provides stockholders with the right to purchase, at a lower per share
price, more shares of a hostile acquiror of MiniMed.
On May 20, 1999, MiniMed amended its Restated Certificate of
Incorporation and its Bylaws to, among other things, (a) implement a classified
board consisting of eight Directors divided into three classes with staggered
three year terms, (b) provide that the authorized number of Directors will be
fixed from time to time by the Board, (c) eliminate existing special voting
requirements to amend provisions of the Company's Bylaws relating to the
authorized number of Directors, the annual election of Directors and the
filling of vacancies on the Board, and (d) authorize the Board to make, alter
and repeal the Bylaws.
A classified board will serve as an obstacle to any attempt by a
stockholder to obtain control of the Board of Directors. Without classes of
Directors, a stockholder could elect a new majority of the Board of Directors at
a single annual meeting. Having a classified Board of Directors, however, means
that even a majority stockholder requires two annual meetings to elect a
majority of the Board. Thus, having a classified Board will make it more
difficult for stockholders to change the composition of the Board of Directors
even if a majority of stockholders consider it desirable to do so. With the
implementation of a classified Board, the provisions of the Bylaws covering
special voting requirements amend to provisions of the Bylaws relating to the
authorized number of Directors and the annual election of Directors became
unnecessary and were deleted. The stockholders' rights relating to filling
vacancies on the Board has not changed materially.
The amendment to the Restated Certificate of Incorporation also
provides that the authorized number of Directors will be fixed by the Directors
from time to time. Prior to this amendment, stockholders could, through an
amendment to the Bylaws, change the authorized number of Directors. Stockholders
no longer have the ability to do this. The amendment authorizing the Board to
make, alter and repeal the Bylaws provides both the Board and the stockholders
the concurrent ability to amend MiniMed's Bylaws. Previously, except for certain
specified changes that could be implemented by the Board, only stockholders
could amend or repeal provisions of the Bylaws.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 20, 1999, The Company held its 1999 Annual Meeting of
Stockholders (the "Annual Meeting"). At the Annual Meeting, stockholders of the
Company voted on proposals to (1) elect eight directors until their respective
successors are elected and qualified ("Proposal One"); (2) amend the Company's
Certificate of Incorporation and Bylaws implementing classified Board and other
provisions ("Proposal Two"); (3) amend the Company's Certificate of
Incorporation to increase the Company's authorized capital stock ("Proposal
Three"); (4) amend the Company's Second Amended and Restated 1994 Stock
Incentive Plan ("Proposal Four"); and (5) ratify the appointment of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
December 31, 1999 ("Proposal Five").
In total, 14,103,678 shares of Common Stock were eligible to vote at
the Annual Meeting, and holders of 12,870,093 shares of Common Stock were
represented in person or by proxy at the Annual Meeting, constituting 91.3% of
the eligible shares. Following is voting information for the matters voted upon
at the Annual Meeting:
Proposal One - The following individuals, all being directors of the
Company prior to such election, were reelected as directors of the Company at
the Annual Meeting: Alfred E. Mann; David Chernoff, M.D.; Carolyne Kahle Davis;
William R. Grant; Terrance H. Gregg; David H. MacCallum; Thomas R. Testman; and
John C. Villforth. Each such director, except for Dr. Chernoff, Mr. Gregg and
Mr. Testman, received 12,799,279 votes (representing 99.5% of the votes cast) in
favor of their election with 70,814 votes (.05%) withheld. Dr. Chernoff received
12,779,579 votes (99.3%) in favor of his election with 90,514 votes (.70%)
withheld. Mr. Gregg received 12,799 204 votes (99.5%) in favor of his election
with 70,889 votes (.05%) withheld. Mr. Testman received 12,799,267 votes (99.5%)
in favor of his election with 70,826 votes (.05%) withheld. None of the
Company's directors received any votes against their reelection nor were any
broker non-votes received.
Proposal Two - At the Annual Meeting, the proposal to amend the
Company's Certificate of Incorporation and Bylaws implementing classified Board
and other provisions was approved. Proposal Two received 8,205,257 votes (58.2%
of the outstanding shares eligible to vote) in favor, 2,946,386 votes (20.9%)
against, 13,281 (.1%) abstaining and 1,705,169 (12.1%) broker non-votes.
Proposal Three - At the Annual Meeting, the proposal to amend the
Company's Certificate of Incorporation to increase the Company's authorized
capital stock was approved. Proposal Three received 8,621,690 votes (61.1% of
the outstanding shares eligible to vote) in favor, 2,529,818 votes (17.9%)
against, 13,416 (.1%) abstaining and 1,705,169 (12.1%) broker non-votes.
18
<PAGE> 19
Proposal Four - At the Annual Meeting, the proposal to amend the
Company's Second Amended and Restated 1994 Stock Incentive Plan was approved.
Proposal Four received 8,219,955 votes (63.9% of the votes cast) in favor,
3,026,374 votes (23.5%) against, 20,104 (.1%) abstaining and 1,603,660 (12.5%)
broker non-votes
Proposal Five - At the Annual Meeting, Deloitte & Touche LLP was
ratified as the Company's independent auditor for the fiscal year ending
December31 1999. Deloitte and Touche LLP received 12,801,196 votes (99.5%) for
such ratification with 63,370 votes (.05%) received against and 5,527 votes
(.04%) withheld. No broker non-votes were received.
ITEM 5. OTHER INFORMATION
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- ---------------------------------------------------------------
<S> <C>
3(i).1 Amended and Restated Articles of Incorporation
3(ii).1 Amendment to Bylaws of MiniMed Inc.
4.1 Amendment to Rights Agreement effective as of May 1, 1999 by
and between MiniMed Inc. and Harris Trust Company of California
(previously filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-3, Registration No. 333-80527 on June 11,
1999, and incorporated by reference)
10.1 Ground Sublease by and between North Campus-University Park
Development Corporation and First Security Bank, N.A. as Owner
Trustee dated as of May 18, 1999.
10.2 Participation Agreement among MiniMed Development Corp. as
Construction Agent and Lessee, MiniMed Inc. and First Security
Bank, N.A. as Trustee, et. Al. dated May 18, 1999.
10.3 Parent Guaranty dated as of May 18, 1999 from MiniMed Inc. to
First Security Bank, N.A. as Trustee.
10.4 Master Lease between First Security Bank, N.A. as Trustee and
MiniMed Development Corp. dated May 18, 1999.
10.5 Revolving Credit Agreement dated as of May 18, 1999, among
MiniMed Inc., the Revolving Credit Lenders and ING (U.S.)
Capital LLC.
10.6 Security Agreement dated as of May 18, 1999, among MiniMed
Inc., certain subsidiaries of MiniMed Inc. and ING (U.S.)
Capital LLC.
10.7 License Supply and Distribution Agreement between Eli Lilly and
Company and MiniMed Inc. dated February 1, 1999.
10.8 Amendment to License Supply and Distribution Agreement between
Eli Lilly and Company and MiniMed Inc. dated as June 28, 1999.
10.9 Development, License and Supply Agreement between Elan
Pharmaceutical Technologies, Elan Pharma International Limited
and MiniMed Inc. dated June 11, 1999.
10.10 License and Manufacturing Agreement between Elan Pharmaceutical
Technologies, Elan Pharma International Limited and MiniMed
Inc. dated June 11, 1999.
27.1 Financial Data Schedule
</TABLE>
19
<PAGE> 20
(b) Reports on Form 8-K
Current Report on Form 8-K filed May 7, 1999, reporting an amendment to
the Rights Agreement between MiniMed Inc. and Harris Trust Company of
California, as Rights Agent.
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MiniMed Inc.
Date: August 16, 1999 /s/ KEVIN R. SAYER
----------------------------------
Kevin R. Sayer
Senior Vice President, Finance &
Chief Financial Officer
21
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- ---------------------------------------------------------------
<S> <C>
3(i).1 Amended and Restated Articles of Incorporation
3(ii).1 Amendment to Bylaws of MiniMed Inc.
4.1 Amendment to Rights Agreement effective as of May 1, 1999 by
and between MiniMed Inc. and Harris Trust Company of California
(previously filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-3, Registration No. 333-80527 on June 11,
1999, and incorporated by reference)
10.1 Ground Sublease by and between North Campus-University Park
Development Corporation and First Security Bank, N.A. as Owner
Trustee dated as of May 18, 1999.
10.2 Participation Agreement among MiniMed Development Corp. as
Construction Agent and Lessee, MiniMed Inc. and First Security
Bank, N.A. as Trustee, et. Al. dated May 18, 1999.
10.3 Parent Guaranty dated as of May 18, 1999 from MiniMed Inc. to
First Security Bank, N.A. as Trustee.
10.4 Master Lease between First Security Bank, N.A. as Trustee and
MiniMed Development Corp. dated May 18, 1999.
10.5 Revolving Credit Agreement dated as of May 18, 1999, among
MiniMed Inc., the Revolving Credit Lenders and ING (U.S.)
Capital LLC.
10.6 Security Agreement dated as of May 18, 1999, among MiniMed
Inc., certain subsidiaries of MiniMed Inc. and ING (U.S.)
Capital LLC.
10.7 License Supply and Distribution Agreement between Eli Lilly and
Company and MiniMed Inc. dated February 1, 1999.
10.8 Amendment to License Supply and Distribution Agreement between
Eli Lilly and Company and MiniMed Inc. dated as June 28, 1999.
10.9 Development, License and Supply Agreement between Elan
Pharmaceutical Technologies, Elan Pharma International Limited
and MiniMed Inc. dated June 11, 1999.
10.10 License and Manufacturing Agreement between Elan Pharmaceutical
Technologies, Elan Pharma International Limited and MiniMed
Inc. dated June 11, 1999.
27.1 Financial Data Schedule
</TABLE>
22
<PAGE> 1
EXHIBIT 3(i).1
RESTATED CERTIFICATE OF INCORPORATION
OF
MINIMED INC.
MiniMed Inc., a corporation organized and existing under the laws of the
State or Delaware, hereby certifies as follows:
1. The name of the corporation is MiniMed Inc. MiniMed Inc. was
originally incorporated under the same name and the original Certificate of
Incorporation of the corporation was filed with the Secretary of State of the
State of Delaware on January 22, 1993.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this corporation.
3. This Restated Certificate of Incorporation was duly adopted in
accordance with Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
4. The text of the Restated Certificate of Incorporation is hereby
restated and further amended to read in its entirety as follows:
ARTICLE I
NAME OF CORPORATION
The name of this corporation is
MiniMed Inc.
<PAGE> 2
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, in the City or Wilmington, County of New Castle,
and the name of its registered agent at that address is Corporation Service
Company.
ARTICLE III
PURPOSE
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock which the corporation
shall have the authority to issue shall be 110,000,000 shares, consisting of
100,000,000 shares of Common Stock, with a par value of one cent ($.01) per
share and 10,000,000 shares of Preferred Stock, with a par value of $.01 per
share (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is expressly authorized to fix, by resolution or
resolutions providing for the issue of any series of Preferred Stock the number
of shares included in such series and the voting powers, designations,
preferences and relative participating optional or other rights, if any, of such
series, and the qualifications, limitations or restrictions thereof and, except
as otherwise provided in respect of any such series, to increase or decrease the
number of shares of any such series (but not below the number of shares thereof
then outstanding). In case the number of shares of any such series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution or resolutions originally
fixing the number of shares of such series. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote irrespective of
Section 242 of the General Corporation Law or any successor provision requiring
that such an increase or decrease be voted upon by the holders of the Preferred
Stock voting as a separate class.
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator of the corporation is:
2
<PAGE> 3
Alfred E. Mann
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the Board of Directors of the corporation is expressly
authorized to make, alter and repeal the bylaws of the corporation, subject to
the power of the stockholders of the corporation to alter or repeal any bylaw
whether adopted by them or otherwise.
ARTICLE VII
DIRECTORS
SECTION 7.01 Definitions. For purposes of this Restated Certificate of
Incorporation:
(a) "Continuing Director" means as to any Interested Stockholder, any
member of the Board of Directors of the corporation who (i) is unaffiliated with
and is not the Interested Stockholder and (ii) was a member of the Board of
Directors of the corporation prior to June 30, 1995 or thereafter became a
member of the Board prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Continuing Director who is
recommended to succeed a Continuing Director by a majority of the Continuing
Directors then on the Board.
(b) "Disinterested Shares" means, as to any Interested Stockholder,
shares of Voting Stock, Owned Beneficially and of record by stockholders other
than such Interested Stockholder.
(c) "Interested Stockholder" shall have the meaning set forth in Section
2 03 of the Delaware General Corporation Law (as such section exists on the date
hereof) but shall not include any person who Owned Beneficially shares of Common
Stock in excess of the 15% limitation set forth therein as of May 23, 1995.
(d) "Owned Beneficially" refers to the ownership of shares set forth in
Rule 13d-3 of the Securities Act of 1934 as in effect on May 23, 1995.
(e) "Voting Stock" means all outstanding shares of capital stock of the
corporation entitled to vote generally in the election of directors of the
corporation, and each reference to a percentage or portion of shares of Voting
Stock shall refer to such percentage or portion of the votes entitled to be cast
by such shares."
3
<PAGE> 4
SECTION 7.02 Number; Election and Terms. Except as otherwise provided
for or fixed pursuant to the provisions of Article IV of this Restated
Certificate of Incorporation relating to the rights of the holders of any series
of Preferred Stock to elect additional directors, the total number of directors
constituting the entire Board shall be fixed from time by the Board of
Directors. Directors need not be stockholders. Other than with respect to those
directors elected by the holders of any series of Preferred Stock provided for
or fixed pursuant to the provisions of Article IV hereof, there shall be three
classes of directors (each, a "Class"), as equal in number as possible, known as
Class 1, Class 2 and Class 3. The terms of office for the initial Class 1, Class
2 and Class 3 directors shall be as follows: the term of office of the initial
Class 1 directors will expire at the 2000 annual meeting of stockholders; the
term of office of the initial Class 2 directors will expire at the 2001 annual
meeting of stockholders; and the term of office of the initial Class 3 directors
will expire at the 2002 annual meeting of stockholders. At each annual meeting
of stockholders following such initial classification and election, each
director elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders after his election unless, by intervening changes in the authorized
number of directors, the Board shall designate the vacant directorship as a
directorship of another class in order more nearly to achieve equality in the
number of directors among classes. Notwithstanding the foregoing, each of the
directors shall hold office until his successor shall have been duly elected and
shall qualify or until he shall die, resign or have been removed in the manner
hereafter provided.
SECTION 7.03 Removal. Subject to the rights of the holders of any
Preferred Stock then outstanding, any director, or the entire board, may be
removed from office at any time, but only (1) for cause and (2) by the
affirmative vote of the holders of the majority of the Voting Stock; provided,
however, that if a proposal to remove a director is made by or on behalf of an
Interested Stockholder or by a director who is not a Continuing Director as to
an Interested Stockholder, then in addition to (1) and (2) above, such removal
shall require the affirmative vote of the holders of a majority of the
Disinterested Shares.
SECTION 7.04 Vacancies. Vacancies resulting from the death, resignation,
removal, increase in the number of directors, or any other cause shall be filled
only by a majority vote of the remaining directors, although less than a quorum
(unless there are no directors, in which case vacancies will be filled by the
stockholders) in accordance with the rule that each Class of directors shall be
as nearly equal in number of directors as possible, provided, however, that if
one or more Interested Stockholders then exists, vacancies resulting from the
death, resignation or removal of a Continuing Director can only be filled by the
vote of a majority of the remaining Continuing Directors or, if there are no
Continuing Directors, by (i) the affirmative vote of the holders of not less
than eighty percent (80%) of the outstanding shares of Voting Stock and (ii) the
affirmative vote of the holders of a majority of the Disinterested Shares as to
all Interested Stockholders. Notwithstanding the foregoing, in the event of any
change in the authorized number of directors, each director then continuing to
serve as such will nevertheless continue as a director of the Class of which he
or she is a member until the expiration of his current term or his earlier
death, resignation or removal. If any newly created directorship or vacancy of
the Board of Directors, consistent with the rule that the three Classes shall be
as nearly equal in number as possible, may be allocated to one or two or more
Classes, the Board of Directors shall allocate it to that of the available
Classes whose term of office is due to expire at the earliest date following
4
<PAGE> 5
such allocation. When the Board of Directors fills a vacancy, the director
chosen to fill that vacancy shall be of the same Class as the director he or she
succeeds and shall hold office until such director's successor shall have been
elected and qualified or until such director shall die, resign or shall been
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
SECTION 7.05 Directors Elected by Preferred Stockholders. During any
period when the holders of the Preferred Stock have the right to elect
additional directors as provided for or fixed pursuant to the provisions of
Article IV hereof, then upon commencement and for the duration of the period
during which such right continues: (i) the then otherwise total authorized
number of directors of the corporation shall automatically be increased by such
specified number of directors, and the holders of such Preferred Stock shall be
entitled to elect the additional directors so provided for or fixed pursuant to
said provisions, and (ii) each such additional director shall serve until such
director's successor shall have been duly elected and qualified, or until such
director's right to hold such office terminates pursuant to said provisions,
whichever occurs earlier, subject to his or her earlier death disqualification,
resignation or removal. Except as otherwise provided by the Board of Directors
in the resolution or resolutions establishing such series, whenever the holders
of any series of Preferred Stock having such right to elect additional directors
are divested of such right pursuant to the provisions of such stock, the terms
of office of all such additional directors elected by the holders of such stock,
or elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional directors shall forthwith
terminate and the total and authorized number of directors of the corporation
shall be reduced accordingly.
SECTION 7.06 Absence of Requirements of Ballots. The election of
directors need not be by written ballot unless the bylaws of the corporation
shall so provide.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or may hereafter be amended, a director of the corporation
shall not be liable to the Corporation or its stockholders for monetary damage
for breach of fiduciary duty as a director. If the Delaware General Corporation
Law is amended after the date of the filing of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the Liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended from time to time. No repeal
or modification of this Article VIII by the stockholders shall adversely affect
any right or protection of a director of the corporation existing by virtue of
this Article VIII in respect of any act or omission prior to such repeal or
modification.
5
<PAGE> 6
ARTICLE IX
CORPORATE POWER
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
ARTICLE X
CREDITOR COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
ARTICLE XI
STOCKHOLDER VOTE
Any election or other action by stockholders of this Corporation must be
effected at an annual or special meeting of stockholders and may not be effected
by written consent without a meeting.
ARTICLE XII
SPECIAL MEETINGS
Special meetings of the stockholders of the Corporation for any purpose
or purposes may be called at any time by the Board or by a majority of the
members of the Board; provided, however, that where a proposal requiring
stockholder approval is made, at any time that one or more Interested
Stockholders exist, by a director who is not a Continuing Director as to all
Interested Stockholders, then the affirmative vote of a majority of the
Continuing Directors shall also be required to call a special meeting of the
stockholders for the purpose of considering such proposal or obtaining such
approval. Such special meeting may not be called by any other person or persons
or in any other manner.
6
<PAGE> 7
ARTICLE XIII
AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION
In addition to any affirmative vote required by applicable law and any
voting rights granted to or held by holders of Preferred Stock, any alteration,
amendment, repeal or rescission (any "Change") of any provision of this Restated
Certificate of Incorporation must be approved by a majority of the directors of
the corporation then in office and by the affirmative vote of the holders of a
majority of the outstanding shares of Voting Stock of the corporation; provided,
however, that if any such Change relates to Articles VI, VII, XI or XII hereof
or to this Article XIII, such Change must also be approved either (i) by a
majority of the authorized number of directors and, if one or more Interested
Stockholders then exist, by a majority of the directors who are Continuing
Directors with respect to all Interested Stockholders or (ii) by the affirmative
vote of the holders of not less than eighty percent (80%) of the outstanding
shares of Voting Stock of the corporation and, if the change is proposed by or
on behalf of an Interested Stockholder or, at any time that one or more
Interested Stockholders exist, by a director who is not a Continuing Director as
to all Interested Stockholders, by the affirmative vote of not less than a
majority of the Disinterested Shares.
Subject to the foregoing the corporation reserves the right to amend,
alter, repeal or rescind any provision contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by law.
THIS RESTATED CERTIFICATE OF INCORPORATION has been signed this 20th day
of May 1999.
MINIMED INC.
By: /s/ ALFRED E. MANN
---------------------------------
Alfred E. Mann, Chairman
of the Board of Directors
7
<PAGE> 1
EXHIBIT 3(ii).1
MINIMED INC.
AMENDMENT TO BYLAWS
ADOPTED MAY 20, 1999
"SECTION 3.02 Number; Election and Terms. Except as otherwise provided
for or fixed pursuant to the provisions of Article IV of the Restated
Certificate of Incorporation of the Corporation and until otherwise fixed by the
Board of Directors pursuant to the Restated Certificate of Incorporation, the
Board of Directors shall consist of eight (8) persons. Directors need not be
stockholders. Other than with respect to those directors elected by the holders
of any series of Preferred Stock provided for or fixed pursuant to the
provisions of Article IV of the Restated Certificate of Incorporation, there
shall be three classes of directors (each, a "Class"), as equal in number as
possible, known as Class 1, Class 2 and Class 3. The terms of office for the
initial Class 1, Class 2 and Class 3 directors shall be as follows: the term of
office of the initial Class 1 directors will expire at the 2000 annual meeting
of stockholders; the term of office of the initial Class 2 directors will expire
at the 2001 annual meeting of stockholders; and the term of office of the
initial Class 3 directors will expire at the 2002 annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification and election, each director elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after his election unless, by
intervening changes in the authorized number of directors, the Board shall
designate the vacant directorship as a directorship of another Class in order
more nearly to achieve equality in the number of directors among Classes.
Notwithstanding the foregoing, each of the directors shall hold office until his
successor shall have been duly elected and shall qualify or until he shall die,
resign or have been removed in the manner hereafter provided.
2. Section 3.03 is amended and restated in its entirety to read as follows:
"SECTION 3.03 Intentionally Omitted."
3. Section 3.05 is hereby amended and restated in its entirety to read as
follows:
"SECTION 3.05 Vacancies. Vacancies resulting from the death,
resignation, removal, an increase in the number of directors, or any other
cause, shall be filled only by a majority vote of the remaining directors,
although less than a quorum (unless there are
<PAGE> 2
no directors, in which case vacancies will be filled by the stockholders) and in
accordance with the rule that each Class of directors shall be as nearly equal
in number of directors as possible, provided, however, that if one or more
Interested Stockholders then exists, vacancies resulting from the death,
resignation or removal of a Continuing Director can only be filled by the vote
of a majority of the remaining Continuing Directors or, if there are no
Continuing Directors, by (i) the affirmative vote of the holders of not less
than eighty percent (80%) of the outstanding shares of Voting Stock and (ii) the
affirmative vote of the holders of a majority of the Disinterested Shares as to
all Interested Stockholders. (All of the foregoing capitalized terms shall have
the meanings ascribed to them in the Restated Certificate of Incorporation).
Notwithstanding the foregoing, in the event of any change in the authorized
number of directors, each director then continuing to serve as such will
nevertheless continue as a director of the Class of which he is a member until
the expiration of his current term or his earlier death, resignation or removal.
If any newly created directorship or vacancy on the Board of Directors,
consistent with the rule that the three Classes shall be as nearly equal in
number as possible, may be allocated to one or two or more Classes, the Board of
Directors shall allocate it to that of the available Classes whose term of
office is due to expire at the earliest date following such allocation. When the
Board of Directors fills a vacancy, the director chosen to fill that vacancy
shall be of the same Class as the director he or she succeeds and shall hold
office until such director's successor shall have been elected and qualified or
until such director shall resign or shall been removed. No reduction of the
authorized number of directors shall have the effect of removing any director
prior to the expiration of such director's term of office."
<PAGE> 1
EXHIBIT 10.1
GROUND SUBLEASE
BY AND BETWEEN
NORTH CAMPUS-UNIVERSITY PARK DEVELOPMENT CORPORATION
"LANDLORD"
AND
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually but solely as Owner Trustee under the
MiniMed Real Estate Trust 1999-1
"TENANT
LEASED PREMISES ARE PARCELS 1, 2 & 3
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C> <C>
ARTICLE 1 - DEFINITIONS...........................................................................................2
1.1 Additional Rent.................................................................................2
1.2 Affiliate.......................................................................................2
1.3 Agreed Rate.....................................................................................3
1.4 Building........................................................................................3
1.5 Commencement Date...............................................................................3
1.6 Construction Loan...............................................................................3
1.7 CPI.............................................................................................3
1.8 Default(s)......................................................................................4
1.9 Environmental Laws..............................................................................4
1.10 Fair Market Rent................................................................................4
1.11 Force Majeure Events............................................................................4
1.12 Governmental Restrictions.......................................................................4
1.13 Hazardous Materials.............................................................................4
1.14 Improvements....................................................................................4
1.15 JPA.............................................................................................4
1.16 Leased Premises.................................................................................5
1.17 Leasehold Mortgage..............................................................................5
1.18 Lease Year......................................................................................5
1.19 Lender..........................................................................................5
1.20 Losses and Liabilities..........................................................................5
1.21 Mortgage........................................................................................5
1.22 Parcel or Parcels...............................................................................5
1.23 Party or Parties................................................................................5
1.24 Permitted Exceptions............................................................................5
1.25 Plans...........................................................................................6
1.26 Rent............................................................................................6
1.27 Representatives.................................................................................6
1.28 Research Center.................................................................................6
1.29 Site Plan.......................................................................................6
1.30 Sublease(s); Subtenant..........................................................................6
1.31 Term............................................................................................6
1.32 Title Insurer...................................................................................6
1.33 Title Policy....................................................................................6
1.34 Transfer Documents..............................................................................6
1.35 Transfer/Transferee.............................................................................7
</TABLE>
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<TABLE>
<S> <C> <C>
1.36 Uncured Default(s)..............................................................................7
1.37 University......................................................................................7
ARTICLE 2 - LEASED PREMISES.......................................................................................7
2.1 Leased Premises.................................................................................7
2.2 Leased Premises; Condition of Premises; Zoning..................................................7
2.3 North Campus Library Annex......................................................................7
ARTICLE 3 - TERM..................................................................................................8
3.1 Initial Term....................................................................................8
3.2 Options to Extend...............................................................................8
3.3 Possession; Covenant of Quiet Enjoyment.........................................................9
ARTICLE 4 - RENT PAYMENTS.........................................................................................9
4.1 Rent............................................................................................9
4.2 Adjustments to Rent.............................................................................9
4.3 Fair Market Rent...............................................................................10
4.4 Additional Rent................................................................................13
4.5 Landlord's Special Right to Terminate Lease....................................................13
4.6 Tenant's Special Rights to Terminate Lease.....................................................14
4.7 Miscellaneous..................................................................................15
4.8 Triple Net Lease; No Counterclaim, Abatement, etc..............................................15
ARTICLE 5 - USE OF THE LEASED PREMISES, MAINTENANCE AND HAZARDOUS MATERIALS
16
5.1 Use of the Leased Premises.....................................................................16
5.2 No use of Hazardous Materials on the Leased Premises...........................................17
5.3 Notice and Remediation by Tenant...............................................................17
5.4 Environmental Indemnity........................................................................17
5.5 Termination; Subtenants........................................................................18
5.6 Grant of Easements.............................................................................18
ARTICLE 6 - CONSTRUCTION BY MINIMED..............................................................................19
6.1 Development of Improvements....................................................................19
6.2 Conditions to Construction of Improvements.....................................................19
6.3 Construction of Improvements...................................................................22
6.4 Completion of Improvements and Other Work: Quality and Compliance With Law.....................22
6.5 Construction Cost..............................................................................23
6.6 Mechanic's, Materialman's, Contractor's, or Subcontractor's Liens..............................24
6.7 Hazardous Materials............................................................................24
6.8 Ownership Of Improvements......................................................................25
6.9 Right of Access................................................................................26
</TABLE>
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<TABLE>
<S> <C> <C>
6.10 Governmental Approvals.........................................................................26
ARTICLE 7 - REPAIRS AND MAINTENANCE..............................................................................26
7.1 Landlord's Nonresponsibility...................................................................26
7.2 Tenant's Duty to Maintain Premises.............................................................27
7.3 Damage or Destruction..........................................................................27
ARTICLE 8 - LEASEHOLD FINANCING..................................................................................29
8.1 Conditions To Obtaining Leasehold Mortgage.....................................................29
8.2 Lender's Rights................................................................................29
8.3 Default Notice.................................................................................30
8.4 Lender Cure Rights.............................................................................30
8.5 Obligations of Lender and Purchaser............................................................31
8.6 New Lease......................................................................................32
8.7 Multiple Lenders...............................................................................33
8.8 New Lease Priority.............................................................................34
8.9 Liability of New Tenant........................................................................34
8.10 Subleases and Rents............................................................................34
8.11 Legal Proceedings..............................................................................35
8.12 Encumbrance of Landlord's Leasehold Interest...................................................35
8.13 Notices........................................................................................36
ARTICLE 9 - ASSIGNMENT AND TRANSFER..............................................................................36
9.1 Assignment of Landlord's Interest in Lease or the Leased Premises..............................36
9.2 Transfer of the Lease, the Leased Premises or the Improvements to be Constructed Thereon.......37
9.3 Transfer of Tenant's Interest in Lease and Tenant's Ownership..................................39
9.4 Subleases......................................................................................40
9.5 Assignment for Financing Purposes..............................................................42
ARTICLE 10 - TAXES AND IMPOSITIONS...............................................................................43
10.1 Tenant To Pay Impositions......................................................................43
10.2 Proration of Impositions.......................................................................43
10.3 Payment Before Delinquency.....................................................................43
10.4 Contest of Imposition..........................................................................43
10.5 Tax Returns And Statements.....................................................................44
10.6 Possessory Interest Taxes......................................................................44
ARTICLE 11 - UTILITY SERVICES....................................................................................45
11.1 Tenant's Responsibility........................................................................45
11.2 Landlord Has No Responsibility.................................................................45
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 12 - INSURANCE...........................................................................................45
12.1 Fire and Extended Coverage Insurance...........................................................45
12.2 Commercial General Liability Insurance.........................................................45
12.3 Worker's Compensation Insurance................................................................46
12.4 Course of Construction Insurance...............................................................46
12.5 Business Automobile Liability Insurance........................................................46
12.6 Policy Form, Content And Insurer...............................................................46
12.7 Waiver of Subrogation..........................................................................47
12.8 Indemnification................................................................................48
ARTICLE 13 - CONDEMNATION........................................................................................50
13.1 General........................................................................................50
13.2 Award..........................................................................................50
13.3 Taking for Temporary Use.......................................................................51
ARTICLE 14 - DEFAULT.............................................................................................51
14.1 Default........................................................................................51
14.2 Notice of Default; Tenant's Right to Cure......................................................51
14.3 Landlord's Right to Cure Tenant's Defaults.....................................................52
14.4 Notice of Landlord's Default; Tenant Waiver....................................................52
14.5 Landlord's Remedies............................................................................53
14.6 Tenant Remedies; Remedies Cumulative...........................................................54
14.7 No Waiver......................................................................................55
14.8 Delays in Performance..........................................................................55
ARTICLE 15 - EXPIRATION; TERMINATION.............................................................................55
ARTICLE 16 - MASTER GROUND LEASES................................................................................56
ARTICLE 17 - INTERRELATIONSHIP BETWEEN UNIVERSITYAND LEASED PREMISES.............................................56
17.1 Goals of Master Landlord, Landlord and Tenant..................................................56
17.2 Cooperation Covenants of Tenant and its Subtenants.............................................56
17.3 Businesses Within Research Center..............................................................57
17.4 Use of University Facilities...................................................................57
17.5 Cooperation Covenants Regarding Tenant.........................................................57
17.6 Change In Use..................................................................................58
ARTICLE 18 - MISCELLANEOUS.......................................................................................58
18.1 Landlord's Representations and Warranties......................................................58
18.2 Tenant's Representations and Warranties........................................................59
18.3 Survival of Representations, Warranties and Covenants..........................................60
</TABLE>
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<TABLE>
<S> <C> <C>
18.4 Further Assurances.............................................................................60
18.5 Estoppel Certificate...........................................................................60
18.6 Notices........................................................................................60
18.7 Attorneys' Fees................................................................................62
18.8 Headings.......................................................................................63
18.9 Rights of Successors...........................................................................63
18.10 Amendments in Writing..........................................................................63
18.11 No Brokers.....................................................................................63
18.12 Negation of Partnership........................................................................63
18.13 Time of Essence................................................................................63
18.14 Interpretation.................................................................................63
18.15 Applicable Law; Severability...................................................................64
18.16 Exhibits.......................................................................................64
18.17 Short Form of Lease............................................................................64
18.18 Hold as One Parcel; Reciprocal Easement Agreement..............................................64
18.19 Landlord's Rights of Inspection................................................................64
18.20 Nonmerger of Fee and Leasehold Estates.........................................................65
18.21 Counterparts...................................................................................65
18.22 Interest On Past Due Obligations...............................................................65
18.23 Holding Over...................................................................................65
18.24 Owner Trustee..................................................................................65
18.25 MiniMed As Third Party Beneficiary.............................................................65
18.26 Automatic Amendment of this Lease..............................................................66
</TABLE>
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EXHIBITS
Exhibit A - Legal Description of the Leased Premises
Exhibit B - Site Plan
Exhibit C - Memorandum of Lease
Exhibit D - Rent Schedule
Exhibit E - Estoppel Certificate
Exhibit F - Allowed Uses
Schedule 18.26
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GROUND SUBLEASE
Parcels 1, 2 and 3
This Ground Sublease ("Lease") is dated for identification purposes as
of the 18th day of May, 1999, and is entered into by and between the following
(collectively, the "Parties"): NORTH CAMPUS-UNIVERSITY PARK DEVELOPMENT
CORPORATION, a not-for-profit corporation ("Landlord"), and FIRST SECURITY BANK,
NATIONAL ASSOCIATION, not individually but solely as Owner Trustee under the
MiniMed Real Estate Trust 1999-1 ("Tenant").
RECITALS
A. Pursuant to those certain four master leases (the "Master Leases")
each dated May 18, 1999, Landlord is the master tenant of certain real property
comprised of four parcels, "Parcel 1", "Parcel 2" and "Parcel 3" (collectively,
the "Leased Premises") and Parcel 4 located in the City of Los Angeles, and
owned by the State of California under the administration of the Trustees of the
California State University (the "Trustees").
B. The Leased Premises collectively are approximately 19 acres, and
will be developed in accordance with this Lease as a research and development
center consisting of a conference center and central plant, manufacturing,
research and development, and general business facilities; such initial
development is referred to herein as "Phase A".
C. The Leased Premises are Parcels 1, 2 and 3, and are legally
described in the attached legal description, Exhibit A, and depicted on the Site
Map, Exhibit B; the Site Map also depicts Parcel 4.
D. The Trustees, Landlord and MiniMed Inc., a Delaware corporation
("Minimed"), entered into that certain Agreement to Lease dated May ___, 1999,
pursuant to which Landlord has agreed to lease to MiniMed or a special purpose
entity or trust formed or operated for financing purposes ("SPE"), and MiniMed
has agreed to lease (or to cause its assignee to lease) from Landlord, upon the
satisfaction of certain conditions precedent, Parcel 4. The Agreement to Lease
provides that if MiniMed or an SPE has not leased Parcel 4 on or before June 30,
2005, then the Agreement to Lease shall terminate and be of no further force or
effect, and thereafter MiniMed and, if
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applicable, its assignee shall have no further rights in Parcel 4.
E. On June 17, 1998, the City of Los Angeles, a Charter City and
municipal corporation of the State of California (the "City"), and the Trustees
of the California State University System (the "Master Landlord"), have entered
into that certain Joint Powers Agreement (the "JPA"). Pursuant to the JPA, among
other things, the City and Master Landlord clarified certain jurisdictional
issues relating to this Lease.
F. Landlord and MiniMed have agreed that MiniMed will be responsible to
pay for and to construct certain of those mitigation measures applicable to this
project as identified in Attachment No. 6 to the JPA and/or as required by the
Trustees of the California State University as identified in Attachment No. 5 to
the JPA, and that Landlord and MiniMed will share the cost of such mitigation
measures; Landlord's payment for such mitigation measures will be by way of Rent
credits, which are reflected in the Rent Schedule, as set forth at Article 4.
G. If MiniMed and/or one of its affiliated entities succeeds to the
interest of Tenant under this Lease, then in connection with the financing of
the construction of the Improvements, MiniMed and/or one or more of its
affiliated entities may enter into a synthetic lease financing transaction,
pursuant to which a special purpose entity or trust formed or operated for
financing purposes shall become Tenant hereunder pursuant to a novation,
assignment or similar mechanism.
H. Prior to the date hereof, MiniMed has delivered to Landlord a
guarantee of Tenant's obligations hereunder.
NOW, THEREFORE, in consideration of the payments to be made hereunder
and the covenants and agreements contained herein, Landlord hereby leases to
Tenant and Tenant hereby leases from Landlord the real property hereinafter
defined as the "Leased Premises" upon the following terms and conditions.
ARTICLE 1 - DEFINITIONS
1.1 Additional Rent. The term "Additional Rent" means all sums of money
required to be paid pursuant to the terms of this Lease other than Rent
including but not limited to the sums to be paid pursuant to Section 6.6(b)
(regarding liens), Section 10.1(a) (regarding Impositions), and Section 14.3
(regarding self help).
1.2 Affiliate. The term "Affiliate" as used herein shall mean any
person directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with another person, which, in the case of
a partnership, shall
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include each of the general partners thereof. The term control, as used in the
immediately preceding sentence, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of the
controlled person. If MiniMed is Tenant, the term "Affiliate" shall also mean a
general partnership of which MiniMed or Alfred E. Mann is a general partner, or
any entity of which MiniMed Inc. or Alfred E. Mann owns a 20% or greater equity
interest; provided that such partnership or other entity is engaged in the
business or businesses as permitted pursuant to Section 5.1(b) below.
1.3 Agreed Rate. The term "Agreed Rate" as used herein shall mean an
annual rate of interest equal to the lesser of (i) two percent (2%) above the
rate of interest announced from time to time by the Bank of America, Downtown
Los Angeles, Main Branch, as the prime or reference rate (or, in the event said
bank ceases to announce a prime or reference rate or is acquired or ceases
operations and there is no successor bank, another established and financially
secure commercial bank, having a headquarters in California, selected by
Landlord), or (ii) the highest rate permitted by law, if any.
1.4 Building. The term "Building" shall mean and refer to each of the
structures designed for occupancy within the Leased Premises.
1.5 Commencement Date. The Commencement Date is the date that this
Lease is executed by Landlord.
1.6 Construction Loan. The term "Construction Loan" as used herein
shall mean and refer to a construction loan made by a construction Lender to
Tenant for the development and construction of all or a portion of the
Improvements contemplated for the Leased Premises by this Lease.
1.7 CPI. The term "CPI" as used herein shall mean the Consumer Price
Index [All Urban Consumers] (base year 1982-84 = 100) for the Los Angeles-Long
Beach area published by the United States Department of Labor, Bureau of Labor
Statistics. If the CPI is changed so that the base is changed from 1982-84 =
100, the CPI shall be converted in accordance with the conversion factor
published by the United States Department of Labor, Bureau of Labor Statistics.
If the CPI is discontinued or revised during the Term, such other governmental
index or computation with which it is replaced shall be used in order to obtain
substantially the same result as would be obtained if the CPI had not been
discontinued or revised. If there is no such replacement, then Landlord and
Tenant shall select another price index which is satisfactory to both.
1.8 Default(s). The term "Default(s)" as used herein shall have the
meaning
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described in Section 14.1.
1.9 Environmental Laws. The term "Environmental Laws" means any
federal, state or local environmental, health and/or safety-related law, rule,
regulation, requirement, order, ordinance, directive, guideline, permit or
permit condition, currently existing and as amended, enacted, issued or adopted
in the future. The term Environmental Laws includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and similar state or local laws.
1.10 Fair Market Rent. "Fair Market Rent" means the prevailing market
rent being paid for real property comparable to the Leased Premises and for the
industrial uses permitted under this Lease, unencumbered by the Improvements,
but without considering the actual Rent of the Leased Premises pursuant to this
Lease.
1.11 Force Majeure Events. The term "Force Majeure Events" shall have
the meaning described in Section 14.8.
1.12 Governmental Restrictions. The term "Governmental Restrictions" as
used herein shall mean and include any and all laws, statutes, official
policies, ordinances, codes, formal decrees, rulings, regulations, writs,
injunctions, orders, rules, conditions of approval or authorizations of any
governmental entity, agency or political subdivision, now in force or hereafter
adopted, which are applicable to the Leased Premises or the use thereof as of
the date such term is being applied.
1.13 Hazardous Materials. The term "Hazardous Materials" as used herein
shall have the meaning set forth in Section 6.7(c).
1.14 Improvements. The term "Improvements" shall mean and include all
grading done on the Leased Premises as well as all Buildings, structures,
fixtures, excavation, parking areas, walkways, drives, landscape areas,
underground installations and all other improvements of whatsoever character
constructed on, around, under or over the Leased Premises by Tenant pursuant to
this Lease.
1.15 JPA. The term "JPA" refers to that certain Joint Powers Agreement
between the Master Landlord and the City of Los Angeles, dated June 17, 1998,
including all exhibits, amendments, restatements, extensions and modifications
thereof, and any successor agreement thereto.
1.16 Leased Premises. The term "Leased Premises" as used herein shall
have the meaning described in Article 2 below.
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1.17 Leasehold Mortgage. The term "Leasehold Mortgage" shall mean any
mortgage, deed of trust, assignment and leaseback for financing purposes, or
synthetic lease transaction or other established method of securing real
property financing, including the deeds of trust securing the Construction
Loan(s) and any permanent loan.
1.18 Lease Year. The term "Lease Year" as used herein shall mean each
of the consecutive twelve (12) calendar month periods beginning on the first day
of the first calendar month following the Commencement Date unless the
Commencement Date falls on the first day of a calendar month, in which event the
Lease Year shall commence on the Commencement Date.
1.19 Lender. The term "Lender" shall mean the owner and holder of any
Leasehold Mortgage permitted by this Lease.
1.20 Losses and Liabilities. The term "Losses and Liabilities" as used
herein shall mean all liabilities, claims, losses, causes of action, charges,
penalties, damages, costs and expenses (including reasonable attorneys' fees and
costs), of whatsoever character, nature and kind, whether to property or person,
whether by direct or derivative action, and whether known or unknown, suspected
or unsuspected, latent or patent.
1.21 Mortgage. The term "Mortgage" as used herein shall mean and
include any mortgage, deed of trust, monetary lien, financing conveyance or
other voluntary monetary lien of any kind and all appropriate modes of financing
real estate construction, development and ownership, including a sale and
leaseback, and corporate financing structured as a lease, commonly referred to
as "synthetic leasing".
1.22 Parcel or Parcels. The term "Parcel" shall refer to one of Parcel
1, Parcel 2, Parcel 3 or Parcel 4. The term "Parcels" shall refer to Parcel 1,
Parcel 2, Parcel 3 and Parcel 4 collectively.
1.23 Party or Parties. The term "Party" shall refer to one of Landlord
or Tenant; the term "Parties" shall refer to both Landlord and Tenant.
1.24 Permitted Exceptions. As used herein the term "Permitted
Exceptions" means (a) a lien to secure payment of real estate taxes due but not
yet payable, (b) item 5 of the Preliminary Title Report dated February 3, 1999,
Order No. 8132884-X52, issued by the Title Insurer, and (c) such other matters
as may be approved by Tenant in writing in its sole and absolute discretion.
1.25 Plans. The term "Plans" as used herein shall mean the plans
referenced in Section 6.2.
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1.26 Rent. The term "Rent" as used herein shall have the meaning
described in Section 4.2.
1.27 Representatives. The term "Representatives" as used herein shall
mean the agents, contractors, employees and (with respect to Master Landlord and
Landlord only) students or faculty of the referenced entity (to the extent
acting on behalf of such entity and within the scope of its employment or
contract).
1.28 Research Center. The term "Research Center" shall refer to the
Improvements to be constructed on the Leased Premises pursuant to this Lease.
1.29 Site Plan. The "Site Plan" as used herein shall mean and refer to
the preliminary Site Plan attached hereto as Exhibit B, as it may be amended
from time to time in accordance with the terms of this Lease.
1.30 Sublease(s); Subtenant. The term "Sublease(s)" as used herein
shall mean subleases and any other like agreements between Tenant and Subtenant
(including, but not limited to, any subleases which are subordinate to this
Lease (i.e., such as a sublease between Subtenant and its Subtenants)). The term
"Subtenant" or "Sublessee" as used herein shall mean the subtenant or other
corresponding party under any Sublease.
1.31 Term. The term "Term" as used herein shall mean the term of this
Lease as described in Section 3.1 below.
1.32 Title Insurer. The term "Title Insurer" as used herein shall mean
the Chicago Title Insurance Company.
1.33 Title Policy. The term "Title Policy" as used herein shall mean
and include the most current form of ALTA owner's policy of title insurance,
dated as of the Commencement Date, and with liability in the amount of
$65,000,000.00, insuring Tenant as the owner of the leasehold estate under the
Lease, subject only to the Permitted Exceptions, together with such endorsements
as required by Tenant.
1.34 Transfer Documents. The term "Transfer Documents" as used herein
shall have the meaning described in Section 9.2.
1.35 Transfer/Transferee. The term "Transfer" as used herein shall mean
and include any conveyance, transfer, sale, assignment, lease, Sublease,
license, concession, franchise, gift, hypothecation, Mortgage, pledge,
encumbrance, or the like, to any person or entity ("Transferee"), excluding any
Leasehold Mortgage which
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encumbers Tenant's leasehold estate created by this Lease.
1.36 Uncured Default(s). The term "Uncured Default(s)" as used herein
shall have the meaning described in Section 14.2(c).
1.37 University. The term "University" as used herein shall mean the
university campus at California State University, Northridge.
ARTICLE 2 - LEASED PREMISES
2.1 Leased Premises. The premises demised and leased hereunder ("Leased
Premises") consist of the real property located in the City, County of Los
Angeles, State of California, referred to as Parcels 1, 2 and 3, and more
particularly described in the legal description for that Parcel attached hereto
as Exhibit A, and depicted on Exhibit B, the Site Map, together with all
buildings, structures, improvements and fixtures now located thereon and all
right, title and interest of Landlord in and to all rights of way or use,
servitudes, licenses, easements, tenements, hereditaments and appurtenances now
or hereafter belonging or pertaining to the use of such real property during the
Term, including, but not limited to, any easements granted to Tenant pursuant to
Section 5.6.
2.2 Leased Premises; Condition of Premises; Zoning. Prior to the
Commencement Date, Tenant, at Tenant's sole expense, shall have investigated and
approved the physical condition of, and the condition of title with respect to,
the Leased Premises. Tenant acknowledges and agrees that Landlord makes no
representation or warranty, express or implied, written or oral, with respect to
the condition of the Leased Premises or its fitness or availability for any
particular use. Landlord shall provide the Title Policy (Landlord shall pay for
the CLTA portion of the Title Policy), insuring Tenant as the owner of the
leasehold estate under the Lease, subject only to the Permitted Exceptions.
Should Tenant determine during the excavation phase for the construction of the
Improvements that the physical condition of the Leased Premises is not as
anticipated, Tenant shall have a special right of termination as provided at
Section 4.6.
2.3 North Campus Library Annex . One of the buildings on the Leased
Premises as of the Commencement Date is the North Campus Library Annex (the
"Annex"). Landlord acknowledges and agrees that Tenant may use the Annex for any
of the Allowed Uses set forth at Exhibit F, and subject to Section 6.2 may make
whatever changes, structural modifications, or improvements as are required to
make the structure suitable for Tenant's purposes. From and after June 1, 1999
until the expiration of the Term (including any extensions of the Term in
accordance with Article 3 of this Lease) or earlier termination of this Lease,
Tenant shall have the right, but not the obligation (in its sole discretion), to
demolish and remove the Annex at Tenant's
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sole cost and expense, provided, however, that if Tenant has not demolished the
Annex on or before July 1, 2001, Tenant shall ensure that the exterior of the
Annex is in a clean and well kept condition.
ARTICLE 3 - TERM
3.1 Initial Term. The Term of this Lease shall be that period of time
beginning on the Commencement Date and ending at midnight on December 31, 2039,
unless the Term of this Lease is sooner terminated or extended as provided for
herein.
3.2 Options to Extend.
(a) Tenant with the prior written consent of Landlord, which
consent shall not be unreasonably withheld, may extend the original Term of this
Lease, subject to all the provisions of this Lease including but not limited to
provisions for increases in Rent, for one (1) additional period of ten (10)
years, followed by six (6) additional periods of five (5) years each, each such
period commencing upon the expiration of the term of the immediately preceding
period. With respect to each such extended term, Tenant shall give Landlord
written notice (in the manner prescribed by Section 18.6) of Tenant's intention
to exercise said option not more than thirty (30) months and not less than
twenty four (24) months before the end of the Term then in effect. Within sixty
(60) days after Landlord's receipt of said notice, Landlord shall advise Tenant
in writing whether Landlord consents or does not consent to such extended term.
If Landlord does not consent to such extended term, Landlord's written notice
shall state the reasons for withholding consent. Landlord's failure to respond
within sixty (60) days after its receipt of Tenant's notice of intention to
exercise its option shall be deemed to be a grant of consent. If Landlord does
not consent to such extended term, then such refusal shall be considered to be
Landlord's notice to terminate this Lease as provided below at Section 4.5,
Landlord's Special Right of Termination, and Tenant may exercise those rights
provided to Tenant by said Section 4.5. After the valid exercise of any option
to extend, all references in this Lease to the Term hereof shall be considered
to mean the Term as extended, and all references to the end of the Term shall be
considered to mean the end of the Term as extended.
(b) Tenant's right to exercise the option to extend for each period
is subject to satisfaction of the following conditions precedent: (i) this Lease
shall be in effect at the time notice of exercise of an option to extend is
given and on the last day of the Term of the Lease prior to its extension; and
(ii) Tenant shall not be in Default under any provision of this Lease at the
time notice of exercise of the option is given nor shall an Uncured Default
exist as of the last day of the Term prior to its extension.
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3.3 Possession; Covenant of Quiet Enjoyment.
(a) Sole possession of the Leased Premises shall be delivered to
Tenant on the Commencement Date free and clear of any other tenancies or rights
of occupancy or use, and Tenant shall take possession as of that date.
(b) Landlord covenants that, subject to the limitations expressly
set forth herein, Tenant, upon Tenant's timely payment of the Rent and
performance of Tenant's covenants and obligations under this Lease, may quietly
have, hold, and enjoy the Leased Premises during the Term of this Lease, without
hindrance or interruption by Landlord or anyone claiming by or through Landlord,
subject to Landlord's right to enter upon the Leased Premises as expressly
provided herein.
ARTICLE 4 - RENT PAYMENTS
4.1 Rent. The Rent payable for each Lease Year (the "Rent") shall be as
set forth in the Rent Schedule, Exhibit D hereto. Beginning on January 1, 2000,
the Rent shall be paid in advance in twelve (12) equal monthly installments
payable on or before the first day of each calendar month during the Term.
4.2 Adjustments to Rent.
(i) As of January 1, 2010 (the "First Adjustment Date") and as
of the commencement of each five (5) year anniversary of the First Adjustment
Date (each such date is referred to as a "Rent Adjustment Date") through and
including the twenty-fifth (25th) anniversary of the First Adjustment Date, the
Rent then in effect shall be raised by increases in the CPI as provided in this
Section, but in no event less than the Rent for the prior Lease Year, nor more
than 110% of the Rent for the prior Lease Year. For purposes of this adjustment,
the "base month" shall be December 1999, and the "adjustment month" shall be the
calendar month immediately prior to each Rent Adjustment Date. The increase
shall be calculated by multiplying the Rent by a fraction in which the numerator
is the CPI for the adjustment month and the denominator is the CPI for the base
month, and Rent so calculated shall commence effective as of that Rent
Adjustment Date.
(ii) Effective January 1, 2040, the Rent then in effect shall be
adjusted to equal the Fair Market Rent as of such adjustment date without any
limitation on the percentage of such adjustment; provided, however, that in no
event shall the adjusted Rent be less than the Rent for the prior Lease Year.
(iii) Effective January 1, 2045, and as of each Rent Adjustment
Date
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thereafter, the Rent then in effect shall be raised by increases in the CPI as
provided in Section 4.2(i) above as of such Rent Adjustment Date, but in no
event shall the adjusted Rent be less than the Rent for the prior Lease Year,
nor more than 110% of the Rent for the prior Lease Year.
(iv) If the Fair Market Rent has not been determined as of January
1, 2040, Tenant shall continue to pay Rent in an amount equal to the Rent due
prior to the Rent Adjustment Date. If the Rent as adjusted is higher than the
prior Rent, the excess amount shall be payable ten (10) days after determination
of the Fair Market Rent as provided below, with interest at the Agreed Rate from
the date such Rent was due until paid.
(v) In addition, the Rent may be adjusted should Landlord determine
to pay all or a portion of "Landlord's Portion" as provided below at Section
6.5(b).
4.3 Fair Market Rent. The amount of Fair Market Rent, if not otherwise
agreed to by the parties, shall be resolved by Mediation and, if such Mediation
does not result in an agreement as to such Fair Market Rent, then by Arbitration
in accordance with the procedures set forth below. THE ONLY ISSUE TO BE
DETERMINED BY SUCH PROCEDURES IS THE AMOUNT OF FAIR MARKET RENT AS REQUIRED
UNDER SECTION 4.2 ABOVE AND NO OTHER ISSUE.
(a) Mediation. 90 days prior to the Rent Adjustment Date, and at
the request of Tenant between 28 and 22 months prior to January 1, 2040 (i.e.,
between August 1, 2037 and March 1, 2038), Landlord shall deliver to Tenant its
valuation of the Fair Market Rent for the Leased Premises, together with such
assumptions and data sufficient to provide Tenant with an understanding of how
Landlord arrived at such valuation. If Tenant does not respond to Landlord's
valuation within ninety (90) calendar days, then Landlord's determination shall
be final. If Tenant disagrees with Landlord's valuation, then Tenant shall
deliver to Landlord its valuation of the Fair Market Rent for the Leased
Premises, together with such assumptions and data as are sufficient to provide
Landlord with an understanding of how Tenant arrived at its valuation. If the
parties are unable to agree upon the Fair Market Rent within sixty (60) days of
Landlord's receipt of Tenant's valuation, then Landlord shall call a special
meeting to be held at a mutually convenient time within sixty (60) days of
Landlord's receipt of Tenant's valuation.
(i) Special Meeting. Landlord shall attempt to employ the
services of a third person mutually acceptable to the parties to conduct such
mediation within 5 days of his or her appointment. Landlord shall arrange for
the special meeting to be attended by the independent mediator, and shall
provide the independent mediator with Landlord's and Tenant's valuations of the
Fair Market Rent for the Leased Premises,
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together with their respective assumptions and data as are sufficient to provide
the independent mediator with an understanding of how Landlord and Tenant
arrived at their valuations. The meeting shall be held within five (5) working
days of a written request for the meeting. The meeting shall be attended by
representatives of Landlord, the Tenant and any experts involved, and the
independent mediator, who shall conduct the special meeting in accordance with
American Intermediation Service procedures. The costs of the mediator shall be
shared equally by Landlord and Tenant.
(ii) The proceedings under this Section shall be subject to
California Evidence Code Sections 1152 and 1152.5. By executing this Lease, the
parties agree that Section 1152.5 of the Evidence Code shall apply to the
special meeting and mediation and further agree to abide by subparagraphs (a)
and (b) of that section, which provide as follows:
(iii) Subject to the conditions and exceptions provided in
this section, when persons agree to conduct and participate in a mediation for
the purpose of compromising, settling, or resolving a dispute:
(1) Evidence of anything said or of any admission made
in the course of the mediation is not admissible in evidence, and disclosure of
any such evidence shall not be compelled, in any civil action or applicable
arbitration in which, pursuant to law, testimony can be compelled to be given.
(2) Unless the document otherwise provides, no document
prepared for the purpose of, or in the course of, or pursuant to, the mediation,
or copy thereof, is admissible in evidence, and disclosure of any such document
shall not be compelled, in any civil action in which, pursuant to law, testimony
can be compelled to be given.
(iv) Subdivision (iii) does not limit the admissibility of
evidence if all persons who conducted or otherwise participated in the mediation
consent to its disclosure.
(v) If, as a result of the mediation, an agreement as to Fair
Market Rent is reached, then the parties also agree that the mediator shall be
appointed an arbitrator for the sole purpose of signing the mediation agreement;
that the mediation agreement shall have the same force and effect as an
arbitration award; and that judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction thereof.
(vi) If, as a result of the mediation, an agreement as to Fair
Market Rent is not reached, then the parties shall resolve the issue by
arbitration, as set forth below.
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(vii) If the parties are unable to agree on the third person to
be selected pursuant to subparagraph (i) above, or, if on completion of such
mediation, the parties are unable to agree and settle the dispute, then the
dispute shall be referred to arbitration in accordance with paragraph (b) below.
(b) ARBITRATION OF DISPUTE AS TO FAIR MARKET RENT. TENANT AND
LANDLORD SHALL APPOINT A TOTAL OF THREE (3) INDEPENDENT APPRAISERS, WHO SHALL BE
MEMBERS (M.A.I.) OF THE APPRAISAL INSTITUTE, OR IF SUCH INSTITUTE DOES NOT
EXIST, THEN A COMPARABLE ORGANIZATION, TO APPRAISE THE FAIR MARKET RENT OF THE
LEASED PREMISES. ONE (1) APPRAISER SHALL BE APPOINTED BY TENANT AND ONE (1) BY
LANDLORD WITHIN THIRTY (30) DAYS OF THE FAILURE OF MEDIATION. THE THIRD
APPRAISER SHALL BE SELECTED BY THE APPOINTED APPRAISERS. IF EITHER PARTY SHALL
FAIL TO TIMELY APPOINT AN APPRAISER, THE APPOINTED APPRAISER SHALL SELECT THE
SECOND APPRAISER WITHIN TEN (10) DAYS AFTER SUCH PARTY'S FAILURE TO SO APPOINT.
IF THE TWO (2) APPRAISERS SO DETERMINED SHALL BE UNABLE TO AGREE ON THE
SELECTION OF A THIRD APPRAISER, THEN EITHER APPRAISER WITHIN THIRTY (30) DAYS OF
THEIR BEING APPOINTED, ON BEHALF OF BOTH, MAY REQUEST THE ASSOCIATION OR
ORGANIZATION OF MAI APPRAISERS OF WHICH SUCH APPRAISER IS A MEMBER TO MAKE SUCH
APPOINTMENT (OR, IF SUCH ORGANIZATION OR ASSOCIATION SHALL DECLINE TO MAKE SUCH
APPOINTMENT, EITHER PARTY MAY APPLY TO THE AMERICAN ARBITRATION ASSOCIATION, LOS
ANGELES, CALIFORNIA, OR TO ANY COURT IN LOS ANGELES COUNTY, CALIFORNIA TO MAKE
SUCH APPOINTMENT). IT IS SPECIFICALLY CONTEMPLATED AND AGREED BETWEEN THE
PARTIES THAT THE PROVISIONS OF SECTION 1283.05 OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE ARE INCORPORATED HEREIN. SUCH APPRAISERS SHALL DETERMINE THE FAIR
MARKET RENT OF THE LEASED PREMISES AFTER AT LEAST ONE NOTICED HEARING AT WHICH
LANDLORD AND TENANT ARE GIVEN THE OPPORTUNITY TO PRESENT THEIR DETERMINATION OF
THE FAIR MARKET RENT TOGETHER WITH THEIR SUPPORTING ASSUMPTIONS AND DATA. THE
FAIR MARKET RENT OF THE LEASED PREMISES SHALL BE THE AVERAGE OF THE VALUATIONS
OF THE RENT AS DETERMINED BY SUCH THREE (3) APPRAISERS; PROVIDED, HOWEVER, THAT
IF ANY SUCH VALUATION DEVIATES MORE THAN TEN PERCENT (10%) FROM THE MEDIAN OF
SUCH VALUATIONS, THE FAIR MARKET RENT OF THE LEASED PREMISES SHALL BE THE
AVERAGE OF THE TWO (2) CLOSEST SUCH PROPOSALS. UNLESS OTHERWISE INDICATED IN
THIS LEASE, THE COST OF THE ARBITRATION SHALL BE BORNE EQUALLY BY TENANT AND
LANDLORD.
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NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISIONS DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE
FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
------------------- -----------------
LANDLORD'S INITIALS TENANT'S INITIALS
4.4 Additional Rent . In addition to the Rent, Tenant shall pay or
cause the Additional Rent to be paid throughout the Term. Additional Rent shall
constitute rent payable hereunder except that unless specifically indicated in
this Lease such amounts shall be paid directly to the party to whom such amount
is owed, not Landlord, unless such amount has been paid by Landlord pursuant to
Article 14, in which case such amount shall be paid to Landlord.
4.5 Landlord's Special Right to Terminate Lease. From and after January
1, 2040, Landlord may terminate this Lease upon ten (10) years prior written
notice (the "Notice to Quit"), which Notice to Quit may not be given prior to
January 1, 2040. Landlord's notice that it is withholding its consent to
Tenant's election to exercise its Option to extend the Term of this Lease
pursuant to Section 3.2 above shall also constitute Landlord's Notice to Quit
pursuant to this Section. Thereafter, Tenant shall notify Landlord in writing of
the date it will quit the Leased Premises, which date shall be the later of (i)
January 1, 2043, or (ii) the first anniversary of the date Landlord received
Tenant's notice of the date it will vacate the Leased Premises, or (iii) the
date specified by Tenant in its notice, and this Lease shall terminate as of
that date. In any event Tenant shall vacate the Leased Premises, and this Lease
shall terminate, on or before the tenth anniversary of the date Tenant received
the Notice to Quit. Upon vacation of the Leased Premises by Tenant, Landlord
shall purchase the Buildings on the Leased Premises at their fair market value
as of the date of vacation, such payment to be due and payable within 60 days
after Tenant's vacation of the Leased Premises.
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Amounts not paid when due shall bear interest at the Agreed Rate. The fair
market value of the Buildings shall be determined by mediation, then arbitration
in accordance with the procedures provided in Section 4.3 above.
4.6 Tenant's Special Rights to Terminate Lease.
(a) Termination Because of Unanticipated Condition. If during the
construction phase of the construction of the Improvements on the Leased
Premises (or on Parcel 4) Tenant (or the tenant under the sublease for Parcel 4)
discovers an unanticipated physical condition (whether natural or not) which
substantially interferes with the construction of the Improvements on the Leased
Premises (the "Condition"), Tenant shall immediately notify Landlord of the
nature and location of the Condition discovered and shall include all findings
and reports of Tenant's consultants. For a period of sixty (60) days thereafter
Tenant shall undertake to perform such tests as are required and to prepare
estimates of the cost to remediate the Condition, and shall apprise Landlord on
a weekly basis of the results of its tests, and when available, a detailed, good
faith estimate of the cost required to remediate the Condition prepared by
Tenant's consultants. Said estimate shall be subject to reasonable review and
approval by Landlord. If Tenant's estimate of the cost to remediate the
Condition is in the aggregate less than $500,000, then Tenant shall undertake to
perform the remediation in a continuous and diligent manner; if the actual costs
to remediate the Condition are in excess of $500,000, Tenant shall be
responsible to pay such overage. If Tenant's estimate of the cost to remediate
the Condition is in the aggregate greater than $500,000 for the Leased Premises,
then Tenant may terminate this Lease by written notice (the "Notice to
Terminate"), such notice to be effective ninety (90) days after Landlord's
receipt of it. Upon receipt of the Notice to Terminate, Landlord may determine
to fund the overage of the cost to remediate and shall so advise Tenant in
writing (the "Notice to Proceed"). The Notice to Proceed shall be delivered to
Tenant prior to the 90th day after Landlord's receipt of Tenant's notice to
terminate, and upon Tenant's receipt of the Notice to Proceed, Tenant's Notice
to Terminate shall be void and this Lease shall remain in effect. Thereafter,
Tenant shall undertake the remediation of the Condition, shall pay the first
$500,000 of the cost of the remediation and Landlord shall be responsible for
the overage up to the Landlord's Share including interest at the Agreed Rate,
which overage shall, at Landlord's election, be funded by Tenant and repaid with
credits against the Rent. If the actual cost to remediate the Condition is, or
after commencement of the remediation is anticipated to be, in excess of the
amount which Landlord is willing to contribute plus $500,000, either party may
by written notice to the other terminate this Lease, effective 30 days after
receipt by the other party, the parties shall share equally in the cost to rough
grade the Leased Premises to approximate its original condition, and thereafter
the parties shall have no further liabilities one to the other.
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(b) Termination Because of Increased Rent. If the Rent as adjusted
on January 1, 2040, is greater than 110% of the Rent in effect immediately prior
to such adjustment, Tenant may terminate this Lease by delivering to Landlord
written notice of its intention to terminate this Lease on or before January 1,
2041. Such notice shall state the date upon which Tenant will vacate the Leased
Premises and the Lease will terminate, which date shall not be prior to January
1, 2043, and not later than January 1, 2050. Upon termination of the Lease in
accordance with this Section and vacation of the Leased Premises by Tenant,
Landlord shall purchase the Buildings on the Leased Premises at their fair
market value as of the date of vacation, such payment to be due and payable
within 60 days after the date of vacation. Amounts not paid when due shall bear
interest at the Agreed Rate. The fair market value of the Buildings shall be
determined by mediation, then arbitration in accordance with the procedures
provided in Section 4.3 above.
4.7 Miscellaneous. All payments of Rent shall be made to Landlord as
they become due in lawful money of the United States of America in cash or by
corporate check drawn on sufficient available funds, at such place as is
designated herein by Landlord for the receipt of notices or such other place as
shall be designated to Tenant by Landlord in writing from time to time.
4.8 Triple Net Lease; No Counterclaim, Abatement, etc.. All Rent shall
be paid absolutely net to Landlord, so that this Lease shall yield to Landlord
the full amount of the installments of all Rent throughout the Term, and (unless
otherwise expressly provided herein) shall be paid without assertion of any
counterclaim, setoff, deduction or defense and, except as otherwise expressly
provided herein, without abatement, suspension, deferment, diminution or
reduction. Under no circumstances or conditions, whether now existing or
hereafter arising, or whether beyond the present contemplation of the parties,
shall Landlord be expected or required to make any payment of any kind
whatsoever or be under any obligation or liability hereunder, except as herein
expressly set forth. Except as otherwise expressly provided herein, this Lease
shall continue in full force and effect, and the obligations of Tenant hereunder
shall not be released, discharged or otherwise affected, by reason of: (a) any
damage to or destruction of the Leased Premises or Improvements or any part
thereof or any Taking of the Leased Premises or the Improvements or any part
thereof; (b) any restriction or prevention of or interference with any use of
the Leased Premises or the Improvements or any part thereof which materially
interferes with Tenant's possession or use of the Leased Premises (other than a
breach of Landlord's covenant of quiet enjoyment set forth at Section 3.3); (c)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other proceeding relating to Landlord, or any action
taken with respect to this Lease by any trustee or receiver of Landlord with
respect to this Lease by any trustee or receiver of Landlord, or by any court,
in any proceeding; (d) any claim which Tenant has or might have
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against Landlord; (e) any failure on the part of Landlord to perform or comply
with any of the terms hereof or of any other agreement with Tenant; or (f) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing, in
each case, whether or not Tenant shall have notice or knowledge of any of the
foregoing. Except as expressly provided in this Lease, the obligations of Tenant
shall be separate and independent covenants and agreements.
ARTICLE 5 - USE OF THE LEASED PREMISES,
MAINTENANCE AND HAZARDOUS MATERIALS
5.1 Use of the Leased Premises.
(a) General. Tenant covenants and agrees for itself, its successors
and assigns, which covenants shall run with the land and bind every successor or
assign in interest of Tenant, that during development and use of the Leased
Premises pursuant to this Lease, neither the Leased Premises nor any portion
thereof shall be improved, used or occupied in violation of any Governmental
Restrictions or the Master Leases.
(b) Research and Development Center. During the Term, Tenant and
any of its Sublessees or Subtenants shall use the Leased Premises only for those
Allowed Uses as set forth at Exhibit F, attached hereto.
(c) Conference Center. As part of the Improvements to be
constructed on the Leased Premises, the Tenant shall construct a conference
facility. In the design of the conference rooms and facilities within the
conference facility, Tenant shall give due consideration to the needs of the
University as expressed by Landlord. For so long as Tenant maintains such
conference facility on the Leased Premises, Landlord, Master Landlord and their
permittees (including but not limited to faculty, staff and students) shall
enjoy the use of the Conference Center jointly with Tenant and its Subtenants on
a noninterfering basis, under the control of Tenant, and in accordance with
"Conference Center and University Use Guidelines" to be negotiated and agreed to
by the parties within one hundred eighty (180) days after the Commencement Date.
Once agreed to, the Conference Center and University Use Guidelines may only be
amended by written agreement between Master Landlord and Tenant. Nothing
contained in this Lease shall be interpreted to prevent Tenant from charging
user fees for the use of the Conference Center or other portions of the
Improvements, or Landlord from charging user fees for the use of University
facilities, in accordance with a user-fee schedule to be negotiated between the
parties.
5.2 No use of Hazardous Materials on the Leased Premises. Tenant
covenants and agrees that it shall not, and that any Sublease shall provide that
the
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Subtenant shall not, treat, use, store, dispose, release, handle or otherwise
manage Hazardous Materials (as defined in Section 6.7) on the Leased Premises
except in connection with any construction, operation, maintenance or repair of
the Improvements or in the ordinary course of its business, and that such
conduct shall be done in compliance with all applicable federal, state and local
laws, including all Environmental Laws. Tenant's violation of the foregoing
prohibition shall constitute a breach hereunder and Tenant shall indemnify, hold
harmless and defend the Landlord for such violation as provided below.
5.3 Notice and Remediation by Tenant. Tenant shall promptly give the
Landlord written notice of any reportable release of any Hazardous Materials,
and/or any notices, demands, claims or orders received by Tenant from any
governmental agency pertaining to Hazardous Materials which may affect the
Leased Premises.
5.4 Environmental Indemnity.
(a) MiniMed agrees to indemnify, protect, defend, save and hold
harmless Landlord and its successors and assigns, officers, members, directors,
shareholders, and Representatives from and against any and all debts, duties,
obligations (including any remediation obligations or clean up costs imposed by
any Governmental Restrictions), liabilities, suits, claims, demands, penalties,
fines, causes of action, damages, losses, costs and expenses, including, without
limitation, attorneys' fees and expenses (and including any allocable costs of
any of the foregoing parties' in-house counsel) arising on or accruing as a
result of the presence, use, storage, handling, treatment, generation, release,
discharge, refining, manufacturing, dumping or disposal of any Hazardous
Materials (as defined in Section 6.7 of this Lease) or other kinds of
contamination or pollutants of any kind into the air, soil, groundwater or
surface water on, under, in or about the Leased Premises (whether legal or
illegal, accidental or intentional), that is caused by MiniMed or its
Representatives. The indemnity provided in this Section 5.4(a) shall survive the
Termination of the Lease.
(b) Landlord agrees to indemnify, protect, defend, save and hold
harmless Tenant and MiniMed and all of their respective affiliates, successors
and predecessors in interest, assigns, officers, members, directors,
shareholders, and Representatives from and against any and all debts, duties,
obligations (including any remediation obligations or clean up costs imposed by
any Governmental Restrictions), liabilities, suits, claims, demands, penalties,
fines, causes of action, damages, losses, costs and expenses, including, without
limitation, attorneys' fees and expenses (and including any allocable costs of
any of the foregoing parties' in-house counsel) (I) arising on or accruing
during the period prior to the Commencement Date as a result of the presence,
use, storage, handling, treatment, generation, release, discharge, refining,
manufacturing, dumping or disposal of any Hazardous Materials (as defined in
Section
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6.7 of this Lease) or other kinds of contamination or pollutants of any kind
into the air, soil, groundwater or surface water on, under, in or about the
Leased Premises (whether legal or illegal, accidental or intentional), or (ii)
arising on or accruing during the period from and after the Commencement Date as
a result of the presence, use, storage, handling, treatment, generation,
release, discharge, refining, manufacturing, dumping or disposal of any
Hazardous Materials (as defined in Section 6.7 of this Lease) or other kinds of
contamination or pollutants of any kind into the air, soil, groundwater or
surface water on, under, in or about the Leased Premises (whether legal or
illegal, accidental or intentional) that is caused by Master Landlord, Landlord
or their Representatives. The indemnity provided in this Section 5.4(b) shall
survive the Termination of the Lease.
5.5 Termination; Subtenants. The agreements and obligations of Tenant
under this Article 5 with regard to indemnification of Landlord shall survive
the scheduled termination or sooner expiration of the Term for any reason, for
five (5) years and all claims relating thereto must be delivered in writing to
Tenant within such period. No action by any subtenant in violation of its
sublease shall constitute a cause to terminate this Lease provided that Tenant
diligently pursues its available remedies against such subtenant.
5.6 Grant of Easements. Tenant may enter into agreements granting
easements reasonably necessary for the development and operation of the Research
Center provided they are limited to the expiration or sooner termination of this
Lease, are subordinate to Master Landlord's fee interest, and will not interfere
with any rights and remedies of Landlord hereunder. Tenant must obtain
Landlord's prior written consent to any agreement that would grant an easement
extending beyond the Term hereof, or that would interfere with any of Landlord's
rights and remedies hereunder. A grant of easement made in accordance with this
Section 5.6 shall not be deemed a "Transfer" within the meaning of Section 9.2.
Landlord agrees that it will not unreasonably withhold its consent to and will
join in the execution of such easements over the Leased Premises as may be
necessary to provide utilities to the Leased Premises; provided, Landlord shall
not be obligated to incur any cost or expense in connection with such an
easement and Tenant shall indemnify, defend and hold Landlord and Landlord's
Representatives harmless from any Losses and Liabilities arising from the
creation or use of such easements during the Term of this Lease.
ARTICLE 6 - CONSTRUCTION BY MINIMED
6.1 Development of Improvements. MiniMed shall construct or cause to be
constructed on the Leased Premises the improvements necessary for Tenant to
develop and maintain its portion of the proposed Research Center on its Parcel,
all in
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substantial conformity with the construction plans, drawings and related
documents approved by Landlord pursuant to this Article 6. The Master Landlord
has entered into a Joint Powers Agreement with the City which sets forth the
jurisdiction of those parties with respect to the development of these
Improvements. MiniMed agrees that it will implement the Mitigation Monitoring
Plan, attached as Attachment No. 5 to the JPA, and those portions of the
Mitigation Measures which the University has the obligation to perform pursuant
to the Mitigation Monitoring Plan, and that it will cause the construction, use
and occupancy of the Research Center to comply with the mitigation measures set
forth in Attachment No. 6 attached to the JPA. Landlord hereby agrees to execute
such assignments, applications or other instruments, as required to allow
MiniMed, at its cost, to exercise the rights of Master Landlord pursuant to the
JPA. The Parties and MiniMed acknowledge and agree that during the term of the
JPA the standards set forth in the JPA are the standards to be applied with
respect to this Lease for land use, environmental quality, building and design
codes, seismic, life safety, and any other matters described in the JPA, and
that no modification shall be made to the standards set forth therein without
the written consent of each Party. The Parties acknowledge that in the future it
may be necessary or desirable for Tenant or MiniMed to obtain, on a voluntary
basis, certain permits, subdivision approvals, or other land use approvals, and
if the Tenant or MiniMed, as applicable, so desires to process and obtain such
approvals, Landlord agrees to cooperate and assist Tenant or MiniMed, as
applicable, in the filing of such applications, including signing any such
applications if required, in connection with the development of the Leased
Premises.
6.2 Conditions to Construction of Improvements. Before MiniMed begins
construction of the Improvements on the Leased Premises, and before any building
materials are delivered to the Leased Premises by MiniMed or under MiniMed's
authority, and as a condition to MiniMed's right to proceed with the
construction of the Improvements, MiniMed shall have complied with all of the
conditions set forth in this Section 6.2.
(a) Plans and Specifications.
(i) It is the intention of Landlord, MiniMed and Tenant that
all Improvements within the Leased Premises be constructed, installed, erected,
operated and maintained so that the Improvements shall be aesthetically and
architecturally harmonious. Accordingly, except as otherwise provided
hereinafter, all Improvements within the Leased Premises, including initial
construction and any major alterations (but not including tenant improvements
other than as may be requested by Landlord pursuant to Section 5.1(c)),
additions, exterior remodeling or reconstruction of any Improvements following
the initial construction thereof, shall be performed only in accordance with
approved plans for such work as provided herein. As of the Commencement Date,
the schematic design for the Research Center has been approved.
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(ii) Prior to the commencement of the construction and/or
installation of any Improvements whatsoever on the Leased Premises or any part
thereof by Tenant, MiniMed or any Subtenant, MiniMed shall deliver to Landlord
detailed plans through and including construction drawings (the "Plans") of
scaled elevations, exterior design concepts, material selection and color for
the exterior surfaces of the proposed Improvements (which Plans shall include a
grading plan and/or a utility plan, to the extent applicable). Landlord shall in
writing either approve or disapprove the Plans within thirty (30) days of the
receipt thereof. If Landlord fails to approve or disapprove the Plans in
accordance with the terms of this Lease within such thirty (30) day period, the
Plans shall be deemed disapproved. Upon a deemed disapproval, Tenant or MiniMed
may deliver a notice to Landlord which states that there has been a deemed
disapproval, requesting that Landlord approve or disapprove the Plans, stating
that Landlord must approve or disapprove the Plans within 15 days after
Landlord's receipt of this notice, and that failure by Landlord to either
approve or disapprove of the Plans within such 15 day period will result in
deemed approval. If Landlord fails to approve or disapprove the Plans in
accordance with the terms of this Lease within such fifteen (15) day period, the
Plans shall then be deemed approved. Upon submission of any disapproval,
Landlord shall inform Tenant and MiniMed in writing (the "Plan Disapproval
Notice") of the reasons for disapproval with particularity and the required
changes to the Plans. MiniMed shall have ten (10) business days from receipt of
any Plan Disapproval Notice within which to notify Landlord that MiniMed agrees
to make such changes or objects to any required changes. If MiniMed notifies
Landlord within said 10-day period of its objections to the required changes,
then Landlord and MiniMed agree to meet to discuss their differences within ten
(10) days after MiniMed gives such notice. Following such meeting, MiniMed shall
revise such Plans and resubmit them to Landlord by the later of (i) thirty (30)
days after receipt of the Plan Disapproval Notice, or (ii) ten (10) days after
such meeting, unless the nature of such changes requires a longer period of
time, in which case MiniMed shall resubmit said Plans or other submissions as
soon as possible, and, in any case, no later than seventy-five (75) days after
receipt of the Plan Disapproval Notice. Any resubmissions by MiniMed shall be
approved or disapproved and revised within the times set forth herein with
respect to the initial submission. Landlord shall not disapprove of any Plans
for design or aesthetic reasons if the same are compatible and/or in substantial
conformity with the general architectural design, aesthetic quality, and
exterior materials of Improvements previously approved by Landlord and are a
logical evolution of the previously approved schematic design. Landlord shall
exercise its discretion with respect to approval or disapproval of any such
plans in a reasonable and uniform manner.
(iii) Upon the completion of the initial construction and
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installation of any Improvements, the same shall not be thereafter materially
changed or materially altered without the prior written approval of Landlord if
such changes or alterations would substantially modify the exterior appearance
of such Improvements, which approval shall be sought pursuant to the terms set
forth above and shall not be unreasonably withheld in accordance with the
criteria set forth above. Landlord shall not withhold or delay its approval of
any proposed changes or alterations to any Improvements which are consistent
with the architectural design, aesthetic quality, and exterior materials of
Improvements existing at the Leased Premises and previously approved by
Landlord. In addition, Landlord shall have no approval rights with respect to
changes to exterior plans or materials which are required by any governmental
authority. Nothing herein shall require Tenant or MiniMed to obtain Landlord's
approval of the interior designs of the Improvements.
(iv) During the preparation of any revisions to the Plans or
the preparation of any other submissions, Landlord and MiniMed shall hold
progress meetings to coordinate the preparation, submission and review thereof.
Landlord and MiniMed shall communicate and consult informally as frequently as
is necessary to ensure that the formal submission of all documents and Plans to
Landlord shall receive reasonably prompt and speedy consideration.
(b) Site Plan. The Parties and MiniMed acknowledge that the
preliminary Site Plan attached to this Lease as Exhibit B is a conceptual Site
Plan of the Research Center, which Site Plan is hereby approved by Landlord. Any
material modifications to the Site Plan shall be subject to the approval of
Landlord, which approval shall not be unreasonably withheld or delayed. In the
event MiniMed submits a revised Site Plan to Landlord, Landlord shall approve or
disapprove the revised Site Plan within forty five (45) days of MiniMed's
submittal. If Landlord fails to approve or disapprove the revised Site Plan in
accordance with the terms of this Lease within such forty five (45) day period,
the revised Site Plan shall be deemed disapproved. Upon a deemed disapproval,
MiniMed may deliver a notice to Landlord which states that there has been a
deemed disapproval, requesting that Landlord approve or disapprove the Site
Plan, stating that Landlord must approve or disapprove the Site Plan within 15
days after Landlord's receipt of this notice, and that failure by Landlord to
either approve or disapprove the Site Plan within such 15 day period will result
in deemed approval. If Landlord fails to approve or disapprove the Site Plan in
accordance with the terms of this Lease within such fifteen (15) day period, the
Site Plan shall then be deemed approved. Upon submission of any disapproval,
Landlord shall inform Tenant and MiniMed in writing with particularity of the
reasons for disapproval. Tenant and MiniMed acknowledge that any proposed
increases in the scale, density, square footage, bulk or other factors which may
impact the environment may require further review pursuant to the California
Environmental Quality Act prior to a grant of approval.
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If there is a dispute between the Parties and MiniMed regarding an
acceptable, revised site plan, the Parties and MiniMed shall attempt in good
faith to mediate such dispute and use their best efforts to reach agreement on
the matters in dispute. Within 5 days of the request of a Party or MiniMed, the
requesting party shall attempt to employ the services of a third person mutually
acceptable to the Parties and MiniMed to conduct such mediation within 5 days of
his appointment. If on completion of such mediation, the parties are unable to
agree upon an acceptable, revised site plan, then Tenant shall have those
remedies available at law or equity.
(c) Construction Contracts. With respect to any Improvements which
MiniMed may elect to construct, MiniMed shall submit to Landlord for
informational purposes only, a copy of the final construction contracts relating
thereto, which submission shall occur prior to the commencement of any
significant construction work pursuant to any such construction contracts.
(d) Builder's Risk and Other Insurance. Prior to commencing
construction of any of the Improvements, MiniMed shall have obtained (and
delivered insurance certificates therefor to Landlord and Tenant) all insurance
coverage required under Article 12 of this Lease.
6.3 Construction of Improvements. All Improvements, together with all
off-site improvements that may be constructed by reason of Governmental
Requirements as a condition to the construction of Improvements upon the Leased
Premises, shall be constructed by MiniMed in a good and workmanlike manner using
materials of good quality and in substantial compliance with the Plans as
modified pursuant to this Article 6, and shall comply with all applicable
governmental permits, laws, ordinances and regulations.
6.4 Completion of Improvements and Other Work: Quality and Compliance
With Law. MiniMed covenants that the Improvements to be constructed on the
Leased Premises, and all other construction thereon, when undertaken, while in
progress and as completed: (i) will comply with all Governmental Restrictions,
including, without limitation, all laws and ordinances necessary to permit the
development, completion and lease of the Leased Premises pursuant to this Lease;
(ii) will be entirely on the Leased Premises and will not encroach upon the land
of others; (iii) will be wholly within any enforceable building restriction
lines, however established, and will not violate any enforceable use restriction
or any applicable easement, license, covenant, condition or restriction of
record; and (iv) will comply in all material respects with the Site Plan (as may
be modified as provided herein), all Plans approved for such Improvements
pursuant to Section 6.2(a) (as may be modified as provided herein), and all
provisions of this Lease. All work performed on the Leased Premises pursuant to
this Lease, or authorized by this Lease, shall be done in a good workmanlike
manner.
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The interior architectural design and appearance and the interior improvements
and finish of each of the structures on the Leased Premises shall not be subject
to the review and approval of Landlord. As noted above at Section 5.1(c),
Landlord may comment on the conference rooms and facilities to be included in
the Conference Facility, which comments are to be considered by Tenant and
MiniMed, but Landlord does not have approval rights over such conference rooms
or facilities.
6.5 Construction Cost.
(a) In General . Tenant shall bear the cost of developing the
Leased Premises and constructing the Improvements, including all fees, except as
expressly provided in the following paragraph.
(b) Mitigation Measures . As noted above at Recital F, MiniMed
(through Tenant or otherwise) will be responsible to pay for and to construct
certain of those mitigation measures (the "Mitigation Measures") applicable to
the development of the Leased Premises, and that Landlord and MiniMed (through
Tenant or otherwise) will share the cost of such mitigation measures; Landlord's
payment for its portion of such mitigation measures will be by way of Rent
credits, which are reflected in the Rent Schedule, as set forth at Exhibit D.
The Parties and MiniMed estimate that the Mitigation Measures will cost
approximately $2,481,000. The Parties and MiniMed agree that MiniMed (through
Tenant or otherwise) will contribute $111,000 toward the cost of the Mitigation
Measures, Landlord will use its best efforts to obtain a governmental grant (the
"Grant") in an amount of at least $1,470,000 to be made available to MiniMed to
be used to pay for the Mitigation Measures, and that Landlord will pay its
contribution of the cost of the Mitigation Measures ("Landlord's Portion")
through rent credits incorporated in the Rent Schedule. Landlord's Portion shall
not exceed $900,000. If the cost of the Mitigation Measures exceeds $2,481,000,
MiniMed's shall be responsible to pay such overage. Landlord reserves the right
to pay to MiniMed (or its designee) the unamortized portion of the Landlord's
Portion allocated to this Lease. In order to exercise such right, Landlord shall
provide Tenant, MiniMed and Tenant's Lender with sixty (60) days prior written
notice of its intention to pay all or a portion of the unamortized portion of
the Landlord's Portion together with Landlord's calculations of the revised Rent
Schedule. Within thirty (30) days after MiniMed's and Tenant's (and its or their
Lender's) receipt of such notice and revised schedule, the Parties, MiniMed and
Lender shall confer for the purpose of agreeing upon the revised Rent Schedule.
Upon such agreement, the Parties shall amend this Lease to incorporate the
amended Rent Schedule, and thereafter Tenant shall pay the "gross" rent as
indicated on the Rent Schedule.
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6.6 Mechanic's, Materialman's, Contractor's, or Subcontractor's Liens.
(a) MiniMed shall provide Landlord with not less than twenty (20)
days' prior written notice of the commencement of any major alterations to the
Improvements and Landlord shall have the right to enter upon the Leased Premises
to post customary notices of non-responsibility with respect thereto. Subject to
Tenant's right to contest as hereinafter provided, at all times during the Term
of this Lease, MiniMed shall keep the Leased Premises, including all Buildings
and Improvements now or hereafter located on the Leased Premises, free and clear
of all liens and claims of liens for labor, services, materials, supplies, or
equipment performed on or furnished to the Leased Premises (other than Leasehold
Mortgages permitted by this Lease). MiniMed shall (i) promptly pay and
discharge, or cause the Leased Premises to be released from, any such lien or
claim of lien, or, (ii) if Tenant decides to contest said lien, MiniMed shall
furnish Landlord such bond as may be required by law to free the Leased Premises
from the effect of such a lien and to secure Landlord against payment of such
lien, or provide Landlord with other assurances with respect thereto which are
satisfactory to Landlord, in its good faith discretion.
(b) Should Tenant fail to pay and discharge, or cause the Leased
Premises to be released from any such lien or claim of lien or to provide a bond
or other assurance as permitted hereunder within thirty (30) days after service
on Tenant by Landlord of a written request to do so, Landlord may pay, adjust,
compromise and discharge any such lien or claim of lien on such terms and in
such manner as Landlord may deem appropriate. In such event, Tenant shall,
following any such payment by Landlord, and after receiving not less than thirty
(30) days' written notice and reasonable evidence of payment, reimburse Landlord
for the full amount so paid by Landlord, including any reasonable attorneys'
fees or other costs expended by Landlord, together with interest thereon at the
Agreed Rate from the date of payment by Landlord to the date of Tenant's
reimbursement of Landlord, and such amount shall constitute Additional Rent and
become a part of Tenant's obligation to pay Rent hereunder.
6.7 Hazardous Materials.
(a) In the event that Tenant discovers the presence of Hazardous
Materials (as defined below in this Section 6.7) on or under the Leased Premises
subsequent to the Commencement Date, Tenant shall, within five (5) days of such
discovery, notify Landlord in writing of such discovery and shall promptly
thereafter provide a reasonably detailed description of the location, extent and
nature of the Hazardous Materials discovered, and if it is determined that the
Hazardous Materials were placed or discharged after the Commencement Date by
persons other than Master Landlord, Landlord or their Representatives, MiniMed's
plan to remediate such contamination. All remediation which is undertaken with
respect to the Leased Premises shall comply with all Governmental Restrictions.
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(b) In the event that any Hazardous Materials are or were
discharged in, on or under the Leased Premises by Master Landlord or Landlord or
any of its Representatives or anyone else acting on behalf of Landlord before or
after the Commencement Date, or anyone else before the Commencement Date, and
such Hazardous Materials are required to be remediated pursuant to applicable
laws or the same has a material and adverse affect upon Tenant's use of or
operation of the Leased Premises or the Improvements, Landlord shall perform or
cause to be performed the necessary clean-up of such Hazardous Materials on or
affecting the Leased Premises or the Improvements at no expense to Tenant, and
Landlord shall defend, indemnify and hold Tenant and MiniMed harmless against
and from all clean up costs in connection therewith.
(c) For purposes of this Lease, the term "Hazardous Materials"
means any chemical, substance, object, condition, material, waste, or controlled
substance which is or may be hazardous to human health or safety or to the
environment, due to its radioactivity, ignitability, corrosiveness, explosivity,
flammability, reactivity, toxicity, infectiousness, or other harmful or
potentially harmful properties or effects, including, without limitation, all
chemicals, substances, materials, or wastes that are now or hereafter may be
listed, defined, or regulated in any manner by any federal, state, or local
government agency or entity, or under any federal, state, or local law,
regulation, ordinance, rule, policy or procedure due to such properties or
effects.
6.8 Ownership Of Improvements. Notwithstanding anything that is or
appears to be to the contrary herein, any and all Improvements erected on the
Leased Premises as permitted by this Lease, as well as any and all alterations
or additions thereto or any other Improvements or fixtures on the Leased
Premises, shall be owned by Tenant until the expiration of the Term or sooner
termination of this Lease. Upon the expiration or sooner termination of this
Lease, all Improvements and all alterations, additions or improvements thereto
that are made to or placed on the Leased Premises by Tenant or any other person
shall be considered part of the real property of the Leased Premises and shall
remain on the Leased Premises and become the property of Landlord, subject to
the provisions for payment, if due, according to Sections 4.5 and 4.6; provided
that Tenant (or its Subtenants, as the case may be) shall retain ownership of
and shall be required to remove furniture, equipment, machinery, trade fixtures
and removable personal property except as may be left on the Leased Premises
with Landlord's prior written approval. Except as otherwise expressly provided
in this Lease, any non-disturbance agreement approved by Landlord, any easement
approved by Landlord, or any written instrument executed by Landlord which
expressly states that Landlord is waiving its rights under this Section 6.8 to
receive such Improvements free and clear of all other claims, said Improvements
shall become
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Landlord's property free and clear of any and all rights to possession and all
claims to or against them by Tenant or any third person or entity, subject to
the provisions for payment, if due, according to Sections 4.5 and 4.6.
6.9 Right of Access. Subject to reasonable procedures regarding safety
established by Tenant, during normal construction hours, representatives of
Landlord shall have the reasonable right of access to the Leased Premises
without charges or fees for the purpose of inspecting the work being performed
in constructing the Improvements; provided, however, that such representatives
shall present and identify themselves at Tenant's construction office, be
accompanied by a representative of Tenant while on the Leased Premises and obey
Tenant's, or its contractor's safety rules and regulations. In addition,
Landlord shall have the right to authorize other public agencies to enter the
Leased Premises, upon the same terms after reasonable prior notice to Tenant,
for the purpose of constructing, reconstructing, maintaining or repairing any
public improvements or public facilities located on the Leased Premises.
Landlord hereby indemnifies and holds Tenant, and its Representatives, and the
Leased Premises, harmless from and against any loss, cost, damage or liability,
including, without limitation, attorneys' fees and disbursements, which results
from the exercise by Landlord, or any party acting under Landlord's authority,
of the rights granted by this Section.
6.10 Governmental Approvals. If requested by Landlord in writing,
MiniMed covenants and agrees to deliver to Landlord conformed copies (and
certified copies of all recorded instruments) of all governmental approvals and
permits obtained by MiniMed for the construction, alteration or reconstruction
of any Improvements upon the Leased Premises in accordance with Section 6.1. In
no event shall MiniMed commence construction of any Improvements pursuant to the
provisions of this Article 6 until such time as MiniMed shall have obtained all
necessary governmental approvals and permits to so construct such Improvements.
ARTICLE 7 - REPAIRS AND MAINTENANCE
7.1 Landlord's Nonresponsibility. During the Term of this Lease,
Landlord shall not be required to maintain or make any repairs or replacements
of any nature or description whatsoever to the Leased Premises or the
Improvements thereon, except as expressly provided elsewhere herein.
7.2 Tenant's Duty to Maintain Premises. Except as expressly otherwise
provided for herein, throughout the Term of this Lease, Tenant shall, at
Tenant's sole cost and expense, maintain or cause to be maintained the Leased
Premises (including the Improvements) and the Improvements now or hereafter
located on the Leased
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Premises in good and clean condition and repair, free of debris, and in
compliance with (i) all Governmental Restrictions and (ii) all applicable rules,
orders, and regulations of any insurance company insuring all or any part of the
Leased Premises or the Improvements thereon or both, and Tenant shall make or
cause to be made whatever repairs and replacements are required by such
enactments or provisions or future enactments or provisions.
7.3 Damage or Destruction.
(a) In the event any of the Improvements are damaged by an insured
casualty, Tenant promptly shall remove the debris resulting from such event, and
within a reasonable time thereafter shall apply insurance proceeds to the repair
or restoration of the Improvements so damaged to their condition immediately
prior to such casualty, such repair or restoration to be performed in accordance
with all provisions of this Lease.
(b) In the event any of the Improvements are damaged by an
uninsured casualty, Tenant promptly shall remove the debris resulting from such
event, and within a reasonable time thereafter shall either (i) repair or
restore the Improvements so damaged, such repair or restoration to be performed
in accordance with all provisions of this Lease, or (ii) erect other
Improvements in such location, provided all provisions of this Lease are
complied with, or (iii) demolish the damaged portion of such Improvements,
restore any remaining Improvements to an architectural whole, remove all
rubbish, and pave or plant grass and otherwise restore the area to a neat,
orderly, sanitary and attractive condition. Tenant shall have the option to
choose among the aforesaid alternatives, but Tenant shall be obligated to
perform one of such alternatives. Tenant shall give notice to Landlord within a
reasonable time of which alternative it elects. Nothing contained in subsections
(a) or (b) shall be construed as permitting the abatement or reduction of Rent,
or the termination of this Lease.
(c) Notwithstanding anything to the contrary contained in this
Lease, if (i) there is damage to or destruction of the Improvements on the
Leased Premises during the last five (5) years of the Term (including all
exercised options) and the cost of repairing said damage or destruction exceeds
the cost of demolishing and removing the remaining Improvements on the Leased
Premises, or (ii) there is damage to or destruction of the Improvements on the
Leased Premises which (1) arises from a cause which is not required to be
insured against under any provision of this Lease, or (2) arises from a cause
which is in fact insured against in compliance with the terms of this Lease, but
for which the recoverable proceeds of such insurance are less than 90% of the
cost to repair said damage or destruction, and (3) the cost to Tenant (which is
not covered by insurance proceeds) of repairing said damage or destruction
exceeds the cost of demolishing and removing the remaining Improvements on the
Leased
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Premises, or (iii) there is damage to or destruction of the Improvements on the
Leased Premises and the Governmental Restrictions then in effect with respect to
the Leased Premises prohibit the construction of economically viable replacement
Improvements with respect to a use which Tenant either has the right to engage
in under this Lease or which Tenant desires to engage in and Landlord will
permit to be engaged in, then Tenant shall have the option to terminate this
Lease, subject to Tenant's satisfaction of all of the following requirements:
(A) Tenant shall, within ninety (90) days after the event giving rise to such
right to terminate, give Landlord written notice of its election to terminate
("Notice of Election to Terminate"); and (B) Tenant shall, at the election of
Landlord (which election shall be communicated in writing to Tenant ("Demolition
Notice") within thirty (30) days of Landlord's receipt of the Notice of Election
to Terminate), raze and remove the damaged or destroyed Improvements and any
other Improvements on the Leased Premises that Landlord may designate in the
Demolition Notice, and shall complete said demolition and removal and shall
vacate the Improvements on the Leased Premises within ninety (90) days of
Landlord's delivery of the Demolition Notice(which vacation date shall fix the
termination date of this Lease); and (c) Tenant shall comply with all provisions
of Article 15 of this Lease consistent with this Section 7.3 prior to or
concurrent with Tenant's vacation of the Improvements on the Leased Premises. If
Tenant fails to satisfy the requirements set forth in (b) or (c) above, the
failure to meet such conditions shall not invalidate the termination of this
Lease, although, in that event and notwithstanding anything else in this Lease
that may be or appear to be to the contrary, Tenant shall remain liable to
Landlord in damages for such breach. Any and all property damage insurance
proceeds (exclusive of any proceeds applicable to Tenant's trade fixtures,
equipment or personal property that would be retained by Tenant at the end of
the Term) paid to Tenant as a result of the damage or destruction giving rise to
the termination, shall be distributed to the Parties, and any Lender, as their
interest are determined.
(d) Except as expressly provided in this Lease, no deprivation,
impairment, or limitation of use resulting from any damage or destruction or
event or work contemplated by this Section shall entitle Tenant to any offset,
abatement, or reduction in Rent, nor to any termination or extension of the Term
hereof.
ARTICLE 8 - LEASEHOLD FINANCING
8.1 Conditions To Obtaining Leasehold Mortgage.
(a) Notwithstanding anything which is or appears to be to the
contrary in this Lease, Tenant shall not encumber the estate created by this
Lease, except as expressly provided in this Article 8.
(b) Tenant shall have the right, without Landlord's consent, to
encumber
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Tenant's estate created by this Lease with any Leasehold Mortgage; provided,
that such Leasehold Mortgage shall meet each of the following terms, conditions
and requirements:
(i) The Leasehold Mortgage shall contain provisions requiring
that copies of all notices of default under said Leasehold Mortgage must be sent
to Landlord;
(ii) The Leasehold Mortgage shall be subordinate to the Master
Landlord's fee interest and Landlord's leasehold interest in the Leased Premises
and the Landlord's interest under this Lease, and shall not cover any interest
in real property other than the leasehold estate created by this Lease and any
easement, to the extent it benefits the Leased Premises; and
(iii) The Leasehold Mortgage shall not permit or authorize, or
be construed to permit or authorize, any Lender to devote the Leased Premises to
any uses, or to construct any Improvements thereon, other than those uses and
Improvements provided for and authorized by this Lease.
8.2 Lender's Rights. During the continuance of any Leasehold Mortgage
permitted by this Lease, and until such time as the lien of any Leasehold
Mortgage has been extinguished (which provisions shall be for the benefit of the
Leasehold Mortgagee):
(a) Landlord shall not agree to any mutual termination nor accept
any surrender or termination of this Lease, nor shall Landlord consent to any
amendment or modification of this Lease without the prior written consent of
Lender; provided, that the provisions of this subsection shall not apply to any
cancellation or surrender occurring without Landlord's consent pursuant to the
provisions of the United States Bankruptcy Code, 11 U.S.C. 101, et seq.;
(b) Following Lender's acquisition of Tenant's interest in this
Lease pursuant to a foreclosure or an assignment in lieu of foreclosure, the
Lender shall be entitled to assign its interest in this Lease without Landlord's
prior consent, subject to compliance with the terms and conditions of this
Article 8. All subsequent Transfers by the Transferee of Lender shall comply
with the provisions of this Lease, including all restrictions on Transfer set
forth in Article 9 hereof; and
(c) If, in connection with securing by Tenant of any Leasehold
Mortgage, the affected Lender requests an amendment with respect to the Lender
protection rights set forth in this Article 8, Landlord agrees not to
unreasonably withhold its consent to any such amendment; provided, that Landlord
shall not be required to consent to such
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an amendment if it would, in Landlord's reasonable determination, materially
impair any of Landlord's rights or materially increase any of Landlord's
obligations under this Lease.
8.3 Default Notice. Landlord, upon providing Tenant with any "Notice of
Default" (as defined below) under this Lease, shall, at the same time, provide a
copy of such notice to every Lender who has given written notice to Landlord of
its interest in the leasehold estate. From and after such notice has been given
to a Lender, such Lender shall have the same period for remedying the Default
complained of as the cure period provided to Tenant pursuant to Section 14.2,
plus the additional period provided to such Lender as specified below. Landlord
shall accept performance by or at the instigation of such Lender as if the same
had been done by Tenant. Landlord acknowledges that Landlord has received
written notice that ING (U.S.) Capital LLC is a Lender holding a first priority
Leasehold Mortgage encumbering Tenant's interest in the leasehold estate, a copy
of which Leasehold Mortgage (containing such Lender's address for notice
purposes) has been provided to Landlord.
8.4 Lender Cure Rights. Notwithstanding anything to the contrary
contained in this Lease, Landlord shall have no right to terminate this Lease on
account of an Uncured Default of Tenant unless, following expiration of Tenant's
applicable cure period, Landlord first provides each Lender not less than thirty
(30) days notice of its intent to terminate, if Tenant's Default can be cured by
the payment of money (a "Monetary Default"), and not less than sixty (60) days
notice of its intent to terminate, if Tenant's Default is of any other type (a
"Non-monetary Default"), and Lender fails to cure such Monetary Default within
thirty (30) days after receipt of such notice or cure or, in good faith and with
reasonable diligence and continuity, commence to cure such Non-monetary Default
within said sixty (60) day period. If such Non-monetary Default cannot
reasonably be cured within said sixty (60) day period (or is such that
possession of the Leased Premises is necessary for Lender to obtain possession
and to remedy the Default), the date for termination shall be extended for such
period of time as may be reasonably required to remedy such Default, if (a)
Lender shall have fully cured any default in the payment of any monetary
obligations of Tenant under this Lease within thirty (30) days after its receipt
of notice of Landlord's intent to terminate, and shall continue to pay currently
such monetary obligations as and when the same are due, and (b) Lender continues
its good faith and diligent efforts to remedy such nonmonetary Default
(including its acquisition of possession of the Leased Premises if necessary to
the cure of such Default). Nothing in this Section 8.4 shall be construed to
require a Lender to continue any foreclosure proceeding it may have commenced
against Tenant after all Defaults have been cured by Lender, and if such
Defaults shall be cured and the Lender shall discontinue such foreclosure
proceedings, this Lease shall continue in full force and effect as if Tenant had
not defaulted under this Lease. Nothing herein shall require a Lender who has
acquired Tenant's leasehold interest
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and has taken possession of the Leased Premises to cure any Non-monetary Default
which is not capable of being cured by such Lender, and such Default shall be
deemed to be waived following Lender's acquisition of Tenant's leasehold
interest and such Lender's timely cure of all Monetary Defaults and all
Non-monetary Defaults which are capable of cure by such Lender in accordance
with the foregoing provisions.
8.5 Obligations of Lender and Purchaser.
(a) No Lender, acting in such capacity, shall be deemed to be an
assignee or transferee of this Lease or of the leasehold estate hereby created
so as to require such Lender, in that capacity, to assume the performance of any
of the terms, covenants or conditions on the part of the Tenant to be performed
hereunder, unless and until it acquires the interest of Tenant hereunder. Upon
acquiring Tenant's leasehold, Lender may, without the consent of Landlord, sell
and assign the leasehold estate on such terms and to such persons and entities
as are acceptable to such Lender and thereafter be relieved of all obligations
of Tenant first arising under this Lease after the date of such sale or
assignment; provided, that such assignee of the Lender shall have delivered to
Landlord an assumption agreement as provided by Section 9.2(iii) of this Lease.
Any such assignee of Lender or any other assignee of this Lease or of the
leasehold estate created hereby by a conveyance in lieu of foreclosure or any
purchaser at any foreclosure sale of this Lease or of the leasehold estate
hereby created (other than the Lender), shall be deemed to be a Transferee of
this Lease, and shall be deemed to have agreed to perform all of the terms,
covenants and conditions on the part of the Tenant to be performed hereunder
from and after the date of such purchase and assignment and, from and after such
date, shall be subject to all the terms of this Lease, including all
restrictions on further Transfer set forth in Article 9; provided, however,
nothing herein shall require an assignee or transferee who has acquired Tenant's
leasehold interest and has taken possession of the Leased Premises to cure any
Non-monetary Default which is not capable of being cured by such assignee or
transferee, and such Default shall be deemed to be waived following such
assignee's or transferee's acquisition of Tenant's leasehold interest.
(b) Notwithstanding any other provision of this Lease, any bona
fide sale of this Lease and of the leasehold estate hereby created in any
proceedings for the foreclosure of any Leasehold Mortgage or a bona fide
assignment or transfer of this Lease and of the leasehold estate hereby created
in lieu of foreclosure of a Leasehold Mortgage shall be deemed to be a permitted
sale, transfer or assignment of this Lease and of the leasehold estate hereby
created so long as such Transfer has not been undertaken for the purpose or with
the intent of circumventing any otherwise applicable restrictions upon Transfers
of Tenant's interest under this Lease.
8.6 New Lease. Except as expressly provided in the last sentence of
this
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Section, in the event of a termination of this Lease for any reason including,
without limitation, by reason of any Default or the rejection or disaffirmance
of this Lease pursuant to bankruptcy law or other law affecting creditors
rights, Landlord shall give prompt notice thereof to any Lenders who have
requested notice from Landlord in writing and furnished their names and
addresses to Landlord. Landlord shall, on written request of any such Lender,
made at any time within thirty (30) days after the giving of such notice by
Landlord, enter into a new lease of the Leased Premises with such Lender within
twenty (20) days after the receipt of such request, which new lease shall be
effective as of the date of such termination of this Lease and shall be for the
remainder of the Term of this Lease, at the rent provided for herein, and upon
the same terms, covenants, conditions and agreements as are herein contained;
provided that such Lender shall: (i) pay to Landlord at the time of the
execution and delivery of said new lease any and all sums for Rent payable by
Tenant hereunder to and including the date thereof, less the net amount (i.e.,
net of all reasonable expenses) of all sums received by Landlord from any
Subtenants in occupancy of any part or parts of the Leased Premises and/or
Improvements up to the date of commencement of such new lease; (ii) pay all
reasonable costs resulting from the preparation and execution of such new lease;
and (iii) on or prior to the execution and delivery of said new lease, agree in
writing that promptly following the delivery of such new lease, such Lender will
perform or cause to be performed all of the other covenants and agreements
herein contained on Tenant's part to be performed to the extent that Tenant
shall have failed to perform the same to the date of delivery of such new lease,
except where such failure to perform by Tenant is, by its nature, a Non-monetary
Default not susceptible of cure by such Lender. Nothing herein contained shall
be deemed to impose any obligation on the part of Landlord to deliver physical
possession of the Leased Premises to such Lender unless Landlord at the time of
the execution and delivery of such new lease shall have obtained physical
possession thereof. Notwithstanding anything contained in this Section 8.6 to
the contrary, Lender's leasehold interest in the Leased Premises pursuant to the
new lease shall be subject to any claims by Tenant that it has a right to
possession of the Leased Premises.
8.7 Multiple Lenders.
(a) If more than one Lender shall make written request upon
Landlord for a new lease in accordance with the provisions of Section 8.6 above,
then such new lease shall be entered into pursuant to the request of the Lender
whose Leasehold Mortgage shall be junior in lien provided: (i) all Lenders
senior in lien shall have been paid all installments of interest and
amortization of principal then due and owing to such Lenders plus all expenses,
including reasonable attorneys' fees, incurred by such senior Lenders in
connection with the termination of this Lease and with the execution and
delivery of such new lease; (ii) the new lessee will assume, in writing, all of
the covenants, agreements and obligations on the part of the mortgagor under
such senior
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Leasehold Mortgages to be kept, observed and performed on the part of such
mortgagor; (iii) such new lease shall contain all of the same provisions and
rights in favor of and for the benefit of Lenders holding leasehold mortgages
thereon as are contained in this Lease, including but not limited to the right
to obtain a new lease in the event of the termination of said lease, and the
right to receive notices of default, and to cure the same, in the same manner as
provided in this Lease; and (iv) the senior Lenders shall have received from the
respective title insurance companies insuring the respective senior Leasehold
Mortgages assurances satisfactory to such senior Lenders that said senior
Leasehold Mortgages and any assignment of rents and other security instruments
executed in connection therewith will continue, with respect to such new lease,
in the same manner and order of priority of lien as was in existence with
respect to this Lease; and thereupon the leasehold estate of the new lessee
created by such new lease shall be subject to the lien of the senior Leasehold
Mortgages in the same manner and order of priority of lien as was in existence
with respect to this Lease. In the event not all of the foregoing provisos shall
have been satisfied by or with respect to any such junior Lender, the Lender
immediately senior in lien to such junior Lender shall have paramount rights to
the benefits set forth in Section 8.6 above, subject nevertheless to the
provisions hereof respecting the senior Lenders, if any. In the event of any
dispute as to the respective senior and junior priorities of any such Leasehold
Mortgages, the certification of such priorities by a title company doing
business in California, satisfactory to Landlord, shall be conclusively binding
on all parties concerned. Should there be a dispute among Lenders as to
compliance with the foregoing provisions, Landlord may rely on the affidavit of
the most senior Lender as to compliance by any junior Lender. Landlord's
obligation to enter into a new lease with any junior Lender shall be subject to
the receipt by Landlord of evidence reasonably satisfactory to it that the
conditions of (i), (ii) and (iv) above have been satisfied with respect to each
senior Lender.
(b) The right of a senior Lender under Section 8.6 above, to
request a new lease may, notwithstanding any limitation of time set forth above
in Section 8.6 or in this Section 8.7, be exercised by the senior Lender within
twenty (20) days following the failure of the junior Lender to have exercised
such right within the time provided by Section 8.6.
(c) If a junior Lender shall fail or refuse to exercise the rights
set forth in this Section, said senior Lenders, in the inverse order of the
seniority of their respective liens, shall have the right to exercise such
rights subject to the provisions of this Lease.
8.8 New Lease Priority.
(a) It is the intent of the Parties that any new lease made
pursuant to Section 8.6 shall have the same priority with respect to any lien,
charge or encumbrance on the
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fee of the Leased Premises as did this Lease and that the Tenant under such new
lease shall have the same right, title and interest in and to the Leased
Premises as Tenant had under this Lease.
(b) The provisions of this Section 8.8 and Sections 8.6 and 8.7
shall survive the termination, rejection or disaffirmance of this Lease and
shall continue in full force and effect thereafter to the same extent as if
Sections 8.6, 8.7 and this Section 8.8 were a separate and independent contract
made by Landlord, Tenant and such Lender.
8.9 Liability of New Tenant. The Lender which becomes the tenant under
any such new lease made pursuant to Sections 8.6 or 8.7 shall be liable to
perform the obligations imposed on the tenant by such new lease as well as those
arising under Sections 8.6 or 8.7 to the same extent as a Lender which acquires
Tenant's estate under this Lease by the foreclosure thereof.
8.10 Subleases and Rents. After the termination of this Lease and
during the period thereafter during which any Lender is entitled to enter into a
new lease of the Leased Premises, Landlord will not voluntarily terminate any
Sublease or the rights of the Subtenant thereunder (provided such Sublease is a
permissible Sublease under this Lease), unless such Subtenant is in default
under such Sublease and has failed to cure same within the time provided under
such Sublease. During such periods Landlord shall receive all rent and other
payments due from Subtenants (subject to Landlord's right to not accept such
rent and other payments as set forth below), including Subtenants whose
attornment it shall have agreed to accept, as agent of such Lender and shall
deposit such rents and payments in a separate and segregated account, but may
withdraw and pay to Landlord such sums as are required or were required to be
paid to Landlord under this Lease, at the time and in the amounts due hereunder,
and may withdraw and expend such amounts as are necessary for the maintenance,
operation, and management of the Leased Premises in accordance with the
requirements of this Lease; and, upon the execution and delivery of such new
lease, Landlord shall account to the lessee under the said new lease for the
balance, if any (after application as aforesaid), of the rent and other payments
made under said Subleases. The collection of rent by Landlord acting as an agent
pursuant to this Section shall not be deemed an acceptance by Landlord for its
own account of the attornment of any Subtenant unless Landlord shall have agreed
in writing with such Subtenant that its tenancy shall be continued following the
expiration of any period during which a Lender may be granted a new lease, in
which case such attornment shall take place upon such expiration but not before;
provided, however, in the event Landlord determines that it cannot accept rent
payments from a Subtenant without risk of being deemed to have accepted such
Subtenant's attornment (and Landlord has not previously agreed to recognize such
Subtenant in the event of a Default under this Lease by Tenant), Landlord shall
have the right to direct such Subtenant to pay such
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rents directly to Lender. If all Lenders fail to exercise their rights to enter
into a new lease or fail to timely execute such new lease, all rents collected
by Landlord on behalf of such Lenders pursuant to this Section shall become
Landlord's property free and clear of any claim by such Lenders and such Lenders
shall have no further rights with respect thereto.
8.11 Legal Proceedings. Landlord shall give each Lender who has given
written notice of its interest in the leasehold estate to Landlord prompt notice
of any legal proceedings between Landlord and Tenant involving obligations under
this Lease. Each said Lender shall have the right to intervene in any such
proceeding to protect its interest and be made a party thereto, and the parties
hereto do hereby consent to such intervention. In the event that any such Lender
shall not elect to intervene or become a party to any such proceedings, Landlord
shall give such Lender notice of, and a copy of, any award or decision made in
any such proceedings, which shall be binding on all Lenders not intervening
after receipt of notice of the legal proceeding.
8.12 Encumbrance of Landlord's Leasehold Interest. Tenant acknowledges
that Landlord may encumber, pledge or otherwise hypothecate its leasehold
interest in the Leased Premises; provided that any such encumbrance holder will
enter into a commercially reasonable non-disturbance and attornment agreement
with Tenant. No such trustee or beneficiary under a deed of trust, or holder of
the rights and interest of Landlord hereunder ("Landlord's Lender") shall be or
become liable to Tenant solely as a result of an assignment of this Lease as
security.
Landlord's Lender shall not, in the exercise of any of its rights
arising or which may arise out of such encumbrance, or any instrument modifying
or amending the same or entered into in substitution or replacement thereof,
disturb or deprive Tenant in or of its possession or its right to possession of
the Leased Premises, or of any part thereof under this Lease, or any right or
privilege created for or inuring to the benefit of Tenant under this Lease,
provided this Lease is then in full force and effect.
If a default has not occurred under any such encumbrance, and if this
Lease shall not have been terminated, then, and in such event, Tenant shall not
be made a party in any action or proceeding to foreclose said encumbrance, nor
shall Tenant be evicted or removed or its possession or right of possession be
disturbed or in any manner interfered with, and this Lease shall continue in
full force and effect as a direct lease from the purchaser in foreclosure or
transferee in lieu thereof.
Any such encumbrance shall provide that Landlord's Lender, upon serving
the Landlord with any notice under such encumbrance will simultaneously serve a
copy of such notice upon the Tenant.
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Landlord shall, upon request, execute, acknowledge and deliver to
Tenant an agreement in form satisfactory to Landlord and Tenant, between
Landlord, Tenant and Landlord's Lender, agreeing to all of the provisions of
this Section.
Tenant shall give notice in writing of the existence and nature of any
default of Landlord hereunder to Landlord's Lender; provided that Landlord's
Lender has given Tenant a written request for such notice including the name and
address of Landlord's Lender. Tenant shall not terminate this Lease if
Landlord's Lender has cured such default within thirty (30) days after receipt
of such notice. Tenant agrees that Landlord's Lender may, in the event of a
default by Landlord in the performance of any obligations of Landlord which are
contained in any instrument of hypothecation or evidence of indebtedness, the
repayment of which is secured by Landlord's interest hereunder, elect to cause
Landlord's leasehold estate in and to all or a portion of the Leased Premises to
be sold, to hold foreclosure proceedings thereon, or to accept from Landlord an
assignment, transfer or other conveyance of those interests which are thus
hypothecated, all without prejudice to Tenant.
8.13 Notices. Notices from Landlord to any Lender shall be mailed to
the address of the Lender set forth in the Leasehold Mortgage furnished to
Landlord or at such other address as may have been furnished to Landlord by such
Lender. All notices from the Lender to Landlord shall be mailed to the address
designated pursuant to the provisions of Section 18.6 or such other address as
Landlord may designate in writing from time to time. Such notices shall be given
in the manner described in Section 18.6 and shall in all respects be governed by
the provisions of such Section.
ARTICLE 9 - ASSIGNMENT AND TRANSFER
9.1 Assignment of Landlord's Interest in Lease or the Leased Premises.
Landlord may Transfer the Leased Premises, this Lease, all or a portion of its
interest thereunder, and/or all or a portion of the payments that are payable to
it by Tenant pursuant to this Lease, subject to the tenancy under and the terms
and conditions of this Lease. Tenant hereby consents and agrees to any such
Transfer which Landlord considers necessary or proper, regardless of the reason
or reasons for which Landlord makes such Transfer and regardless of the entity
that is the Transferee thereunder; provided, however, that such transferee shall
not violate the JPA or any other approvals necessary for Tenant to construct and
operate the Improvements pursuant to the terms of this Lease or otherwise limit
or restrict Tenant's rights granted under this Lease or increase any of Tenant's
obligations under this Lease. In the event Landlord Transfers the Leased
Premises or this Lease to Master Landlord, to an entity controlled by Master
Landlord, or to an "Auxiliary Organization" (as such term is defined at
California Education Code Section 89900) of Master Landlord, Landlord shall be
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released of any liability under this Lease accruing after the Commencement Date
of such Transfer, provided, however, as a condition to such release, such
Transferee must assume in writing all of Landlord's obligations under this Lease
accruing as of the Commencement Date of such Transfer, and a copy of such
written assumption agreement is delivered to Tenant. If, in connection with
securing by Landlord of any financing encumbering its interest in the Leased
Premises, the affected lender requests an amendment to this Lease, Tenant agrees
not to unreasonably withhold its consent to any such amendment; provided, that
Tenant shall not be required to consent to such an amendment if it would, in
Tenant's reasonable determination, impair any of Tenant's rights or increase any
of Tenant's obligations under this Lease or the JPA.
9.2 Transfer of the Lease, the Leased Premises or the Improvements to
be Constructed Thereon.
(a) (i) Tenant shall not Transfer all or any part of its interest
in or rights under this Lease and/or any part of its interest in or rights to
the Leased Premises and/or any of the Improvements constructed thereon, without
the prior written consent of Landlord, which consent will not be unreasonably
withheld or delayed. Tenant acknowledges that prior to its approval of a
Transfer, Landlord must obtain the consent of Master Landlord, which consent
shall not be unreasonably withheld, conditioned or delayed. If Tenant is MiniMed
or any Affiliate of MiniMed and the stock of Tenant is not publicly traded, the
transfer of more than twenty percent (20%) of Tenant's stock shall be deemed to
be a Transfer requiring Landlord's consent. If the stock of Tenant is publicly
traded, any transfer of Tenant's stock or the sale of all or substantially all
of Tenant's assets shall not be a Transfer requiring Landlord's consent.
Notwithstanding the foregoing, the Transfer to MiniMed or any Affiliate of
MiniMed by Tenant shall not require any prior consent of Landlord or Master
Landlord, upon which Transfer, Tenant shall be released from any and all
liabilities arising under this Lease from and after such Transfer.
(ii) Landlord shall have the right to consider the following
factors (among others Landlord reasonably determines are necessary to consider
in evaluating the proposed Transferee) in determining whether or not to consent
to any proposed Transfer of Tenant's rights under or interest in this Lease, the
Leased Premises, or the Improvements constructed thereon: (1) The financial
condition of the proposed Transferee and its ability to perform all of the
financial and other obligations of Tenant under this Lease, (2) the Transferee's
business reputation, (3) the Transferee's ability to demonstrate its capability
to manage or provide for the management of the Improvements located on the
Leased Premises, (4) whether the proposed Transferee will provide and/or share
services and facilities needed for the students, faculty and employees of the
University, and (5) whether the proposed Transferee will provide opportunities
for student employment, materials and education, and enhance the
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attractiveness of the University campus, encourage students, faculty and
visitors to make increased use of present University facilities, all as more
particularly set forth at Article 17 below. Notwithstanding the foregoing,
Landlord expressly consents to any Transfer by Tenant of all or any part of its
interest in or rights under this Lease and/or any part of its interest in or
rights to the Leased Premises and/or any of the Improvements constructed thereon
to (x) a Sublessee in connection with an exercise by said Sublessee of its
rights to acquire the leasehold pursuant to its Sublease, whereupon Tenant shall
be released from any and all liabilities under this Lease arising from and after
such Transfer, or (y) an entity ("Lender Entity") affiliated with any bank,
trust or financial institution as may be required in connection with a
"synthetic lease" financing, and the Transfer back by the Lender Entity to
MiniMed or an Affiliate of MiniMed in accordance with the terms and conditions
of the "synthetic lease" financing documents, and upon such Transfer back the
Lender Entity shall be released from any and all liabilities arising under this
Lease from and after such Transfer.
(iii) Upon any approved or permitted Transfer of this Lease or
the Leased Premises (other than for security purposes), said Transferee shall
expressly assume in writing liability for all of Tenant's obligations accruing
under this Lease after the date of such Transfer. Upon any Transfer prior to
completion of construction of the Improvements (including a Transfer to an
Affiliate) Tenant shall not be released of its obligations under this Lease.
Upon any Transfer after completion of construction of the Improvements
(including a Transfer to an Affiliate) Tenant shall not be released of its
obligations under this Lease unless either (A) pursuant to the process described
in subparagraph (ii) immediately above, Tenant has demonstrated to Landlord's
reasonable satisfaction that Transferee's net worth at the time of the Transfer
is equal to or greater than the net worth of MiniMed Inc. as of the Commencement
Date (adjusted to correspond to any changes in the CPI since the Commencement
Date), or (B) MiniMed Inc. has guaranteed Tenant's obligations under this Lease.
If Transferee's net worth satisfies the foregoing test, or if MiniMed has
delivered (or maintained) its guarantee of this Lease, then Tenant (as well as
former Tenants still liable hereunder) shall be released of all liability under
this Lease accruing after the date of such Transfer.
(iv) At any time Tenant desires to effect a Transfer which
requires Landlord's consent pursuant to clause (ii) or (iii) above, Tenant shall
request consent from Landlord in writing and shall submit to Landlord in
connection with such request all proposed agreements and documents
(collectively, the "Transfer Documents") memorializing, facilitating and/or
evidencing such proposed Transfer, as well as all other information Tenant
reasonably believes is necessary for Landlord to properly evaluate the proposed
Transferee pursuant to the criteria set forth in Section 9.2(a)(ii) and, if
applicable, Section 9.2(a)(iii) above. Landlord agrees to advise Tenant in
writing of its decision on Tenant's request for consent to such Transfer, as
promptly as
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possible, and, in any event, not later than thirty (30) days after Landlord
receives all of the items required by the preceding sentence. If such request is
denied, Landlord shall state the reasons for such denial in its notice of denial
of Tenant's request. If Landlord fails to respond to Tenant's request within
thirty (30) days after its receipt of all of the items required above, Tenant's
request shall be deemed disapproved. Upon a deemed disapproval, Tenant may
deliver a notice to Landlord which states that there has been a deemed
disapproval, requesting that Landlord consent to the proposed Transfer, stating
that Landlord must consent to or deny the proposed Transfer within thirty (30)
days after Landlord's receipt of this notice, and that failure by Landlord to
either consent to or deny such Transfer within such 30 day period will result in
deemed consent. If Landlord fails to consent to or deny the proposed Transfer
within such second thirty (30) day period, the Transfer shall then be deemed
approved by Landlord.
(b) Notwithstanding anything to the contrary in this Lease, and
provided that Tenant is not requesting that it be released from its obligations
hereunder, Landlord agrees that it shall have no right to withhold consent to
any Transfer to an Affiliate of Tenant, so long as such Transferee is in
compliance with the requirements of Article 17, Interrelationship between
University and Leased Premises.
9.3 Transfer of Tenant's Interest in Lease and Tenant's Ownership .
The restrictions on Transfer contained in this Article 9 shall be
binding on any successors, heirs or permitted Transferees of Tenant. The
provisions of this Article 9 shall apply to each successive Transfer and
Transferee in the same manner as initially applicable to Tenant under the terms
set forth herein.
9.4 Subleases.
(a) Tenant shall be entitled to enter into Subleases of the Leased
Premises with Landlord's consent, which consent shall not be unreasonably
withheld if such Subleases are in conformity with Article 17 below. If Tenant
requests such consent in writing, Landlord shall have thirty (30) days within
which to withhold consent (or sixty (60) days in the event the Sublease relates
to a leasable area of 100,000 square feet or more), in which case Landlord shall
provide written notice thereof to Tenant, and state with specificity (i) the
reasons for such denial and (ii) the changes to any such Sublease which would be
necessary in order for Landlord to grant such consent. In the event Landlord
fails to deliver written notice to Tenant withholding consent within such thirty
(30) day (or where applicable, sixty (60) day) period, then Landlord shall be
deemed to have consented to such Sublease, and Tenant shall be entitled to enter
into such Sublease.
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(b) Each Sublease shall explicitly provide that it is subject and
subordinate to the provisions of this Lease.
(c) With respect to each Sublease, Tenant agrees to provide
Landlord with a written notice at least thirty (30) days prior to the effective
date of the Sublease (i) setting forth the name of such Subtenant and the use of
the demised premises by such Subtenant which shall be consistent with the
Allowed Uses, (ii) certifying that the term of such Sublease will not exceed the
Term of this Lease, (iii) setting forth with specificity the ways in which such
Subtenant will comply with Article 17 and further the educational mission of the
University, and (iv) providing reasonable financial information for such
Sublessee. Following Landlord's receipt of such notice, Landlord agrees to the
non-disturbance and attornment provisions set forth below with respect to any
Sublease for more than 5000 square feet of the leasable area within the
Improvements, which shall be automatic and self-operative without the necessity
of any further agreement between Landlord and the applicable Subtenant. In the
alternative, Landlord agrees to enter into an attornment agreement with all
Subtenants subleasing more than 5000 square feet of the leasable area within the
Improvements incorporating the following provisions:
(1) Commencing on the date that Subtenant enters into a
Sublease with Tenant and continuing thereafter for so long as Subtenant's Lease
is in full force and effect and Subtenant is not in default in payment of rent
or in the performance of any other obligation required under Subtenant's Lease,
Landlord agrees that, notwithstanding a termination of this Lease because of
Tenant's default hereunder, Subtenant's rights and privileges under Subtenant's
Sublease, or any extensions or renewals thereof provided for in Subtenant's
Lease, shall not be diminished or interfered with by Landlord, and Subtenant's
occupancy of its subleased premises shall not be disturbed by Landlord during
the term of Subtenant's Sublease and any extensions or renewals thereof.
(2) Upon the cancellation or termination, for any reason
whatsoever, of this Lease, or the surrender thereof, whether voluntary,
involuntary or by operation of law, prior to the expiration date of Subtenant's
Sublease, including any extensions and renewals of Subtenant's Sublease provided
for therein (in any event not to exceed the present termination date of this
Lease), Landlord may, at its option and without the execution of further
instruments by Landlord or Subtenant, succeed to the interest of Tenant under
Subtenant's Sublease and upon such election by Landlord Subtenant shall be bound
to Landlord under all of the terms of Subtenant's Sublease for the balance of
the term thereof, including any extensions or renewals thereof provided for in
Subtenant's Lease, with the same force and effect as if Subtenant's Lease was
originally entered into directly by Landlord and Subtenant, and Subtenant hereby
agrees to attorn to Landlord, as its landlord, such attornment to be effective
and self-
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operative immediately upon Landlord succeeding to the interest of Tenant under
Subtenant's Sublease. The rights and obligations of Subtenant and Landlord
respectively, upon such attornment shall, to the extent of the then remaining
balance of the term of Subtenant's Sublease, including any renewals or
extensions thereof provided for in Subtenant's Sublease, be the same as now set
forth in Subtenant's Sublease; provided, however, that Landlord shall not, in
any case or under any event, be:
(A) Liable for any act or omission of the Tenant under
Subtenant's Lease, or for any obligations first arising or attributable to any
act or event occurring prior to Landlord's succession to the interest of Tenant
under Subtenant's Sublease;
(B) Subject to any offsets or defenses which Subtenant
might have against Tenant under Subtenant's Sublease;
(C) Charged with or required to recognize payment of any
rent, additional rent or other lease charges which Subtenant may have paid to
Tenant under Subtenant's Sublease which is applicable to any month other than
the current month in which the Landlord succeeds to the interest of Tenant;
(D) Liable for (x) the refund of any security deposits, or
payments of estimated taxes, assessments, common area maintenance fees,
insurance or similar payments, except to the extent Landlord has actually
received such monies from Tenant, or (y) expending funds for the repair of any
damage to or destruction of the subleased premises which is in excess of any
available insurance or condemnation proceeds, as applicable;
(E) Bound by any waiver or forbearance by Tenant or bound
by any amendment or modification of Subtenant's Sublease made without Landlord's
prior written consent;
(F) Bound by any warranties or indemnities given or
required to be given by Tenant to Subtenant under the terms of Subtenant's
Sublease;
(G) Liable for constructing or causing the construction of
any improvements within the subleased premises or for funding any obligation of
Tenant to Subtenant for payment or reimbursement of any expenses incurred by
Subtenant in connection with construction of such improvements; or
(H) Liable for any act or omission of any successor or
assign following Landlord's transfer of its interest under Subtenant's Sublease
and, following such transfer, Landlord shall be relieved of and released from
any further obligations or liability under Subtenant's Sublease.
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As of the Commencement Date, Tenant has entered into a Sublease
with MiniMed Development Corp., a Delaware corporation, as Subtenant thereunder
and Landlord consents to such Sublease and acknowledges and agrees it has been
provided all information required pursuant to Section 9.4(c) hereof and such
information is satisfactory in all respects to Landlord.
(d) Upon Landlord's written request, Tenant shall deliver to
Landlord a summary of any sublease setting forth the primary terms and
conditions (other than rent) of such sublease.
9.5 Assignment for Financing Purposes. If Tenant's assignment or other
transfer of this Lease or Tenant's leasehold interest hereunder is to effect an
assignment and leaseback for financing purposes, or a synthetic lease
transaction, then Tenant may assign or otherwise Transfer this Lease or its
interest hereunder to the proposed Lender/tenant upon a showing to Landlord that
(i) such assignment is for financing purposes only, (ii) Tenant will continue to
enjoy the right to exclusively possess, and will be the end-user of, the Leased
Premises, and (iii) such assignment does not affect the validity or amount of a
guarantee by MiniMed, if any, of Tenant's obligations under this Lease. Tenant
shall furnish to Landlord written notice of the proposed assignment of this
Lease at least sixty (60) days prior to such assignment together with such
information as is reasonably required to show that the proposed assignment
satisfies the conditions set forth at clauses (i), (ii) and (iii) immediately
above. In addition, if the proposed assignment satisfies the above-stated
conditions, the liability of such Lender/tenant shall be limited to its
leasehold interest in the Leased Premises plus the amount of Rent, if any,
received by the Lender/tenant from the end-user/tenant and not paid to Landlord;
provided, however, that nothing in this Section shall be interpreted to limit
the obligations of Lender pursuant to Sections 8.5 and 8.6 above.
ARTICLE 10 - TAXES AND IMPOSITIONS
10.1 Tenant To Pay Impositions.
(a) In addition to the Rent and other payments required to be paid
under this Lease, Tenant shall pay or cause to be paid any and all taxes
(including possessory interest taxes) and assessments (collectively,
"Impositions") levied or assessed from the Commencement Date until the
termination of this Lease by any governmental agency or entity on or against the
Leased Premises or any portion thereof, or on or against any interest in the
Leased Premises (including the leasehold interest created by this Lease), or any
Improvements or other property in or on the Leased Premises.
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The timely payment of the Impositions is a material term of this Lease, and, to
the extent the above-referenced items are payable to Landlord or its successors
or assigns, they shall constitute Additional Rent hereunder.
(b) If, by law, any such Imposition is payable, or may, at the
option of Tenant be paid, in installments, Tenant may pay the same, together
with any accrued interest on the unpaid balance of such Imposition, in such
installments as those installments respectively become due and before any fine,
penalty, interest, or cost may be added thereto for the nonpayment of any such
installment and interest.
10.2 Proration of Impositions. All Impositions levied or assessed on or
against the Leased Premises shall be prorated, based on a 365-day year, between
Landlord and Tenant as of the Commencement Date of this Lease, and as of the
expiration or earlier termination of this Lease. On service of written request
by Landlord, Tenant shall promptly pay to Landlord Tenant's share of such
Impositions paid by Landlord on Tenant's behalf and, on service of written
request by Tenant, Landlord shall promptly pay to Tenant Landlord's share of
such Impositions paid by Tenant on Landlord's behalf.
10.3 Payment Before Delinquency. Subject to Tenant's right to contest
under Section 10.4, any and all Impositions and installments of Impositions
required to be paid by Tenant under this Lease shall be paid by Tenant prior to
delinquency, and, upon Landlord's written request, copies of the official and
original receipt for the payment of each such Imposition or installment thereof
or other reasonably satisfactory evidence of payment shall promptly be given to
Landlord.
10.4 Contest of Imposition.
(a) Tenant shall have the right to contest, oppose, or object to
the amount or validity of any Imposition levied on or assessed against the
Leased Premises or any portion thereof and may in good faith diligently conduct
any necessary proceeding to prevent or void or reduce the same; provided,
however, that the contest, opposition, or objection must be filed before the
Imposition at which it is directed becomes delinquent if such contest,
opposition or objection is required to be made or filed prior to payment of the
Imposition being challenged, and written notice of the contest, opposition, or
objection must be given to Landlord at least thirty (30) days before the date
the Imposition becomes delinquent. No such contest, opposition, or objection
shall be continued or maintained after the date on which the Imposition at which
it is directed becomes delinquent unless Tenant has met one of the following
conditions:
(i) Paid such Imposition under protest prior to its becoming
delinquent; or
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(ii) Posted such bond or other security, satisfactory to
Landlord, as is necessary to protect Landlord and the Leased Premises from any
lien arising from such Imposition.
(b) Landlord shall not be required to join in any proceeding or
contest brought by Tenant unless the provisions of any law require that the
proceeding or contest be brought by or in the name of Landlord or any owner of
the Leased Premises. In that case, Landlord shall join in the proceeding or
contest or permit it to be brought in Landlord's name, but such action shall be
without cost to Landlord and Tenant shall reimburse Landlord upon demand for any
reasonable attorneys' fees and costs incurred therein.
10.5 Tax Returns And Statements. Tenant shall, as between Landlord and
Tenant, have the duty of attending to, preparing, making, and filing any
statement, return, report, or other instrument required or permitted by law in
connection with the determination, equalization, reduction, or payment of any
Imposition that is or may be levied on or assessed against the Leased Premises,
or any portion thereof, or any interest therein, or any Improvements or other
property on the Leased Premises.
10.6 Possessory Interest Taxes. Master Landlord is a public entity, and
as such, Master Landlord's underlying fee in the Leased Premises is, or may be,
exempt from property tax assessments. In addition, Landlord is a non-profit
corporation whose leasehold interest in the Leased Premises is, or may be,
exempt from property tax assessment. In accordance with California Revenue and
Taxation Code Section 107.6(a), Master Landlord and Landlord state that by
entering into this Lease, a Possessory interest in Tenant subject to property
taxes may be created. Tenant or any other party in whom the Possessory interest
is vested may be subject to the payment of property taxes levied on such
interest.
ARTICLE 11 - UTILITY SERVICES
11.1 Tenant's Responsibility. During the Term of this Lease, Tenant
shall pay, or cause to be paid, and MiniMed shall indemnify, defend and hold
Landlord and the property of Landlord harmless from all charges for water,
sewage, gas, heat, air conditioning, light, power, steam, telephone service and
all other services and utilities used, rendered or supplied to, on or in the
Leased Premises during the Term.
11.2 Landlord Has No Responsibility. Landlord shall not be required to
furnish to Tenant or any other occupant of the Leased Premises during the Term
of this Lease, any water, sewage, gas, heat, air conditioning, light, power,
steam, telephone, or any other utilities, equipment, labor, materials or
services of any kind whatsoever.
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ARTICLE 12 - INSURANCE
12.1 Fire and Extended Coverage Insurance. Throughout the term of this
Lease, MiniMed, at no cost or expense to Tenant or Landlord, shall keep or cause
to be kept, for the mutual benefit of Landlord and Tenant, a policy of standard
fire insurance, with extended coverage and vandalism and malicious mischief
endorsements, including earthquake insurance if such insurance is commercially
available at commercially reasonable rates with commercially reasonable
deductibles. The amount of insurance required hereunder shall in no event be
less than one hundred percent (100%) of the full replacement cost of the
Improvements on the Leased Premises (exclusive of foundations and footings),
including tenant improvements or betterments. MiniMed shall not be obligated to
obtain flood insurance as part of the extended coverage required hereunder.
Coverage shall be "Property broad form" and shall include rent interruption
insurance, which insurance shall also cover all real estate taxes and insurance
costs for the purposes of continuing rental payments to the landlord for the
duration of the Lease. Coverage shall not include a coinsurance penalty
provision.
12.2 Commercial General Liability Insurance. MiniMed, commencing on the
Commencement Date and continuing throughout the Term hereof, shall maintain or
cause to be maintained, at no cost or expense to Landlord or Tenant,
comprehensive broad form commercial general liability insurance against claims
and liability for personal injury, death, or property damage arising from the
use, occupancy or condition of the Leased Premises, the Improvements thereon,
which insurance shall provide combined single limit protection of at least Two
Million Dollars ($2,000,000) for bodily injury or death to one or more persons,
and at least One Million Dollars ($1,000,000) for property damage, which limits
shall be increased by MiniMed from time to time based upon Tenant's reasonable
assessment of the limits carried by prudent and responsible property owners of
similar property in the geographic area of the Leased Premises.
12.3 Worker's Compensation Insurance. MiniMed shall carry worker's
compensation insurance as required by the State of California, and employer's
liability insurance with a liability insurance minimum of $1,000,000 per
accident for bodily injury or disease.
12.4 Course of Construction Insurance. Course of construction insurance
coverage for all risk of loss shall be maintained by MiniMed at one hundred
percent of the completed value basis on the insurable portion of the work
including materials at the project site, stored off the project site, or in
transit. MiniMed shall include the interests of the Landlord, Tenant and
subcontractors in the work and shall insure against the perils of physical loss
or damage. Nothing in this Article, however, shall be
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construed to relieve MiniMed of full responsibility for loss of or damage to
materials not yet incorporated in the work or MiniMed's tools and equipment used
to perform the work, whether on the project site or elsewhere, or to relieve
MiniMed or Tenant of any other responsibility under the Lease. If the Landlord
or Tenant is damaged by the failure of MiniMed to purchase or maintain such
insurance, MiniMed shall bear all losses attributable thereto and indemnify the
Landlord and Tenant therefrom.
12.5 Business Automobile Liability Insurance. If not covered by its
other insurance policies, MiniMed shall carry business liability insurance on an
occurrence form covering owned, hired, leased and non-owned automobiles used by
or on behalf of the Tenant and providing insurance for bodily injury, property
damage and contractual liability.
12.6 Policy Form, Content And Insurer.
(a) All insurance required by the provisions of this Lease shall
be carried only with insurance companies licensed to do business in this state
with Best's Financial Rating of A VII or better or otherwise acceptable to
Landlord.
(b) All such policies required by the provisions of this Lease
shall be nonassessable and shall contain language to the effect that (i) the
policies are primary and noncontributing with any insurance that may be carried
by Landlord, (ii) the policies cannot be canceled or materially changed except
after thirty (30) days notice by the insurer to Landlord and (iii) Landlord
shall not be liable for any premiums or assessments. The insurer under the
policy of property insurance for the Leased Premises shall also waive its rights
of subrogation against Landlord, Tenant, Tenant's Representatives and Landlord's
Representatives.
(c) All deductibles or self-insured retentions shall be
commercially reasonable for companies of similar net worth as MiniMed.
(d) Upon Tenant's execution and delivery of this Lease, MiniMed
shall deliver to Landlord and Tenant certificates of insurance evidencing the
insurance coverages specified in this Article. MiniMed shall thereafter deliver
to Landlord and Tenant original certificates and amendatory endorsements
evidencing the insurance coverages required by this Article upon renewal of any
insurance policy. Full copies of the policies shall be made available to
Landlord and Tenant upon request. MiniMed may provide any insurance required
under this Lease by blanket insurance covering the Leased Premises and any other
location or locations, provided that the specific policy of blanket insurance
proposed by MiniMed provides the coverages required by this Agreement taking
into account the other properties, persons and risks covered by such blanket
policy. All policies shall name Landlord, Tenant and each Lender as an
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additional insured as their interests may appear, and shall contain the
following special endorsements:
"The State of California, Board of Trustees of the California
State University, California State University, Northridge, the
North Campus University-Park Corporation, First Security Bank,
National Association, not individually but solely as Owner Trustee
under the MiniMed Real Estate Trust 1999-1 and their officers,
employees and agents are hereby declared to be additional insureds
under the terms of this policy as to the activities of Landlord,
Tenant and its sublessees, if any.
"This insurance policy will not be canceled without 30 days prior
written notice to the Trustees and the Corporation. Neither the
State of California, the Board of Trustees of the California State
University, California State University, Northridge, North Campus
University-Park Corporation nor First Security Bank, National
Association, not individually but solely as Owner Trustee under
the MiniMed Real Estate Trust 1999-1, is not liable for the
payment of premiums or assessments on this policy."
(e) For any claims related to this project, MiniMed's insurance
coverage shall be primary insurance as respects the Landlord and Tenant. Any
insurance or self-insurance maintained by the Landlord or Tenant shall be excess
of the MiniMed's insurance and shall not contribute with it.
(f) MiniMed shall include all subcontractors as insured under its
policies or shall furnish separate certificates and endorsements for each
subcontractor. All coverages for subcontractors shall be subject to all
requirements stated herein.
12.7 Waiver of Subrogation. Landlord and Tenant hereby release the
other and its Representatives from any and all liability or responsibility to
the other or anyone claiming through or under them by way of subrogation or
otherwise for any insured loss or damage to the Leased Premises, the campus of
California State University at Northridge, any Improvements thereon, or any of
Landlord's or Tenant's property thereon caused by or arising from a fire or any
other event even if such fire or other casualty shall have been caused by the
fault or negligence of the other party, or anyone for whom such party may be
responsible.
12.8 Indemnification.
(a) MiniMed shall indemnify, defend and hold harmless Landlord and
its Representatives, and the property of Landlord, including the Leased
Premises, from and against any and all Losses and Liabilities of every nature
arising out of or in
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connection with the use, occupancy or enjoyment of the Leased Premises by Tenant
or any person thereon or holding under Tenant arising from any action, inaction,
events or facts occurring during the Term from any cause; provided, that nothing
in this Section 12.8(a) or this Lease shall be construed to require Tenant or
MiniMed to rebuild the Improvements or to pay charges to Landlord in connection
therewith as a result of damage to or destruction of the Improvements or any
Taking of the Improvements except to the extent expressly provided in the other
Sections of this Lease. The above indemnification includes, without limitation,
any Losses and Liabilities arising by reason of:
(1) The death or injury of any person, including Tenant or any
person who is an employee or agent of Tenant, or damage to or destruction of any
property, including property owned by Tenant or by any person who is an employee
or agent of Tenant, from any cause whatever while such person or property is in
or on the Leased Premises;
(2) The death or injury of any person, including Tenant or any
person who is an employee or agent of Tenant, or damage to or destruction of any
property, including property owned by Tenant or any person who is an employee or
agent of Tenant, caused or allegedly caused by either (A) the condition of the
Leased Premises or some Improvements on said premises, or (B) some act or
omission on the Leased Premises by Tenant or any person in, on, or about the
Leased Premises with the permission and consent of Tenant;
(3) Any work performed on the Leased Premises or materials
furnished to said premises at the insistence or request of Tenant or any person
or entity acting for or on behalf of Tenant; or
(4) Tenant's failure to perform any provision of this Lease or
to comply with any Governmental Restriction.
However, the foregoing indemnification shall not extend to any Loss or
Liability to the extent (5) it arises out of the negligence or intentional or
willful misconduct of Landlord or its Representatives or Tenant; or (6) it
arises from a claim for personal injury or property damage asserted by the
owners of any properties adjacent or proximate to the Leased Premises, or their
guests, invitees, employees, tenants or other like person or entity claiming
through them, which are based upon the migration of any Hazardous Materials
deposited on the Leased Premises prior to the Commencement Date of this Lease
onto such properties adjacent or proximate to the Leased Premises.
(b) Landlord shall indemnify, defend and hold harmless Tenant and
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MiniMed and their respective Representatives, and the property of Tenant,
including the Leased Premises, from and against any and all Losses and
Liabilities of every nature arising out of or in connection with the use,
occupancy or enjoyment of the Leased Premises by Landlord or any person thereon
or holding under Landlord arising from any action, inaction, events or facts
occurring during the Term from any cause. The above indemnification includes,
without limitation, any Losses and Liabilities arising by reason of:
(1) The death or injury of any person, including Landlord or
any person who is an employee or agent of Landlord, or damage to or destruction
of any property, including property owned by Landlord or by any person who is an
employee or agent of Landlord, from any cause whatever while such person or
property is in or on the Leased Premises;
(2) The death or injury of any person, including Landlord or
any person who is an employee or agent of Landlord, or damage to or destruction
of any property, including property owned by Landlord or any person who is an
employee or agent of Landlord, caused or allegedly caused by either (A) the
condition of the Leased Premises or some Improvements on said premises, or (B)
some act or omission on the Leased Premises by Landlord or any person in, on, or
about the Leased Premises with the permission and consent of Landlord;
(3) Any work performed on the Leased Premises or materials
furnished to said premises at the insistence or request of Landlord or any
person or entity acting for or on behalf of Landlord; or
(4) Landlord's failure to perform any provision of this Lease
or to comply with any Governmental Restriction.
However, the foregoing indemnification shall not extend to any Loss or
Liability to the extent (5) it arises out of the negligence or intentional or
willful misconduct of Tenant or MiniMed or their respective Representatives; or
(6) it arises from a claim for personal injury or property damage asserted by
the owners of any properties adjacent or proximate to the Leased Premises, or
their guests, invitees, employees, tenants or other like person or entity
claiming through them, which are based upon the migration of any Hazardous
Materials deposited on the Leased Premises after the Commencement Date of this
Lease onto such properties adjacent or proximate to the Leased Premises.
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ARTICLE 13 - CONDEMNATION
13.1 General. If any portion of or interest in the Leased Premises
shall be condemned (including, without limitation, inverse condemnation) or
taken by any public authority or by any other person or entity with the power of
condemnation, by eminent domain or by purchase in lieu thereof (a "Taking"), and
such Taking renders the Leased Premises unsuitable in the commercially
reasonable judgment of Tenant for Tenant's business operations, Tenant may
terminate this Lease by giving notice to Landlord, such termination to be
effective as of the date specified in such notice. If this Lease is not
terminated, Tenant's condemnation award shall be used for the purpose of
repairing or restoring the Improvements in accordance with Section 7.4.
13.2 Award. Whether or not this Lease is terminated as a result of any
Taking, Landlord and Tenant shall together make one claim for an award for their
combined interests in the Leased Premises including an award for severance
damages if less than the whole shall be so taken. The condemnation proceeds
shall be distributed to Landlord and Tenant as their respective interests
appear. Both parties shall have the right to appear in and defend against such
action as they deem proper in accordance with their own interests at their own
expense. To the extent possible, the parties shall cooperate to maximize the
condemnation proceeds payable by reason of the condemnation. Issues between
Landlord and Tenant required to be resolved pursuant to this Article shall be
joined in any such condemnation proceeding to the extent permissible under then
applicable procedural rules of such court of law or equity for the purpose of
avoiding multiplicity of actions and minimizing the expenses of the parties. If
this Lease is not terminated pursuant to this Article, it shall continue, except
that commencing with the date on which Tenant is deprived of the use of any
portion of the Leased Premises or of any rights under this Lease, Rent shall be
abated or reduced according to the extent to which Tenant is deprived of the use
or benefit of the Leased Premises or of any rights under this Lease. If the
Taking occurs in the last five (5) years of the Term, either Landlord or Tenant,
by written notice to the other, may terminate this Lease, such termination to be
effective as of the date that the condemnor acquires title to all or a portion
of the Leased Premises.
13.3 Taking for Temporary Use. If there is a Taking of the Leased
Premises for temporary use for a period equal to or less than eight (8) months,
this Lease shall continue in full force and effect, Tenant shall continue to
comply with Tenant's obligations under this Lease not rendered physically
impossible by such Taking, neither the Term nor the Rent shall be reduced or
affected in any way, but the Rent shall continue at the level of the last Rent
paid prior to the Taking (including any subsequent increases in such Rent
provided for under this Lease), and Tenant shall be entitled to any and all
Awards for the use or estate taken. If any such Taking is for a period extending
beyond such eight (8) month period, the Taking shall be treated as a total,
substantial or partial taking, as appropriate.
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ARTICLE 14 - DEFAULT
14.1 Default.
The occurrence of any one or more of the following events shall, after
the giving of the Notice of Default required by Section 14.2 or 14.4 (nonpayment
of Rent does not require a Notice of Default), constitute a default
("Default(s)") under this Lease by Tenant or Landlord, as applicable:
(i) any failure by Tenant to pay the Rent or make any other
payment required to be made by Tenant hereunder, on the date the payment is due;
or
(ii) a failure by Tenant or Landlord to observe and perform
any other condition, restriction, covenant, obligation or provision of this
Lease to be observed or performed by Tenant or Landlord, as applicable.
14.2 Notice of Default; Tenant's Right to Cure .
(a) If Tenant has committed or permitted to exist a breach of any
provision of this Lease (other than nonpayment of Rent) or has committed or
permitted any other breach described above in Section 14.1, Landlord shall give
notice of said breach ("Notice of Default") to Tenant.
(b) Tenant shall be in default hereunder without notice from
Landlord if Rent is not paid by the tenth (10th) day of each calendar month (or
if the tenth day falls on a Saturday or Sunday, the first Monday of the calendar
month); except that if the Rent Commencement Date is on a day other than the
first day of a calendar month, then Tenant shall be in default hereunder if the
Rent is not paid within ten (10) days after the Rent Commencement Date.
(c) If the alleged Default is nonpayment of Additional Rent,
Impositions or other sums to be paid by Tenant as provided in this Lease, Tenant
shall have twenty (20) days after the Notice of Default is given to cure the
Default. For any other Default, Tenant shall, after the Notice of Default,
promptly and diligently commence curing the Default and shall have sixty (60)
days after the Notice of Default to complete the cure of said Default; provided,
however, that if the nature of said Default is such that the same cannot
reasonably be cured within said sixty (60) day period, Tenant shall have such
additional time as is reasonably necessary to cure such Default, provided that
at all times prior to the expiration of said sixty (60) day period and for the
period thereafter that the Default remains uncured, Tenant is exercising
reasonable diligence in its efforts to cure such Default.
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(d) As used in this Lease, the term "Uncured Default" shall mean
any Default by Tenant which continues uncured, following the giving of a Notice
of Default as required by this Lease, for the cure period applicable to that
Default under the provisions of this Lease.
14.3 Landlord's Right to Cure Tenant's Defaults. After expiration of
the applicable time for curing a particular Default and upon not less than five
(5) business days' notice (unless a longer period of time is otherwise expressly
provided by this Lease, in which case such longer period shall apply), Landlord
may, at Landlord's election, make any payment (other than Rent payable to
Landlord) required of Tenant under this Lease or perform or comply with any
covenant or condition imposed on Tenant under this Lease, and the amount so
paid, plus the reasonable cost of any such performance or compliance, plus
interest on such sum at the Agreed Rate, from the date of payment, performance,
or compliance until the date of repayment by Tenant, shall be due and payable by
Tenant on the first day of the next calendar month following any such payment,
performance or compliance by Landlord as Additional Rent hereunder. No such act
shall constitute a waiver of any Default or of any remedy for Default or render
Landlord liable for any loss or damage resulting from any such act (except to
the extent such loss or damage arises from Landlord's or Landlord's
Representatives' negligence or intentional or willful misconduct).
14.4 Notice of Landlord's Default; Tenant Waiver.
(a) If Landlord has committed a breach under this Lease, as
described in Section 14.1, Tenant shall deliver a Notice of Default to Landlord.
Each Notice of Default shall specify the alleged Default.
(b) Landlord shall, after notice, promptly and diligently commence
curing the Default and shall have sixty (60) days after notice is given to
complete the cure of said Default; provided, however, that if (i) the nature of
said Default is such that the same cannot reasonably be cured within said sixty
(60) day period, and (ii) Landlord shall have in good faith commenced and
diligently and continuously pursued such cure, then Landlord shall have such
time as is reasonably necessary to complete the cure of said Default. If it is
determined that Landlord is liable to Tenant for damages pursuant to this Lease
Landlord shall pay such damages to Tenant in accordance with such judgment
within 30 days after such determination. Tenant shall have no right to offset
any amount of damages owed by Landlord to Tenant against the Rent owed by Tenant
to Landlord under this Lease. If any amount owed to the Tenant by Landlord is
not paid when due, interest shall accrue on such amount at the Agreed Rate from
the date due until the date that such amount is paid. After expiration of the
applicable time for Landlord to cure a particular Default and upon not less than
five (5) business days'
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notice (unless a longer period of time is otherwise expressly provided by this
Lease, in which case such longer period shall apply), Tenant may, at Tenant's
election, make any payment required of Landlord under this Lease or perform or
comply with any covenant or condition imposed on Landlord under this Lease, and
the amount so paid, plus the reasonable cost of any such performance or
compliance, plus interest on such sum at the Agreed Rate, from the date of
payment, performance, or compliance until the date of repayment by Landlord,
shall be due and payable by Landlord on the first day of the next calendar month
following any such payment, performance or compliance by Tenant. No such act
shall constitute a waiver of any Default or of any remedy for Default or render
Tenant liable for any loss or damage resulting from any such act (except to the
extent such loss or damage arises from Tenant's or Tenant's Representatives'
negligence or intentional or willful misconduct).
14.5 Landlord's Remedies.
(a) In the event of any Uncured Default, then, subject to the
rights of a Lender expressly set forth in this Lease, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder by
giving written notice of such termination, in which event the Parties shall have
no further obligation to one another under this Lease.
(b) Notwithstanding the provisions of this Article 14 above to the
contrary, if, within ten (10) days of Tenant's receipt of a Notice of Default
with respect to a Non-monetary Default by Tenant, Tenant shall in good faith
notify Landlord in writing that it disputes the existence of such Non-monetary
Default and that it requests a determination of the existence or non-existence
of such Non-monetary Default, then Landlord may not exercise its right to
terminate this Lease pursuant to this Article 14 on account of such Non-monetary
Default of Tenant until the expiration of the applicable cure period measured as
if such cure period commenced upon the earlier of (i) the date of the
determination that such Non-monetary Default exists, or (ii) the failure by
Tenant to diligently and continuously pursue the legal proceeding. The exercise
of Tenant's right pursuant to this paragraph shall not impair or delay the
ability of Landlord to exercise any rights or remedies other than termination of
this Lease.
(c) In the event Tenant fails to pay Rent to Landlord, Landlord
shall have the right to pursue all of its legal and equitable remedies against
Tenant for collection of such amounts, including without limitation the remedy
described in California Civil Code Section 1951.4 which provides that a lessor
may continue a lease in effect after lessee's breach and abandonment and recover
rent as it becomes due, if the lessee has the right to sublet or assign, subject
only to reasonable limitations.
(d) Tenant hereby acknowledges that late payment by Tenant to
Landlord of
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Rent and other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges and late charges which may be imposed on Landlord by the
terms of any mortgage, deed of trust, or bonded indebtedness. Accordingly, if
any installment of Rent shall not be received by Landlord or its designee within
ten (10) days after Rent is due, or if any Additional Rent or Impositions shall
not be received by Landlord within twenty (20) days after the Notice of Default
is given, then without any requirement for notice to Tenant, Tenant shall pay to
Landlord a late charge equal to five percent (5%) of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge to Landlord shall in no event constitute a waiver
of Tenant's default with respect to such overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies granted hereunder. In the
event that a late charge is payable hereunder, whether or not collected, for
three (3) consecutive installments of Rent, then Rent shall automatically become
due and payable quarterly in advance, rather than monthly, notwithstanding
Article 4 or any other provision of this Lease to the contrary.
14.6 Tenant Remedies; Remedies Cumulative. Except as otherwise
expressly provided in this Lease, Tenant and MiniMed, as appropriate, shall have
all rights and remedies at law or equity upon the occurrence of an Uncured
Default by Landlord hereunder including, but not limited to, the remedies
provided under California Civil Code Sections 1951.2 (pursuant to California
Civil Code Section 1951.2, the damages Landlord may recover against Tenant
include, but are not limited to, the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award,
exceeds the amount of such rental loss for the same period that the Tenant
proves could be reasonably avoided). Each right and remedy of Landlord, Tenant
and MiniMed provided for in this Lease shall be cumulative and shall be in
addition to every other right or remedy provided for in this Lease except as
otherwise limited by this Lease, and the exercise or the beginning of the
exercise by Landlord, Tenant or MiniMed of any one or more of the rights or
remedies provided for in this Lease, except as otherwise limited by this Lease,
shall not preclude the simultaneous or later exercise by Landlord, Tenant or
MiniMed of any or all other rights or remedies provided for in this Lease,
except as otherwise limited by this Lease.
14.7 No Waiver. Landlord's, Tenant's or MiniMed's failure to enforce
any provision of this Lease with respect to a Default hereunder shall not
constitute a waiver of Landlord's, Tenant's or MiniMed's right to enforce such
provision or any other provision with respect to any future Default. The
acceptance of Rent by Landlord shall not be deemed a waiver of Landlord's right
to enforce any term or provision hereof. The waiver of any term or condition of
this Lease shall not be deemed to be a waiver of
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any other term or condition hereof or of any subsequent failure of any term or
condition hereof.
14.8 Delays in Performance. The time within which the Parties hereto
shall be required to perform any obligation under this Lease shall be extended
by a period of time equal to the number of days during which performance of such
act is delayed due to an act of God, strikes, lockouts, fire, earthquake, flood,
explosion, war, invasion, insurrection, riot, mob violence, acts of the public
enemy, epidemics, quarantine restrictions, freight embargoes, unusually severe
weather, application of governmental restrictions, regulations or controls not
contemplated by this Lease or otherwise reasonably foreseeable, court order,
delays or inaction of independent contractors, remediation of Hazardous
Materials located upon the Leased Premises, litigation brought against the
Leased Premises or a Party without that Party's consent, or other like events
which are completely and strictly beyond a Party's control (the "Force Majeure
Events"). The additional grace period or extension of time provided above shall
be equal to the period of delay caused by the above-described event, which
period shall commence to run from the time of the commencement of the cause for
delay and shall terminate upon termination of that cause. A Party wishing to
invoke this Section must notify in writing the other Party to this Lease of that
intention within sixty (60) days of the commencement of any such cause for delay
and shall, at that time, specify the reasons therefor, the specific provision of
this Lease which will be delayed as a result, and the period of such extension,
if known, or if not known, a reasonable estimate thereof.
ARTICLE 15 - EXPIRATION; TERMINATION
At the expiration or earlier termination of this Lease, Tenant shall
surrender to Landlord possession of the Leased Premises free and clear of all
liens, encumbrances and Mortgages other than those, if any, created by Landlord,
those which both extend beyond the Term of this Lease and were expressly
approved in writing by Landlord, or those which encumbered the Leased Premises
prior to the Commencement Date of this Lease. If this Lease is terminated under
circumstances for which Landlord is obligated to buy the Improvements, Tenant
shall leave the Leased Premises and any other property surrendered in good
condition, reasonable wear and tear excepted. If this Lease is terminated for
any other reason, Tenant shall leave the Leased Premised and any other property
surrendered in its then existing "as is" condition. As provided above at Section
6.8, all property that Tenant is required to surrender shall become Landlord's
property at termination or expiration of this Lease. All property that Tenant is
not required to surrender but that Tenant does abandon by failure to remove said
property within sixty (60) days after the expiration or earlier termination of
this Lease shall, at Landlord's election, become Landlord's property.
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ARTICLE 16 - MASTER GROUND LEASES
The Parties acknowledge that this Lease is subject and subordinate to
the terms of the Master Leases between the Trustees of the California State
University System and Landlord dated May __, 1999.
ARTICLE 17 - INTERRELATIONSHIP BETWEEN UNIVERSITY
AND LEASED PREMISES
17.1 Goals of Master Landlord, Landlord and Tenant. The Parties
acknowledge that the Leased Premises is currently located on the campus of the
University. It is the desire of Landlord and Tenant that many of the services,
goods and facilities of the Research Center will (a) relate to many functions of
the University, (b) provide and/or share services and facilities needed for the
students, faculty and employees of the University, and (c) provide opportunities
for student employment, materials and education. In addition, it is the desire
of Landlord and Tenant that the presence of the Research Center will (i) enhance
the attractiveness of the University campus; (ii) encourage students, faculty
and visitors to make increased use of present University facilities; and (iii)
allow some of the businesses operating at the Research Center to interrelate
with University activities.
17.2 Cooperation Covenants of Tenant and its Subtenants. Tenant shall,
subject to the qualifications set forth below, cooperate with Landlord to
provide the following:
(a) Provide internships for undergraduate and graduate
students;
(b) Participate in work-study programs for undergraduate and
graduate students;
(c) Provide employment opportunities for undergraduate and
graduate students;
(d) Undertake joint research programs with the University's
faculty;
(e) Co-sponsor research seminars or conferences;
(f) Undertake such other academic activities as mutually
agreed upon;
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(g) Make the Conference Center available for University use in
accordance with Section 5.1(c).
The above goals, purposes and programs shall be provided as long as
they do not unreasonably interfere with the operation and management of the
Research Center and the commercially reasonable business operations of the
occupants thereof. The parties will reasonably cooperate to implement the above
programs.
The above items shall be by way of example, and not of limitation, with
the understanding that such undertakings will relate to Tenant or Subtenants
which will operate their businesses in the Research Center pursuant to Subleases
with Tenant. Tenant will incorporate provisions in its Subleases to accommodate
these goals, purposes and programs, and to reasonably provide for such
accommodations in any conditions, covenants or restrictions governing the
Research Center.
17.3 Businesses Within Research Center. Tenant shall use its reasonable
good faith efforts to cause all of the Subtenants to agree to (a) interact with
the University business school, (b) make corporate and enterprise personnel
available for lecturing and instruction to the University, (c) provide intern
programs to University students.
17.4 Use of University Facilities. The Master Leases provide that so
long as Tenant is not in default under this Lease, the University will enable
Tenant and appropriate Subtenants to use the University library and other
University facilities. The guidelines for use of University facilities are to be
negotiated between the parties.
17.5 Cooperation Covenants Regarding Tenant. Tenant shall (a) establish
rules and regulations acceptable to Landlord regarding the use of the Conference
Center on a non-interfering basis by faculty, staff and students of the
University which promote the integration of the Conference Center into the
University's activities, (b) engage in advertising and public relations noting
the University and the interface between the Research Center and the University,
(c) designate management personnel of the Research Center to be coordinators and
contacts with the University for events and public relations, (d) subject to the
terms of the Subleases, make hardscape and landscape areas within the Research
Center available for University events and functions on a non-interfering basis
as appropriate such as art exhibits and displays featuring the University and it
students, faculty and programs, and (e) consult with and develop programs and
public relations for co-sponsored University and Research Center events with an
event and information officer of the University campus.
17.6 Change In Use. In the event Tenant desires to change the use of
the
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Research Center from those permitted pursuant to Section 5.1, Tenant agrees that
it must cooperate with Landlord and Master Landlord to create an
interrelationship between the new use of the Leased Premises and the University
which allows the University students, faculty and employees to benefit from the
close proximity of the Leased Premises to University facilities, and that absent
prior written approval from Landlord, Tenant may not change the use of the
Research Center.
ARTICLE 18 - MISCELLANEOUS
18.1 Landlord's Representations and Warranties. Landlord covenants,
represents and warrants to Tenant and MiniMed, as of the date of execution of
this Lease, as follows:
(a) Landlord is a not-for-profit corporation duly incorporated and
in good standing under the laws of the State of California, has full legal
right, power, and authority to enter into this Lease and to carry out and
consummate all transactions contemplated by this Lease, and by appropriate
corporate action has duly authorized the execution and delivery of this Lease.
Further, Landlord will take those actions required to remain in good standing
under the laws of the state of California during the term of this Lease.
(b) To Landlord's actual knowledge, the execution, delivery and
performance of this Lease by Landlord does not result in a material violation
of, or constitute a material default under, any provision of any existing
agreement, judgment or court order.
(c) Except as revealed in writing by Landlord to Tenant, Landlord
has not been served with any pending, and knows of no threatened, litigation or
claims against the Leased Premises or against Landlord in connection with the
Leased Premises which would have an adverse effect on the transactions
contemplated herein.
(d) Copies of all documents heretofore delivered by Landlord to
Tenant are true, correct and complete copies of such documents in all material
respects.
(e) Landlord makes no representation or warranty as to the
condition of the title to the Leased Premises except that Master Landlord is
vested with the fee simple title thereto, subject to all recorded and unrecorded
encumbrances, liens, encroachments, rights of way, easements and other possible
claims of interest that may be discovered by examination of the public records
and by survey and inspection, and that Landlord has leasehold title to the
Leased Premises pursuant to the Master Leases.
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18.2 Tenant's Representations and Warranties. Tenant covenants,
represents and warrants to Landlord, as of the date of execution of this Lease,
as follows:
(a) Tenant has full legal right, power, and authority to enter
into this Lease and to carry out and consummate all transactions contemplated by
this Lease.
(b) The persons executing this Lease on behalf of Tenant are fully
authorized to execute the same.
(c) This Lease has been duly authorized, executed, and delivered
by Tenant, and will constitute a legal, valid, and binding agreement of Tenant,
enforceable against Tenant in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or other laws affecting the enforcement
of creditors' rights generally and by the application of equitable principles if
equitable remedies are sought.
(d) Except as may be disclosed in MiniMed's public filings with
the Securities and Exchange Commission, or as revealed in writing by Tenant to
Landlord, Tenant has not been served with any pending, and knows of no
threatened, litigation or claims against Tenant which would have an adverse
effect on the transactions contemplated herein.
(e) Copies of all documents heretofore delivered by Tenant to
Landlord are true, correct and complete copies of such documents in all material
respects;
(f) Tenant has examined the Leased Premises and hereby accepts
possession of the Leased Premises in its "as is" condition, with all faults and
defects subject to the terms of this Lease.
18.3 Survival of Representations, Warranties and Covenants. The
respective representations, warranties and covenants contained herein shall
survive the Commencement Date and continue throughout the Term.
18.4 Further Assurances. Each party hereto will promptly execute and
deliver without further consideration such additional agreement, assignments,
endorsements and other documents as the other party hereto may reasonably
request to carry out the purposes of this Lease.
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18.5 Estoppel Certificate.
(a) Within twenty (20) days after request by Landlord or Tenant
(which request may be from time to time as often as reasonably required by
Landlord or Tenant) Landlord or Tenant shall execute and deliver to the other,
without charge, a statement (the "Estoppel Certificate") in the form of Exhibit
E attached hereto or in such other similar form as Landlord or Tenant may
reasonably request. Any such statement may be conclusively relied upon by any
Lender, Subtenant or prospective purchaser of the Leased Premises.
(b) If the other Party fails to respond to such request within
such twenty (20) day period, the requesting Party shall deliver a second notice
stating that the failure of the other Party to respond to such request within
three (3) working days after receipt of such second request will result in a
deemed approval with respect to the requested matters. The failure to deliver
such statement within that three (3) day period shall (with respect to third
parties relying upon such estoppel certificate), without limiting any other
remedy which the requesting party may have as a result of such failure, be
conclusive upon the Party which fails to deliver such statement that this Lease
is in force and effect with only such modifications as have been identified by
the requesting Party, that there are no outstanding Defaults in the performance
of the requesting Party, and that there have not been any payments of advance
rent other than as provided in the provisions of this Lease.
18.6 Notices. All notices, requests, demands and other communications
under this Lease shall be in writing and shall be deemed to have been given on
(a) the date of service if served personally on the Party to whom notice is to
be given, (b) the date of actual or attempted delivery provided such attempted
delivery is made on a business day, if served by Federal Express, Express Mail
or another like overnight delivery service, (c) the date of actual delivery as
shown by the addressee's registry or certification of receipt or the third
business day after the date of mailing, whichever is earlier, if mailed to the
person to whom notice is to be given, by first class U.S. mail, registered or
certified, postage prepaid, return receipt requested and properly addressed as
follows (or to such other address as either Party may from time to time direct
by written notice given in the manner herein prescribed), or (d) one day after
receipt of a confirmed facsimile transmission provided any such communication is
concurrently given by one of the above methods:
If to Landlord: North Campus Development Corporation
California State University Northridge
Northridge, California 91330
Attn: Vice President for Administration
& University Advancement
Tel: 818-677-2333
FAX: 818-677-5089
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With a copy to: Herbert M. Weiser, Esq.
King, Weiser, Bazar & Jacobs
2049 Century Park East
Suite 900
Los Angeles, California 90067
Tel: 310-553-1600
FAX: 310-556-5687
California State University, Northridge
Attention: University Counsel
18111 Nordhoff Street
Northridge, California 91330-8355
Tel: 818-677-5931
FAX: 818-677-2001
and, if to Tenant: First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val Orton
FAX: 801-246-5053
with copies to: ING (U.S.) Capital LLC
55 East 52nd Street, 33rd Floor
New York, New York 10055
Attention: Chief Credit Officer
ING (U.S.) Capital LLC
Atlanta Office
200 Galleria Parkway, Suite 950
Atlanta, Georgia 30339
Attention: Darren J. Wells
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telephone: 818-362-5958
FAX: 818-367-1460
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and if to MiniMed: MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attn: General Counsel
Tel: 818-362-5958
FAX: 818-367-1460
With copies to: Broebeck Phleger & Harrison
55 West C. Street, Suite 1300
San Diego, California 92101
Attention: Scott Biel
18.7 Attorneys' Fees. In the event that either Party hereto brings any
action or files any proceeding in connection with the enforcement of its
respective rights under this Lease or as a consequence of any breach by the
other party of its obligations under this Lease, the prevailing party in such
action or proceeding shall be entitled to have its reasonable attorneys' fees
(including allocable costs for any in-house counsel) and out-of-pocket
expenditures paid by the losing Party. The attorneys' fees so recovered shall
include fees for prosecuting or defending any appeal and shall be awarded for
any supplemental proceedings until the final judgment is satisfied in full. In
addition to the foregoing award of attorneys' fees to the prevailing party, the
prevailing party in any lawsuit on this Lease shall be entitled to its
attorneys' fees incurred in any post judgment proceedings to collect or enforce
the judgment. This provision is separate and several and shall survive the
merger of this Lease into any judgment on this Lease.
18.8 Headings. The headings used in this Lease are inserted for
reference purposes only and do not affect the interpretation of the terms and
conditions hereof.
18.9 Rights of Successors. All of the rights and obligations of the
Parties under this Lease shall bind and inure to the benefit of their respective
heirs, successors and assigns; provided, however, that nothing in this Section
18.9 shall be construed to limit or waive the provisions concerning restrictions
on Transfer set forth in Article 9 hereof.
18.10 Amendments in Writing. This Lease cannot be orally amended or
modified. Any modification or amendment hereof must be in writing and signed by
the Party to be charged.
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18.11 No Brokers. Each Party shall defend, indemnify, and hold the
other harmless from all costs and expenses, including attorneys' fees, arising
out of any and all claims for broker's agent's or finder's fees or commissions
in connection with the negotiation, execution or consummation of this
transaction incurred as a result of any statement, representation or agreement
alleged to have been made or entered into by the indemnifying Party. Neither
Tenant nor Landlord is entitled to receive any brokerage commission as a
consequence of this transaction.
18.12 Negation of Partnership. Nothing in this Lease shall be construed
to render Landlord, a partner, joint venturer, or associate in any relationship
or for any purpose with Tenant, other than that of Landlord and Tenant, nor
shall this Lease be construed to authorize either to act as agent for the other.
18.13 Time of Essence. Time is of the essence of each provision in this
Lease, subject to delays caused by any of the force majeure events set forth in
Section 14.8.
18.14 Interpretation. When the context and construction so require, all
words used in the singular herein shall be deemed to have been used in the
plural, and the masculine shall include the feminine and neuter and vice versa.
The term "Person" as used in this Lease means a natural person, corporation,
limited liability company, association, partnership, organization, business,
trust, individual, or a governmental authority, agency, instrumentality or
political subdivision, and whenever the word "day" or "days" is used herein,
such shall refer to calendar day or days, unless otherwise specifically provided
herein. Whenever a reference is made herein to a particular Section of this
Lease, it shall mean and include all subsections and subparts thereof. The word
"include" or "including" shall describe examples of the antecedent clause, and
shall not be construed to limit the scope of such clause.
18.15 Applicable Law; Severability. The interpretation and enforcement
of this Lease shall be governed by the laws of the State of California. Should
any part, term, portion or provision of this Lease, or the application thereof
to any person or circumstances be held to be illegal or in conflict with any
Governmental Restrictions, or otherwise be rendered unenforceable or
ineffectual, the validity of the remaining parts, terms, portions or provisions,
or the application thereof to other persons or circumstances, shall be deemed
severable and the same shall remain enforceable and valid to the fullest extent
permitted by law.
18.16 Exhibits. All exhibits referred to in this Lease are attached
hereto and incorporated herein by reference.
18.17 Short Form of Lease. On or before the date which is ten days
following the execution hereof, the Parties shall execute and thereafter record
with the County
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Recorder of Los Angeles County a Memorandum of Lease, attached hereto as Exhibit
C, giving notice of the existence of this Lease and the Term hereof.
18.18 Hold as One Parcel; Reciprocal Easement Agreement. Tenant
anticipates that it and the tenant of Parcel 4 will covenant to hold the Leased
Premises and Parcel 4 as one parcel. If Tenant and the subtenant of Parcel 4 do
not so covenant, then concurrently with the delivery of the sublease for Parcel
4, Landlord, Tenant, and the tenant of Parcel 4 shall execute and deliver a
reciprocal easement agreement ("REA") in form acceptable to Landlord. The REA
shall address such issues as cross easements, restrictions, covenants and
agreements (including, but not limited to, those relating to use, utilities,
parking, ingress and egress). The REA may only be amended with the prior written
consent of Landlord. The REA shall be recorded with the County Recorder of Los
Angeles County immediately prior to the Memorandum of Lease.
18.19 Landlord's Rights of Inspection. Landlord and its authorized
Representatives shall have the right during business hours, upon not less than
twenty-four (24) hours' oral or written notice to Tenant (except that in the
case of an emergency, the existence of which shall be determined by Landlord in
its reasonable discretion, no advance notice shall be required) to enter upon
the Leased Premises for purposes of inspecting the same and exercising its
rights under this Lease, provided that such inspections shall not unreasonably
interfere with Tenant's or its Subtenant's construction or business activities.
18.20 Nonmerger of Fee and Leasehold Estates. If both Landlord's and
Tenant's estates in the Leased Premises become vested in the same owner (other
than by termination of this Lease following an Uncured Default hereunder,
subject to the rights, if any, of a Lender pursuant to Article 8 above), this
Lease shall not be terminated by application of the doctrine of merger except at
the express election of Landlord and with the consent of any Lender(s) of a
Leasehold Mortgage.
18.21 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
18.22 Interest On Past Due Obligations. Except where another rate of
interest is specifically provided for in this Lease, any amount due from either
Party to the other under this Lease which is not paid within ten (10) days after
receipt of written notice that such amount is due (or in the case of Rent,
within three (3) days after such Rent is due), shall bear interest at the Agreed
Rate from the date such amount was originally due to and including the date of
payment.
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18.23 Holding Over. Any holding over by Tenant after the expiration of
the Term shall be construed as a tenancy from month to month and shall be
subject to all of the terms and conditions which are provided for in this Lease
except that the Rent shall be in an amount equal to 150% of the Rent in effect
immediately prior to the expiration of the Term.
18.24 Owner Trustee. Landlord acknowledges and agrees that so long as
First Security Bank, National Association, not individually but solely as Owner
Trustee under the MiniMed Real Estate Trust 1999-1 is Tenant, said Tenant shall
have no obligations under Section 5.4, Section 12.8 and those provisions in
Article 6 and Article 12 for which MiniMed has assumed responsibility. For the
avoidance of doubt MiniMed shall at all times remain liable for such obligations
under this Lease and in no event shall Owner Trustee have any liability or
obligation therefor. Landlord acknowledges and agrees that it shall look solely
to MiniMed for the satisfaction of such obligations.
18.25 MiniMed As Third Party Beneficiary. Notwithstanding any other
provision of this Lease, it is the express intention of the parties hereto that
the benefits of certain provisions of this Lease inure to MiniMed, its
successors and assigns. Accordingly, Tenant and Landlord acknowledge and agree
that MiniMed, its successors and assigns are hereby granted and shall have the
rights, benefits, indemnities, claims, defenses, causes of action, priorities
and interests, as the case may be, granted to "Tenant" under Sections 2.3, 3.2,
5.1, 5.4(b), 5.6, 6.7(b), 13.1, 13.2, 13.3, 14.4, 14.6, 18.7 and 18.26 hereof,
and that MiniMed, its successors and assigns are hereby granted and shall have
any and all rights to enforce and defend its rights (at law or in equity) as a
third party beneficiary under the foregoing sections hereof.
18.26 Automatic Amendment of this Lease. Landlord and Tenant
acknowledge that Sections 5.4(a), 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.10, 11.1,
12.1, 12.2, 12.3, 12.4, 12.5, 12.6 and 12.8(a) hereof (collectively, the
"Financing Accommodations") have been agreed to in order to accommodate First
Security Bank, National Association, not individually but solely as Owner
Trustee under the MiniMed Real Estate Trust 1999-1, as the "Tenant" under this
Lease. Landlord and Tenant agree that at such time that First Security Bank,
National Association, not individually but solely as Owner Trustee under the
MiniMed Real Estate Trust 1999-1, is no longer the "Tenant" under this Lease,
this Lease shall be automatically amended without further action by deleting the
Financing Accommodations and inserting in their stead the corresponding
provisions set forth in the attached Schedule 18.26. That is, when First
Security Bank, National Association, not individually but solely as Owner
Trustee under the MiniMed Real Estate Trust 1999-1, is no longer the "Tenant"
under this Lease, Section 5.4, Environmental Indemnity, Subparagraph (a) as set
forth above shall be deleted, and Section 5.4, Subparagraph (a) as set forth in
Schedule 18.26 shall be inserted in its stead, and so on with each of the
remaining Financing Accommodations.
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IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
TENANT:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually but solely as Owner Trustee
under the MiniMed Real Estate Trust 1999-1
Date: May 18, 1999 By: /s/ VAL T. ORTON
-------------------------------------
Print Name: Val T. Orton
Its: Vice President
By: /s/ DEANN MADSEN
-------------------------------------
Print Name: DeAnn Madsen
Its: Assistant Trust Officer
LANDLORD:
NORTH CAMPUS-UNIVERSITY PARK
DEVELOPMENT CORPORATION, a
not-for-profit corporation
Date: May 12, 1999 By: /s/ THOMAS J. MCCARRON
-------------------------------------
Print Name: Thomas J. McCarron
Its: Executive Director
By: /s/ JAMES F. SULLIVAN
-------------------------------------
Print Name: James F. Sullivan
Its: Interim V.P. Administration; Finance
The undersigned, MiniMed Inc., has executed this Lease for the purpose of
acknowledging and agreeing to its obligations under Section 5.4, Article 6,
Section 11.1, Article 12 and Section 18.26 of this Lease.
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MINIMED INC., a Delaware corporation
By: /s/ ERIC S. KENTOR
-------------------------------------
Print Name: Eric S. Kentor
Its: Sr. Vice President and General Counsel
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EXHIBIT 10.2
PARTICIPATION AGREEMENT
dated as of May 18, 1999
among
MINIMED DEVELOPMENT CORP.
as the Construction Agent and as the Lessee,
MINIMED INC. AND CERTAIN OF ITS SUBSIDIARIES
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as the Owner Trustee
under the MiniMed Real Estate Trust 1999-1,
THE HOLDERS FROM TIME TO TIME OF CERTIFICATES
ISSUED BY THE AFOREMENTIONED TRUST, as the Certificateholders,
THE LENDERS FROM TIME TO TIME PARTIES HERETO, as the Lenders,
THE REVOLVING CREDIT LENDERS FROM TIME TO TIME PARTIES HERETO,
as the Revolving Credit
Lenders,
THE BANK OF NOVA SCOTIA,
as Documentation Agent,
ING BARING FURMAN SELZ LLC,
as Syndication Agent,
and
ING (U.S.) CAPITAL LLC,
as the Agent for the Lenders and the Revolving Credit Lenders
and as the Collateral Agent for the Owner Trustee,
the Lenders, the Revolving Credit Lenders
and the Certificateholders to the extent of their interests
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. THE LEASE TRANSACTION
Section 1.1. The Term Loan Facility
Section 1.2. The Certificateholder Advances
ARTICLE 2. REVOLVING CREDIT FACILITY
Section 2.1. The Revolving Credit Facility
ARTICLE 3. SUMMARY OF TRANSACTIONS
Section 3.1. Related Documents
Section 3.2. Property Acquisition
Section 3.3. Construction of Improvements; Commencement of Basic Rent
ARTICLE 4. THE CLOSINGS
Section 4.1. Effective Date
Section 4.2. Effective Date; Fundings
ARTICLE 5. FUNDINGS; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION
DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS
Section 5.1. General
Section 5.2. Procedures for Funding
Section 5.3. Conditions Precedent Relating to the Effective Date
Section 5.4. Conditions Precedent Relating to Fundings after the Effective
Date and prior to the Completion Date
Section 5.5. Additional Reporting and Delivery Requirements on Completion Date
Section 5.6. The Construction Agent Delivery of Construction Budget
Modifications
Section 5.7. Restrictions on Liens
Section 5.8 Joinder Agreement Requirements
Section 5.9. Payments
Section 5.10. Modifications of Schedules Reflecting Certificateholder
Commitments and Lender Commitments
Section 5.11. Minimum Size of Fundings
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
Section 6.1. Representations and Warranties of the Borrower
Section 6.2. Representations and Warranties of the Construction Agent and
the Lessee
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7. PAYMENT OF CERTAIN EXPENSES
Section 7.1. Payment of Lease Transaction Expenses on or
prior to Completion Date
Section 7.2 Lease Transaction Expenses
Section 7.3. Expenses under Revolving Credit Agreement
ARTICLE 8. OTHER COVENANTS AND AGREEMENTS
Section 8.1. Cooperation with the Construction Agent or the Lessee
Section 8.2. Covenants of the Owner Trustee and the Certificateholders
Section 8.3. Credit Party Covenants, Consent and Acknowledgment
Section 8.4. Sharing of Certain Payments
Section 8.5. Grant of Easements, etc.
Section 8.6. Release of Property, etc.
ARTICLE 9. CREDIT AGREEMENT AND TRUST AGREEMENT
Section 9.1. The Construction Agent's and the Lessee's Credit Agreement Rights
Section 9.2. The Construction Agent's and the Lessee's Trust Agreement Rights
ARTICLE 10. COLLATERAL AGENT
Section 10.1 Appointment and Authorization
Section 10.2 Same Rights as a Lender
Section 10.3 Actions by the Collateral Agent
Section 10.4 Consultation with Experts
Section 10.5 Liability
Section 10.6 Indemnification
Section 10.7 Credit Decision
Section 10.8 Successor Collateral Agent; Removal
Section 10.9 Sharing by Secured Parties
ARTICLE 11. EVENTS OF DEFAULT
Section 11.1 Events of Default
Section 11.2 Default Remedies
Section 11.3 Set-off and Other Remedies
ARTICLE 12. APPLICATION OF PAYMENTS AND PROCEEDS
Section 12.1 Collection and Allocation of Payments and other Accounts
Section 12.2 Application of Proceeds Upon Sale of Property and Equipment
Section 12.3 Application of Proceeds Upon Purchase of Property and
Equipment by Lessee
Section 12.4 Application of Proceeds of Surrender Payment Upon Surrender
of Property and Equipment by Lessee
Section 12.5 Application of Proceeds Upon Exercise of Remedies Upon
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Event of Default
ARTICLE 13. INDEMNIFICATION
Section 13.1. General Indemnity
Section 13.2. General Tax Indemnity
Section 13.3. Proceedings in Respect of Claims
Section 13.4. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE,
STRICT LIABILITY, ETC
ARTICLE 14. GENERAL PROVISIONS
Section 14.1 Assignment
Section 14.2 Amendments and Waivers
Section 14.3 Notices
Section 14.4 Cumulative Rights; No Waiver
Section 14.5 Counterparts
Section 14.6 Severability
Section 14.7 Headings
Section 14.8 Termination by Parent
Section 14.9 GOVERNING LAW
Section 14.10 WAIVER OF JURY TRIAL
Section 14.11 Survival of Agreements
Section 14.12 Parties in Interest
Section 14.13 Liability Limited
Section 14.14 Further Assurances
Section 14.15 Financial Reporting/Tax Characterization
Section 14.16 Confidentiality
</TABLE>
<PAGE> 5
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of May 18, 1999 (this "Agreement")
is by and among MINIMED DEVELOPMENT CORP., a Delaware corporation (the "Lessee"
or the "Construction Agent"); the various parties hereto from time to time as
guarantors, individually, a "Guarantor" and collectively, the "Guarantors");
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 the Owner Trustee under the MiniMed Real
Estate Trust 1999-1 (in such capacity the "Owner Trustee" or the "Lessor"); the
various parties hereto from time to time as holders of certificates issued by
the Owner Trustee with respect to the MiniMed Real Estate Trust 1999-1
(individually, a "Certificateholder" and collectively, the
"Certificateholders"); the various parties hereto from time to time as Lenders
(individually, a "Lender" and collectively, the "Lenders"); the various parties
hereto from time to time as Revolving Credit Lenders (individually a "Revolving
Credit Lender" and collectively the "Revolving Credit Lenders"), ING BARING
FURMAN SELZ LLC, a Delaware limited liability company, as syndication agent (the
"Syndication Agent"), and ING (U.S.) CAPITAL LLC, a Delaware limited liability
company, as the agent for the Lenders and the Revolving Credit Lenders (in such
capacities, the "Agent") and as the collateral agent for the Owner Trustee,
Lenders, Revolving Credit Lenders and Certificateholders, to the extent of their
interests (in such capacity, the "Collateral Agent"). Capitalized terms used but
not otherwise defined in this Agreement shall have the meanings set forth in
Appendix A hereto.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE 1. THE LEASE TRANSACTION.
Section 1.1. The Term Loan Facility. Subject to the terms and conditions
of this Agreement and the other Related Documents and in reliance on the
representations and warranties of each of the parties hereto contained herein or
made pursuant hereto or pursuant to the other Related Documents, the Lenders
have agreed to make Advances to the Lessor from time to time in an aggregate
principal amount of up to the aggregate amount of the Lender Commitments in
order for the Lessor to acquire the Property and Equipment, to develop and
construct the improvements and install the Equipment in accordance with the
Construction Agency Agreement and the terms and provisions hereof and for the
other purposes described herein, and in consideration of the receipt of proceeds
of the Advances, the Lessor will issue the Tranche A Term Notes and Tranche B
Term Notes. The Advances shall be made and the Tranche A Term Notes and Tranche
B Term Notes shall be issued pursuant to the Credit Agreement. Pursuant to
Article V of the Credit Agreement and Article 5 of this Agreement, the Advances
will be made to the Lessor from time to time at the request of the Construction
Agent in consideration for the
<PAGE> 6
Construction Agent agreeing for the benefit of the Lessor, pursuant to the
Construction Agency Agreement, to acquire the Property and the Equipment, to
construct the improvements and to cause the Lessee to lease the Property and
Equipment, each in accordance with the Construction Agency Agreement and the
other Related Documents. The Obligations of the Lenders under the Credit
Agreement and the other Related Documents are several, and not joint or joint
and several. The Advances and the obligations of the Lessor under the Credit
Agreement shall be secured by the Trust Collateral.
Section 1.2. The Certificateholder Advances. Subject to the terms and
conditions of this Agreement and the other Related Documents and in reliance on
the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto or pursuant to the other Related Documents, on
each date that a Funding is requested to be made in accordance with Article 5
hereof, each Certificateholder shall make a Certificateholder Advance on a pro
rata basis to the Lessor with respect to the MiniMed Real Estate Trust 1999-1
based on its Certificateholder Commitment in an amount in immediately available
funds such that the aggregate of all Certificateholder Advances on such date
shall be three percent (3%) of the amount of the requested Funding on such date;
provided, that no Certificateholder shall be obligated for any Certificateholder
Advance in excess of its pro rata share of the Available Certificateholder
Commitment. The aggregate amount of Certificateholder Advances shall be up to
the aggregate amount of the Certificateholder Commitments. The representations,
warranties, covenants and agreements of the Certificateholders herein and in the
other Related Documents are several, and not joint or joint and several. The
Certificateholder Advances and the obligations of the Lessor under the Trust
Agreement shall be secured by the Trust Collateral.
ARTICLE 2. REVOLVING CREDIT FACILITY.
Section 2.1. The Revolving Credit Facility. Subject to the terms and
conditions of this Agreement and the other Related Documents and in reliance on
the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto or pursuant to the other Related Documents, the
Revolving Credit Lenders have agreed to make Revolving Credit Advances to the
Parent Guarantor from time to time in an aggregate principal amount at any one
time outstanding of up to the aggregate amount of the Revolving Credit
Commitments, for the purposes set forth in the Revolving Credit Agreement. The
Revolving Credit Advances shall be made and the Revolving Credit Notes shall be
issued pursuant to the Revolving Credit Agreement. Pursuant to Article V of the
Revolving Credit Agreement and Article 5 of this Agreement, the Revolving Credit
Advances will be made to the Parent Guarantor from time to time at the request
of the Parent Guarantor in accordance with the provisions of the Revolving
Credit Agreement. The Revolving Credit Advances and the obligations of the
Parent Guarantor under the Revolving Credit Agreement shall be secured by the
MiniMed Collateral.
<PAGE> 7
ARTICLE 3. SUMMARY OF TRANSACTIONS.
Section 3.1. Related Documents. On the Effective Date, each of the
respective parties hereto and thereto shall execute and deliver this Agreement,
the Master Lease, the Ground Sublease, the Construction Agency Agreement, the
Credit Agreement, the Revolving Credit Agreement, the Tranche A Term Notes,
Tranche B Term Notes, the Revolving Credit Notes, the Trust Agreement, the
Certificates, the Security Documents, and such other documents, instruments,
certificates and opinions of counsel as agreed to by the parties hereto.
Section 3.2. Property Acquisition. On the Effective Date and subject to
the terms and conditions of this Agreement (a) the Certificateholders will each
make a Certificateholder Advance in accordance with Articles 1 and 5 of this
Agreement and the terms and provisions of the Trust Agreement, (b) the Lenders
will each make Advances in accordance with Articles 1 and 5 of this Agreement
and the terms and provisions of the Credit Agreement, (c) the Lessor, pursuant
to the Ground Sublease, will acquire good and insurable leasehold title to the
Property, will sublease such leasehold title to Lessee pursuant to the Master
Lease, and will grant to the Collateral Agent a Lien on all right, title and
interest of the Lessor in the Property pursuant to the Security Documents, (d)
the Collateral Agent, the Lessee and the Lessor shall execute and deliver the
Master Lease and (e) the Lease Term shall commence with respect to the Property.
Section 3.3. Construction of Improvements; Commencement of Basic Rent.
Fundings will be made with respect to the Improvements to be constructed and the
Equipment to be installed, in each case, pursuant to the terms and conditions of
this Agreement and the Construction Agency Agreement. The Construction Agent
will act as a construction agent on behalf of the Lessor respecting the
construction of the Improvements to be installed and the expenditures related to
the foregoing. The Construction Agent shall promptly notify the Lessor upon
Substantial Completion, and the Lessee shall commence to pay Basic Rent as of
the Rent Commencement Date.
ARTICLE 4. THE CLOSINGS.
Section 4.1. Effective Date. All documents and instruments required to
be delivered on the Effective Date shall be delivered at the offices of King &
Spalding, 1185 Avenue of the Americas, New York, New York 10036-4003, or at such
other location as may be determined by the Lessor, the Collateral Agent and the
Lessee.
Section 4.2. Effective Date; Fundings. The Construction Agent shall
deliver to the Collateral Agent a requisition (a "Requisition") in the form
attached hereto as Exhibit A or in such other form as is satisfactory to the
Collateral Agent, in its reasonable discretion, in connection with (a) the Lease
Transaction Expenses and (b) each request for a Funding pursuant to Section 5.2.
<PAGE> 8
ARTICLE 5. FUNDINGS; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON
COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS
ON LIENS.
Section 5.1. General. To the extent funds have been advanced to the
Lessor as Advances by the Lenders and as Certificateholder Advances by the
Certificateholders, the Lessor will use such funds from time to time in
accordance with the terms and conditions of this Agreement and the Related
Documents (i) pursuant to the directions of the Construction Agent made in
accordance with the terms of this Agreement, the Construction Agency Agreement
and the other Related Documents, and (ii) to pay Lease Transaction Expenses.
Section 5.2. Procedures for Funding.
(a) Each Funding hereunder shall be made on the twenty-sixth
(26th) day of each calendar month during the Construction Period, provided that
if such day is not a Business Day the date of such Funding shall be the
immediately succeeding Business Day. Not less than three (3) Business Days prior
to the date that a Funding is to be made, the Construction Agent shall deliver
to the Collateral Agent (to be forwarded by the Collateral Agent to the Agent,
the Lenders and the Certificateholders), a Requisition as described in Section
4.2 hereof. Such Requisition, upon receipt by the Collateral Agent, shall
constitute a Notice of Borrowing under the Credit Agreement and a Notice of
Funding under the Trust Agreement and shall constitute a representation and
warranty by the Construction Agent and each other Credit Party that as of the
date of the Funding to which such Requisition relates (i) each of the
representations and warranties set forth in Section 6.2 of this Agreement,
including, without limitation, the Incorporated Representations and Warranties,
are true and correct (unless such relate solely to an earlier point in time),
(ii) each of the conditions precedent to such Funding set forth in Article 5 of
this Agreement are satisfied, and (iii) the Construction Agent has no knowledge
or reasonable expectation that the aggregate costs for the Property shall exceed
the original Construction Budget (or exceed the Construction Budget as modified
in accordance with the Operative Agreements) for the Property or that Completion
for the Property shall not occur on or prior to the Construction Period
Termination Date.
<PAGE> 9
(b) Each Requisition shall: (i) be irrevocable, (ii) request a Funding
in an amount that is not in excess of the total aggregate of the Available
Funding Commitment at such time, and (iii) request that the Certificateholders
make Certificateholder Advances and that the Lenders make Advances to the Lessor
for the payment of Property Costs that have previously been incurred or are to
be incurred on the date of such Funding to the extent such 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 or 5.4, as applicable, on the date on which a requested Funding is
to be made, (i) the Lenders shall make Advances based on their respective Lender
Commitments to the Lessor in an aggregate amount equal to ninety-seven percent
(97%) of the requested Funding specified in the Requisition (with the Tranche A
Lenders making Advances equal to eighty-two percent (82%) of the requested
Funding and the Tranche B Lenders making Advances equal to fifteen percent (15%)
of the requested Funding), up to the aggregate of the Available Lender
Commitment, (ii) the Certificateholders shall make Certificateholder Advances
based on their respective Certificateholder Commitments in an aggregate amount
equal to three percent (3%) of the requested Funding specified in such
Requisition, up to the aggregate of the Available Certificateholder Commitment;
and (iii) the total amount of such Funding made on such date shall (x) be used
by the Lessor to pay Property Costs and Lease Transaction Expenses specified in
such Requisition within ten (10) Business Days of the receipt by the Lessor of
such requested Funding or (y) be advanced by the Lessor on the date of such
requested Funding to the Construction Agent or the Lessee to pay Property Costs
described in such Requisition within ten (10) Business Days of the receipt by
the Lessor of such requested Funding. Notwithstanding that the Related Documents
state that a requested Funding shall be directed to the Lessor, each requested
Funding shall in fact be directed to the Collateral Agent (for the benefit of
the Lessor) and applied by the Collateral Agent (for the benefit of the Lessor)
pursuant to the requirements imposed on the Lessor or the Construction Agent, as
applicable, under the Related Documents.
(d) With respect to a Funding obtained by the Lessor to pay for Property
Costs or Lease Transaction Expenses and not expended by the Lessor for such
purpose on the date of such Funding, such amounts shall be held by the
Collateral Agent on behalf of the Lessor until the applicable payment date.
Section 5.3. Conditions Precedent Relating to the Effective Date. The
obligations (i) of the Lessor, the Agent, the Lenders and the Certificateholders
to enter into the transactions contemplated by this Agreement on the Effective
Date, including, without limitation, the obligation to execute and deliver the
applicable Related Documents to which each is a party on the Effective Date, and
(ii) of the Certificateholders to make Certificateholder Advances and of the
Lenders to make Advances in order to pay Lease Transaction Expenses, in each
case are subject to the satisfaction or waiver of the following conditions
precedent on or prior to the Effective Date (to the extent such conditions
precedent require the delivery of any agreement, certificate, instrument,
<PAGE> 10
memorandum, legal or other opinion, appraisal, commitment, title insurance
commitment, lien report or any other document of any kind or type, such shall be
in form and substance reasonably satisfactory to the Collateral Agent):
(a) the correctness of the representations and warranties of the parties
to this Agreement contained herein, in each of the other Related Documents and
each certificate delivered pursuant to any Related Document (including without
limitation the Incorporated Representations and Warranties) on the Effective
Date;
(b) the performance by the parties to this Agreement of their respective
agreements contained herein and in the other Related Documents to be performed
by them on or prior to the Effective Date;
(c) the satisfaction of each of the conditions set forth in Article V of
the Credit Agreement, Article IIIC of the Trust Agreement and Article V of the
Revolving Credit Agreement;
(d) the Collateral Agent shall have received a fully executed
counterpart copy of the Requisition for the Funding to be made on the Effective
Date, appropriately completed;
(e) title to the Property shall conform to the representations and
warranties set forth in Section 6.2(j) hereof;
(f) there shall not have occurred and be continuing any Potential
Default or Event of Default under any of the Related Documents (other than a
Potential Default that would be cured upon application of the proceeds of such
Funding, provided such proceeds are so applied or provision reasonably
satisfactory to the Collateral Agent shall have been made such that such
proceeds will be so applied), and no Potential Default or Event of Default under
any of the Related Documents will have occurred after giving effect to the
Funding requested by such Requisition;
(g) the Construction Agent shall have delivered to the Collateral Agent
title insurance commitments to issue policies respecting the Property in favor
of the Lessor and the Collateral Agent from the Title Company, with such title
exceptions thereto as are reasonably acceptable to the Collateral Agent;
(h) the Construction Agent shall have delivered to the Collateral Agent
the Environmental Site Assessment;
(i) the Construction Agent shall have delivered to the Collateral Agent
the Survey;
<PAGE> 11
(j) the Construction Agent shall have delivered to the Collateral Agent
evidence reasonably satisfactory to the Collateral Agent of the various Lease
Transaction Expenses;
(k) the Construction Agent shall have caused to be delivered to the
Collateral Agent the Security Documents, all fully executed and in recordable
form;
(l) with respect to each Funding, the Available Funding Commitment will
be sufficient to pay all amounts payable therefrom (after giving effect to any
increase in the Lender Commitments and the Certificateholder Commitments
pursuant to Section 5.10 hereof).
(m) the Construction Agent shall have caused a lease memorandum (or
short form lease) to be delivered to the Collateral Agent for the Ground
Sublease and the Landlord Waiver;
(n) the Construction Agent shall have delivered to the Collateral Agent
the Construction Budget;
(o) the Construction Agent shall cause (i) Uniform Commercial Code lien
searches, tax lien searches and judgment lien searches regarding the Lessee to
be conducted (and copies thereof to be delivered to the Collateral Agent) in
such jurisdictions as determined by the Collateral Agent by a nationally
recognized search company acceptable to the Collateral Agent and (ii) the liens
referenced in such lien searches which are objectionable to the Collateral Agent
to be either removed or otherwise handled in a manner satisfactory to the
Collateral Agent;
(p) all taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of the Related Documents and/or
documents related thereto shall have been paid by or on behalf of the Lessor or
provisions for such payment shall have been made to the satisfaction of the
Collateral Agent;
(q) in the opinion of the Collateral Agent and its counsel, the
transactions contemplated by the Related Documents do not and will not subject
the Collateral Agent, the Lessor or any of the Secured Party to any violation of
Law;
(r) each of the Related Documents to be entered into on such date shall
have been duly authorized, executed and delivered by the parties thereto, and
shall be in full force and effect, and the Collateral Agent shall have received
a fully executed copy of each of the Related Documents;
(s) since the date of the last audited financial statements of Parent
Guarantor, there shall not have occurred any event, condition or state of facts
which shall have or could reasonably be expected to have a Material Adverse
Effect;
<PAGE> 12
(t) the Collateral Agent shall have received an Officer's Certificate of
the Lessor dated as of the Effective Date in the form attached hereto as Exhibit
B, stating that (i) each and every representation and warranty of the Lessor
contained in the Related Documents to which it is a party is true and correct on
and as of the Effective Date, (ii) each Related Document 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 Related Document required to be performed or complied
with by it on or prior to the Effective Date;
(u) the Collateral 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 C or in such other form as is
acceptable to the Collateral Agent, attaching and certifying as to (A) the
signing resolutions duly authorizing the execution, delivery and performance by
the Lessor of each of the Related Documents to which it is or will be a party,
(B) its articles of association or other equivalent charter documents and its
by-laws, as the case may be, certified as of a recent date by an appropriate
officer of the Trust Company and (C) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Related Documents to which
it is a party and (ii) a good standing certificate from the Office of the
Comptroller of the Currency; and
(v) the Construction Agent shall have caused (i) tax lien searches and
judgment lien searches regarding each Credit Party to be conducted (and copies
thereof to be delivered to the Collateral Agent) in such jurisdictions as
determined by the Collateral Agent by a nationally recognized search company
acceptable to the Collateral Agent and (ii) the liens referenced in such lien
searches which are objectionable to the Collateral Agent to be either removed or
otherwise handled in a manner satisfactory to the Collateral Agent.
Section 5.4. Conditions Precedent Relating to Fundings after the
Effective Date and prior to the Completion Date. The obligations of the
Certificateholders to make Certificateholder Advances and of the Lenders to make
Advances in connection with all requests for Fundings subsequent to the
Effective Date are subject to the satisfaction or waiver of the following
conditions precedent (to the extent such conditions precedent require the
delivery of any agreement, certificate, instrument, memorandum, legal or other
opinion, appraisal, commitment, title insurance commitment, lien report or any
other document of any kind or type, such shall be in form and substance
reasonably satisfactory to the Collateral Agent):
(a) the correctness on the date of such Funding of the representations
and warranties of the parties to this Agreement contained herein, in each of the
other Related Documents and in each certificate delivered pursuant to any
Related Document (including without limitation the Incorporated Representations
and Warranties) as of the date given or made or deemed given or made;
<PAGE> 13
(b) the performance by the parties to this Agreement of their respective
agreements contained herein and in the other Related Documents to be performed
by them on or prior to each such date;
(c) the satisfaction of each of the conditions set forth in Section 5.02
of the Credit Agreement and Section 3.02C of the Trust Agreement;
(d) the Collateral Agent shall have received a fully executed
counterpart of the Requisition for such Funding, appropriately completed;
(e) based upon the Construction Budget the Available Funding Commitment
will be sufficient to complete the improvements and to purchase and install the
Equipment in accordance with the Plans and Specifications;
(f) there shall not have occurred and be continuing any Potential
Default or Event of Default under any of the Related Documents (other than a
Potential Default that would be cured upon application of the proceeds of such
Funding, provided such proceeds are so applied or provision reasonably
satisfactory to the Collateral Agent shall have been made such that such
proceeds will be so applied), and no Potential Default or Event of Default under
any of the Related Documents will have occurred after giving effect to such
Funding;
(g) 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, and there shall be no title change or
exception objectionable to the Collateral Agent in its reasonable discretion;
(h) the Construction Agent shall have delivered to the Collateral Agent
copies of all material amendments to and modifications of the Plans and
Specifications;
(i) the Construction Agent shall have delivered to the Collateral Agent
evidence reasonably satisfactory to the Collateral Agent of any Transaction
Expenses and other fees, expenses and disbursements referenced in Section 7.1(b)
that are to be paid with such Funding;
(j) the Construction Agent shall have delivered, or caused to be
delivered to the Collateral Agent, invoices, bills of sale or other documents
reasonably acceptable to the Collateral Agent, in each case with regard to any
Equipment or other components of such Property then being acquired with the
proceeds of such Funding and naming the Lessor as purchaser and transferee;
(k) since the date of the last audited financial statements of Parent
Guarantor, there shall not have occurred any event, condition or state of facts
which shall have or could reasonably be expected to have a Material Adverse
Effect; and
<PAGE> 14
(l) in the good faith opinion of the Collateral Agent and its counsel,
the transactions contemplated by the Related Documents do not and will not
subject the Collateral Agent, the Lessor, the Lenders, the Agent or the
Certificateholders to any violation of Law.
Section 5.5. Additional Reporting and Delivery Requirements on
Completion Date. On or prior to the Completion Date, the Construction Agent
shall deliver to the Collateral Agent an Officer's Certificate in the form
attached hereto as Exhibit D or in such other form as is acceptable to the
Collateral Agent specifying (a) the Completion Date, (b) the aggregate Property
Cost, (c) detailed, itemized documentation supporting the asserted Property Cost
and (d) that all representations and warranties of the Construction Agent and
Lessee in each of the Related Documents and each certificate delivered pursuant
thereto (including, without limitation, the Incorporated Representations and
Warranties) are true and correct in all material respects as of the Completion
Date. The Collateral Agent shall have the right to contest the information
contained in such Officer's Certificate. Furthermore, on or prior to the
Completion Date, the Construction Agent shall deliver or cause to be delivered
to the Collateral Agent (unless previously delivered to the Collateral Agent)
originals of the following, each of which shall be in form and substance
acceptable to the Collateral Agent, in its reasonable discretion: (x) a title
insurance endorsement regarding the title insurance policy delivered in
connection with the requirements of Section 5.3(g), but only to the extent such
endorsement is necessary to provide for insurance in an amount at least equal to
the maximum total Property Cost and, if endorsed, the endorsement shall not
include a title change or exception objectionable to the Collateral Agent; (y)
an as-built survey for the Property, (z) insurance certificates respecting the
Property as required hereunder and under the Master Lease.
Section 5.6. The Construction Agent Delivery of Construction Budget
Modifications. The Construction Agent covenants and agrees to deliver to the
Collateral Agent each calendar quarter notification of any and all modifications
to any Construction Budget regarding the Property; provided no Construction
Budget may 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 Section 5.4(g) of this
Agreement and (b) after giving effect to any such increase, the projected
Property Cost is less than or equal to $65,000,000 or such greater amount as the
Total Commitments shall have been increased pursuant to Section 5.10 hereof.
Section 5.7. Restrictions on Liens. On the Effective Date, the
Construction Agent shall cause the Property to be free and clear of all Liens
other than Permitted Liens. On the date the Property is either sold to a third
party in accordance with the terms of the Related Documents or, on the date the
Lessee exercises its right to surrender the Property in accordance with Section
13(b) of the Master Lease, the Lessee shall cause the Property to be free and
clear of all Liens (other than Lessor Liens and such other Liens that are
expressly set forth as title exceptions on the title commitment issued under
Section 5.3(g) with respect to the Property).
<PAGE> 15
Section 5.8 Joinder Agreement Requirements. Each Domestic Subsidiary
formed or acquired subsequent to the Effective Date that is not an Inactive
Subsidiary shall become a Subsidiary Guarantor and shall satisfy the following
conditions within thirty (30) days after the formation or acquisition of such
Domestic Subsidiary:
(a) such Domestic Subsidiary shall execute and deliver to the Collateral
Agent a Joinder Agreement in the form attached hereto as Exhibit E;
(b) such Domestic Subsidiary shall have delivered to the Collateral
Agent (x) an Officer's Certificate of such Domestic Subsidiary in the form
attached hereto as Exhibit F, (y) a certificate of the Secretary or an Assistant
Secretary of such Domestic Subsidiary in the form attached hereto as Exhibit G
and (z) good standing certificates from the respective states where such
Domestic Subsidiary is incorporated or organized and where the principal place
of business of such Domestic Subsidiary is located as to its good standing in
each such state;
(c) such Domestic Subsidiary shall have delivered to the Collateral
Agent an opinion of counsel (acceptable to the Collateral Agent) in the form
attached hereto as Exhibit H; and
(d) the Collateral Agent shall have received such other documents,
certificates and information as the Collateral Agent shall have reasonably
requested.
Section 5.9. Payments. All payments of principal of and interest on
Advances, all payments of the amount of any yield on Certificateholder Advances
and other amounts to be made by the Construction Agent or the Lessee under this
Agreement or any other Related Documents (excluding Excepted Payments which
shall be paid directly to the party to whom such payments are owed) shall be
made to the Collateral Agent at the office designated by the Collateral Agent
from time to time in Dollars and in immediately available funds, without setoff,
deduction, or counterclaim. Subject to the definition of "Interest Period" and
"LIBOR Period" in Appendix A attached hereto, whenever any payment under this
Agreement or any other Related Documents shall be stated to be due on a day that
is not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time in such case shall be included in the
computation of interest, yield and fees payable pursuant to the Related
Documents.
Section 5.10. Increase in Total Funding Commitments; Modifications of
Schedules Reflecting Certificateholder Commitments and Lender Commitments. In
the event that, at any time the Construction Agent or the Collateral Agent shall
determine that, as a result of any modifications to the Plans and
Specifications, any modifications to the Construction Budget, any delays in
construction of the Improvements or otherwise, the Lessee may deliver to the
Collateral Agent a request to increase the Total Funding Commitments, which
request shall specify the revised Project Cost and the amount by which the Total
Funding Commitments are requested to be increased, and the Collateral Agent
shall promptly forward to all of the Lenders and Certificateholders a copy of
such request. In
<PAGE> 16
the event that (a) the Majority Lenders and the Majority Certificateholders
consent to any such increase, and (b) existing Lenders and existing
Certificatholders agree to increase their respective Lender Commitments or
Certificateholder Commitments in an aggregate amount equal to the aggregate
amount of the requested increase or prospective Lenders and prospective
Certificateholders provide to the Agent and the Owner Trustee irrevocable
binding commitments to provide an aggregate amount of Lender Commitments and
Certificateholder Commitments equal to or in excess of the amount of such
increase, then the Lender Commitments or the Certificateholder Commitments shall
be increased by the amount so requested; provided, however, that no increase in
the Lender Commitments shall exceed an amount equal to 97% of the sum of the
amount of such increase in the Lender Commitments plus the amount of any
increase in the Certificateholder Commitments; provided, further, however, that
commitments in amount in excess of the amounts requested are received by the
Agent and the Owner Trustee, the amount of such increase in the Total Funding
Commitment shall be allocated by the Collateral Agent to such existing Lenders
and existing Certificateholders, or such prospective Lenders or prospective
Certificateholders as the Collateral Agent shall determine in its sole and
absolute discretion. To the extent the Certificateholder Commitments or the
Lender Commitments are increased in accordance with the terms of the Related
Documents, then the Collateral Agent shall prepare and distribute an amendment
to the Trust Agreement and the Credit Agreement reflecting such increase which,
in each case, shall be binding and enforceable against all parties (absent
manifest error).
Section 5.11. Minimum Size of Fundings. The Certificateholders and the
Lenders shall have no obligation to make Advances or Certificateholder Advances
unless comprising requested Fundings equal to or exceeding the lesser of (a)
$250,000, (b) the amount of the Available Funding Commitments, or (c) the amount
of the Final Advance.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES.
Section 6.1. Representations and Warranties of the Borrower. As of the
Effective Date and the date of each Funding, the Trust Company in its individual
capacity and as the Owner Trustee, as indicated, represents and warrants to each
of the other parties hereto as follows, provided, that the representations in
the following paragraphs (g), (j) and (k) are made solely in its capacity as the
Owner Trustee:
(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 Certificateholders) 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 Related Documents 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
<PAGE> 17
delivered by it in connection with or as contemplated by each such Related
Document to which the 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 Related Document 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
Certificateholders) 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 law, rule,
regulation, license, judgment, order or decree of any government, governmental
body or court and 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
the Owner Trustee, to perform its obligations under the Related Documents to
which it is a party or (iv) does or will require any Governmental Action by any
government or governmental or public body or 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 Certificateholders, each other Related
Document to which the Trust Company or the Owner Trustee, as the case may be, is
or will be a party have been, or on or before the Effective Date 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 Related Document 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;
(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 the Owner Trustee, to perform its obligations under the Related
Documents to which it is a party or would question the validity or
enforceability of any of the Related Documents 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 Master Lease, the Construction Agency Agreement or its
interest in any Property or any portion thereof, except in accordance with the
Related Documents;
(f) No Potential Default of Event of Default under the Related Documents
attributable to it has occurred and is continuing;
<PAGE> 18
(g) 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 Trust
Estate or the Certificates, Tranche A Notes or Tranche B Notes, or in any
similar security relating to the 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 Tranche A Notes and Tranche B 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 Trust Estate or the Notes to the
provisions of Section 5 of the Securities Act or require the qualification of
any Related Document under the Trust Indenture Act of 1939, as amended;
(h) The Owner Trustee's principal 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 Related Document are
kept are located at 79 South Main Street, Salt Lake City, Utah 84111;
(i) The Owner Trustee is not engaged principally in, and does not have
as one (1) 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
Certificateholder Advances 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 of Governors of the
Federal Reserve System of the United States;
(j) The Owner Trustee is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act;
(k) Each Property is free and clear of all Lessor Liens attributable to
the Trust Company; and
(l) The Owner Trustee is a party to no documents, instruments or
agreements other than the Related Documents to which it is a party and any other
documents delivered by the Owner Trustee in connection with the Related
Documents.
Section 6.2. Representations and Warranties of the Construction Agent
and the Lessee. As of the Effective Date, the date of each Funding, the date
each Domestic Subsidiary becomes a Credit Party and the Rent Commencement Date,
each Credit Party represents and warrants to each of the other parties hereto
that:
<PAGE> 19
(a) The Incorporated Representations and Warranties are true and correct
(unless such relate solely to an earlier point in time);
(b) Each Credit Party (i) is duly organized, validly existing and in
good standing under the laws of the state of its incorporation, (ii) has the
corporate power, authority and legal right to own or operate its properties or
to lease the properties it operates and to conduct the business in which it is
currently engaged, and (iii) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification, except where such failure to qualify could not have a Material
Adverse Effect.
(c) Each Credit Party has the corporate power, authority and legal right
to make, deliver and perform this Agreement and the other Related Documents to
which it is a party and has taken on necessary corporate action to authorize the
execution, deliver and performance of this Agreement and the other Related
Documents to which it is a party. No consent of any other Person (including,
without limitation, the stockholders and creditors of any Credit Party), and no
authorization of, notice to, or other act by any governmental authority, agency
or instrumentality is required in connection with (i) the execution, delivery,
performance, validity or enforceability of this Agreement or any other Related
Document to which such Credit Party is a party, (ii) the acquisition of,
construction of the Improvements on and installation of the Equipment at the
Property in accordance with the Plans and Specifications, the completion of
construction of the Improvements and the occupancy of and the operation leasing
and subleasing of the Property, except as has been or will be obtained in order
to satisfy the obligations of any Credit Party hereunder or under any other
Related Document, or (iii) any Advance, Certificateholder Advance or Revolving
Credit Advance made pursuant to the terms of the Related Documents. This
Agreement and the other Related Documents to which such Credit Party is a party
have been duly executed and delivered by such Credit Party, and this Agreement
and the other Related Documents to which such Credit Party is a party constitute
the legal, valid and binding obligation of such Credit Party, enforceability
against such Credit Party in accordance with its terms, except that such
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally or by general principles of equity.
(d) The execution, delivery and performance by each Credit Party of this
Agreement and the other Related Documents to which it is a party will not
violate any provision of any existing Law or regulation applicable to such
Credit Party or any award, order or decree applicable to such Credit Party of
any court, arbitrator or governmental authority or the articles or certificate
of incorporation or by-laws of such Credit Party, or of any security issued by
such Credit Party or of any mortgage, indenture, lease, contract or other
agreement or undertaking to which such Credit Party is a party or by which such
Credit Party or any of its properties or assets may be bound.
<PAGE> 20
(e) Upon the execution and delivery of the Master Lease, (i) the Lessee
will have unconditionally accepted the Property subject to the Master Lease and
will have a valid and subsisting leasehold interest in the Property, subject
only to the Permitted Liens, and (ii) no offset will exist with respect to any
Rent or other sums payable under the Master Lease;
(f) Except as otherwise contemplated by the Related Documents, the
Construction Agent has not used the proceeds of any Advance or Certificateholder
Advance for any purpose other than the acquisition, installation and testing of
the Equipment, the design, permitting and construction of the Improvements in
accordance with the Plans and Specifications and the payment of Lease
Transaction Expenses; as of the date of each Funding the Construction Agent has
no knowledge or reasonable expectation that the aggregate costs for the Property
shall exceed the original Construction Budget (or exceed the Construction Budget
as modified in accordance with the Operative Agreements) for the Property or
that Completion for the Property shall not occur on or prior to the Construction
Period Termination Date;
(g) All information furnished by each Credit Party or its Subsidiaries
to the Collateral Agent, the Agent, the Owner Trustee, any Revolving Credit
Lender, any Lender or any Certificateholder for purposes of or in connection
with this Agreement or the transactions contemplated hereby is, true and
accurate 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 omit to
state any material fact necessary to make such information, taken as a whole,
not misleading;
(h) The principal place of business, chief executive office and office
of the Construction Agent and the Lessee where the documents, accounts and
records relating to the transactions contemplated by this Agreement and each
other Related Document are kept are located at 12744 San Fernando Road, Sylmar,
California 91342, and the states of formation and the chief executive offices of
each other Credit Party are located at the places set forth in Exhibit I;
(i) Each Credit Party is in all material respects in compliance with its
obligations under the Related Documents and there exists no Potential Default or
Event of Default under any of the Related Documents which is continuing and
which has not been cured within any cure period expressly granted under the
terms of the applicable Related Document or otherwise waived in accordance with
the applicable Related Document. No Potential Default or Event of Default will
occur under any of the Related Documents as a result of, or after giving effect
to, any Funding requested by a Requisition on the date of each Funding;
(j) The Lessor has good and insurable leasehold title to and a valid
leasehold interest in the Property enforceable against North Campus - University
Park Development Corporation and the Board of Trustees of California State
University, in accordance with the terms of Ground Sublease and the Landlord
Waiver, subject only to Permitted Liens;
<PAGE> 21
(k) No portion of the Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or other
applicable agency, or if the Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or other
applicable agency, then flood insurance has been obtained for the Property in
accordance with Section 10 of the Master Lease and in accordance with the
National Flood Insurance Act of 1968, as amended;
(l) The Property complies with all requirements for insurance set forth
in Section 10 of the Master Lease;
(m) The Property complies with all Legal Requirements as of such date
(including without limitation all zoning and land use laws and Environmental
Requirements), except to the extent that failure to comply therewith,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect;
(n) All utility services and facilities necessary for the construction
of the improvements on and the installation of the Equipment at the Property in
accordance with the Plans and Specifications, and thereafter for the operation
and use of the Property, (including without limitation gas, electrical, water
and sewage services and facilities) are available or will be constructed prior
to the Completion Date;
(o) At all times during the Construction Period and as of the Completion
Date, the acquisition, installation and testing of the Equipment and
construction of the Improvements on the Property shall have been performed in a
good and workmanlike manner, in accordance with the Plans and Specifications;
(p) (i) The Security Documents create, as security for the Secured
Obligations (as such term is defined in the Security Documents), valid and
enforceable Liens on all of the Collateral, in favor of the Collateral Agent,
for the benefit of the Secured Parties, as their respective interests appear in
the Related Documents. Upon recordation of the Security Documents in the real
estate recording office identified by the Credit Parties, the Lien created by
the Security Documents in the real property described therein shall be a
perfected first priority mortgage Lien on all of Lessor's right, title and
interest in the Property and Equipment in favor of the Collateral Agent, for the
benefit of the Secured Parties, as their respective interests appear in the
Related Documents. To the extent that the security interests in the portion of
the Collateral comprised of personal property can be perfected by filing in the
filing offices identified by the Credit Parties, upon filing of the Financing
Statements in such filing offices, the security interests created by the
Security Documents shall be perfected security interests in such personal
property in favor of the Collateral Agent, for the benefit of the Secured
Parties, as their respective interests appear in the Related Documents, subject
only to Permitted Liens;
(ii) The Trust Security Documents create, as security for the
obligations of the Lessor under the Related Documents, valid and enforceable
Liens on the Collateral described in the Trust Security Documents, in favor of
the Collateral Agent, and
<PAGE> 22
such Liens are subject to no other Liens other than Liens that are expressly set
forth as title exceptions on the title commitment issued under Section 5.3(e)
with respect to the Property.
(iii) Upon recordation of the memorandum of the Master Lease and
the memorandum of the Ground Sublease (or, in either case, a short form Master
Lease or Ground Sublease) in the real estate recording office identified by the
Construction Agent or the Lessee, the Lien created by the Master Lease in the
leasehold estate described therein shall be a perfected first priority mortgage
Lien on such leasehold estate in favor of the Lessor and the Collateral Agent as
the Lessor's assignee, for the benefit of the Agent, the Lenders, the
Certificateholders and the Owner Trustee, as their respective interests appear
in the Related Documents. To the extent that the security interests in the
portion of the Property comprised of personal property can be perfected by the
filing of the Lessor Financing Statements, upon filing of the Lessor Financing
Statements in the appropriate filing offices, the security interest created by
the Master Lease shall be a perfected security interest in such personal
property, subject only to Permitted Liens, in favor of the Lessor and the
Collateral Agent as the Lessor's assignee, for the benefit of the Agent, the
Lenders, the Certificateholders and the Owner Trustee, as their respective
interests appear in the Related Documents;
(q) The Plans and Specifications for the Property have been prepared in
accordance with all applicable Legal Requirements (including without limitation
all applicable Environmental Requirements and building, planning, zoning and
fire codes), except to the extent the failure to comply therewith, in the
aggregate, shall not have and could not reasonably be expected to have a
Material Adverse Effect. Upon completion of the Improvements for the Property in
accordance with the Plans and Specifications, such Improvements will be within
any and all building restriction lines and will not encroach in any manner onto
any adjoining land (except as permitted by express written easements, which have
been approved by the Collateral Agent if such approval is required under any of
the Related Documents);
(r) As of the Completion Date, the Property shall be improved in
accordance with the Plans and Specifications and in a good and workmanlike
manner and shall be operational;
(s) Each Domestic Subsidiary that is not an Inactive Subsidiary has
executed this Agreement in its capacity as a Subsidiary Guarantor; and
(t) The software and the hardware operated by each Credit Party are
capable of providing or being adapted to provide the ability to process dates or
store data within the twenty-first century or between the twentieth and
twenty-first century, or otherwise operate without error with respect to
twenty-first century dates in substantially the same manner and with the same
functionality as such software records, stores processes and presents such data
as of the date hereof ("Y2K Compliance"). All adaptations and replacements of
software and hardware required to achieve full Y2K Compliance will be
<PAGE> 23
completed on or before September 30, 1999, except where a failure to achieve
full Y2K Compliance will not have a Materially Adverse Effect.
ARTICLE 7. PAYMENT OF CERTAIN EXPENSES.
Section 7.1. Payment of Lease Transaction Expenses on or prior to
Completion Date.
(a) The Lessor agrees to pay or cause to be paid on the Effective Date,
all Lease Transaction Expenses, including, without limitation, all reasonable
fees, expenses and disbursements of counsel for the Lessor, the Collateral Agent
and the Agent in connection with the transactions contemplated by the Related
Documents, the initial fees and expenses of the Owner Trustee due and payable on
the Effective Date, all fees, taxes and expenses for the recording, registration
and filing of documents and all other reasonable fees, expenses and
disbursements incurred in connection the execution and delivery of the Related
Documents and the consummation of the transactions to be consummated on the
Effective Date; provided, however, the Lessor shall pay such amounts described
in this Section 7.1(a) only to the extent (i) such amounts are properly
described in a Requisition delivered on or before the Effective Date, (ii) funds
are made available by the Lenders and the Certificateholders in connection with
such Requisition in an amount sufficient to allow such payment and (iii) if any
such amounts relate to the Revolving Credit Agreement or the Revolving Credit
Notes, the portion thereof that is reasonably allocable to the Revolving Credit
Agreement and Revolving Credit Notes is deducted or excluded therefrom. On the
Effective Date after delivery and receipt of the Requisition referenced in
Section 4.2 hereof and satisfaction of the other conditions precedent for such
date, the Certificateholders shall make Certificateholder Advances and the
Lenders shall make Advances to the Lessor to pay for the Lease Transaction
Expenses referenced in this Section 7.1(a).
(b) Assuming no Event of Default or Potential Default (other than a
Potential Default that would be cured upon application of the proceeds of such
Funding, provided such proceeds are so applied or provision reasonably
satisfactory to the Collateral Agent shall have been made such that such
proceeds will be so applied) shall have occurred and be continuing, the Lessor
agrees on the date of any Funding and on the Completion Date to pay or cause to
be paid all Lease Transaction Expenses including, without limitation, all
reasonable fees, expenses and disbursements of counsel for the Lessor, the
Collateral Agent and the Agent in connection with the transactions contemplated
by the Related Documents and billed in connection with such Funding or the
Completion Date, all amounts described in Section 7.1(a) of this Agreement which
have not been previously paid, the fees and reasonable out-of-pocket expenses of
the Trust Company, all fees, expenses and disbursements incurred with respect to
the various items referenced in Sections 5.3, 5.4 and 5.5 (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 Funding or the Completion Date including,
without limitation, all expenses relating to and all fees, taxes and expenses
for
<PAGE> 24
the recording, registration and filing of documents; provided, however, the
Lessor shall pay such amounts described in this Section 7.1(b) only if (i) such
amounts are properly described in a Requisition delivered on the applicable
date, (ii) funds are made available by the Lenders and the Certificateholders in
connection with such Requisition in an amount sufficient to allow such payment
and (iii) if any such amounts relate to the Revolving Credit Agreement or the
Revolving Credit Notes, the portion thereof that is reasonably allocable to the
Revolving Credit Agreement and Revolving Credit Notes is deducted or excluded
therefrom. On the Effective Date, on the date of any Funding or the Completion
Date, after delivery of the applicable Requisition and satisfaction of the other
conditions precedent for such date, the Certificateholders shall make
Certificateholder Advances and the Lenders shall make Advances to the Lessor to
pay for the Lease Transaction Expenses referenced in this Section 7.1(b).
Section 7.2. Lease Transaction Expenses. Each of the following, if due
and payable prior to the Completion Date, shall constitute Lease Transaction
Expenses payable by the Lessor to the extent provided in this Section 7.1
hereof: (a) the $5,000 initial fee payable to the Trust Company (for its
individual account) on the Effective Date, the $5,000 annual fee payable to the
Trust Company (for its individual account) on the Effective Date and on each
anniversary thereof, and all reasonable expenses of the Owner Trustee and any
co-trustees (including without limitation reasonable counsel fees and expenses)
or any successor owner trustee or co-trustee, for acting as the owner trustee
under the Trust Agreement, (b) all reasonable costs and expenses incurred by the
Credit Parties, the Collateral Agent, the Syndication Agent, the Agent and the
Lessor in connection with the negotiation, preparation, execution and delivery
of the Related Documents and matters incidental to the financing provided under
the Credit Agreement and the Trust Agreement (including, without limitation, all
reasonable fees and expenses of counsel to the Credit Parties, the Collateral
Agent, the Agent, the Syndication Agent and the Lessor and any consultants or
other experts retained by any of the foregoing in connection therewith), (c) all
reasonable costs and expenses incurred by the Credit Parties, the Collateral
Agent, the Agent, the Syndication Agent and the Lessor in connection with the
initial syndication of the Lender Commitments and the Certificateholder
Commitments (including, without limitation, the reasonable fees and expenses of
counsel to the Credit Parties, the Collateral Agent, the Agent, the Syndication
Agent and the Lessor and any consultants or other experts retained by any of the
foregoing in connection therewith), (d) all reasonable costs and expenses
incurred by the Credit Parties, the Collateral Agent, the Agent and the Lessor
in entering into any future amendments, modifications, supplements, restatements
or replacements with respect to any of the Related Documents, whether or not
such amendments, modifications, supplements, restatements or replacements are
ultimately entered into, or giving or withholding of waivers or consents hereto
or thereto (including, without limitation, all reasonable fees and expenses of
counsel to the Credit Parties, the Collateral Agent, the Agent and the Lessor
and any consultants or other experts retained by the any of the foregoing in
connection therewith), (e) all reasonable costs and expenses incurred by the
Collateral Agent, the Agent, the Lenders, the Certificateholders and the Lessor
in connection with any exercise of remedies under any Related Document or any
purchase of the Property by the Construction Agent, the Lessee
<PAGE> 25
or any third party (including, without limitation, all reasonable fees and
expenses of counsel to any of the foregoing and any consultants or other experts
retained by any of the foregoing in connection therewith), and (f) all
reasonable costs and expenses incurred by the Collateral Agent, the Agent, the
Lenders, the Certificateholders or the Lessor in connection with any transfer or
conveyance of the Property, whether or not such transfer or conveyance is
ultimately accomplished (including, without limitation, the reasonable fees and
expenses of counsel to the Collateral Agent, the Agent, the Lenders, the
Certificateholders and the Lessor and any consultants or other experts retained
by any of the foregoing in connection therewith). All Lease Transaction Expenses
payable after the Completion Date shall be paid or caused to be paid by the
Lessee.
Section 7.3. Expenses under Revolving Credit Agreement. MiniMed agrees
to pay (a) all cost and expenses of the Revolving Credit Lenders and the Agent
in connection with negotiation, preparation, execution and delivery of the
Revolving Credit Agreement and the Revolving Credit Notes, (b) all reasonable
costs and expenses incurred by the Collateral Agent, the Agent and the
Syndication Agent in connection with the initial syndication of the Revolving
Credit Commitments, (c) all reasonable costs and expenses incurred by the
Revolving Credit Lenders and the Agent in connection with any future amendments,
modifications, supplements, restatements or replacements with respect to the
Revolving Credit Agreement or in the Revolving Credit Notes, whether or not such
amendments, modifications, supplements, restatements or replacements are
ultimately entered into, or giving or withholding of waivers or consents hereto
or thereto, (d) all reasonable costs and expenses incurred by the Revolving
Credit Lenders and the Agent in connection with any exercise of remedies under
the Revolving Credit Agreement, Revolving Credit Notes or any of the Security
Documents, in each of the cases described in clauses (a) through (d) inclusive,
including, without limitation, all reasonable fees and expenses of counsel to
the Agent and, in the case of clause (d) above, the Revolving Credit Lenders,
and any consultants or other experts retained by the Agent from time to time in
connection therewith.
<PAGE> 26
ARTICLE 8. OTHER COVENANTS AND AGREEMENTS.
Section 8.1. Cooperation with the Construction Agent or the Lessee. The
Certificateholders, the Lenders, the Lessor (at the direction of the Majority
Secured Parties), the Agent and the Collateral Agent shall, at the expense of
and to the extent reasonably requested by the Construction Agent or the Lessee
(but without assuming additional liabilities on account thereof and only to the
extent such is acceptable to the Certificateholders, the Lenders, the Lessor (at
the direction of the Majority Secured Parties), the Agent and the Collateral
Agent in their reasonable discretion), cooperate with the Construction Agent or
the Lessee in connection with the Construction Agent or the Lessee satisfying
its obligations contained under the Related Documents including without
limitation at any time and from time to time, promptly and duly executing and
delivering any and all such further instruments, documents and financing
statements (and continuation statements related thereto).
Section 8.2. Covenants of the Owner Trustee and the Certificateholders.
Each of the Owner Trustee and the Certificateholders hereby agrees that so long
as this Agreement is in effect:
(a) Neither the Owner Trustee (in its trust capacity or in its
individual capacity) nor any Certificateholder will create or permit to exist at
any time, and each of them 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 Property attributable to it; provided, however, that the
Owner Trustee and the Certificateholders 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 materially and adversely affect the rights of the Lessee under the Master
Lease and the other Related Documents or 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, the 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 Certificateholders' rights under
the Trust Agreement Collateral to remove the Trust Company acting as the Owner
Trustee (after consent to such removal by the Agent as provided in the Trust
Agreement), each of the Owner Trustee and the Certificateholders hereby agrees
with the Lessee and the Collateral 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)
<PAGE> 27
to comply with all of the terms of the Trust Agreement, the nonperformance of
which would adversely affect such party;
(c) The Trust Company or any successor may resign or be removed by the
Certificateholders as the Owner Trustee, a successor Owner Trustee may be
appointed and become the Owner Trustee under the Trust Agreement, only in
accordance with the provisions of Article IX of the Trust Agreement;
(d) The Trust Company, in its capacity as the 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 or enter into any contracts or agreements, other than pursuant to or
under the Related Documents;
(e) No Certificateholder will instruct the Owner Trustee to take any
action in violation of the terms of any Related Document;
(f) No Certificateholder 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 Certificateholder 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
Collateral Agent if the Owner Trustee's principal 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) The Owner Trustee shall take or refrain from taking such actions and
grant or refrain from granting such approvals with respect to the Related
Documents or the Property, in each case as directed in writing by the Collateral
Agent (until such time as the Advances are paid in full, and then by the
Majority Certificateholders); provided, however, that notwithstanding the
foregoing provisions of this subparagraph (h) the Owner Trustee acknowledges,
covenants and agrees that it shall act or refrain from acting, regarding each
matter requiring the consent of a particular Secured Party without the consent
of such Secured Party or the consent of all Secured Parties with the consent of
all such Secured Parties as provided in Section 14.2, until it has received the
approval of each Lender and each Certificateholder and each Revolving Credit
Lender affected by such matter; and
Section 8.3. Credit Party Covenants, Consent and Acknowledgment.
<PAGE> 28
(a) Each Credit Party acknowledges and agrees that the Owner Trustee,
pursuant to the terms and conditions of the Security Documents, shall create
Liens respecting the various personal property, fixtures and real property
described therein in favor of the Collateral Agent. Each Credit Party hereby
irrevocably consents to the creation, perfection and maintenance of such Liens
until such Liens are subject to release in accordance with this Agreement and
the other Related Documents. 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 Related Documents 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) The Lessor hereby instructs each Credit Party, and each Credit Party
hereby acknowledges and agrees, that until such time as the Advances and the
Certificateholder Advances are paid in full and the Liens evidenced by the
Security Documents have been released (i) any and all Rent (excluding Excepted
Payments which shall be payable to each Person entitled thereto) and any and all
other amounts of any kind or type under any of the Related Documents due and
owing or payable to any Person shall instead be paid directly to the Collateral
Agent (excluding Excepted Payments which shall be payable to each Person
entitled thereto) or as the Collateral Agent may direct from time to time for
allocation and distribution in accordance with the procedures set forth in
Article 12 hereof, (ii) all rights of the Lessor under the Master Lease shall be
exercised by the Collateral Agent and (iii) each Credit Party shall cause all
notices, certificates, financial statements, communications and other
information which are delivered, or are required to be delivered, to the
Collateral Agent for the benefit of the Lessor.
(c) No Credit Party shall consent to or permit any amendment, supplement
or other modification of the terms or provisions of any Related Document except
in accordance with Section 14.2 of this Agreement.
(d) Each Credit Party hereby covenants and agrees that, except for
amounts payable as Basic Rent, any and all payment obligations owing from time
to time under the Related Documents (other than the Revolving Credit Agreement
and the Revolving Credit Notes) by any Credit Party or the Lessor to the
Collateral Agent, the Agent, any Lender, any Certificateholder or the Lessor
shall (without further action) be deemed to be Additional Rent obligations
payable by the Lessee and guaranteed by the other Credit Parties in accordance
with the terms and conditions of this Agreement and the other Related Documents.
(e) At any time the Lessor or the Collateral Agent is entitled under the
Related Documents to possession of the Property or Equipment or any component
thereof, each of the Construction Agent and the Lessee hereby covenants and
agrees, at its own cost and expense, to assemble and make the same available to
the Collateral Agent (on behalf of the Lessor).
<PAGE> 29
(f) The Lessee hereby covenants and agrees that as of the Completion
Date the Property Cost for the Property shall be not greater than $65,000,000 or
such greater amount to which the Total Funding Commitments shall have been
increased in accordance with Section 5.10 hereof.
(g) The Lessee hereby covenants and agrees that it shall give prompt
notice to the Collateral Agent if the Lessee's principal place of business or
chief executive office, or the office where the records concerning its accounts
or contract rights are kept, shall cease to be located at 12744 San Fernando
Road, Sylmar, California 91342 or if it shall change its name.
(h) Until all the obligations of the Credit Parties under the Related
Documents (other than indemnity claims unasserted as of the Expiration Date)
have been finally and indefeasibly paid and satisfied in full, the Lender
Commitments and the Certificateholder Commitments terminated and the Lease Term
and all Renewal Terms have expired or been terminated, then unless consent has
been obtained from the Majority Secured Parties, the Parent Guarantor and the
Lessee will furnish or cause to be furnished to each Certificateholder, each
Lender, the Agent and the Collateral Agent at their respective addresses
specified in Section 14.3 of this Agreement, or such other office as may be
designated by any such Certificateholder, Lender, Agent or the Collateral Agent
from time to time, contemporaneously with the delivery of the financial
information required to be delivered pursuant to Section 13(e)(i) or (ii) of the
Parent Guaranty, a compliance certificate duly executed by a Responsible Officer
of the Parent Guarantor in the form of Exhibit J.
(i) The Lessee hereby covenants and agrees that the rights of the Lessee
under this Agreement and the Master Lease shall not impair or in any way
diminish the obligations of the Construction Agent or the rights of the Lessor
under the Construction Agency Agreement.
(j) Each Credit Party hereby covenants and agrees to cause each Domestic
Subsidiary formed or acquired after the Effective Date that is not an Inactive
Subsidiary shall comply with the provisions of Section 5.8.
(k) Each Credit Party shall promptly notify the Collateral Agent, or
cause the Collateral Agent to be promptly notified, upon such Credit Party
gaining knowledge of the occurrence of any Potential Default or Event of
Default. In any event, such notice shall be provided to the Collateral Agent
within ten (10) days of when such Credit Party gains such knowledge.
(l) Until all of the obligations under the Related Documents, other than
indemnity claims unasserted as of the Final Date, have been finally and
indefeasibly paid and satisfied in full and the Lender Commitments and the
Certificateholder Commitments terminated, each Credit Party will observe,
perform and comply with all of the provisions,
<PAGE> 30
terms, covenants and obligations to be so observed, performed or complied with
by or on behalf of such Credit Party under the other Related Documents.
(m) The Lessee shall perform any and all obligations of the Lessor
under, and cause the Lessor to otherwise remain in full compliance with, the
terms and provisions of the Ground Sublease, if any; provided, however, that the
Lessee shall not be obligated to perform any obligations of the Lessor that are
not reasonably capable of being performed solely due to the gross negligence or
willful misconduct of the Lessor, the Agent or the Collateral Agent.
Section 8.4. Sharing of Certain Payments. Except for Excepted Payments,
the parties hereto acknowledge and agree that all payments due and owing by any
Credit Party to the Lessor under the Master Lease or any of the other Related
Documents shall be made by any Credit Party directly to the Collateral Agent as
more particularly provided in Section 12.1 hereof. The Lessor, the
Certificateholders, the Lenders the Agent, the Collateral Agent and the Credit
Parties acknowledge the terms of Section 12.1 of this Agreement regarding the
allocation of payments and other amounts made or received from time to time
under the Related Documents and agree that all such payments and amounts are to
be allocated as provided in Section 12 of this Agreement.
Section 8.5. Grant of Easements, etc. The Collateral Agent, the Agent,
the Lenders and the Certificateholders hereby agree that, so long as no Event of
Default or Potential Default shall have occurred and be continuing, the Lessor,
the Certificateholders, the Lenders, the Agent and the Collateral Agent hereby
consent to the following actions by Lessee, in the name and stead of Owner
Trustee, but at Lessee's sole cost and expense: (i) the grant of easements and
other rights in the nature of easements with respect to the Property (prior to
the Lien of the Deed of Trust) with respect to the use, repair, renovation or
maintenance of the Property; (ii) the release (free and clear of the Lien of the
Lien of the Deed of Trust) existing easements or other rights in the nature of
easements which are for the benefit of the Property, (iii) the execution and
delivery to any Person of any instrument appropriate to confirm or effect such
grants or releases, and (iv) filing and processing or execution and deliver, to
any Person of such other documents or materials in connection with the
acquisition, development, construction, testing or operation of the Property,
including without limitation reciprocal easement agreements, construction
contracts, operating agreements, development agreements, plats, replats or
subdivision documents; provided, that in each case the Lessee shall have
delivered to the Owner Trustee an officer's certificate stating that: (A) such
grant, release, dedication, transfer, filing or processing does not materially
impair the value or useful life of the Property and is reasonably necessary or
beneficial to the construction, use, maintenance, alteration, renovation,
restoration or improvement of the Property; and (B) the Lessee shall pay and
perform all obligations of the Owner Trustee under such grant, release,
dedication, transfer, filing or processing. Without limiting the effectiveness
of the foregoing, provided that no Event of Default or Potential Default shall
have occurred and be continuing, the Owner Trustee shall, upon request of the
Lessee, and at the Lessee's sole cost and expense, execute and deliver any
instrument necessary or appropriate to
<PAGE> 31
confirm any such grant, release, dedication or transfer to any Person permitted
under this Section 8.5.
Section 8.6. Release of Property, etc. If the Lessee shall at any time
purchase the Property pursuant to the Master Lease, or the Construction Agent
shall purchase any Property pursuant to the Construction Agency Agreement, then,
upon satisfaction by the Owner Trustee of its obligation to repay the Advances,
Certificateholder Advances and all other amounts owing to the Lenders and the
Certificateholders under the Related Documents, the Collateral Agent is hereby
authorized and directed to release such Property from the Liens created by the
Related Documents to the extent of its interest therein. In addition, upon the
termination of the Lender Commitments and the Certificateholder Commitments and
the payment in full of the Advances, the Certificateholder Advances and all
other amounts owing by the Owner Trustee and the Lessee hereunder or under any
other Related Document, the Collateral Agent is hereby authorized and directed
to release all of the Property from the Liens created by the Related Documents
to the extent of its interest therein. Upon request of the Owner Trustee
following any such release the Collateral Agent shall, at the sole cost and
expense of the Lessee, execute and deliver to the Owner Trustee and the Lessee
such documents, and shall take such other actions as are reasonably necessary or
advisable, as the Owner Trustee or the Lessee shall reasonably request to
evidence such release.
ARTICLE 9. CREDIT AGREEMENT AND TRUST AGREEMENT.
Section 9.1. The Construction Agent's and the Lessee's Credit Agreement
Rights. Notwithstanding anything to the contrary contained in the Credit
Agreement, the Agent, the Lenders, the Certificateholders, the Lease and
Construction Agent, the Credit Parties and the Owner Trustee hereby agree that,
unless a Potential Default or Event of Default has occurred and is continuing,
the Construction Agent or the Lessee, as the case may be, shall have the
following rights:
(a) the right to designate an account to which amounts funded
under the Credit Agreement shall be credited pursuant to Section 2.03(c)
of the Credit Agreement;
(b) the right to terminate or reduce the Lender Commitments
pursuant to Section 4.05(a) of the Credit Agreement or to request an
increase of the Lender Commitments pursuant to Section 4.05(b) of the
Credit Agreement;
(c) the right to exercise the conversion and continuation
options pursuant to Section 2.03 of the Credit Agreement; and
<PAGE> 32
(d) the right to consent to any assignment by a Lender to the
extent the Lessor has the right to consent to any such assignment
pursuant to Section 11.01(a) of the Credit Agreement.
Section 9.2. The Construction Agent's and the Lessee's Trust Agreement
Rights. Notwithstanding anything to the contrary contained in the Trust
Agreement, the Credit Parties, the Owner Trustee and the Certificateholders
hereby agree that, unless a Potential Default or Event of Default has occurred
and is continuing, the Construction Agent or the Lessee, as the case may be,
shall have the following rights:
(a) the right to designate an account to which amounts funded
under the Related Documents shall be credited pursuant to Section
3.03(c) of the Trust Agreement;
(b) the right to terminate or reduce the Certificateholder
Commitments pursuant to Section 3.05B(a) of the Trust Agreement or to
request an increase of the Certificateholder Commitments pursuant to
Section 3.05B(b) of the Trust Agreement;
(c) the right to exercise the conversion and continuation
options pursuant to Section 3.03(a) of the Trust Agreement; and
(d) the right to consent to any assignment by a
Certificateholder, to the extent that the Lessor has the right to
consent to any such assignment pursuant to Section 11.08 of the Trust
Agreement.
ARTICLE 10. THE COLLATERAL AGENT
Section 10.1. Appointment and Authorization. Each of the Lessor, the
Lenders, the Certificateholders, the Revolving Credit Lenders and the Agent
appoints ING (U.S.) Capital LLC to act as collateral agent in connection
herewith and with the Lien and other rights and remedies granted for the benefit
of the Secured Parties pursuant to the Security Documents, and authorizes the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement and the Related Documents as are delegated to the
Collateral Agent by the terms hereof or thereof, together with all such powers
as are reasonably incidental thereto. The Collateral Agent is further appointed
to provide notices under the Related Documents on behalf of the Owner Trustee
(as determined by the Collateral Agent, in its reasonable discretion), to
receive notices under the Related Documents on behalf of the Owner Trustee and
(subject to Section 9.2) to take such other action under the Related Documents
on behalf of the Owner Trustee as the Collateral Agent shall determine in its
reasonable discretion from time to time. The Collateral Agent hereby accepts
such appointments.
<PAGE> 33
Section 10.2. Same Rights as a Lender. The Collateral Agent and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Lessor or any Credit Party or any affiliate of the
foregoing as if it were not the Collateral Agent hereunder.
Section 10.3. Actions by the Collateral Agent. The obligations of the
Collateral Agent hereunder are only those expressly set forth herein and in the
other Related Documents. As to any matters not expressly provided for by this
Agreement, the Collateral Agent shall not be required to exercise any discretion
or take any action on behalf of the Secured Parties, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Secured Parties,
and such instructions shall be binding upon all Secured Parties; provided,
however, that the Collateral Agent shall not be required to take any action
which exposes the Collateral Agent to personal liability or which is contrary to
this Agreement or applicable law. The Collateral Agent agrees to give to each
Secured Party prompt notice of each notice given to it by the Lessor or any
Credit Party pursuant to the terms of this Agreement or the Related Documents.
Without limiting the generality of the foregoing, the Collateral Agent shall not
be required to take any action with respect to any Potential Default or Event of
Default, except as expressly provided in this Article 10.
Section 10.4. Consultation with Experts. The Collateral Agent may
consult with legal counsel (who may be counsel for the Lessor or any Credit
Party), independent public
accountants and other experts selected by it and, as between the Collateral
Agent and the Secured Parties, shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
Section 10.5. Liability. Neither the Collateral Agent nor any of its
directors, officers, agents or employees shall be liable to any Secured Party
for any action taken or not taken by it in connection herewith or with any
Related Document (a) with the consent or at the request of the Majority Secured
Parties or (b) in the absence of its own gross negligence or willful misconduct.
Neither the Collateral Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify: (i) any statement, warranty or representation made by the Lessor or
any Credit Party in connection with this Agreement or any Related Document; (ii)
the performance or observance of any of the covenants or agreements of the
Lessor or the Credit Parties herein or in any Related Document; (iii) the
satisfaction of any condition specified in Article 5, except receipt of items
required to be delivered to the Collateral Agent; or (iv) as between the
Collateral Agent and the Secured Parties, the validity, effectiveness or
genuineness of this Agreement, any Related Document or any other instrument or
writing furnished in connection herewith. The Collateral Agent shall not incur
any liability by acting in reliance upon any notice, consent, certificate,
statement or other writing (which may be a bank wire, facsimile, telex or
similar writing) reasonably believed by it to be genuine or to be signed by the
proper party or parties.
Section 10.6. Indemnification. Each of the Lenders, the
Certificateholders and the Revolving Credit Lenders shall, ratably in accordance
with its Commitment Percentage,
<PAGE> 34
indemnify the Collateral Agent (to the extent not reimbursed by the Credit
Parties) on demand from and against any and all costs, expenses (including
counsel fees and disbursements), claims, demands, actions, losses or liabilities
(except such as result from the Collateral Agent's own gross negligence or
willful misconduct) that the Collateral Agent may suffer or incur in connection
with this Agreement or any Related Document or any action taken or omitted by
the Collateral Agent hereunder or thereunder. The obligations of each of the
Lenders, the Certificateholders and the Revolving Credit Lenders set forth in
this Section 10.6 shall survive any termination of this Agreement.
Section 10.7. Credit Decision. Each Secured Party acknowledges that it
has, independently and without reliance upon the Collateral Agent or any other
Secured Party, and based on such financial statements and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Secured Party also acknowledges that
it will, independently and without reliance upon the Collateral Agent or any
other Secured Party, 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 any action permitted to be taken or omitted under this
Agreement and the Related Documents.
Section 10.8. Successor Collateral Agent; Removal. (a) The Collateral
Agent may resign at any time by giving written notice thereof to the Secured
Parties and the Lessor, provided that no such resignation shall take effect
until a successor collateral agent has been appointed and agreed to act as such
under this Agreement. Upon any such resignation, the Majority Secured Parties
shall appoint a successor to the Collateral Agent.
(b) Upon the written request of Lenders, Certificateholders and
Revolving Credit Lenders holding not less than 80% of the Total Funding
Commitment or, if all Funding Commitments have been terminated, not less than
80% of the aggregate amount of all Outstanding Advances, Revolving Credit
Advance and Certificateholder Advances, and provided that immediately upon the
effectiveness of such resignation, such Lenders, Certificateholders and
Revolving Credit Lenders appoint a successor to the Collateral Agent, the
Collateral Agent shall resign and effective immediately upon such resignation,
the Collateral Agent shall no longer be the Collateral Agent under this
Agreement and the successor to the Collateral Agent so appointed shall
immediately and thereafter become the Collateral Agent.
(c) The decision of the Majority Secured Parties shall be binding upon
all of the Secured Parties. After any retiring Collateral Agent's resignation
hereunder as Collateral Agent, the provisions of this Article 10 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Collateral Agent.
Section 10.9. Sharing by Secured Parties. (a) If any Secured Parties
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of any Secured Obligation owed
to it in excess of the amount it would otherwise be entitled to receive pursuant
to the provisions of Article 12 of this
<PAGE> 35
Agreement (or, if such provisions are not applicable at the time of receipt of
such payment, in excess of its ratable share based upon the amounts then owing,
of payments on account of like Obligations obtained by all Secured Parties, such
Secured Parties shall immediately so notify (the "Information Notice") the
Collateral Agent. Promptly upon its receipt of an Information Notice from any
Secured Parties, the Collateral Agent shall notify (the "Sharing Notice") all of
the Secured Parties (based upon information contained in all Information Notices
received by the Collateral Agent from the Secured Parties) of the amount or
amounts (the "Excess Payment") received by one or more of the Secured Parties in
excess of its or their ratable share of payments received by all of the Secured
Parties on account of the Obligations. Within two Business Days of the giving of
a Sharing Notice by the Collateral Agent, each Secured Parties which has
received an Excess Payment (each, an "Excess Secured Parties") shall purchase
from Secured Parties which have not received an Excess Payment (each, a "Deficit
Secured Parties") such participations in the Obligations, as the case may be,
owed to each Deficit Secured Parties as shall be necessary to cause such Excess
Secured Parties to share its Excess Payment ratably with each Deficit Secured
Parties; provided, however, that if all or any portion of such Excess Payment is
thereafter recovered from an Excess Secured Parties, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
(b) Each Credit Party agrees that any Secured Parties so purchasing a
participation from another Secured Parties pursuant to this Section 10.9 may
exercise all its rights of payment with respect to such participation as fully
as if such Secured Parties were the direct creditor of the Borrower in the
amount of such participation. If under any applicable bankruptcy, insolvency or
other similar law, any Secured Parties receives a secured claim in lieu of a
set-off to which this Section 10.9 would apply, such Secured Parties shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Secured Parties entitled under this
Section 10.9 to share in the benefits of any recovery on such secured claim.
ARTICLE 11 EVENTS OF DEFAULT
Section 11.1. Events of Default. If any one or more of the following
events (an "Event of Default") shall occur and be continuing, the Collateral
Agent on behalf of the Secured Parties shall be entitled to exercise the
remedies set forth in Section 11.2 hereof and in the Related Documents.
(a) Any representation or warranty made or deemed made by any Credit
Party in this Agreement, any Related Document to which it is a party, or any
certificate, financial statement or other document delivered pursuant hereto or
thereto shall not be Accurate and Complete on any date as of which made or
deemed made; or
(b) (i) The Lessee shall fail to pay Basic Rent and such failure shall
continue for more than five (5) Business Days after such payment is due pursuant
to Section 7 of the
<PAGE> 36
Master Lease, or (ii) any Credit Party shall default in the payment when due of
any other amount payable to any Secured Party hereunder or under any Related
Document to which it is a party, and the failure to pay such other amount
referred to in this clause (ii) shall continue for 10 days after receipt of
notice thereof; or
(c) Any Credit Party shall fail to perform or observe any covenant or
obligation contained in Section 8.3 of this Agreement and, if such covenant or
obligation shall be contained in subsections (h), (l) or (m) of Section 8.3 of
this Agreement (other than, in the case of subsection (m) of Section 8.3, the
failure by the Lessee to make any payment under the Ground Sublease or any other
failure by the Lessee that could permit the Ground Sublessor to terminate the
Ground Sublease within thirty (30) days after the occurrence thereof), such
failure shall continue for 30 days after the Lessee becomes aware of such
failure; or
(d) Any Credit Party shall fail to perform or observe any other covenant
or obligation of such Credit Party the performance or observance of which is
owed to any Secured Party hereunder, and such failure shall continue for 30 days
after such Credit Party becomes aware of such failure (other than any failure
described in Subsection 11.1(b) or (c) above); provided that if such failure is
of such a nature that it is not capable of being cured within such 30-day
period, and the Lessee promptly commences appropriate steps to cure such failure
within such 30-day period and continues to pursue such cure with diligence and
good faith thereafter, unless the Collateral Agent or the Majority Secured
Parties determine that such delay could reasonably be expected to have a
Material Adverse Effect, such 30-day period shall be extended to 90 days; or
(e) Any Credit Party shall default in the payment when due of any
principal of or premium (if any) or interest on any Indebtedness (other than
Indebtedness owing to any Secured Party) of $1,000,000 or more and such default
shall continue beyond any applicable grace period, or shall fail to observe or
perform any terms of any instrument pursuant to which any such Indebtedness was
created or of any mortgage, indenture or other agreement relating thereto if the
effect of such failure is to cause or permit the acceleration of such
Indebtedness and such failure shall not have been waived pursuant thereto; or
(f) The entry of a decree or order for relief in respect of any Credit
Party by a court having jurisdiction in the premises, or the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of such Credit Party or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy, insolvency or
other similar law; or the commencement against any Credit Party of an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy, insolvency or
other similar law, and the continuance of any such case unstayed and in effect
for a period of 60 consecutive days; or
<PAGE> 37
(g) The commencement by any Credit Party of a voluntary case under the
Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency or other similar law, or the
consent by it to the entry of an order for relief in an involuntary case under
any such law or the consent by it to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of such Credit Party or of any substantial part of its
property, or the making by it of a general assignment for the benefit of
creditors, or the failure of any Credit Party generally to pay its debts as such
debts become due or the taking of any corporate action in furtherance of any of
the foregoing; or
(h) An "Event of Default" shall occur under Section 18 of the Master
Lease or Section 5.01 of the Construction Agency Agreement or an "Event of
Default" shall occur under the Credit Agreement, the Revolving Credit Agreement
or any Security Document; or
(i) One or more final judgments for the payment of money shall be
rendered against any Credit Party in an aggregate amount in excess of $1,000,000
and the same shall remain undischarged for a period of 30 days during which
execution of such judgment shall not be effectively stayed; or
(j) The Master Lease, the Construction Agency Agreement, the Guaranties,
or any of the Security Documents shall cease to be in full force and effect
(except for any termination of the Construction Agency Agreement or Master Lease
in accordance with its terms not due to the occurrence of a default thereunder).
Section 11.2. Default Remedies. If any Event of Default shall occur and
be continuing, then and in every such event, and at any time thereafter during
the continuance of such Event of Default, the Collateral Agent may, and at the
request of the Majority Secured Parties shall, by written notice to each Credit
Party and each Secured Party, take one or more of the following actions: (a)
terminate the Commitments, the Certificateholder Commitments and the Revolving
Credit Commitments, and (b) declare the Obligations to be forthwith due and
payable, whereupon (subject to the limitations set forth in the Construction
Agency Agreement and the Master Lease) the Obligations shall become forthwith
due and payable together with all other amounts payable by the Credit Parties
under this Agreement and the other Related Documents, without presentment,
demand, protest or any other notice of any kind, all of which are expressly
waived; provided, however, that if any of the Events of Default set forth in
paragraphs (f) or (g) of Section 11.1 hereof shall occur with respect to any
Credit Party, then without any notice to any Credit Party or any other act by
the Collateral Agent or any other Person (i) the Commitments, the
Certificateholder Commitments and the Revolving Credit Commitments shall
immediately become terminated, and (ii) the Obligations shall become forthwith
due and payable, all without presentment, demand, protest or notice of any kind,
all of which are expressly waived. In the event of a declaration by the
Collateral Agent pursuant to clause (b) above, the Collateral Agent may enforce
its rights hereunder and under any other instrument or agreement delivered in
connection herewith and take any other action
<PAGE> 38
to which it is entitled hereunder, thereunder, or by law, whether for the
specific performance of any covenant or agreement contained in this Agreement,
in any such instrument or agreement or to enforce payment as provided herein,
therein, or by law.
Section 11.3. Set-off. (a) Each Secured Party is hereby authorized at
any time and from time to time, upon the occurrence and during the continuance
of any Event of Default, without prior notice to any Credit Party, to the
fullest extent permitted by law, to set-off and apply any and all balances,
credits, deposits (general or special, time or demand, provisional or final
including certificates of deposit whether matured or unmatured), accounts or
monies at any time held and other indebtedness at any time owing by such Secured
Party at any of its branches or affiliates to or for the account of such Credit
Party, including the Collateral Account and any Permitted Investments held
therein, against any and all of the amounts owing by the Credit Parties under
this Agreement or the Related Documents, whether or not (i) such Secured Party
shall have made any demand hereunder or thereunder, (ii) the Collateral Agent
shall have declared any or all of the Secured Obligations to be due and payable
or (iii) any of such Secured Obligations shall be contingent or unmatured. The
rights of Secured Parties under this Section 11.3 are in addition to, and do not
derogate from or impair, other rights and remedies (including, without
limitation, other rights of set-off) which the Secured Parties may have.
(b) Each Secured Party agrees that if it shall, by exercising any right
of set-off or counterclaim or otherwise receive payment of a proportion of the
aggregate amount due to it which is greater than the amount it would otherwise
have received had such amount been deposited in the Collateral Account and
disbursed by the Collateral Agent for application in accordance with Article 12,
the Secured Party receiving such proportionately greater payment shall purchase
participations in the Obligations held by the other Secured Parties and such
other adjustments shall be made, as may be required so that all such payments of
Obligations held by the Secured Parties shall be shared by the Secured Parties
in accordance with the priorities set forth in Article 12 of this Agreement.
Each Credit Party agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in any Obligation, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other collection rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of such Credit Party in the amount of such participation.
ARTICLE 12. APPLICATION OF PAYMENTS AND PROCEEDS
Section 12.1. Collection and Allocation of Payments and Other Amounts.
(a) Each Credit Party has agreed pursuant to Section 5.9 and otherwise
in accordance with the terms of this Agreement to pay to (i) the Collateral
Agent any and all Rent (excluding Excepted Payments) and any and all other
amounts of any kind or type under any of the Related Documents due and owing or
payable to any Person and (ii) each Person entitled thereto, the Excepted
Payments. Promptly after receipt, the Collateral
<PAGE> 39
Agent shall deposit into the Collateral Account and shall disburse such amounts
in accordance with this Section 12.1, such amounts received from any Credit
Party.
(b) Payments and other amounts received by the Collateral Agent from
time to time in accordance with the terms of subparagraph (a) shall be applied
and allocated as follows:
(i) Any such payment or amount identified as or deemed to be
Basic Rent shall be allocated and disbursed by the Collateral Agent
first, ratably to the Lenders and the Certificateholders for application
to the payment of interest on the Advances and thereafter the principal
of the Advances then due and payable and to the payment of accrued yield
on the Certificates and thereafter any portion of the Certificateholder
Advances then due and payable; and second, if no Potential Default or
Event of Default has occurred and is continuing to such Person or
Persons as the Lessee may designate; provided, that if a Potential
Default or Event of Default has occurred and is continuing, such excess
(if any) shall instead be held by the Collateral Agent until the earlier
of (A) the first date thereafter on which no Potential Default or Event
of Default shall be continuing (in which case such payments or returns
shall then be made to such other Person or Persons as the Lessee may
designate), (B) the Final Date (in which case such amounts shall be
applied and allocated in the manner contemplated by the applicable
provisions of this Article 12) and (C) the date of any Acceleration (in
which case such amounts shall be applied and allocated in the manner set
forth in Section 12.5 hereof).
(ii) If on any date the Collateral Agent or the Lessor shall
receive any amount in respect of (A) any Casualty or Condemnation
pursuant to Sections 15 or 16 of the Master Lease (excluding any
payments in respect thereof which are payable to the Lessee in
accordance with the Master Lease), or (B) any payment required to be
made or elected to be made by the Construction Agent to the Lessor
pursuant to the terms of the Construction 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 outstanding principal balance
of the Advances and the outstanding amount of the Certificateholder
Advances, on a pro rata basis, or (2) if an Acceleration has occurred,
to apply and allocate such proceeds in accordance with Section 12.5
hereof.
(iii) An amount equal to any such payment identified as
Additional Rent shall be applied and allocated by the Collateral Agent
to the payment of any amounts then owing to the Collateral Agent, the
Lenders, the Certificateholders and the other parties to the Related
Documents (or any of them) (other than any such amounts payable pursuant
to the preceding provisions of this Section 12.1) as shall be determined
by the Collateral Agent in its reasonable discretion;
<PAGE> 40
(iv) The Collateral Agent in its reasonable judgment shall
identify the nature of each payment or amount received by the Collateral
Agent and apply and allocate each such amount in the manner specified
above.
(c) Each Secured Party hereby agrees that (i) it shall not exercise any
rights or remedies against any Credit Party or its property, including, without
limitation, any right of set-off or counterclaim, whether granted pursuant to
any Related Document, arising at law or in equity or otherwise, without the
prior written consent of the Majority Secured Parties, and (ii) the Collateral
Agent shall be the sole party entitled to exercise rights and remedies against
the Lessor; provided, however, that nothing herein shall be deemed to preclude
or prohibit the acceleration of the maturity of any of the Obligations as
provided in the Related Documents.
Section 12.2. Application of Proceeds Upon Sale of Property and
Equipment. Upon the sale of the Property and Equipment pursuant to Section 12(a)
of the Master Lease, all Cash Proceeds from such sale, together with all other
amounts payable by any Credit Party in connection with such sale in accordance
with the provisions of Section 12 of the Master Lease, shall be paid to the
Collateral Agent for deposit into the Collateral Account and shall be disbursed
by the Collateral Agent to the respective Secured Parties set forth below for
application to the Obligations of such Secured Parties in the following order of
priority:
(a) First, to the Collateral Agent, the Agent and the Owner Trustee, an
amount equal to all Additional Amounts then due and payable by the Credit
Parties consisting of all losses, damages, costs and expenses incurred and
sustained by the Collateral Agent, the Agent or the Owner Trustee in connection
with such sale of the Property and Equipment;
(b) Second, to the Collateral Agent, the Agent and the Owner Trustee, an
amount equal to all other Additional Amounts then due and payable by the Credit
Parties consisting of all other accrued and unpaid fees and expenses of the
Collateral Agent, the Agent and the Trust Company due and payable by the Credit
Parties under the Related Documents;
(c) Third, to the respective Secured Parties owed such amounts, an
amount equal to all other Additional Amounts then due and payable by the Credit
Parties under the Related Documents; and
(d) Fourth, to the Tranche A Lenders, the Tranche B Lenders and the
Certificateholders, an amount equal to the outstanding principal amount of the
Tranche A Notes and Tranche B Notes, together with accrued and unpaid interest
thereon, plus the outstanding amount of Certificates, together with accrued and
unpaid yield thereon; provided, however, that if upon the sale of the Property
and Equipment, the provisions of Section 12(b)(iii) of the Master Lease shall
apply, the amounts to be applied pursuant to this clause (d) shall be applied in
the following order of priority:
<PAGE> 41
(i) First, to the Tranche A Lenders, an amount equal to the
outstanding principal amount of Tranche A Term Notes, together with
accrued and unpaid interest thereon;
(ii) Second, to the Tranche B Lenders, an amount equal to the
outstanding principal amount of Tranche B Term Notes, together with
accrued and unpaid interest thereon; and
(iii) Third, to the Certificateholders, an amount equal to the
outstanding amount of the Certificates, together with accrued and unpaid
yield thereon.
Section 12.3. Application of Proceeds Upon Purchase of Property and
Equipment by Lessee. Upon the exercise by the Lessee of its option to purchase
the Property and Equipment pursuant to Section 13(a) of the Master Lease or
pursuant to Section 12 of the Master Lease, the Lessee shall pay to the
Collateral Agent for deposit into the Collateral Account the purchase price
payable in connection with the Lessee's purchase of the Property and Equipment
as set forth in the Master Lease, and the Collateral Agent shall disburse such
proceeds to the Secured Parties for application to the Obligations in the order
of priority set forth in Section 12.2 of this Agreement.
Section 12.4. Application of Proceeds of Surrender Payment Upon
Surrender of Property and Equipment by Lessee. Upon the exercise by the Lessee
of its option to surrender the Property and Equipment in accordance with Section
13(b) of the Master Lease, (a) the Lessee shall pay to the Collateral Agent for
deposit into the Collateral Account the Surrender Payment, and the Collateral
Agent shall disburse such Surrender Payment to the Tranche A Lenders for
application by the Tranche A Lenders (i) first, to all Additional Amounts then
due and payable by the Credit Parties in respect of the Tranche A Term Notes,
(ii) second, to accrued and unpaid interest on the Tranche A Term Notes, and
(iii) third, to the outstanding principal amount of Tranche A Term Notes, and
(b) upon the sale by the Collateral Agent or the Lessor of the Property and
Equipment, or any portion thereof, the Cash Proceeds from the sale of such
Property and Equipment shall be deposited in the Collection Account and shall be
disbursed by the Collateral Agent to the following Secured Parties for
application to the Obligations of such Secured Parties in the following order of
priority:
(a) First, to the Collateral Agent, the Agent and the Owner Trustee, an
amount equal to all Additional Amounts consisting of all losses, damages, costs
and expenses sustained or incurred by Collateral Agent, the Agent or the Owner
Trustee by reason of the sale of such Property and Equipment;
(b) Second, to the Collateral Agent, the Agent and the Owner Trustee, an
amount equal to all other Additional Amounts then due and payable by the Credit
Parties to the Collateral Agent, the Agent or the Owner Trustee in accordance
with the terms of the Related Documents;
<PAGE> 42
(c) Third, to the Tranche B Lenders and the Certificateholders, an
amount equal to all other Additional Amounts then due and payable by the Credit
Parties to the Tranche B Lenders and the Certificateholders;
(d) Fourth, to the Tranche B Lenders, an amount equal to the outstanding
principal amount of all Tranche B Notes, together with accrued and unpaid
interest thereon; and
(e) Fifth, to the Certificateholders, an amount equal to the aggregate
outstanding amount of Certificates, together with accrued and unpaid yield
thereon.
Section 12.5. Application of Proceeds Upon Exercise of Remedies Upon
Event of Default. Upon the exercise of any rights or remedies by the Collateral
Agent or any Secured Party upon the occurrence of an Event of Default and
Acceleration, whether such remedies are provided for in the Related Documents,
are available at law or in equity or otherwise:
(a) to the extent that the Collateral Agent or such Secured Party shall
have realized any Trust Proceeds, such Trust Proceeds shall be deposited in the
Collateral Account and the Collateral Agent shall disburse such Trust Proceeds
to the following Secured Parties for application to the Obligations of such
Secured Parties in the following order of priority:
(i) first, to the Collateral Agent, the Agent and the Owner
Trustee, an amount equal to all Additional Amounts then due and payable
consisting of the costs and expenses of the Collateral Agent, the Agent
and the Lessor incurred in connection with the enforcement of the
Related Documents and the realization of such Trust Proceeds;
(ii) second, to the Collateral Agent, the Agent and the Trust
Company, an amount equal to all other Additional Amounts then due and
payable under the Related Documents and consisting of accrued and unpaid
fees and expenses of the Collateral Agent, the Agent and the Trust
Company (after giving effect to the application of all MiniMed Proceeds
to the payment thereof in accordance with clause (b)(ii) of this Section
12.5);
(iii) third, to the Tranche B Lenders and the
Certificateholders, an amount equal to all other Additional Amounts then
due and payable by the Credit Parties under the Related Documents to the
Tranche B Lenders and the Certificateholders;
(iv) fourth, to the Tranche B Lenders, an amount equal to the
outstanding principal amount of the Tranche B Notes, together with
accrued and unpaid interest thereon; and
<PAGE> 43
(v) fifth, to the Certificateholders, an amount equal to the
outstanding amount of all Certificates, together with accrued and unpaid
yield thereon; and
(b) to the extent that the Collateral Agent or such Secured Party shall
have realized any MiniMed Proceeds (including, without limitation, any proceeds
realized in respect of the right of the Lessee to receive excess Trust Proceeds
upon satisfaction in full of all Obligations described in clause (a) above), the
Collateral Agent or such Secured Party shall deposit such MiniMed Proceeds in
the Collateral Account and the Collateral Agent shall disburse such MiniMed
Proceeds to the following Secured Parties for the application to the Obligations
of such Secured Parties in the following order of priority:
(i) First, to the Collateral Agent, the Agent and the Owner
Trustee, an amount equal to all Additional Amounts then due and payable
under the Related Documents consisting of all costs and expenses
incurred by the Collateral Agent, the Agent and the Owner Trustee with
respect to enforcement of the Related Documents and realization of the
MiniMed Proceeds;
(ii) Second, to the Collateral Agent, the Agent and the Owner
Trustee, an amount equal to all other Additional Amounts then due and
payable under the Related Documents consisting of accrued and unpaid
fees and expenses of the Collateral Agent, the Agent and the Owner
Trustee;
(iii) Third, to the Tranche A Lenders and the Revolving Credit
Lenders, an amount equal to all other Additional Amounts then due and
payable to the Revolving Credit Lenders and the Revolving Credit Lenders
under the Related Documents respectively Tranche A Notes and the
Revolving Credit Notes (to be applied pro rata based upon the
outstanding principal amounts of the Tranche A Notes and Revolving
Credit Notes);
(iv) Fourth, to the Tranche A Lenders and the Revolving Credit
Lenders, an amount equal to the aggregate outstanding principal amount
of Tranche A Notes and Revolving Credit Notes, together with accrued and
unpaid interest thereon (to be applied pro rata to such Obligations
based upon the outstanding principal amounts of the Tranche A Notes and
Revolving Credit Notes);
(v) Fifth, to the Tranche B Notes and Certificateholders, an
amount equal to all other Additional Amounts then due and payable to the
Tranche B Lenders and Certificateholders pursuant to the Related
Documents (to be applied pro rata based upon the respective outstanding
amounts thereof); and
(vi) Sixth, to the Tranche B Lenders and the Certificateholders,
an amount equal to the outstanding principal amount of the Tranche B
Notes and the outstanding amount of the Certificates, together with
accrued and unpaid interest
<PAGE> 44
on the Tranche B Notes and accrued and unpaid yield on the Certificates
to be applied pro rata to such Obligations based upon the outstanding
amounts thereof).
ARTICLE 13. INDEMNIFICATION.
Section 13.1. General Indemnity. 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 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) in any way relating to
or arising or alleged to arise out of the execution, delivery, performance or
enforcement of this Agreement, the Master Lease or any other Related Document or
on or with respect to the 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, occupancy, operation,
maintenance repair, modification, transportation, condition, sale, return,
repossession (whether by summary proceedings or otherwise), or any other
disposition of the Property or any part thereof, including without limitation
the acquisition, holding or disposition of any interest in the Property, Master
Lease or agreement comprising a portion of any thereof; (b) any latent or other
defects in the Property or any portion thereof whether or not discoverable by an
Indemnified Person or the Indemnity Provider; (c) a violation of Environmental
Requirements, Environmental Damages or other loss of or damage to any property
or the environment relating to the Property, the Master Lease, the Construction
Agency Agreement or the Indemnity Provider; (d) the Related Documents or any
transaction contemplated thereby; (e) any breach by the Indemnity Provider of
any of its representations or warranties under the Related Documents 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 Related Documents; (f) the transactions contemplated hereby or by any other
Related Document, 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 without limitation Claims based on strict or absolute liability in
tort. Notwithstanding anything to the contrary set forth herein, during the
Construction Period the Lessee shall not be obligated under any of the Related
Documents to indemnify any Person with respect to any cost arising from third
party damage claims other than those third party damage claims caused by or
resulting from the actions or failure to act by the Lessee or any of its agents,
employees, consultants, contractors or subcontractors (or any one else under the
control of the Lessee or such Persons), while the Lessee is in possession or
control of the Property.
<PAGE> 45
Section 13.2. General Tax Indemnity.
(a) The Indemnity Provider shall pay and assume liability for, and does
hereby agree to indemnify, protect and defend the Property and Equipment and all
Indemnified Persons, and hold them harmless against, all Impositions on an After
Tax Basis, and all payments pursuant to the Related Documents 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) Impositions (other than Impositions 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 the Lessor, the
Owner Trustee and the Trust Estate) by the United States federal
government that are based on or measured by the net income (including
without limitation 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) Impositions (other than Impositions 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 the Lessor, the
Owner Trustee and the Trust Estate) 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 (including without limitation
taxes based on capital gains and minimum taxes) of such Person; provided
that such Impositions shall not be excluded under this subparagraph (ii)
to the extent such Impositions would have been imposed had the location,
possession or use of the Property in, the location or the operation of
the Lessee in, or the Lessee's making payments under the Related
Documents from, the jurisdiction imposing such Impositions been the sole
connection between such Indemnified Person and the jurisdiction imposing
such Impositions; provided, however, that the Indemnity Provider shall
not have any obligation to indemnify any Indemnified Person for any
unitary tax obligations of the Indemnified Person beyond that portion of
such tax obligation directly attributable to the payments received under
the Related Documents; provided, further, 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; and
(iii) any Imposition to the extent it relates to any act, event
or omission that occurs after the termination of the Master Lease and
redelivery or sale of the Property in accordance with the terms of the
Master Lease (but not any Imposition that relates to such termination,
redelivery or sale, or to any period prior to such termination,
redelivery or sale); and
<PAGE> 46
(c) (i) 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 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 without limitation the computation of
the amount payable), accompanied by receipts or other reasonable evidence of
such demand. In the case of Impositions for which a contest is conducted, 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 Section 13.2(a), prior to the latest time permitted by the relevant
taxing authority for timely payment after conclusion of such contests.
(d) The Indemnity Provider shall be responsible for preparing and filing
any real and personal property or ad valorem tax returns in respect of the
Property and Equipment and any other tax returns required for the Owner Trustee
respecting the transactions described in the Related Documents. 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 Section 13.2(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 prepare
and file such report or return) (A) to the extent required or permitted by and
consistent with applicable legal requirements, make and file in the 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 Section
13.2(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 Section 13.2(a).
(e) As between the Indemnity Provider on one hand, and each Secured
Party on the other hand, the Indemnity Provider shall be responsible for, and
the Indemnity Provider shall indemnify and hold harmless each Secured Party
(without duplication of any indemnification required by Section 13.2(a)) on an
After Tax Basis against, any obligation
<PAGE> 47
for United States or foreign withholding taxes or similar levies, imposts,
charges, fees, deductions or withholdings (collectively, "Withholdings") imposed
in respect of the interest payable on the Advances or Revolving Credit Advances
or the yield payable on the Certificateholder Advances or with respect to any
other payments under the Related Documents (all such payments being referred to
herein as "Exempt Payments" to be made without deduction, withholding or set
off) (and, if any Secured Party receives a demand for such payment from any
taxing authority or a Withholding is otherwise required with respect to any
Exempt Payment, the Indemnity Provider shall discharge such demand on behalf of
such Secured Party); provided, however, that the obligation of the Indemnity
Provider under this Section 13.2(e) shall not apply to:
(i) any Lender that has failed to comply with the requirements
of Section 11.13 of the Credit Agreement, or
(ii) any Certificateholder that has failed to comply with the
requirements of Section 11.15 of the Trust Agreement, or
(iii) any Revolving Credit Lender that has failed to comply with
the provisions Section 11.11 of the Revolving Credit Agreement;
if in any such case compliance would have avoided such Withholdings.
(f) The Indemnity Provider shall be entitled for a period of 30 days
from receipt of notice from such Indemnified Person (or such shorter period as
such Indemnified Person has notified the Indemnity Provider is required by law
or regulation for such Indemnified Person to commence such contest), to request
in writing that such Indemnified Person contest such Imposition, at the
Indemnity Provider's expense. If the Indemnity Provider shall have posted a bond
or other security satisfactory to the relevant Indemnified Person in the amount
of such Imposition and (x) such contest can be pursued in the name of the
Indemnity Provider and independently from any other proceeding involving an
Imposition liability of such Indemnified Person for which the Indemnity Provider
has not agreed to indemnify such Indemnified Person, (y) such contest must be
pursued in the name of such Indemnified Person, but can be pursued independently
from any other proceeding involving an Imposition liability of such Indemnified
Person for which the Indemnity Provider has not agreed to indemnify such
Indemnified Person, then the Indemnity Provider shall be permitted to control
the contest of such claim, provided that in the case of a contest described in
clause (y), if such Indemnified Person determines in good faith that such
contest by the Indemnity Provider could have a material adverse impact on the
business or operations of such Indemnified Person, such Indemnified Person may
elect to control or reassert control of the contest, and provided, that by
taking control of the contest, the Indemnity Provider acknowledges that it is
responsible for the Imposition ultimately determined to be due. In no event
shall the Indemnity Provider be permitted to contest (or such Indemnified Person
required to contest) any claim (A) if such Indemnified Person provides the
Indemnity Provider with a legal opinion of counsel reasonably acceptable to the
Indemnity Provider that such action, suit or proceeding
<PAGE> 48
involves a risk of imposition of criminal liability or will involve a material
risk of the sale, forfeiture or loss of, of the creation of any Lien (other than
a Permitted Lien) on the Property, (B) if an Event of Default has occurred and
is continuing, (C) unless the Indemnity Provider shall have agreed to pay and
shall pay, to such Indemnified Person on demand all reasonable out-of-pocket
costs, losses and expenses that such Indemnified Person may incur in connection
with contesting such Imposition including all reasonable legal, accounting and
investigatory fees and disbursements (and any retainer or deposit in respect of
such costs, losses and expenses which such Indemnified Person deems to be
appropriate), or (D) if such contest shall involve the payment of the Imposition
prior to the contest, unless the Indemnity Provider shall have paid such
Imposition on behalf of the Indemnified Party at no cost to the Indemnified
Party and with no additional net after-tax costs to such Indemnified Person. In
addition no Indemnified Person shall be required to contest any Imposition in a
public forum (A) unless the amount of the Imposition exceeds $75,000 and (B)
unless the Indemnity Provider shall have provided to such Indemnified Person an
opinion of independent tax counsel selected by such Indemnified Person and
reasonably acceptable to the Indemnity Provider that a reasonable basis exists
to contest such claim. In no event shall an Indemnified Person be required to
appeal an adverse judicial determination. The party conducting the contest shall
consult in good faith with the other party and its counsel with respect to the
contest of such claim for Impositions (or claim for refund) but the decisions
regarding what actions to be taken shall be made by the controlling party in its
sole judgment. Each Indemnified Person shall, at the Indemnity Provider's
expense, supply the Indemnity Provider with such information and documents
reasonably requested by the Indemnity Provider as are necessary or advisable for
the Indemnity Provider to participate in any action, suit or proceeding.
(g) If any Indemnified Person receives any refunds or credits for any
Imposition that are attributable to amounts paid by an Indemnity Provider
pursuant to this Section 13.2, as determined by such Indemnified Person in its
good faith discretion, such Indemnified Person shall pay such amounts, without
interest, to the Indemnity Provider provided that if any such refund or credit
is subsequently disallowed, the Indemnity Provider shall return such amounts
(including any interest or penalties owed by the Indemnified Person) with
respect thereto, to such Indemnified Person.
Section 13.3. Proceedings in Respect of Claims.
(a) With respect to any amount that the Indemnity Provider is requested
by an Indemnified Person to pay by reason of Section 13.1 or Section 13.2, such
Indemnified Person shall, if so requested by the Indemnity Provider, submit such
additional information to the Indemnity Provider as the Indemnity Provider may
reasonably request and which is in the possession of such Indemnified Person to
substantiate properly the requested payment.
(b) In case any action, suit or proceeding shall be brought against any
Indemnified Person, such Indemnified Person shall notify the Indemnity Provider
of the commencement thereof, and the Indemnity Provider shall be entitled, at
the Indemnity
<PAGE> 49
Provider's expense, to participate in a reasonable manner in, and, to the extent
that the Indemnity Provider desires to, assume and control the defense of such
action, suite or proceeding; provided, however, that the Indemnity Provider
shall have acknowledged in writing its obligation to fully indemnify such
Indemnified Person in respect of such action, suit or proceeding and shall have
posted a bond or other security satisfactory to the relevant Indemnified Person
in an amount equal to the maximum aggregate liability to which such Indemnified
Person may be subject; provided, further, that the Indemnity Provider shall not
be entitled to assume and control the defense of any such action, suit or
proceeding if and to the extent that (1) in the reasonably opinion of such
Indemnified Person (x) such action, suit or proceeding involves any risk of
imposition of criminal liability or will involve a risk of the sale, forfeiture
or loss of, or the creation of any Lien (other than a Permitted Lien) on the
Property or any part thereof or (y) the control of such action, suit or
proceeding would involve an actual or potential conflict of interest, (2) such
proceeding involves claims not fully indemnified by the Indemnity Provider which
the Indemnity Provider and the Indemnified Persons have been unable to sever
from the indemnified claim(s), or (3) an Event of Default has occurred and is
continuing. In the event the Indemnity Provider assumes the defense of any such
action, suit or proceeding as described above, (i) the Indemnity Provider shall
keep such Indemnified Person fully apprised of the status of such action, suit
or proceeding and shall provide such Indemnified Person with all information
with respect to such action, suit or proceeding as such Indemnified Person shall
reasonably request, (ii) the Indemnified Person may participate in a reasonable
manner at its own expense and with its own counsel in any proceeding conducted
by the Indemnity Provider in accordance with the foregoing, and (iii) the
Indemnity Provider shall not enter into any settlement or other compromise with
respect to any claim against which an Indemnified Person is entitled to be
indemnified under Section 13.1 or Section 13.2 without the prior written consent
of such Indemnified Person, which consent shall not be unreasonably withheld in
the case of a money settlement not involving an admission of liability of such
Indemnified Person and resulting in the unconditional release and satisfaction
of all claims against and liability of such Indemnified Person.
(c) Each Indemnified Person shall at the expense of the Indemnity
Provider supply the Indemnity Provider with such information and documents
reasonably requested by the Indemnity Provider as are necessary or advisable for
the Indemnity Provider to participate in any action, suit or proceeding to the
extent permitted by Section 13.1 or Section 13.2.
(d) Upon payment in full of any claim by the Indemnity Provider pursuant
to Section 13.1 or Section 13.2 to or on behalf of an Indemnified Person and to
the extent permitted under applicable law, the Indemnity Provider, without any
further action, shall be subrogated to any and all claims that such Indemnified
Person may have relating thereto (other than claims in respect of insurance
policies maintained by such Indemnified Person at its own expense and claims
that are not independent or severed from claims not indemnified hereunder), and
such Indemnified Person shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents, instruments
and agreements as may be necessary to preserve any such claims and
<PAGE> 50
otherwise cooperate with the Indemnity Provider and give such further assurances
as are necessary or advisable to enable the Indemnity Provider to pursue such
claims.
(e) Any amount payable to an Indemnified Person pursuant to Section 13.1
or Section 13.2 shall be paid to such Indemnified Person promptly upon receipt
of a written demand therefor from such Indemnified Person, accompanied by a
written statement describing in reasonable detail the basis for such indemnity
and the computation of the amount so payable.
(f) Notwithstanding anything in this Article 13 to the contrary, no
Indemnified Person shall be obligated to provide any information or documents to
the Indemnity Provider (whether in connection with any action, suit or
proceeding or otherwise) if such information or documents consist of or contain
any confidential information or any information or documents which the
Indemnified Person believes, based upon the advice of counsel, could prejudice,
compromise or waive its attorney-client privilege, its right to assert the
attorney-work product doctrine or any other legal or equitable privilege.
Section 13.4. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
LIABILITY, ETC. WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION
PROVISIONS OF ANY AND ALL OF THE RELATED DOCUMENTS, EACH PERSON PROVIDING
INDEMNIFICATION OF ANOTHER PERSON UNDER ANY RELATED DOCUMENT HEREBY FURTHER
EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS
FOR LOSS OR DAMAGE, DESCRIBED IN ANY RELATED DOCUMENT, 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 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 RELATED
DOCUMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY.
ARTICLE 14. GENERAL PROVISIONS
Section 14.1. Assignment. (a) No Credit Party may assign its rights or
obligations under this Agreement or any Related Documents without the prior
written consent of the Majority Secured Parties, which consent may be given or
withheld in the
<PAGE> 51
sole and absolute discretion of the Secured Parties; provided, however, that the
Parent Guarantor may assign its rights and delegate its obligations under this
Agreement and the Related Documents to any Person that is the surviving
corporation of a merger or consolidation permitted under Section 14(j) of the
Parent Guaranty.
(b) Any Lender, Certificateholder or Revolving Credit Lender may assign
all or a part of its rights and obligations under this Agreement and may grant,
on a participating basis but not as a party to this Agreement, a participation
or participations in all or any part of such Secured Party's rights and benefits
under this Agreement to the extent permitted by and in accordance with, (i) in
the case of the Lenders, the provisions of the Credit Agreement, (ii) in the
case of the Certificateholders, the provisions of the Trust Agreement, and (iii)
in the case of the Revolving Credit Lenders, the provisions of the Revolving
Credit Agreement.
Section 14.2. Amendments and Waivers. Any provision of this Agreement or
any Related Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by each of the Credit Parties and the
Majority Secured Parties (and, if the rights, obligations or duties of the Trust
Company, Collateral Agent, Agent or Syndication Agent are affected thereby, by
the Trust Company, Collateral Agent, Agent or Syndication Agent, respectively);
provided, further, that no such amendment or waiver shall, unless approved by
all the Revolving Credit Lenders, Lenders and Certificateholders, (a) change the
definition of Majority Secured Parties, (b) amend this Section 14.2, (c) release
all or any substantial portion of the Collateral, (d) reduce the amount or
postpone the time fixed for the payment of any amount payable under the
Construction Agency Agreement or the Master Lease (including, without
limitation, purchase price, rent, additional rent and all other amounts of any
kind whatsoever) or (e) impair the absolute and unconditional nature of the
Construction Agent's obligations under the Construction Agency Agreement or the
Lessee's obligations under the Master Lease; provided, further, however, that no
such amendment or waiver shall, unless approved by each Secured Party directly
affected thereby, (a) increase the amount of any obligation of such Secured
Party to make Advances, Certificateholder Advances or Revolving Credit Advances,
as the case may be, or subject such Secured Party to any additional obligation,
(b) reduce the principal of or rate of interest on any Advance or Revolving
Credit Advance or the amount of or the rate of yield on any Certificateholder
Advance or the rate at which any fees are payable to any such Secured Party
under any Related Document, (c) postpone the date fixed for any payment of
principal of or interest on any Advance or Revolving Credit Advance or the
amount of or yield on any Certificateholder Advance, or the amount of any fees
payable to such Secured Party under any Related Document; provided, further,
however, that the Lessor and Assignee (as such term is used in the Master Lease)
may not elect to proceed with any sale of the Property and Equipment pursuant to
Section 12(a) of the Master Lease resulting in Cash Proceeds less than the
Termination Value plus amounts due under paragraph (c) of Section 12 of the
Master Lease without the prior written consent of each of the Term Note B
Lenders and each of the Certificateholders. Any amendment or waiver made
pursuant to and in
<PAGE> 52
accordance with this Section 14.2 shall be binding upon the Secured Parties upon
delivery of an executed or conformed copy of such waiver to the Secured Parties.
Section 14.3. Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing (including telex,
telecopier or similar writing) and shall be given to such party at its address
or telecopier number set forth below or such other address, telex or telecopier
number as such party may hereafter specify by notice to the other parties listed
below. Any notice, request, demand or other communication sent by telex or
telecopier shall be promptly confirmed with a copy of such notice sent by
courier or by first class mail.
If to the Collateral Agent,ING
(U.S.) Capital LLC Agent or
Syndication Agent: 55 East 52nd
Street, 33rd Floor New York, New
York 10055 Attention: Chief Credit
Officer Telecopier: (212) 750-8935
With copies of each such notice to be simultaneously given, delivered or served
to the following addresses:
ING (U.S.) Capital LLC
Atlanta Office
200 Galleria Parkway, Suite 950
Atlanta, Georgia 30339
Attention: Darren J. Wells
Telecopier: (770) 951-1005
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens
Telecopier: (404) 572-5100
If to a Lender: At the address set
forth on the signature pages of the
Credit Agreement or in the
assignment agreement pursuant to
which such Lender became a party to
the Credit Agreement and this
Agreement
If to a Certificateholder: At the address set forth on the
signature pages of the Trust
Agreement or in the assignment
agreement pursuant to which such
<PAGE> 53
Certificateholder became a party to
the Trust Agreement and this
Agreement
If to a Revolving Credit At the address set forth on the
signature pages of the Lender:
Revolving Credit Agreement or in the
assignment agreement pursuant to
which such Revolving Credit Lender
became a party to the Revolving
Credit Agreement and this Agreement
If to the Owner Trustee: First Security Bank, National
Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val Orton
Telecopier: (801) 246-5053
If to the Parent Guarantor: MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telecopier: (818) 367-1460
With a copy of each such notice to be simultaneously given, delivered or served
to the following served to the following address:
Brobeck Phleger & Harrison
55 West C Street, Suite 1300
San Diego, California 92101
Attention: Scott Biel
Telecopier: (619) 234-3848
If to the Lessee or other MiniMed Inc.
Credit Party: 12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telecopier: (818) 367-1460
<PAGE> 54
With a copy of each such notice to be simultaneously given, delivered or served
to the following served to the following address:
Brobeck Phleger & Harrison
55 West C Street, Suite 1300
San Diego, California 92101
Attention: Scott Biel
Telecopier: (619) 234-3848
Each such notice, request or other communication shall be effective when
actually received.
Section 14.4 Cumulative Rights; No Waiver. The rights, powers and
remedies of the Secured Parties hereunder are cumulative and in addition to all
rights, powers and remedies provided under any and all agreements between any
Credit Party and any Secured Party relating hereto, at law, in equity or
otherwise. Neither any delay nor any omission by any Secured Party to exercise
any right, power or remedy shall operate as a waiver thereof, nor shall a single
or partial exercise thereof preclude any other or further exercise thereof or
any exercise of any other right, power or remedy.
Section 14.5 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which counterparts, when executed and delivered, shall be deemed an original
and all of which counterparts, taken together, shall constitute one and the same
Agreement.
Section 14.6 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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 14.7 Headings. The Article and Section headings in this
Agreement are for convenience of reference only and shall not affect the
interpretation hereof.
Section 14.8. Termination by Parent Guarantor. The Parent Guarantor may
terminate this Agreement upon not less than 30 days' prior written notice to the
Collateral Agent at any time; provided, however, that on the date specified by
the Parent Guarantor for termination (a) there shall not be any Obligations then
outstanding and (b) all amounts then due and payable to the Secured Parties
under this Agreement or the Related Documents shall have been paid in full. No
termination of this Agreement, for whatever reason, shall affect the obligations
and liabilities of the Credit Parties hereunder which arose prior to such
termination or any Secured Party's rights, powers and remedies with respect
thereto. Upon any such termination all Commitments of the Secured Parties under
the Related Documents shall terminate and any obligation of any Secured Party to
make Advances, Certificateholder Advances or Revolving Credit Advances shall
cease.
<PAGE> 55
Section 14.9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 14.10. WAIVER OF JURY TRIAL. THE PARTIES HERETO KNOWINGLY,
VOLUNTARILY AND EXPRESSLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ENFORCING OR DEFENDING ANY RIGHTS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE BORROWER
ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION 14.10 HAVE BEEN BARGAINED FOR
AND THAT IT HAS BEEN REPRESENTED BY COUNSEL IN CONNECTION THEREWITH.
Section 14.11. Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the Related
Documents, and the parties' obligations under any and all thereof, shall survive
the execution and delivery of this Agreement, the transfer of the Property to
the Owner Trustee, the construction of the Improvements on and the installation
of Equipment at the Property, Substantial Completion, any disposition of any
interest of the Owner Trustee in the Property or the Equipment or any interest
of the Certificateholders in the Trust Estate, or any disposition of any
interest of the Lenders in the Notes or of the Revolving Credit
Lenders in the Revolving Credit Notes, 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 Related Documents. Except as otherwise expressly set forth herein
or in other Related Documents, the indemnities of the parties provided for in
the Related Documents shall survive the repayment of the Secured Obligations and
the expiration or termination of any of the Related Documents.
Section 14.12. 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.
Section 14.13. Liability Limited. Each of the Secured Parties and each
of the Credit Parties acknowledge and agree that the Owner Trustee is entering
into this Agreement and the other Related Documents to which it is a party
(other than the Trust Agreement and except to the extent otherwise expressly
provided in this Agreement or any other Related Document), solely in its
capacity as trustee under the Trust Agreement and not in its individual
capacity, and that the 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 Related
Documents.
<PAGE> 56
Section 14.14. Further Assurances. The parties hereto shall promptly
cause to be taken, executed, acknowledged or delivered, at the sole expense of
the Lessee, all such further acts, conveyances, documents and assurances as the
other parties may from time to time reasonably request in order to carry out and
effectuate the intent and purposes of this Agreement, the other Related
Documents and the transactions contemplated hereby and thereby (including
without limitation the preparation, execution and filing of any and all Uniform
Commercial Code financing statements, filings of Security Documents and other
filings or registrations which the parties hereto may from time to time request
to be filed or effected). The Lessee, at its own expense and without need of any
prior request from any other party, shall take such action as may be necessary
(including without limitation any action specified in the preceding sentence),
or as so requested by the Owner Trustee or the Collateral Agent, in order to
maintain and protect all security interests provided for hereunder or under any
other Related Document. In addition, in connection with the sale or other
disposition of the Property and Equipment or any portion thereof, the Lessee
agrees to execute such instruments of conveyance as may be reasonably required
in connection therewith.
Section 14.15. Financial Reporting/Tax Characterization. Each of the
Credit Parties agrees to obtain advice from, and to consult and rely exclusively
on, its own accountants and tax counsel regarding the financial reporting
treatment and the tax characterization of the transactions described in the
Related Documents. Each of the Credit Parties further acknowledges and agrees
that Lessee shall not rely upon any statement of any Secured Party or any of its
respective Affiliates or Subsidiaries regarding any such financial reporting
treatment or tax characterization and that no Secured Party has made any
representation as to such financial reporting treatment or tax characterization.
Section 14.16. Confidentiality. Each of the Certificateholders, Lenders,
Revolving Credit Lenders, Agent, Syndication Agent, Collateral Agent and Lessor
shall hold all non-public, proprietary or confidential information (which has
been identified as such by MiniMed) obtained pursuant to the requirements of
this Agreement or any of the other Related Documents in confidence in accordance
with its reasonable and customary procedures for handling confidential
information of this nature and in accordance with safe and sound lending
practices; provided however, that any Certificateholder, Lender, Revolving
Credit Lender, the Agent, the Syndication Agent, the Collateral Agent and the
Lessor may make disclosure of any such information to its examiners, Affiliates,
outside auditors, counsel, consultants, appraisers and other professional
advisors in connection with this Agreement and the other Related Documents or as
reasonably required by any proposed transferee or participant in connection with
a contemplated transfer of any Certificate, Note, Revolving Credit Note or
participation therein or as required or requested by any Governmental Authority
or representative thereof or in connection with the enforcement of this
Agreement or any of the other Related Documents or pursuant to legal process;
provided, however, that any such proposed transferee or participant shall have
agreed in writing for the benefit of MiniMed to be bound by the terms of this
Section 14.16.
<PAGE> 57
[signature pages follow]
<PAGE> 58
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.
CONSTRUCTION AGENT
AND LESSEE: MINIMED DEVELOPMENT CORP., as the
Construction Agent and as the Lessee
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
GUARANTORS: MINIMED INC, as the
Parent Guarantor
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
EACH OF THE SUBSIDIARIES OF THE
PARENT GUARANTOR LISTED ON
SCHEDULE 1 HERETO, as the Subsidiary
Guarantors
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
<PAGE> 59
OWNER TRUSTEE AND
LESSOR: FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually,
except as expressly stated herein,
but solely as the Owner Trustee
under the MiniMed Real Estate Trust
1999-1
By: /s/ VAL T. ORTON
---------------------------------
Name: Val T. Orton
Title: Vice President
SYNDICATION AGENT: ING BARING FURMAN SELZ LLC, as the
Syndication Agent
By: /s/ DARREN J. WELLS
---------------------------------
Name: Darren J. Wells
Title: Managing Director
COLLATERAL AGENT, AGENT, REVOLVING CREDIT LENDER, LENDER AND CERTIFICATEHOLDER
ING (U.S.) CAPITAL LLC, as Collateral Agent, Agent, Revolving Credit Lender,
Lender and Certificateholder
By: /s/ DARREN J. WELLS
---------------------------------
Name: Darren J. Wells
Title: Managing Director
<PAGE> 60
CIBC, INC.
By: /s/ RICHARD L. VOGT
---------------------------------
Name: Richard L. Vogt
Title: Agent
THE BANK OF NOVA SCOTIA
By: /s/ R. P. REYNOLDS
---------------------------------
Name: R. P. Reynolds
Title: Relationship Manager
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
By: /s/ TED G. KOPCZYNSKI
---------------------------------
Name: Ted G. Kopczynski
Title: Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /s/ ELLEN A. POLANSKY
---------------------------------
Name: Ellen A. Polansky
Title: Vice President
By: /s/ IAN REECE
---------------------------------
Name: Ian Reece
Title: Senior Credit Officer
SANWA BANK CALIFORNIA
By: /s/ TED A. DUNN
---------------------------------
Name: Ted A. Dunn
Title: Vice President
<PAGE> 61
COMERICA WEST INCORPORATED
By: /s/ EMMANUEL M. SKEVOFILAX
---------------------------------
Name: Emmanuel M. Skevofilax
Title: Assistant Vice President
CITY NATIONAL BANK
By: /s/ ARMAN K. WALKER
---------------------------------
Name: Arman K. Walker
Title: Vice President
SCOTIA BANK, INC.
By: /s/ WILLIAM E. ZARRETT
---------------------------------
Name: William E. Zarrett
Title: Senior Relationship Manager
<PAGE> 1
EXHIBIT 10.3
PARENT GUARANTY
GUARANTY, dated as of May 18, 1999 (this "Guaranty"), from MINIMED INC., a
Delaware corporation (the "Parent Guarantor"), to FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely as Owner Trustee under the MiniMed
Real Estate Trust 1999-1 (the "Lessor").
W I T N E S S E T H:
WHEREAS, all capitalized terms used herein not otherwise defined shall have
the same meanings as set forth in Appendix A to the Participation Agreement,
dated as of the date hereof, among MiniMed Development Corp., as Construction
Agent and Lessee (the "Guaranteed Subsidiary"), the Parent Guarantor and certain
of its Subsidiaries, First Security Bank, National Association, not in its
individual capacity, except as expressly stated therein, but solely as Owner
Trustee, the holders from time to time of Certificates issued by the Owner
Trustee, as Certificateholders, the lenders party thereto from time to time, as
the Lenders, the revolving credit lenders party thereto from time to time, as
the Revolving Credit Lenders, ING Baring Furman Selz LLC, as Syndication Agent,
and ING (U.S.) Capital LLC, as Agent and as Collateral Agent (the "Participation
Agreement");
WHEREAS, the Parent Guarantor wishes to induce the Lessor to enter into the
Construction Agency Agreement and the Master Lease with the Guaranteed
Subsidiary (the Construction Agency Agreement and the Master Lease, as each of
them may be amended, modified, supplemented, or extended from time to time, are
collectively referred to hereinafter as the "Guaranteed Agreements"); and
WHEREAS, the Parent Guarantor is the owner of one hundred percent (100%) of
the issued and outstanding capital stock of the Guaranteed Subsidiary, and the
consummation of the Guaranteed Agreements will inure to the benefit of the
Parent Guarantor, directly or indirectly; and
WHEREAS, the Lessor is unwilling to enter into the Guaranteed Agreements
with the Guaranteed Subsidiary unless the Parent Guarantor enters into this
Guaranty.
NOW, THEREFORE, in order to induce the Lessor to enter into the Guaranteed
Agreements and to consummate the transactions contemplated thereby, the Parent
Guarantor hereby agrees as follows:
<PAGE> 2
1. Guaranty.
(a) The Parent Guarantor unconditionally and irrevocably guarantees to the
Lessor the due and punctual performance of and compliance by the Guaranteed
Subsidiary with all
<PAGE> 3
obligations, covenants, warranties, undertakings and conditions of the
Guaranteed Subsidiary contained in or arising under the Guaranteed Agreements,
including, but not limited to, the full and punctual payment by the Guaranteed
Subsidiary, when due, whether at the stated due date, by acceleration or
otherwise, of any and all rent and other obligations, liabilities, indebtedness
and other amounts of every kind payable by the Guaranteed Subsidiary under or
pursuant to the Guaranteed Agreements, all amounts in respect of the indemnities
provided by the Guaranteed Subsidiary under the Guaranteed Agreements, and all
damages (whether provided for in the Guaranteed Agreements or otherwise
permitted by law) in respect of any failure or refusal by the Guaranteed
Subsidiary to make any such payment or to perform such obligation, howsoever
created, arising or evidenced, voluntary or involuntary, whether direct or
indirect, absolute or contingent, now or hereafter existing or owing to the
Lessor (all the foregoing obligations and undertakings are collectively referred
to hereinafter as the "Obligations").
(b) This Guaranty is an absolute and unconditional guaranty of performance and
payment when due of all obligations to be performed and all amounts to be paid
by the Guaranteed Subsidiary under the Guaranteed Agreements, and not of
collection of any indebtedness contained in or arising under the Guaranteed
Agreements. This Guaranty is in no way conditioned upon any attempt to collect
from the Guaranteed Subsidiary or upon any other event or contingency, and shall
be binding upon and enforceable against the Parent Guarantor without regard to
the validity or enforceability of the Guaranteed Agreements or of any term
thereof. If for any reason the Guaranteed Subsidiary shall fail or be unable
duly and punctually to pay any such amount when due under the Guaranteed
Agreements, the Parent Guarantor will forthwith pay, if not already paid by the
Guaranteed Subsidiary, the same immediately upon demand.
(c) In case either of the Guaranteed Agreements shall be terminated as a result
of the rejection thereof by any trustee, receiver or liquidating agent of the
Guaranteed Subsidiary or any of its properties in any bankruptcy, insolvency,
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar proceeding, the Parent Guarantor's obligations hereunder shall
continue to the same extent as if such agreement had not been so rejected. The
Parent Guarantor agrees that this Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time payment to the Lessor of the
Obligations or any part thereof is rescinded or must otherwise be returned by
the Lessor upon the insolvency, bankruptcy or reorganization of the Guaranteed
Subsidiary, or otherwise, as though such payment to the Lessor had not been
made.
(d) The Parent Guarantor shall pay all reasonable costs, expenses and damages
incurred (including, without limitation, attorneys' fees and disbursements) in
connection with the enforcement of (i) the Obligations to the extent that such
costs, expenses and damages are not paid by the Guaranteed Subsidiary and (ii)
the obligations of the Parent Guarantor under this Guaranty.
<PAGE> 4
2. Guaranty Continuing and Unlimited. The obligations of the Parent Guarantor
hereunder shall be continuing and unlimited, shall not be subject to any
counterclaim, set-off, deduction or defense (other than payment or performance)
based upon any claim the Parent Guarantor may have against the Lessor or the
Guaranteed Subsidiary or any other Person, and shall remain in full force and
effect without regard to, and shall not be released, discharged or in any way
affected by any circumstance or condition (whether or not the Parent Guarantor
shall have any knowledge or notice thereof) whatsoever which might constitute a
legal or equitable discharge or defense including, but not limited to (a) any
express or implied amendment or modification of or supplement to the Guaranteed
Agreements or any other agreement referred to in either thereof, or any other
instrument applicable to the Guaranteed Subsidiary or to the Obligations, or any
part thereof, or any assignment or transfer of any thereof; (b) any failure on
the part of the Guaranteed Subsidiary to perform or comply with any term of the
Guaranteed Agreements or any failure of any other Person to perform or comply
with any term of the Guaranteed Agreements, or any other agreement as aforesaid;
(c) any waiver, consent, change, extension, indulgence or other action or any
action or inaction under or in respect of the Guaranteed Agreements, or any
other agreement as aforesaid, or this Guaranty, whether or not the Lessor, the
Guaranteed Subsidiary or the Parent Guarantor has notice or knowledge of any of
the foregoing; (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to the
Parent Guarantor or the Guaranteed Subsidiary, or their respective properties or
their creditors, or any action taken by any trustee or receiver or by any court
in any such proceeding ; (e) any furnishing or acceptance of additional security
or any release of any security, or the failure to perfect any Lien against, any
security for the Obligations or any action, or the absence of any action, by the
Collateral Agent, any Secured Party or the Lessor in respect of any such Lien or
security; (f) any limitation on the liability or Obligations of the Guaranteed
Subsidiary under the Guaranteed Agreements (other than any limitation expressly
provided for therein) or any termination, cancellation, frustration, invalidity
or unenforceability, in whole or in part, of the Guaranteed Agreements, or any
term of any thereof (including, without limitation, to the extent a court of
competent jurisdiction fails to give full effect to the intent of the parties to
the Master Lease set forth in Section 4 of the Master Lease, (i) any rejection
of the Master Lease by the Lessee or any trustee of the Lessee in any bankruptcy
proceeding filed by or against the Lessee and any limitation on damages which
may be recovered by the Lessor as a result of any such rejection or other
termination of the Master Lease in any such bankruptcy proceeding, and (ii) any
legal or equitable defense which the Lessee may assert against Lessor or its
rights and remedies under the Master Lease); (g) any lien, charge or encumbrance
on or affecting the Parent Guarantor's or the Guaranteed Subsidiary's respective
assets and properties; (h) any act, omission or breach on the part of the Lessor
under the Guaranteed Agreements, or any other agreement at any time existing
between the Lessor and the Guaranteed Subsidiary or any other law, governmental
regulation or other agreement applicable to the Lessor or any Obligation; (i)
any claim as a result of any other dealings among the Lessor, the Parent
Guarantor or the Guaranteed Subsidiary or any of them; (j) the assignment of the
Guaranteed Agreements by the Lessor to any other Person, or the assignment of
this Guaranty by the Lessor to any Person permitted under
<PAGE> 5
the Parent Guarantor's Consent; or (k) any change in the name of the Lessor, the
Guaranteed Subsidiary or any other Person referred to herein.
The unconditional obligations of the Parent Guarantor set forth herein
constitute the full recourse obligations of the Parent Guarantor enforceable
against it to the full extent of all of its present and future income, assets
and properties.
3. Waiver. The Parent Guarantor unconditionally waives: (a) notice of any of the
matters referred to in Section 2 hereof; (b) all notices which may be required
by statute, rule of law or otherwise to preserve any rights against the Parent
Guarantor hereunder, including, without limitation, notice of the acceptance of
this Guaranty, or the creation, renewal, extension, modification or accrual of
the Obligations or notice of any other matters relating thereto, any
presentment, demand, notice of dishonor, protest, nonpayment of any damages or
other amounts payable under the Guaranteed Agreements; (c) any requirement for
the enforcement, assertion or exercise of any right, remedy, power or privilege
under or in respect of the Guaranteed Agreements, including, without limitation,
diligence in collection or protection of or realization upon the Obligations or
any part thereof or any collateral therefor; (d) any requirement of diligence;
(e) any requirement to mitigate the damages resulting from a default by the
Guaranteed Subsidiary under the Guaranteed Agreements; (f) the occurrence of
every other condition precedent to which the Parent Guarantor or the Guaranteed
Subsidiary may otherwise be entitled; and (g) the right to require the Lessor to
proceed against the Guaranteed Subsidiary or any other Person liable on the
Obligations, to proceed against or exhaust any security held from the Guaranteed
Subsidiary or any other Person, or to pursue any other remedy in the Lessor's
power whatsoever, and the Parent Guarantor waives the right to have the property
of the Guaranteed Subsidiary first applied to the discharge of the Obligations.
The Lessor may, at its election, exercise any right or remedy it may have
against the Guaranteed Subsidiary or any security held by the Lessor, including,
without limitation, the right to foreclose upon any such security by judicial or
nonjudicial sale, without affecting or impairing in any way the liability of the
Parent Guarantor hereunder, except to the extent the Obligations have been paid,
and the Parent Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement, contribution or subrogation or
any other right or remedy of the Parent Guarantor against the Guaranteed
Subsidiary or any such security, whether resulting from such election by the
Lessor or otherwise. The Parent Guarantor understands that the liability of the
Guaranteed Subsidiary to the Lessor for the Obligations may be secured by real
property and that the Parent Guarantor shall be liable for the full amount of
its liability hereunder notwithstanding foreclosure on such real property by
trustee sale or any other reason impairing the Parent Guarantor's right to
proceed against the Guaranteed Subsidiary. The Parent Guarantor waives any
defense arising by reason of any disability or other defense of the Guaranteed
Subsidiary or by reason of the cessation from any cause whatsoever of the
liability, either in whole or in part, of the Guaranteed Subsidiary to the
Lessor for the Obligations and all rights and defenses that the Parent Guarantor
may have because the Guaranteed Subsidiary's Obligations are secured by real
property. The Parent Guarantor
<PAGE> 6
hereby waives, to the fullest extent permitted by law, all rights and benefits
under section 2809 of the California Civil Code purporting to reduce a Parent
Guarantor's obligations in proportion to the principal obligation, all rights
and benefits under section 580a of the California Code of Civil Procedure
governing determination of fair market value following the exercise of power of
sale, all rights and benefits under section 580b of the California Code of Civil
Procedure stating that no deficiency may be recovered on a real property
purchase money obligation and all rights and benefits under section 580d of the
California Code of Civil Procedure stating that no deficiency may be recovered
on a note secured by a deed of trust on real property in case such real property
is sold under the power of sale contained in such deed of trust, and all rights
and benefits under section 726 of the California Code of Civil Procedure and any
and all similar laws now in effect or hereafter enacted in the State of
California regarding the procedures to be followed by a creditor with real
property security and/or limiting the right of such a creditor to a deficiency
judgment, including, without limitation, the California law now in effect
stating that the Lessor must first proceed against any real property collateral
before commencing an action to collect the Obligations, if such sections, or any
of them, have any application hereto or any application to the Parent Guarantor.
Accordingly, the Parent Guarantor waives all rights and defenses that the Parent
Guarantor may have because the Obligations are secured by real property. This
means, among other things: (i) the Lessor may collect from the Parent Guarantor
without first foreclosing on any real or personal property collateral pledged by
the Guaranteed Subsidiary; and (ii) if the Lessor forecloses on any real
property collateral pledged by the Guaranteed Subsidiary: (A) the amount of the
debt may be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price, and
(B) the Lessor may collect from the Parent Guarantor even if the Lessor, by
foreclosing on the real property collateral, has destroyed any right the Parent
Guarantor may have to collect from the Guaranteed Subsidiary. This is an
unconditional and irrevocable waiver of any rights and defenses the Parent
Guarantor may have because the Obligations are secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure. The Parent Guarantor expressly waives any and all benefits under the
California Civil Code Sections 2787 to 2855 inclusive.
The Parent Guarantor understands that the Lessor's exercise of certain
rights and remedies contained in the Guaranteed Agreements may affect or
eliminate the Parent Guarantor's rights of subrogation against the Guaranteed
Subsidiary and that the Parent Guarantor may therefore incur partially or
totally nonreimbursable liability hereunder; nevertheless, the Parent Guarantor
hereby authorizes and empowers the Lessor, its successors, endorsees and/or
assignees, to exercise in its or their sole discretion, any rights and remedies,
or any combination thereof, which may then be available, it being the purpose
and intent of the Parent Guarantor that its obligations hereunder shall be
absolute, independent and unconditional under any and all circumstances.
Accordingly, the Parent Guarantor waives all rights and defenses arising out of
an election of remedies by the Lessor, even though the election of remedies,
such as non-judicial foreclosure with respect to security for the Obligations,
has destroyed or
<PAGE> 7
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
impaired the Parent Guarantor's rights of subrogation and reimbursement against
the principal by operation of Section 580d of the California Code of Civil
Procedure or otherwise.
The Parent Guarantor assumes the responsibility for being and keeping
informed of the financial condition of the Guaranteed Subsidiary and of all
other circumstances bearing upon the risk of nonpayment of the Obligations and
agrees that the Lessor shall not have any duty to advise the Parent Guarantor of
information regarding any condition or circumstance or any change in such
condition or circumstance. The Parent Guarantor acknowledges that the Lessor has
not made any representation to the Parent Guarantor concerning the financial
condition of the Guaranteed Subsidiary.
4. Benefits of Guaranty. The provisions of this Guaranty are for the benefit of
the Lessor and its assigns, transferees, endorsees and successors, and nothing
contained herein shall impair, as between the Lessor and its assigns,
transferees, endorsees and successors, the Parent Guarantor and the Guaranteed
Subsidiary, the obligations of the Guaranteed Subsidiary under the Guaranteed
Agreements. In the event all or any part of the Obligations are transferred,
endorsed or assigned by the Lessor as permitted in the Guaranteed Agreements,
any reference to the "Lessor" herein shall be deemed to refer equally to such
Person or Persons.
5. Representations and Warranties of the Parent Guarantor. The Parent Guarantor
represents and warrants to the Lessor that:
(a) Corporate Existence. The Parent Guarantor (i) is duly organized, validly
existing and in good standing under the laws of the State of Delaware, (ii) has
the corporate power, authority and legal right to own or operate its properties
or to lease the properties it operates and to conduct the business in which it
is currently engaged, and (iii) is duly qualified as a foreign corporation and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of properties or the conduct of its business requires such
qualification, except where such failure to qualify would not have a Material
Adverse Effect.
(b) Corporate Power; Authorization; Enforceable Obligations. The Parent
Guarantor as the corporate power, authority and legal right to make, deliver and
perform this Guaranty and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Guaranty. No consent of any
other Person (including, without limitation, stockholders and creditors of the
Parent Guarantor), and no authorization of, notice to, or other act by any
governmental authority, agency or instrumentality is required in connection with
the execution, delivery, performance, validity or enforceability of this
Guaranty. This Guaranty has been duly executed and delivered on behalf of the
Parent Guarantor, and this Guaranty constitutes a legal, valid and binding
obligation of the Parent Guarantor, enforceable against the Parent Guarantor in
accordance with its terms, except as such enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally or
by general principles of equity.
<PAGE> 8
(c) No Legal Bar. The execution, delivery and performance by the Parent
Guarantor of this Guaranty will not violate any provision of any existing Law or
regulation applicable to the Parent Guarantor or of any award, order or decree
applicable to the Parent Guarantor of any court, arbitrator or governmental
authority, or of the Certificate of Incorporation or By-Laws of the Parent
Guarantor, or of any security issued by the Parent Guarantor or of any mortgage,
indenture, lease, contract or other agreement or undertaking to which the Parent
Guarantor is a party or by which the Parent Guarantor or any of its properties
or assets may be bound.
(d) Litigation. Except as disclosed in Schedule 5(d), there is no action, suit,
proceeding or investigation at law or in equity by or before any court,
governmental body, agency, commission or other tribunal now pending or, to the
best knowledge of the Parent Guarantor, threatened against or affecting the
Parent Guarantor or any property or rights of the Parent Guarantor which
questions the enforceability of this Guaranty or which as of the date hereof
could reasonably be expected to exceed $1,000,000, or after the date hereof
could reasonably be expected to have a Material Adverse Effect.
(e) ERISA. Except as disclosed on Schedule 5(e):
(i) neither the Parent Guarantor, its Subsidiaries nor any ERISA
Affiliate maintains or contributes to, or has during the past two years
maintained or contributed to, any Plan that is subject to Title IV of
ERISA;
(ii) each Plan maintained by the Parent Guarantor or any of its
Subsidiaries has at all times been maintained, by its terms and in
operation, in compliance with all applicable laws, and neither the Parent
Guarantor nor any of its Subsidiaries is subject to any tax or penalty with
respect to any Plan of the Parent Guarantor, any of its Subsidiaries or any
ERISA Affiliate, including, without limitation, any tax or penalty under
Title I or Title IV of ERISA or under Chapter 43 of the Internal Revenue
Code, or any tax or penalty arising from a loss of deduction under Sections
162, 404 or 419 of the Internal Revenue Code;
(iii) neither the Parent Guarantor nor any of its Subsidiaries is subject
to any liabilities (including withdrawal liabilities) with respect to any
Plans of the Parent Guarantor, any of its Subsidiaries or any ERISA
Affiliate, including, without limitation, any liabilities arising under
Titles I or IV of ERISA, other than obligations to fund benefits under an
ongoing Plan and to pay current contributions, expenses and premiums with
respect to such Plans;
(iv) the Parent Guarantor and its Subsidiaries and, with respect to any
Plan which is subject to Title IV of ERISA, each ERISA Affiliate have made
full and timely payment of all amounts (A) required to be contributed under
the terms of each Plan and applicable law, and (B) required to be paid as
<PAGE> 9
expenses (including PBGC or other premiums) of each Plan, and no Plan
subject to Title IV of ERISA has an "amount of unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of ERISA), determined as if
such Plan terminated on any date on which this representation or warranty
is made or deemed to be made; and
(v) the Parent Guarantor and its Subsidiaries are subject to no liabilities
with respect to post-retirement medical benefits.
(f) Guaranteed Subsidiary. The Parent Guarantor owns and holds, beneficially and
of record all of the issued and outstanding shares of capital stock of the
Guaranteed Subsidiary. All such shares have been validly issued, are fully paid
and non-assessable, and are free and clear of any liens or encumbrances.
(g) Taxes. The Parent Guarantor and each of its Subsidiaries has filed all
federal and other income tax returns and reports required by law to have been
filed by it and has timely paid all taxes and governmental charges thereby shown
to be owing, except any such taxes or charges which are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books.
(h) Financial Statements. The Parent Guarantor has furnished to the Lessor
copies of its Annual Report on Form 10-K for the year ended January 1, 1999 and
copies of its Quarterly Report on Form 10-Q for the quarters ended April 3,
1998, July 3, 1998 and October 2, 1998. The financial statements contained in
such documents fairly present the financial position, results of operations and
consolidated statements of cash flows of the Parent Guarantor and its
Subsidiaries as of the dates and for the periods indicated therein and have been
prepared in accordance with GAAP applied on a consistent basis. Since the date
of such financial statements, there has been no material adverse change in the
financial condition or business of the Parent Guarantor and its Subsidiaries
which could, when taken as a whole, have a Material Adverse Effect.
(i) Compliance with Laws. The Parent Guarantor and each of its Subsidiaries is
in compliance with all applicable Laws (including, without limitation, all
Environmental Requirements and all applicable laws, rules, regulations and
orders relating to building and land use), except those the non-compliance with
which could not, either singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(j) No Default. No Event of Default has occurred and no condition exists which,
after notice and expiration of any cure period, would constitute, an Event of
Default under the Related Documents.
(k) Labor Controversies. There are no organized labor controversies pending or,
to the best knowledge of the Parent Guarantor, threatened, relating to the
Parent Guarantor or any of its Subsidiaries. There is (i) no unfair labor
practice complaint pending against the Parent Guarantor or any of its
Subsidiaries or, to
<PAGE> 10
the best knowledge of the Parent Guarantor, threatened against any of them,
before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Parent Guarantor or any of its Subsidiaries or, to the best
knowledge of the Parent Guarantor, threatened against any of them, (ii) no
strike, labor dispute, slowdown or stoppage is pending against the Parent
Guarantor or any of its Subsidiaries or, to the best knowledge of the Parent
Guarantor, threatened against the Parent Guarantor or any of its Subsidiaries,
and (iii) no union representation question existing with respect to the
employees of the Parent Guarantor or any of its Subsidiaries. The Parent
Guarantor and each of its Subsidiaries is in compliance in all material respects
with all collective bargaining agreements to which it is subject.
(l) Ownership of Properties; Collateral.
(i) Each of the Parent Guarantor and its Subsidiaries has good title to all
of its material properties and assets of any nature whatsoever, free and
clear of all Liens except as permitted pursuant to Section 14(c). All Liens
attaching to property or assets of the Parent Guarantor or any of its
Subsidiaries as of the date hereof are identified in Schedule 5(l).
(ii) The provisions of the Security Agreement are effective to create in
favor of the Collateral Agent for the benefit of the Collateral Agent and
the Secured Parties (as such term is defined therein), a legal, valid and
enforceable security interest in all right, title and interest of the
Parent Guarantor and each of its Subsidiaries party thereto in the
Collateral described therein, and, upon the filing of the Financing
Statements, the Security Agreement will create a fully perfected first
priority security interest in all right, title and interest of the Parent
Guarantor and each of its Subsidiaries party thereto in all of the
Collateral, subject to no other Liens other than Liens permitted by Section
14(c).
(m) Intellectual Property. Except as disclosed on Schedule 5(m), the Parent
Guarantor owns, beneficially and of record, or licenses pursuant to valid and
binding licenses, all such Intellectual Property, and has obtained assignments
of all licenses and other rights, as the Parent Guarantor considers necessary
for or as are otherwise material to the conduct of the business of the Parent
Guarantor as now conducted without any infringement upon rights of other
Persons.
(n) Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of the Parent Guarantor or any of
its Subsidiaries in writing to the Lessor, the Agent, the Collateral Agent, the
Lenders, the Certificateholders or the Revolving Credit Lenders for purposes of
or in connection with this Guaranty or any transaction contemplated hereby is
true and accurate in every material respect on the date as of which such
information is dated or certified and as of the date of execution and delivery
of this Guaranty, and such information is not incomplete by omitting to state
any material fact necessary to make such information not misleading.
<PAGE> 11
Neither this Guaranty nor any document or statement furnished to the Lessor, the
Agent, the Collateral Agent, the Lenders, the Certificateholders or the
Revolving Credit Lenders by or on behalf of the Parent Guarantor or any of its
Subsidiaries contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein or
therein not materially misleading.
(o) Insurance. All policies of insurance in effect of any kind or nature owned
by or issued to the Parent Guarantor or any of its Subsidiaries, including
policies of life, fire, theft, product liability, public liability, property
damage, other casualty, employee fidelity, workers' compensation, property and
liability insurance, (a) as of the Effective Date are listed in Schedule 5(o),
(b) are, together with all policies of employee health and welfare and title
insurance, in full force and effect, (c) comply in all respects with the
applicable requirements set forth herein and in the Related Documents, and (d)
are of a nature and provide such coverage as is customarily carried by companies
engaged in similar businesses and owning similar properties in the same general
areas in which the Parent Guarantor and its Subsidiaries operate their
respective businesses.
(p) Condition of Property. All of the assets and properties owned by, leased to
or used by the Parent Guarantor or any of its Subsidiaries and material to the
conduct of the business of the Parent Guarantor and its Subsidiaries, taken as a
whole, are in good operating condition and repair, ordinary wear and tear
excepted, and are free and clear of known defects except for defects which do
not substantially interfere with the use thereof in the conduct of normal
operations.
(q) Trade Relations. As of the Effective Date, there exists no actual or, to the
best of Parent Guarantor's knowledge, threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
the Parent Guarantor or any of its Subsidiaries with any material customer or
group of customers of the Parent Guarantor or any of its Subsidiaries or any
material supplier of goods or services to the Parent Guarantor which could
reasonably be expected to have a Material Adverse Effect.
(r) Indebtedness. Schedule 5(r) specifies all Indebtedness of the Parent
Guarantor and its Subsidiaries as of the Effective Date.
(s) Consents. Except as disclosed in Schedule 5(s), each of the Parent Guarantor
and its Subsidiaries has all material permits and governmental consents and
approvals necessary under all applicable Laws or, in the reasonable business
judgment of the Parent Guarantor, deemed advisable under all applicable Laws, in
connection with the transactions contemplated hereby and the ongoing business
and operations of the Parent Guarantor and its Subsidiaries.
(t) No Burdensome Agreement. Neither the Parent Guarantor nor any of its
Subsidiaries is a party to or has assumed any indenture, loan or credit
agreement or any lease or other agreement or instrument or is subject to any
charter or
<PAGE> 12
other corporate restriction that could reasonably be expected to have a Material
Adverse Effect.
(u) Year 2000 Compliance. The software and the hardware operated by the
Borrower and its Subsidiaries are capable of providing or being adapted to
provide the ability to process dates or store data within the twenty-first
century or between the twentieth and twenty-first century, or otherwise operate
without error with respect to twenty-first century dates in substantially the
same manner and with the same functionality as such software records, stores
processes and presents such data as of the date hereof ("Y2K Compliance"). All
adaptations and replacements of software and hardware required to achieve full
Y2K Compliance will be completed on or before September 30, 1999, except where a
failure to achieve full Y2K Compliance will not have a Materially Adverse
Effect.
6. Payments. Each payment by the Parent Guarantor to the Lessor under this
Guaranty shall be made by transferring the amount thereof to the Lessor or to an
account designated by the Lessor in immediately available funds without set-off
or counterclaim. The making of any payments by the Parent Guarantor hereunder
shall not constitute a waiver of any rights not waived pursuant hereto that the
Parent Guarantor may have against the Lessor or the Guaranteed Subsidiary.
7. Parties. This Guaranty shall inure to the benefit of the Lessor and its
successors, assigns or transferees, and shall be binding upon the Parent
Guarantor and its successors and assigns. The Parent Guarantor may not delegate
any of its duties under this Guaranty without the prior written consent of the
Lessor and the Collateral Agent. The Lessor and its successors, assigns and
transferees may assign its or their rights and benefits under this Guaranty as
provided in the Parent Guarantor Consent.
8. Remedies. The Parent Guarantor stipulates that the remedies at law in respect
of any default or threatened default by the Parent Guarantor in the performance
of or compliance with any of the terms of this Guaranty are not and will not be
adequate, and that any of such terms may be specifically enforced by a decree
for specific performance or by an injunction against violation of any such terms
or otherwise.
9. Rights to Deal with the Guaranteed Subsidiary. At any time and from time to
time, without terminating, affecting or impairing the validity of this Guaranty
or the obligations of the Parent Guarantor hereunder, the Lessor may deal with
the Guaranteed Subsidiary in the same manner and as fully as if this Guaranty
did not exist and shall be entitled, among other things, to grant the Guaranteed
Subsidiary, without notice or demand and without affecting the Parent
Guarantor's liability hereunder, such extension or extensions of time to
perform, renew, compromise, accelerate or otherwise change the time for payment
of or otherwise change the terms of payment or any part thereof contained in or
arising under the Guaranteed Agreements, or to waive any Obligation of the
Guaranteed Subsidiary to perform, any act or acts as the Lessor may deem
advisable.
<PAGE> 13
10. Waiver of Subrogation. The Parent Guarantor hereby expressly waives any
rights which it may acquire by way of subrogation, reimbursement, contribution
or setoff under this Guaranty, by virtue of any payment or performance made
hereunder or the realization by any holder of the Obligations on any collateral
granted by the Parent Guarantor as security therefor, or otherwise. The Parent
Guarantor hereby expressly waives any claim, right or remedy which the Parent
Guarantor may now have or hereafter acquire against the Guaranteed Subsidiary
that arises hereunder, from the performance by the Parent Guarantor hereunder,
or from the realization by any holder of the Obligations on any collateral
granted by the Parent Guarantor as security therefor, including, without
limitation, any claim, right or remedy of the Lessor or any other Persons
holding any of the Obligations against the Guaranteed Subsidiary or any security
which the Lessor or any other Persons holding any of the Obligations now have or
hereafter acquire, whether or not such claim, right or remedy arises in equity,
under contract, by statute, under color of law or otherwise. If any amount shall
be paid to the Parent Guarantor on account of such subrogation, reimbursement,
contribution or setoff rights, such amount shall be held in trust for the
benefit of the Lessor and any other holders of the Obligations and shall
forthwith be paid to the Lessor to be credited and applied upon the Obligations,
whether matured or unmatured, or to be held by the Collateral Agent as
collateral security for any Guaranteed Obligations thereafter existing. The
preceding waiver is intended by the Parent Guarantor, the Lessor and any other
holders of the Obligations to be for the benefit of the Guaranteed Subsidiary
and any of its successors and assigns as an absolute defense to any action by
the Parent Guarantor against the Guaranteed Subsidiary or its assets that arises
out of the Parent Guarantor's performance under this Guaranty. To the extent the
Parent Guarantor makes any payment hereunder or any holder of the Obligations
realizes upon any collateral granted by the Parent Guarantor as security for its
obligations hereunder, the Parent Guarantor shall be deemed to have made a
contribution to the equity capital of the Guaranteed Subsidiary in the amount of
such payment or realization.
11. Election of Remedies, Etc. Any election of remedies which results in the
denial or impairment of the right of the Lessor to seek a deficiency judgment
against the Guaranteed Subsidiary shall not impair the Parent Guarantor's
obligation to pay the full amount of the Obligations. In the event the Lessor
shall bid at any foreclosure or trustee's sale or at any private sale permitted
by law or the Related Documents, the Lessor may bid all or less than the amount
of the Obligations and the amount of such bid need not be paid by the Lessor but
shall be credited against the Obligations. The amount of the successful bid at
any such sale, whether the Lessor or any other party is the successful bidder,
shall be conclusively deemed to be the fair market value of the collateral and
the difference between such bid amount and the remaining balance of the
Obligations shall be conclusively deemed to be the amount of the obligations
guaranteed under this Guaranty, notwithstanding that any present or future law
or court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which the Lessor might otherwise be entitled but for such
bidding at any such sale.
<PAGE> 14
12. Continuing Guaranty. The Parent Guarantor agrees that this Guaranty is a
continuing guaranty and shall remain in full force and effect until the payment
and performance in full of the Obligations. Upon payment and performance in full
of the Obligations of the Parent Guarantor, this Guaranty and all obligations of
Parent Guarantor hereunder shall be released and, upon the request of the Parent
Guarantor, the Lessor shall endorse, execute, deliver, record and file all
instruments and documents, and do all other acts and things reasonably required
to evidence or document such release.
13. Affirmative Covenants. The Parent Guarantor hereby covenants and agrees that
until the Obligations and all obligations of the Parent Guarantor under this
Guaranty have been paid or discharged in full:
(a) Compliance with Laws. The Parent Guarantor shall comply, and shall cause
each of its Subsidiaries to comply, in all material respects with all applicable
Laws (including Environmental Requirements).
(b) Payment of Taxes. The Parent Guarantor shall, and shall cause each
Subsidiary to pay and discharge, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its property, and (ii) all lawful claims which, if unpaid, might become a
Lien upon its property; provided, however, that neither the Parent Guarantor nor
any Subsidiary shall be required to pay or discharge any such tax, assessment,
charge or claim which is being diligently contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained,
including, without limitation, a Permitted Contest.
(c) Maintenance of Insurance. The Parent Guarantor shall (i) maintain or cause
to be maintained, with financially sound and reputable independent insurers,
insurance with respect to its or any of its Subsidiaries' business or material
properties, as the case may be, against loss or damage of the kinds customarily
insured against by entities engaged in the same or similarly situated business,
and of such types and amounts (subject to customary deductibles and retentions)
as are customarily carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Parent Guarantor and
its Subsidiaries operate their respective businesses, including, without
limitation, such insurance as is required under Section 10 of the Master Lease
and such insurances as is described on Schedule 5(o), and (ii) furnish to the
Lessor and the Collateral Agent following written request therefor, a
certificate of an authorized officer setting forth the nature and extent of all
insurance maintained by the Parent Guarantor and its Subsidiaries in accordance
with this section. Each such policy shall be issued by an insurance company with
a Best's rating of "A" or better and a financial size category of not less than
VII in the case of Medmarc, or not less than VIII in the case of all other such
insurance companies, shall be in effect on the Effective Date and the premiums
for each such policy shall be paid as such premiums shall come due. All policies
of casualty insurance shall contain an endorsement, in the form submitted to the
Parent Guarantor by the Collateral Agent, showing loss payable to the Collateral
Agent. All policies of liability insurance, including, without limitation, all
primary and umbrella
<PAGE> 15
liability policies, shall name the Collateral Agent, as additional insured. The
Parent Guarantor shall retain all the incidents of ownership of the insurance
maintained pursuant to this Section 13(c), but shall not borrow upon or
otherwise impair its right to receive the proceeds of such insurance.
(d) Preservation of Corporate Existence, Etc. The Parent Guarantor shall
preserve and maintain, and shall cause each Subsidiary to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises, except
as permitted under Section 14(j) below.
(e) Delivery of Financial Statements, Compliance Certificate and Reporting
Requirements. The Parent Guarantor shall furnish to the Lessor and the
Collateral Agent on behalf of the Secured Parties, each of following:
(i) as soon as available, but in any event within 90 days after the end of
each Fiscal Year of the Parent Guarantor, a copy of the audited
consolidated balance sheet of the Parent Guarantor as at the end of such
Fiscal Year and the related audited consolidated statements of income,
stockholders' investment and cash flows for such year, in each case which
shall be (A) in reasonable detail and set forth in comparative form the
figures as of the end of and for the previous year, (B) certified without
qualification by a firm of independent accountants of nationally recognized
standing, and (C) complete and correct in all material respects and
prepared in accordance with GAAP;
(ii) as soon as available, but in any event not later than 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year of
the Parent Guarantor, a copy of the unaudited consolidated balance sheet of
the Parent Guarantor as at the end of each such Fiscal Quarter and the
related unaudited consolidated statements of income, stockholders'
investment and cash flows of the Parent Guarantor for such quarter and the
portion of the fiscal year through such date, in each case which shall be
(A) in reasonable detail and set forth in comparative form the figures as
of the end of and for the corresponding period of the previous Fiscal Year,
(B) certified as to fairness of presentation by the Chief Financial
Officer, the Vice President of Finance or the Controller of the Parent
Guarantor, and (C) complete and correct in all material respects (subject
to normal year-end audit adjustments) and prepared in accordance with GAAP
(except that such financial statements need not contain footnotes and shall
be prepared substantially in accordance with GAAP);
(iii) concurrently with the delivery of the financial statements referred
to in clauses (i) and (ii) above, a certificate signed by the Chief
Financial Officer, the Vice President of Finance or the Controller of the
Parent Guarantor setting forth computations in reasonable detail
demonstrating compliance with the financial covenants set forth in Section
15 hereof, together with a statement that, to the best of such officer's
knowledge, the Parent Guarantor
<PAGE> 16
during the relevant period has observed and performed all of its covenants
and other agreements hereunder, and satisfied every condition contained
herein to be observed, performed or satisfied by it, and that such officer
has obtained no knowledge of any Potential Default or Event of Default
hereunder except as described in such certificate (any such description to
be in reasonable detail and to include a description of any action to be
taken with respect to such default);
(iv) as soon as possible and in any event within five days after the
occurrence of each Potential Default and each Event of Default continuing
on the date of such statement, a statement of the Chief Financial Officer,
the Vice President of Finance, the Controller or other responsible officer
of the Parent Guarantor setting forth details of such Potential Default and
Event of Default and the action which the Parent Guarantor has taken and
proposes to take with respect thereto;
(v) promptly and in any event within 30 days after the filing thereof with
the Internal Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each
Plan;
(vi) promptly and in any event within 10 days after the Parent Guarantor or
any ERISA Affiliate knows or has reason to know that any ERISA Event has
occurred, a statement of the Chief Financial Officer, the Vice President of
Finance, the Controller or other responsible officer of the Parent
Guarantor describing such ERISA Event and the action, if any, which the
Parent Guarantor or such ERISA Affiliate proposes to take with respect
thereto;
(vii) promptly and in any event within two Business Days after receipt
thereof by the Parent Guarantor or any ERISA Affiliate, copies of each
notice from the PBGC stating its intention to terminate any Plan or to have
a trustee appointed to administer any Plan;
(viii) promptly and in any event within five Business Days after receipt
thereof by the Parent Guarantor or any ERISA Affiliate from the sponsor of
a Multiemployer Plan, a copy of each notice received by the Parent
Guarantor or any ERISA Affiliate concerning (A) the imposition of
Withdrawal Liability by a Multiemployer Plan, (B) the reorganization or
termination, within the meaning of Title IV of ERISA, of any Multiemployer
Plan, or (C) the amount of liability incurred, or which may be incurred, by
the Parent Guarantor or any ERISA Affiliate in connection with any event
described in clause (A) or (B) above;
(ix) promptly after the commencement thereof, notice of all actions, suits
and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
<PAGE> 17
affecting the Parent Guarantor or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect;
(x) within ninety (90) days after the end of each Fiscal Year of the Parent
Guarantor, a business plan of the Parent Guarantor and its Subsidiaries, in
form, scope and detail reasonably satisfactory to the Lessor, the
Collateral Agent and the Majority Secured Parties for the twelve (12)
months following the end of such Fiscal Year, including consolidated and
consolidating operating budgets prepared on a quarterly basis for such
Fiscal Year, which budgets shall include estimated Consolidated Capital
Expenditures and Research and Development Expenses and other costs to be
incurred by the Parent Guarantor and its Subsidiaries, on a consolidated
and consolidating basis, during such Fiscal Year, in each case, with
accompanying detail, together with a report containing management's
discussion and analysis of the projected financial condition and results of
operations of the Parent Guarantor and its Subsidiaries;
(xi) within ninety (90) days after the end of each Fiscal Year of the
Parent Guarantor, projected balance sheets, statements of operations and
changes in cash flows of the Parent Guarantor and its Subsidiaries for such
Fiscal Year and each of the Fiscal Years of the Parent Guarantor hereafter
commencing prior to May 18, 2004 prepared on a quarterly basis for the
upcoming Fiscal Year and on an annual basis for all Fiscal Years
thereafter, together with supporting details and a statement of underlying
assumptions;
(xii) promptly after approval by the Parent Guarantor's Board of Directors,
any updates or revisions to any business plan described in the preceding
clause (x) of this Section 13(e);
(xiii) promptly upon the sending or filing thereof, copies of all reports
that the Parent Guarantor or any of its Subsidiaries sends to its security
holders generally, and copies of all reports and registration statements
that the Parent Guarantor or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange;
(xiv) the condemnation or threat of condemnation with respect to any
property used or necessary in the conduct of the business of the Parent
Guarantor or any of its Subsidiaries (including, without limitation, the
Property) which condemnation could reasonably have a Material Adverse
Effect; and
(xv) such other information respecting the condition or operations,
financial or otherwise, of the Parent Guarantor or any of its Subsidiaries
as the Lessor, the Collateral Agent or any Secured Party may from time to
time reasonably request.
<PAGE> 18
(f) Keeping of Books and Records. The Parent Guarantor shall keep, and shall
cause each Subsidiary that is not an Inactive Subsidiary to keep, proper books
of record and accounts, in which full, true and correct entries shall be made of
all financial transactions and the assets and business of the Parent Guarantor
and each such Subsidiary in accordance with GAAP consistently applied.
(g) Visitation Rights. The Parent Guarantor shall and shall cause each Domestic
Subsidiary, upon at least two (2) Business Days' notice, to permit the Lessor,
the Collateral Agent on behalf of the Secured Parties or any agents or
representatives thereof, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Parent
Guarantor and any Subsidiary, and to discuss the affairs, finances and accounts
of the Parent Guarantor and any Subsidiary with any of their officers or
directors and with their independent certified public accountants. The Parent
Guarantor will pay all reasonable costs and expenses incurred by the Lessor, the
Collateral Agent, any Secured Party or their agents or representatives in
connection with the exercise of rights under this Section 12(g) during the
existence of an Event of Default.
(h) Foreign Qualification. The Parent Guarantor will, and will cause each
Subsidiary to, cause to be done at all times all things necessary to be duly
qualified to do business and be in good standing as a foreign corporation in
each jurisdiction where the failure to so qualify could have a Material Adverse
Effect.
(i) Maintenance of Properties, Etc. The Parent Guarantor will maintain and
preserve, and cause each of its Subsidiaries to maintain and preserve, all of
its properties (real and personal and including all intangible assets), except
obsolete properties which are not used or necessary in the conduct of its
business, in good working order and condition, ordinary wear and tear excepted.
(j) Maintenance of Licenses and Permits. The Parent Guarantor will maintain and
preserve, and will cause each of its Subsidiaries to maintain and preserve, all
material Intellectual Property, rights, permits, licenses, approvals and
privileges issued under or arising under any applicable Law.
(k) Real Estate. If the Parent Guarantor or any of its Domestic Subsidiaries
shall acquire a fee or leasehold interest in real estate which the Lessor or the
Collateral Agent determines to be material to the Parent Guarantor or such
Subsidiary, then the Parent Guarantor or such Subsidiary, as the case may be,
will execute a first priority mortgage in favor of the Collateral Agent, in form
and substance reasonably satisfactory to the Collateral Agent, and shall deliver
to the Collateral Agent such title insurance policies, surveys and landlords'
estoppel agreements with respect thereto as the Collateral Agent shall
reasonably request; provided, however, that neither the Parent Guarantor nor any
of its Subsidiaries shall be required to execute any such mortgage or deliver
any other items required under this Section 13(k) (i) in respect of any such
real estate purchased with the proceeds of purchase money Indebtedness permitted
to be
<PAGE> 19
incurred under Section 14(b) hereof or (ii) in respect of real estate purchased
or leased by the Parent Guarantor or any of its Subsidiaries (other than real
estate described in clause (i)) if the aggregate consideration paid or payable
by the Parent Guarantor or such Subsidiary, together with the aggregate
consideration paid or payable by the Parent Guarantor and its Subsidiaries in
respect of all other real estate that is not subject to a first-priority
mortgage in favor of the Collateral Agent (other than real estate described in
clause (i)), does not exceed $5,000,000.
(l) Employee Plans. The Parent Guarantor will, and will cause each Subsidiary
to, comply in all material respects with the provisions of ERISA and the Code
which are applicable to any Plan.
14. Negative Covenants. The Parent Guarantor hereby covenants and agrees that
until the Obligations and all obligations of the Parent Guarantor under this
Guaranty have been paid or discharged in full:
(a) Business Activities. The Parent Guarantor will not, and will not permit any
Subsidiary to, engage in any business activity, except those in which the Parent
Guarantor is engaged on the Effective Date, such activities as may be incidental
or related thereto and any line of business that is similar or complimentary to
the business of the Borrower and its Subsidiaries as of the Effective Date.
(b) Limitation on Indebtedness. The Parent Guarantor shall not create, assume,
incur, suffer to exist or otherwise become or remain liable in respect of, or
permit any of its Subsidiaries to create, assume, incur, suffer to exist or
otherwise become or remain liable in respect of, any Indebtedness except (i)
Indebtedness arising under the Related Documents, (ii) Indebtedness existing on
the date hereof and reflected in the financial statements delivered pursuant to
Section 13(e) hereof, and any extension, renewal or replacement of such
Indebtedness provided, that the principal amount thereof upon any such
extension, renewal or replacement shall not exceed the principal amount of
Indebtedness at the time of such extension, renewal or replacement or the terms
thereof, (iii) Indebtedness of a Person existing at the time such Person becomes
a Subsidiary of the Parent Guarantor and not incurred in connection with or in
contemplation of such Person becoming a Subsidiary of the Parent Guarantor,
provided that all such Indebtedness permitted under this clause (iii) does not
exceed $3,000,000 at any one time outstanding, and any extension, renewal or
replacement of such Indebtedness provided, that the principal amount thereof
upon any such extension, renewal or replacement shall not exceed the principal
amount of Indebtedness at the time of such extension, renewal or replacement,
(iv) Indebtedness of the Parent Guarantor or any of its Subsidiaries secured by
a Lien permitted under Section 14(c)(iv) or Capitalized Lease Obligations,
provided that the principal amount thereof (and the amount of such Capitalized
Lease Obligations attributable to principal) does not exceed in the aggregate
$3,000,000 at any one time outstanding, (iv) Indebtedness which, together with
all other Indebtedness permitted under clauses (ii), (iii) and (iv) of this
Section 14(b), does not exceed $5,000,000 at any one time outstanding, and (v)
Indebtedness that is subordinated to the obligations of the Credit
<PAGE> 20
Parties under the Related Documents on terms and conditions satisfactory to the
Majority Secured Parties in their commercially reasonable discretion provided
that no Potential Default or Event of Default shall have occurred and be
continuing or would result therefrom and after giving pro forma effect to the
incurrence of such Indebtedness the Parent Guarantor shall be in compliance with
and shall be projected to be in compliance with each of the financial covenants
set forth in Section 15.
(c) Liens, Etc. The Parent Guarantor will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its
property, revenues or assets, whether now owned or hereafter acquired, except:
(i) Liens in favor of the Collateral Agent;
(ii) Liens for taxes or assessments or other governmental charges or levies
not yet due or payable;
(iii) Liens created by or resulting from obligations of the Parent
Guarantor or any Subsidiary as lessee under operating leases;
(iv) (A) Liens on any property, acquired, constructed or improved by the
Parent Guarantor or its Subsidiaries after the date of this Guaranty which
are created or assumed contemporaneously with, or within 120 days after,
such acquisition or completion of such construction or improvement, or
within six months thereafter pursuant to a firm commitment for financing
arranged with a lender or investor within such 120-day period, to secure or
provide for the payment of all or any part of the purchase price of such
property or the cost of such construction or improvement incurred after the
date of this Guaranty; (B) Liens on any property of a corporation securing
Indebtedness of such corporation which is merged into the Parent Guarantor
or a Subsidiary; or (C) Liens on property securing indebtedness of a
corporation existing at the time such corporation becomes a Subsidiary of
the Parent Guarantor; provided, that such Liens referred to in (A) shall
not extend to any property theretofore owned by the Parent Guarantor or any
such Subsidiary other than, in the case of any such construction or
improvement, any theretofore unimproved real property on which the property
is so constructed or the improvement is located and; provided, further,
that the fair market value of the property or assets subject to any of the
Liens referred to in (A), (B) or (C) above is not less than the related
Indebtedness secured by any such Lien and such Indebtedness is permitted
under clause (iv) of Section 14(b) hereof.
(v) Liens incidental to and made in the ordinary course of business of the
Parent Guarantor or any Subsidiary (other than to secure Indebtedness)
which consists of (A) Liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings, (B) Liens
<PAGE> 21
(other than Liens arising under ERISA or under Section 412(n) of the
Internal Revenue Code in respect of deposits made in connection with
workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secured performance of tenders,
statutory obligations, leases and contracts or to secure obligations on
surety or appeal bonds, (C) Liens which arise by operation of law under
Article 2 of the Uniform Commercial Code in favor of unpaid sellers of
goods, or Liens in items or accompanying documents or proceeds of either
arising by operation of law under Article 4 of the Uniform Commercial Code
in favor of a collecting bank, (D) easements (including, without
limitation, reciprocal easement agreements and utility agreements),
rights-of-way, covenants, consents, reservations, encroachments, variations
and other restrictions, charges or encumbrances (whether or not recorded)
effecting the use of property, which do not materially detract from the
value of such property or impair the use thereof, (E) Liens in the nature
of leases and subleases granted to others which do not interfere in any
material respect with the business, and do not detract in any material
respect from the value of any property of the Parent Guarantor or any of
its Subsidiaries, and (F) Liens which constitute rights of set-off of a
customary nature or bankers' liens with respect to amounts on deposit,
whether arising by operation of law or by contract, in connection with
deposit accounts established at banks, in each case which do not materially
and adversely affect the financial condition, results of operations,
operations, business, properties or prospects of the Parent Guarantor and
its Subsidiaries, taken as a whole and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(vi) Liens created by or resulting from any litigation or legal proceedings
(including without limitation any taxes or assessments), which are at such
time being diligently contested in good faith by the Parent Guarantor or
any Subsidiary by appropriate proceedings, which proceedings in the
reasonable judgment of Lessor and any assignee, (A) shall not involve any
material danger that any Property or any portion thereof would be subject
to sale, forfeiture or loss, as a result of failure to comply therewith,
(B) shall not affect the payment of any sums due and payable hereunder or
result in any such sums being payable to any Person other than Lessor or
any assignee, (C) will not place Lessor or any assignee thereof in any
danger of civil liability for which it is not adequately indemnified for or
to any criminal liability, (D) if involving taxes, shall suspend the
collection of the taxes and (E) do not result in an Event of Default;
(vii) Liens existing on the date of this Guaranty as set forth on Schedule
5(l) hereto; and
(viii) Liens for the sole purposes of securing Indebtedness permitted by
clause
(iii) of Section 14(b) hereof.
(d) Capital Expenditures. The Parent Guarantor will not, and will not permit any
of its Subsidiaries to, make or commit to make any Consolidated
<PAGE> 22
Capital Expenditures, except the Parent Guarantor and its Subsidiaries may make
Consolidated Capital Expenditures during any Fiscal Year provided (x) no
Potential Default or Event of Default has occurred and is continuing, and (y)
the aggregate amount of Consolidated Capital Expenditures made during such
Fiscal Year does not exceed the greater of (i) $20,000,000 or (ii) twenty
percent (20%) of EBITDA for the immediately preceding Fiscal Year.
(e) Investments. The Parent Guarantor will not, and will not permit any of its
Subsidiaries to, make, incur, assume or suffer to exist any Investment in any
other Person except:
(i) Permitted Investments;
(ii) deposits for utilities, security deposits under leases and similar
prepaid expenses;
(iii) accounts receivable arising in the ordinary course of business;
(iv) Investments existing on the Effective Date and disclosed on Schedule
14(e) hereto;
(v) Investments by the Parent Guarantor and its Subsidiaries in Domestic
Subsidiaries that are not Inactive Subsidiaries;
(vi) Investments by the Parent Guarantor and its Subsidiaries in Foreign
Subsidiaries, provided that the aggregate consideration paid for such
Investments during the term of this Guaranty shall not exceed an amount
equal to five percent (5%) of the Tangible Net Worth of the Parent
Guarantor;
(vii) Investments by the Parent Guarantor and its Subsidiaries in Inactive
Subsidiaries provided that the aggregate amount of such Investments during
the term of this Guaranty shall not exceed $1,000,000;
(viii) Investments by the Parent Guarantor and its Subsidiaries consisting
of minority investments in and joint ventures with Persons that are engaged
in business activities and lines of businesses that are incidental or
related to, or similar or complimentary with, the business of the Borrower
and its Subsidiaries as of the Effective Date, provided that the aggregate
monetary consideration paid by Parent Guarantor and its Subsidiaries for
such Investments during the term of this Guaranty shall not exceed an
amount equal to five percent (5%) of the Tangible Net Worth of the Parent
Guarantor;
<PAGE> 23
(ix) Investments arising under any interest rate swap, cap, collar or other
hedging arrangement provided that the net obligations of the Parent
Guarantor and its Subsidiaries thereunder constitute Indebtedness permitted
under Section 14(b) hereof; and
(x) Investments consisting of deposit accounts of the Parent Guarantor and
its Subsidiaries maintained with banks in the ordinary course of business.
(f) Restricted Payments. The Parent Guarantor will not declare, pay or make any
dividend or distribution (in cash, property or obligations) on any shares of any
class of Capital Stock (now or hereafter outstanding) of the Parent Guarantor or
on any warrants, options or other rights in respect of any class of Capital
Stock (now or hereafter outstanding) of the Parent Guarantor or apply, or permit
any Subsidiary to apply, any of its funds, property or assets to the purchase,
redemption, sinking fund or other retirement of any shares of any class of
Capital Stock (now or hereafter outstanding) of the Parent Guarantor or any
rights, options or warrants to subscribe for or purchase any shares of any class
of Capital Stock of the Parent Guarantor, or make any deposit for any of the
foregoing.
(g) Limitation on Restrictions on Subsidiary Dividends. Except as otherwise
provided in this Agreement or any other Related Document, the Parent Guarantor
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make other distributions on its Capital Stock or other interests or
participations in profits owned by the Parent Guarantor or any Subsidiary of the
Parent Guarantor or pay any Indebtedness owed to the Parent Guarantor or any
Subsidiary of the Parent Guarantor, (b) make loans or advances to the Parent
Guarantor or any Subsidiary of the Parent Guarantor or (c) transfer any of its
property or assets to the Parent Guarantor or any Subsidiary of the Parent
Guarantor, except for such encumbrances and restrictions existing under or by
reason of this Guaranty and the other Related Documents.
(h) Take or Pay Contracts; Sale/Leasebacks.
(i) The Parent Guarantor will not, and will not permit any of its
Subsidiaries to, enter into or be a party to any arrangement for the
purchase of materials, supplies, other property or services if such
arrangement by its express terms requires that payment be made by the
Parent Guarantor or such Subsidiary regardless of whether or not such
materials, supplies, other properties or services are delivered or
furnished to it; and
(ii) The Parent Guarantor will not, and will not permit any Subsidiary to,
enter into any arrangement with any Person providing for the leasing by the
Parent Guarantor or any of its Subsidiaries of any property or assets,
<PAGE> 24
which property or assets has been or is to be sold or transferred by the
Parent Guarantor or such Subsidiary to such Person.
(i) Change of Control. The Parent Guarantor shall not permit a Change of Control
to occur.
(j) Mergers, Etc. The Parent Guarantor shall not merge into or consolidate with,
or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to any Person, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division or
business unit thereof), or permit any of its Subsidiaries to do any of the
foregoing, except that:
(i) any Subsidiary of the Parent Guarantor (other than the Guaranteed
Subsidiary), may merge into or consolidate with or transfer all or
substantially all of its assets to any wholly-owned Domestic Subsidiary of
the Parent Guarantor that is not an Inactive Subsidiary (so long as such
wholly-owned Domestic Subsidiary is the surviving corporation);
(ii) any Subsidiary of the Parent Guarantor (other than the Guaranteed
Subsidiary) may merge into or consolidate with or transfer all or
substantially all of its assets to the Parent Guarantor (so long as the
Parent Guarantor is the surviving corporation);
(iii) the Parent Guarantor or any of its Subsidiaries may purchase or
otherwise acquire all or substantially all of the assets of any Person (or
of any division or business unit thereof) provided that (A) such Person or
division or business unit is in the same or similar or complementary lines
of businesses as the business of the Parent Guarantor and its Subsidiaries,
(B) if the aggregate consideration to be paid by the Parent Guarantor or
any of its Subsidiaries in connection with such purchase or other
acquisition (including the fair market value of any consideration payable
other than in cash) is greater than $5,000,000, the Parent Guarantor shall
have given the Lessor, the Collateral Agent and the Agent not less than 10
days prior written notice thereof, (C) if the aggregate consideration
payable by the Parent Guarantor and its Subsidiaries in connection with any
such purchase or acquisition (including the fair market value of all
consideration payable other than in cash) exceeds $10,000,000, the Parent
Guarantor shall have received the prior written consent of the Majority
Secured Parties and (D) if the aggregate amount of consideration for all
such purchases and acquisitions (including the fair market value of all
consideration payable other than in cash) exceeds $5,000,000, the Parent
Guarantors and its Subsidiaries shall execute and deliver to the Collateral
Agent such additional Security Documents as the Collateral Agent shall deem
reasonably necessary or appropriate in order to obtain and effect a
first-priority Lien on all such assets and Capital Stock so acquired
(including the assets of any Person whose Capital Stock is so acquired);
<PAGE> 25
(iv) any Subsidiary may convey, transfer, lease or otherwise dispose of all
or substantially all of its assets to the extent such transaction is
permitted under clause (c) of Section 14(m); and
(v) the Parent Guarantor may merge with or consolidate into any other
Person provided that (A) (1) if the holders, immediately prior to such
merger or consolidation, of shares of Capital Stock of the Parent Guarantor
entitled to vote in the election of directors of the Parent Guarantor hold,
immediately after giving effect to such merger or consolidation, a majority
of the issued and outstanding shares of Capital Stock of the surviving
corporation entitled to vote in the election of directors of such surviving
corporation, (2) such merger or consolidation shall comply with the
requirements of clause (iii) of this Section 14(j) as if such merger or
consolidation were the acquisition by the Parent Guarantor of the Capital
Stock of the surviving corporation, and (3) the surviving corporation shall
have assumed, pursuant to an instrument in form and substance reasonably
satisfactory to the Collateral Agent, all of the obligations of the Parent
Guarantor under this Guaranty and the other Related Documents, or (B) the
surviving corporation shall have an unsecured long-term debt rating of not
less than "BBB" (or its equivalent) from Standard & Poors Corporation and
not less than Baa2 (or its equivalent) from Moodys Investors Service and
such surviving corporation shall have assumed, pursuant to an instrument in
form and substance reasonably satisfactory to the Collateral Agent, all of
the obligations of the Parent Guarantor under this Guaranty and the other
Related Documents (any such transaction described in clause (B) of this
Section 14(j)(v), a "Permitted Change of Control");
provided that in each such case, immediately after giving effect thereto, (A) no
Event of Default or Potential Default shall occur and be continuing or could
result therefrom, and (B) after giving pro forma effect to any such merger,
consolidation or transfer under this Section 14(j) the Parent Guarantor (or any
successor corporation) is, and is projected to be in compliance with Section 15.
(k) Compliance with ERISA. The Parent Guarantor shall not (i) terminate, or
permit any ERISA Affiliate to terminate, any Plan so as to result in any
material (in the opinion of the Lessor and any assignee) liability of the Parent
Guarantor or any ERISA Affiliate to the PBGC or (ii) permit to exist any
occurrence of any Reportable Event (as defined in Title IV of ERISA), or any
other event or condition, that presents a material (in the opinion of the Lessor
and any assignee) risk of such a termination by the PBGC of any Plan.
(l) Subsidiaries. The Parent Guarantor will not, and will not permit any
Subsidiary to create or acquire any Subsidiary, or to transfer assets to any
Subsidiary other than in compliance with Section 14(j) hereof.
<PAGE> 26
(m) Asset Dispositions, etc. The Parent Guarantor will not, and will not permit
any Subsidiary to, sell, transfer, lease or otherwise dispose of, or grant
options, warrants or other rights with respect to, any of its assets to any
Person, unless (a) such disposition consists of the sale or lease of inventory
in the ordinary course of business, (b) such disposition constitutes a
disposition of obsolete or retired assets not used in the business of the Parent
Guarantor and its Subsidiaries, (c) the disposition is in the ordinary course of
business and the net book value of the asset to be disposed, together with the
net book value of all other assets disposed by the Parent Guarantor or any
Subsidiary pursuant to this clause (c) during any Fiscal Year does not exceed
$10,000,000 and during the term of this Guaranty, does not exceed $20,000,000 or
(d) such disposition consists of the sale by the Parent Guarantor of real
property and improvements comprising its current manufacturing facility and
corporate headquarters located at 12744 San Fernando Road, Sylmar, California.
(n) Modification of Organizational Documents, etc. The Parent Guarantor will not
consent to any amendment, supplement or other modification of any of the terms
or provisions contained in, or applicable to, the Certificate of Incorporation
or the By-Laws of the Parent Guarantor, except for any amendment, supplement or
other modification which does not adversely affect the Parent Guarantor's
ability to pay or perform its obligations under this Guaranty.
(o) Transactions with Affiliates. The Parent Guarantor will not, and will not
permit any Subsidiary to, enter into, or cause, suffer or permit to exist any
transaction, arrangement or contract with any of its Affiliates other than any
such transaction arrangement or contract which is on terms substantially as
favorable to the Parent Guarantor or such Subsidiary as would be obtainable by
the Parent Guarantor or such Subsidiary in a comparable arms-length transaction
with a Person that is not an Affiliate of the Parent Guarantor. To the extent
that any transactions or agreements between Parent Guarantor and any other
Affiliate are permitted by this Guaranty or are consented to in writing by the
Lessor, with respect to such transaction or agreement, Parent Guarantor will (a)
reflect the separate legal existence of each entity party to the transaction or
agreement, (b) formally document such transaction or agreement in writing, and
(c) cause such transaction or agreement to be approved in advance by the board
of directors of Parent Guarantor. The pricing and other material terms of all
such transactions and agreements will be established at the inception of the
particular transaction or agreement on commercially reasonable terms
(substantially similar to the terms that would have been established in a
transaction between unrelated third parties) by written agreement and will not
be amendable except with the written consent of both Parent Guarantor and any
Affiliates party to the transaction or agreement.
(p) Inconsistent Agreements. The Parent Guarantor will not, and will not permit
any Subsidiary to, enter into any material agreement containing any provision
which would be violated or breached in any material respect by this Guaranty or
any Related Document or by the performance by the Parent Guarantor or any
Subsidiary of its obligations hereunder or under any Related Document.
<PAGE> 27
(q) Change in Accounting Method. The Parent Guarantor will not, and will not
permit any Subsidiary to, make any change in accounting treatment and reporting
practices except as required by GAAP.
(r) Change in Fiscal Year End. The Parent Guarantor will not change its Fiscal
Year end without the Lessor's prior written consent.
(s) Amendments to Certain Agreements. The Parent Guarantor will not, and shall
not permit any Subsidiary to, amend, restate or otherwise modify any Related
Document except as provided in the Participation Agreement.
15. Financial Condition. The Parent Guarantor hereby covenants and agrees as set
forth below:
(a) Total Debt to EBITDA Ratio. The Parent Guarantor will not permit its Total
Debt to EBITDA Ratio with respect to the four consecutive Fiscal Quarter period
ending on the last day of any Fiscal Quarter to be greater than the ratio set
forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Ratio
---------- -------------- -----
<S> <C> <C>
1999 First 3.0 to 1
Second 2.9 to 1
Third 2.7 to 1
Fourth 2.5 to 1
2000 First 2.4 to 1
Second 2.4 to 1
Third 2.3 to 1
Fourth 2.2 to 1
2001 First 2.1 to 1
Second and each Fiscal Quarter
thereafter through the Final Date 2.0 to 1.
</TABLE>
(b) Fixed Charge Coverage Ratio. The Parent Guarantor will not permit its Fixed
Charge Coverage Ratio with respect to the four consecutive Fiscal Quarter period
ending on the last day of any Fiscal Quarter to be less than the ratio set forth
below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Ratio
---------- -------------- -----
<S> <C> <C>
1999 First .8 to 1
Second .9 to 1
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C>
Third 1.1 to 1
Fourth 1.2 to 1
2000 First 1.2 to 1
Second 1.2 to 1
Third 1.2 to 1
Fourth 1.3 to 1
2001 First 1.3 to 1
Second 1.3 to 1
Third 1.3 to 1
Fourth 1.3 to 1
2002 First 1.3 to 1
Second 1.3 to 1
Third 1.3 to 1
Fourth 1.3 to 1
2003 First 1.3 to 1
Second 1.3 to 1
Third 1.3 to 1
Fourth 1.3 to 1
2004 First and each Fiscal Quarter
thereafter through the Final Date 1.5 to 1.
</TABLE>
(c) Interest Coverage Ratio. The Parent Guarantor will not permit its Interest
Coverage Ratio with respect to the four consecutive Fiscal Quarter period ending
on the last day of any Fiscal Quarter to be less than the ratio set forth below
opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Ratio
---------- -------------- -----
<S> <C> <C>
1999 First 10.0 to 1
Second 10.0 to 1
Third 10.0 to 1
Fourth 10.0 to 1
2000 First 10.0 to 1
Second 10.0 to 1
Third 10.0 to 1
Fourth 10.0 to 1
2001 First 10.0 to 1
Second 9.0 to 1
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
Third 8.0 to 1
Fourth 8.0 to 1
2002 First 8.2 to 1
Second 8.5 to 1
Third 9.0 to 1
Fourth 9.5 to 1
2003 First 10.0 to 1
Second 10.5 to 1
Third 11.0 to 1
Fourth 11.5 to 1
2004 First 12.0 to 1
Second 12.5 to 1
Third 13.0 to 1
Fourth 13.5 to 1
2005 First 14.0 to 1
Second 14.5 to 1
Third 15.0 to 1
Fourth 15.5 to 1
2006 First 15.5 to 1
</TABLE>
(d) Minimum EBITDA. The Parent Guarantor will not permit EBITDA for the four
consecutive Fiscal Quarter period ending on the last day of any Fiscal Quarter
to be less than the amount set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Minimum EBITDA
---------- ------------- --------------
<S> <C> <C>
1999 First $20,000,000
Second $22,000,000
Third $24,000,000
Fourth $29,000,000
2000 First $30,000,000
Second $31,000,000
Third $32,000,000
Fourth $35,000,000
2001 First $36,000,000
Second $38,000,000
Third $40,000,000
Fourth $45,000,000
</TABLE>
<PAGE> 30
<TABLE>
<S> <C> <C>
2002 First $46,000,000
Second $48,000,000
Third $50,000,000
Fourth $55,000,000
2003 First $56,000,000
Second $58,000,000
Third $60,000,000
Fourth and each Fiscal Quarter
thereafter through the Final Date $65,000,000
</TABLE>
(e) Minimum Tangible Net Worth. The Parent Guarantor will not permit its
Tangible Net Worth on the last day of any Fiscal Quarter to be less than the
amount set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Minimum EBITDA
---------- ------------- --------------
<S> <C> <C>
1999 First $115,000,000
Second $115,000,000
Third $115,000,000
Fourth $125,000,000
2000 First $130,000,000
Second $135,000,000
Third $140,000,000
Fourth $150,000,000
2001 First $155,000,000
Second $160,000,000
Third $165,000,000
Fourth $175,000,000
2002 First $180,000,000
Second $185,000,000
Third $190,000,000
Fourth $200,000,000
2003 First $205,000,000
Second $210,000,000
Third $215,000,000
Fourth $225,000,000
2004 First $230,000,000
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
Second $235,000,000
Third $240,000,000
Fourth and each Fiscal Quarter
thereafter through the Final Date $250,000,000
</TABLE>
16. Survival of Representations, Warranties, Etc. All representations,
warranties, covenants and agreements made herein and in statements or
certificates delivered pursuant hereto shall survive any investigation or
inspection made by or on behalf of the Lessor and shall continue in full force
and effect until all of the obligations of the Parent Guarantor under this
Guaranty shall be fully performed in accordance with the terms hereof, and until
the payment in full of all sums payable by the Guaranteed Subsidiary under the
Guaranteed Agreements and the performance in full of all obligations of the
Guaranteed Subsidiary in accordance with the terms and provisions of such
agreements.
17. GOVERNING LAW AND CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL, SERVICE OF
PROCESS.
(a) THIS GUARANTY HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF NEW YORK. THE
PARENT GUARANTOR AND LESSOR AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY THE
LAWS OF THE STATE OF NEW YORK, THIS GUARANTY, AND THE RIGHTS AND DUTIES OF THE
PARENT GUARANTOR AND LESSOR HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT
LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, IN RESPECT OF ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. THE PARENT GUARANTOR HEREBY IRREVOCABLY
SUBMITS, FOR ITSELF AND ITS PROPERTIES, TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE SUPREME COURT OF
THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS
GUARANTY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR HEREBY
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN
ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR PROCEEDING, IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY OR THE SUBJECT MATTER HEREOF MAY
NOT BE LITIGATED IN OR BY SUCH COURT. THIS SUBMISSION TO JURISDICTION IS
NONEXCLUSIVE AND DOES NOT PRECLUDE LESSOR
<PAGE> 32
FROM OBTAINING JURISDICTION OVER THE PARENT GUARANTOR IN ANY COURT OTHERWISE
HAVING JURISDICTION. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARENT
GUARANTOR AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE
JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION
WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. THE PARENT
GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR
REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS GUARANTY OR ANY
METHOD AUTHORIZED BY THE LAWS OF NEW YORK. THE PARENT GUARANTOR AND LESSOR
EXPRESSLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM RELATED TO THIS GUARANTY. THE PARENT GUARANTOR AND LESSOR
ACKNOWLEDGE THAT THE PROVISIONS OF THIS SECTION 17 HAVE BEEN BARGAINED FOR AND
THAT THEY HAVE BEEN REPRESENTED BY COUNSEL IN CONNECTION THEREWITH.
(b) The Parent Guarantor hereby irrevocably designates, appoints and empowers CT
Corporation System, whose present address is 1633 Broadway, New York, New York
10019, as its authorized agent to receive, for and on its behalf and its
property, service of process in the State of New York when and as such legal
actions or proceedings may be brought in the courts of the State of New York or
of the United States of America sitting in New York, and such service of process
shall be deemed complete upon the date of delivery thereof to such agent whether
or not such agent gives notice thereof to the Parent Guarantor, or upon the
earliest of any other date permitted by applicable law. It is understood that a
copy of said process served on such agent will as soon as practicable be
forwarded to the Parent Guarantor, at its address set forth in Section 18(c),
but its failure to receive such copy shall not affect in any way the service of
said process on said agent as the agent of the Parent Guarantor. The Parent
Guarantor irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of the
copies thereof by certified mail, return receipt requested, postage prepaid, to
it at its address set forth in Section 18(c)), such service to become effective
upon the earlier of (i) the date ten (10) calendar days after such mailing or
(ii) any earlier date permitted by applicable law. The Parent Guarantor agrees
that it will at all times continuously maintain an agent to receive service of
process in the State of New York on behalf of itself and its properties and in
the event that, for any reason, the agent named above or its successor shall no
longer serve as its agent to receive service of process in the State of New York
on its behalf, it shall promptly appoint a successor so to serve and shall
advise the Lessor thereof (and shall furnish to the Lessor the consent of any
successor agent so to act). Nothing in this Section 17(b) shall affect the right
of the Lessor to bring proceedings against the Parent Guarantor in the courts of
any other jurisdiction or to serve process in any other manner permitted by
applicable law.
<PAGE> 33
18. Miscellaneous.
(a) Assignment. The Parent Guarantor may not assign its rights or obligations
under this Guaranty except as provided in the Participation Agreement. The
Lessor may assign its rights under this Guaranty in accordance with the
provisions of the Participation Agreement, and no such assignment or delegation
shall diminish the Parent Guarantor's obligations hereunder.
(b) Amendments and Waivers. The provisions of this Guaranty may from time to
time be amended, modified or waived solely in accordance with the provisions of
the Participation Agreement. No failure of delay on the part of the Lessor in
exercising any power or right under this Guaranty shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right.
(c) Notices. All notices, requests, demands and other communications to any
party hereunder shall be in writing (including telex, telecopier or similar
writing) and shall be given to such party at its address or telecopier number
set forth below or such other address, telex or telecopier number as such party
may hereafter specify by notice to the other parties listed below. Any notice,
request, demand or other communication sent by telex or telecopier shall be
promptly confirmed with a copy of such notice sent by courier or by first class
mail.
If to the Lessor:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val Orton
Telecopier: (801) 246-5053
If to the Collateral Agent:
ING (U.S.) Capital LLC
55 East 52nd Street, 33rd Floor
New York, New York 10055
Attention: Chief Credit Officer
Telecopier: (212) 750-8935
<PAGE> 34
With a copy of each such notice to be simultaneously given, delivered or
served to the following address:
ING (U.S.) Capital LLC
Atlanta Office
200 Galleria Parkway, Suite 950
Atlanta, Georgia 30339
Attention: Darren J. Wells
Telecopier: (770) 951-1005
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr.
Telecopier: (404) 572-5100
If to the Parent Guarantor:
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telecopier: (818) 367-1460
With a copy of each such notice to be simultaneously given,
delivered or served to the following address:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, California 92101-3532
Attention: W. Scott Biel
Telecopier: (619) 234-3848
Each such notice, request or other communication shall be effective when
actually received.
(d) Cumulative Rights; No Waiver. The rights, powers and remedies of the Lessor
hereunder are cumulative and in addition to all rights, powers and remedies
provided under any and all agreements between the Parent Guarantor and the
Lessor relating hereto, at law, in equity or otherwise. Neither any delay nor
any omission by the Lessor to exercise any right, power or remedy shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise thereof or any exercise of any other right, power or
remedy.
<PAGE> 35
(e) Counterparts. This Guaranty may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of which
counterparts, when executed and delivered, shall be deemed an original and all
of which counterparts, taken together, shall constitute one and the same
Guaranty.
(f) Severability. Any provision of this Guaranty 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.
(g) Headings. The Article and Section headings in this Guaranty are for
convenience of reference only and shall not affect the interpretation hereof.
<PAGE> 36
[SIGNATURE PAGE TO PARENT GUARANTY]
IN WITNESS WHEREOF, the undersigned have caused this Guaranty to be
executed and delivered as of the day and year first above written.
MINIMED INC., as Parent Guarantor
By: /s/ TERRANCE H. GREGG
--------------------------------
Terrance H. Gregg
President
ACKNOWLEDGED AND AGREED:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely
as Owner Trustee under the MiniMed Real
Estate Trust 1999-1
By: /s/ VAL T. ORTON
------------------------------
Name: Val T. Orton
Title: Vice President
<PAGE> 1
v EXHIBIT 10.4
MASTER LEASE AGREEMENT
dated as of May 18, 1999
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the Owner Trustee
under the MiniMed Real Estate Trust 1999-1,
as Lessor
AND
MINIMED DEVELOPMENT CORP.,
as Lessee
THIS MASTER LEASE HAS BEEN GRANTED AS SECURITY
FOR INDEBTEDNESS OF THE LESSOR. SEE SECTION 21.
This Master Lease has been manually executed in __ counterparts, numbered
consecutively from 1 through __, of which this is No. __. To the extent, if any,
that this Master Lease constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction) no security
interest in this Lease may be created or perfected through the transfer or
possession of any counterpart other than the original executed counterpart which
shall be the counterpart identified as counterpart No. 1.
MASTER LEASE AGREEMENT
Master Lease Agreement, dated as of May 18, 1999 (as the same may be
amended, restated, modified or supplemented from time to time, this "Lease"),
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
MiniMed Real Estate Trust 1999-1, Lessor (the
<PAGE> 2
"Lessor"), and MiniMed Development Corp., a Delaware corporation, Lessee (the
"Lessee").
SECTION 1. DEFINED TERMS.
Unless the context otherwise requires, each term defined in this Section 1
shall, when used in this Lease, have the meaning set forth in Appendix A to the
Participation Agreement dated as of May 18, 1999 among the Lessee, MiniMed Inc.,
and certain of its subsidiaries, Lessor, the Certificateholders, the Lenders,
the Revolving Credit Lender, ING Baring Furman Selz LLC as Syndication Agent and
ING (U.S.) Capital LLC as agent for the Lenders and the Revolving Credit Lenders
and as Collateral Agent.
SECTION 2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LESSEE.
The Lessee represents, warrants and covenants to the Lessor:
(a) Corporate Matters. The Lessee (i) is duly organized and is and shall at
all times be validly existing as a corporation in good standing under the laws
of the State of Delaware, (ii) has and will continue to have full corporate
power, authority and legal right to own and operate its properties and to
conduct its business as presently conducted and to execute, deliver and perform
its obligations under this Lease and any Consent and any other Related Documents
to which it is a party, and (iii) is and shall at all times be duly qualified to
do business as a foreign corporation in good standing in the State of
California.
(b) Binding Agreement. The Lessee has the corporate power, authority and
legal right to make, deliver and perform this Lease and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Lease. No consent of any other Person (including, without limitation,
stockholders and creditors of the Lessee), and no authorization of, notice to,
or other act by any governmental authority, agency or instrumentality is
required in connection with the execution, delivery, performance, validity or
enforceability of this Lease. This Lease has been duly executed and delivered on
behalf of the Lessee, and this Lease constitutes a legal, valid and binding
obligation of the Lessee, enforceable against the Lessee in accordance with its
terms, except as such enforceability may be limited by bankruptcy and other
similar laws affecting the rights of creditors generally or by general
principles of equity. This Lease and any Consent have been duly authorized,
executed and delivered by the Lessee and, assuming the due authorization,
execution and delivery of this Lease and any Consent by the Lessor, this Lease
and any Consent are legal, valid and binding obligations of the Lessee,
enforceable according to their respective terms.
(c) Compliance with Other Instruments. The execution, delivery and
performance by the Lessee of this Lease and any Consent will not result in any
violation of any term of the certificate of incorporation or the by-laws of the
Lessee, do not require stockholder approval or the approval or consent of any
trustee or Certificateholders of indebtedness of the Lessee except such as have
been obtained prior to the date hereof and will not conflict with or result in a
breach of any terms or provisions of, or constitute a default under, or result
in the creation or imposition of any Lien (other than a Permitted
<PAGE> 3
Lien) upon any property or assets of the Lessee under, any indenture, mortgage
or other agreement or instrument to which the Lessee is a party or by which it
or any of its property is bound, or any existing applicable law, rule,
regulation, license, judgment, order or decree of any government, governmental
body or court having jurisdiction over the Lessee or any of its activities or
properties.
(d) Governmental Consents. There are no consents, licenses, orders,
authorizations, approvals, waivers, extensions or variances of, or notices to or
registrations or filings with (each a "Governmental Action"), any governmental
or public body or authority which are or will be required in connection with the
valid execution, delivery and performance of this Lease, or any Governmental
Action (i) which is or will be required in connection with any participation by
the Lessor or, to the best knowledge of Lessee, any Assignee, in the
transactions contemplated by any bill of sale, deed, assignment, assumption,
ownership agreement, operating agreement, or other agreement relating to any
Property or Equipment or (ii) which is or will be required to be obtained by the
Lessor or the Lessee, or, to the best knowledge of Lessee, any Assignee or any
Affiliate of the foregoing, during the Lease Term, with respect to any Property
or Equipment except such Governmental Actions, (A) as have been duly obtained,
given or accomplished, with true copies thereof delivered to the Lessor, (B) as
may be required by applicable law not now in effect, or (C) which may be
required as a result of the business, properties or activities of the Lessor,
or, to the best knowledge of Lessee, any Assignee or any Affiliate of the
foregoing and which are not dependent on the nature of any Property or Equipment
under this Lease or the business of the Lessee.
(e) Financial Statements. The Lessee has furnished to the Lessor copies of
the Parent Guarantor's Annual Report on Form 10-K for the year ended January 2,
1998 and the Parent Guarantor's Quarterly Reports on Form 10-Q for the quarters
ended April 3, 1998, July 3, 1998 and October 2, 1998. The financial statements
contained in such documents fairly present the financial position, results of
operations and statements of cash flows of the Parent Guarantor as of the dates
and for the periods indicated therein and have been prepared in accordance with
GAAP.
(f) Changes. Since October 2, 1998, there has been no Material Adverse
Effect.
(g) Litigation. Except as described in the Parent Guarantor's Quarterly
Report on Form 10-Q for the quarter ended October 2, 1998, there is no action,
suit, proceeding or investigation at law or in equity by or before any court,
governmental body, agency, commission or other tribunal now pending or, to the
best of Lessee's knowledge, threatened against or affecting the Lessee or any
Guarantor or any property or rights of the Lessee or any Guarantor which
questions the enforceability of this Lease or which could reasonably be expected
to have a Material Adverse Effect.
(h) Delivery of Information. The Lessee shall deliver to the Lessor from
time to time, (i) promptly upon their becoming available, and, in any event, not
more than 90 days after the end of the fiscal year of the Parent Guarantor,
copies of the Parent Guarantor's Annual Reports on Form 10-K, and promptly upon
their becoming available and, in any event, not more than 60 days after the end
of each fiscal quarter of the Parent Guarantor, copies of the Parent Guarantor's
Quarterly Reports on Form 10-Q and,
<PAGE> 4
promptly after filing, any other reports the Parent Guarantor files with the
Securities and Exchange Commission, (ii) promptly upon request, such other
information with respect to the Lessee's and Guarantor's operations, business,
properties, assets, financial condition or litigation as the Lessor or any
Assignee shall reasonably request, (iii) promptly, and in any event within five
(5) Business Days after a Responsible Officer of the Lessee obtains knowledge of
any Event of Default or any Potential Default hereunder, a certificate of a
Responsible Officer of the Lessee specifying the nature and period of existence
of such Event of Default or Potential Default, and what action, if any, the
Lessee has taken, is taking, or proposes to take with respect thereto, and (iv)
promptly, and in any event within five (5) Business Days after a Responsible
Officer of the Lessee obtains knowledge of any material adverse change in the
financial condition or business of the Lessee or any Guarantor or of any
litigation of the type described in paragraph (g) of this Section 2, a
certificate of a Responsible Officer of the Lessee describing such change or
litigation as the case may be.
(i) Accuracy of Appraisal. The information furnished by or on behalf of the
Lessee or the Parent Guarantor to the appraisers for use by such appraisers in
the Appraisal with respect to the Property is accurate and complete in all
material respects.
(j) Compliance with Legal Requirements and Insurance Requirements. The
operation, use and physical condition of the Property and Equipment are at all
times in substantial compliance with all Legal Requirements and Insurance
Requirements, except any Legal Requirements, the non-compliance with which,
individually or in the aggregate, (a) will not place either the Lessor or
Assignee in any danger of civil liability which the Lessor or Assignee in its
sole discretion determines is not adequately indemnified for or subject the
Lessor or Assignee to any danger of criminal liability as a result of failure to
comply therewith, (b) will not result in a diminution in the value of the
Property, (c) will not adversely affect the Lessee's ability to perform its
obligations under this Lease or any Related Documents and (d) is commercially
reasonable.
(k) Liens. No Property is subject to any Lien, except Permitted Liens.
(l) Construction Agency Agreement. The Property acquired and built pursuant
to the Construction Agency Agreement was or shall be acquired and built in
accordance with the terms of the Construction Agency Agreement. The
representations and warranties of the Lessee, as construction agent, in the
Construction Agency Agreement are true and correct in all material respects.
(m) ERISA. The Lessee has not established and does and will not maintain or
contribute to any employee benefit plan that is covered by Title IV of ERISA.
(n) Status of Lessee. All of the Lessee's Capital Stock is owned
beneficially and of record by the Parent Guarantor.
(o) Taxes. The Lessee has filed or caused to be filed all tax returns which
are required to be filed by it, and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
assets and properties and has paid all other taxes, fees or other charges
imposed on it by any Governmental Authority (except taxes, fees and charges
subject to a Permitted Contest).
<PAGE> 5
(p) Nature of the Lessee's Business. The Lessee has not engaged in any
business other than as contemplated by this Lease and the Construction Agency
Agreement and the Permitted Uses of the Ground Sublease (as such term is defined
therein).
(q) Environmental Disclosure. As of the date hereof, there is no fact known
to the Lessee with respect to Environmental Matters which could reasonably be
expected to have a Material Adverse Effect.
SECTION 3. LEASE OF THE PROPERTY.
(a) Subject to the terms and conditions hereof, the Lessor shall lease to
the Lessee, and the Lessee may lease from the Lessor pursuant to this Lease, the
Property described on Exhibit A hereto, when and as the Lessee has need of such
Property or Equipment; provided, that:
(i) such Property or Equipment is available for purchase;
(ii) except with respect to any Parcel of Property acquired and
built pursuant to the Construction Agency Agreement, the
Lessor has approved the purchase order or acquisition with
respect to such Equipment or the acquisition with respect to
such Property (which approval shall be in the sole
discretion of the Lessor);
(iii) at the time any such Property or Equipment is to be ordered
or leased hereunder there exists no Event of Default or
Potential Default; and
(iv) the aggregate Acquisition Cost of such Property or Equipment
shall not, at the time any such Property or Equipment is to
be leased hereunder, exceed the Construction Budget for such
items.
(b) In connection with the Property acquired and built pursuant to the
Construction Agency Agreement, within three (3) months of the Final Advance (as
defined in Appendix A to the Participation Agreement) with respect to such
Parcel, the Lessee may deliver to the Lessor a certificate setting forth any
increased cost and the actual amount expended by the Lessee for items included
in the Construction Budget with respect to the Property while it was subject to
the Construction Agency Agreement, and Lessor shall have all of the rights set
forth in Section 2.01 with respect to such notice.
(c) In connection with the Property acquired and built pursuant to the
Construction Agency Agreement or to be leased hereunder, if Completion has not
occurred on or prior to the Construction Period Termination Date, the Lessee may
deliver to the Lessor a certificate setting forth the actual amount expended by
the Lessee with respect to such Property or Equipment and Lessor may, at its
sole and absolute discretion, elect to proceed as though Completion of such
Property had occurred prior to the
<PAGE> 6
Construction Period Termination Date and such failure to achieve Completion
during the Construction Period shall be deemed not to be an Event of Default
hereunder.
SECTION 4. INTENT OF THE PARTIES.
(a) It is the intent of the Lessor and the Lessee that: (i) the Lease
constitutes an operating lease from the Lessor to the Lessee for purposes of the
Lessee's financial reporting, and (ii) the Lease and other transactions
contemplated hereby preserve the beneficial ownership of the Property in the
Lessee for federal and state income tax and bankruptcy purposes, and (iii) the
Lease grants to the Lessor a Lien on all Property and Equipment. The Lessee and
the Lessor agree that the Lessor shall be deemed to have a valid and binding
security interest in and Lien on the Property, free and clear of all Liens,
other than Permitted Liens, as security for the obligations of the Lessee under
the Lease and the Construction Agency Agreement (it being understood and agreed
that the Lessee does hereby grant a Lien on, and convey, transfer, assign,
mortgage and warrant to the Lessor and its successors, transferees, and assigns,
for the benefit of the Lessor and its successors, transferees and assigns, the
Property and any proceeds or products thereof, to have and hold the same as
collateral security for the payment and performance of the obligations of the
Lessee under this Agreement, the Construction Agency Agreement and all Related
Documents). Each of the Lessor and the Lessee agrees that it will not file any
Federal, state or local income tax returns during the Lease Term and the term of
the Construction Agency Agreement that are inconsistent with the intention of
the Lessor and the Lessee expressed in this Section 4. Notwithstanding the
foregoing, neither party hereto has made, or shall be deemed to have made, any
representation or warranty as to the availability of any of the foregoing
treatments under applicable accounting rules, tax, bankruptcy, regulatory,
commercial or real estate law or under any other set of rules. Lessee shall
claim the cost recovery deductions associated with each Property, and Lessor
shall not, to the extent not prohibited by law, take on its tax return a
position inconsistent with Lessee's claim of such deductions.
(b) Specifically, without limiting the generality of paragraph (a) of this
Section 4, the Lessor and the Lessee intend and agree that in the event of any
insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting the Lessee, the
Lessor, any Assignee or any collection actions relating thereto, the
transactions evidenced by this Lease and the Construction Agency Agreement shall
be regarded as loans made by the Lessor to the Lessee.
SECTION 5. DELIVERY.
(a) The requirements for acceptance for lease hereunder of the Property
acquired and built pursuant to the Construction Agency Agreement shall be the
requirements set forth in the Construction Agency Agreement.
(b) The Lessee shall ensure that the installation or erection of any
Equipment is in accordance with the specifications and requirements of the
vendor thereof and Legal Requirements.
<PAGE> 7
(c) The obligations of the Lessee to pay all amounts payable pursuant to
this Lease (including specifically and without limitation amounts payable under
Sections 7 and 11 hereof) shall be absolute and unconditional under any and all
circumstances of any character, and such amounts shall be paid without notice,
demand, defense, setoff, deduction or counterclaim and without abatement,
suspension, deferment, diminution or reduction of any kind whatsoever, except as
herein expressly otherwise provided. The obligation of the Lessee to lease and
pay Basic Rent for the Property accepted for use pursuant to this Lease is
without any warranty or representation, express or implied, as to any matter
whatsoever on the part of the Lessor or any Assignee or any Affiliate of either,
or anyone acting on behalf of any of them.
THE LESSEE HAS SELECTED AND SHALL SELECT ALL PROPERTY OR EQUIPMENT ACQUIRED
OR ORDERED ON THE BASIS OF ITS OWN JUDGMENT. NEITHER THE LESSOR NOR ANY ASSIGNEE
NOR ANY AFFILIATE OF EITHER, NOR ANYONE ACTING ON BEHALF OF ANY OF THEM MAKES
ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, AS TO THE SAFETY, TITLE, CONDITION, QUALITY,
QUANTITY, FITNESS FOR USE, MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY
OTHER CHARACTERISTIC, OF THE PROPERTY, OR AS TO WHETHER THE PROPERTY OR THE
OWNERSHIP, USE, OCCUPANCY OR POSSESSION THEREOF COMPLIES WITH ANY LAWS, RULES,
REGULATIONS OR REQUIREMENTS OF ANY KIND.
AS BETWEEN THE LESSEE AND THE LESSOR, ANY ASSIGNEE OR ANY INDEMNIFIED
PERSON, THE LESSEE ASSUMES ALL RISKS AND WAIVES ANY AND ALL DEFENSES, SET-OFFS,
DEDUCTIONS, COUNTERCLAIMS (OR OTHER RIGHTS), EXISTING OR FUTURE, AS TO THE
LESSEE'S OBLIGATION TO PAY BASIC RENT AND ALL OTHER AMOUNTS PAYABLE HEREUNDER,
INCLUDING, WITHOUT LIMITATION, ANY RELATING TO:
1. THE SAFETY, TITLE, CONDITION, QUALITY, QUANTITY, FITNESS FOR USE,
MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY OTHER QUALITY OR
CHARACTERISTIC OF THE PROPERTY, LATENT OR NOT;
2. ANY SET OFF, COUNTERCLAIM, RECOUPMENT, ABATEMENT, DEFENSE OR OTHER RIGHT
WHICH THE LESSEE MAY HAVE AGAINST THE LESSOR, ANY ASSIGNEE OR ANY INDEMNIFIED
PERSON FOR ANY REASON WHATSOEVER ARISING OUT OF THIS OR ANY OTHER TRANSACTION OR
MATTER;
3. ANY DEFECT IN TITLE OR OWNERSHIP OF THE PROPERTY OR ANY TITLE
ENCUMBRANCE NOW OR HEREAFTER EXISTING WITH RESPECT TO THE PROPERTY;
4. ANY FAILURE OR DELAY IN DELIVERY OR ANY LOSS, THEFT OR DESTRUCTION OF,
OR DAMAGE TO, THE PROPERTY, IN WHOLE
<PAGE> 8
OR IN PART, OR CESSATION OF THE USE OR POSSESSION OF THE PROPERTY BY THE LESSEE
FOR ANY REASON WHATSOEVER AND OF WHATEVER DURATION, OR ANY CONDEMNATION,
CONFISCATION, REQUISITION, SEIZURE, PURCHASE, TAKING OR FORFEITURE OF THE
PROPERTY, IN WHOLE OR IN PART;
5. ANY INABILITY OR ILLEGALITY WITH RESPECT TO THE USE, OWNERSHIP,
OCCUPANCY OR POSSESSION OF THE PROPERTY BY THE LESSEE;
6. ANY INSOLVENCY, BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDING BY OR
AGAINST THE LESSEE OR THE LESSOR OR ANY ASSIGNEE;
7. ANY FAILURE TO OBTAIN, OR EXPIRATION, SUSPENSION OR OTHER TERMINATION
OF, OR INTERRUPTION TO, ANY REQUIRED LICENSES, PERMITS, CONSENTS,
AUTHORIZATIONS, APPROVALS OR OTHER LEGAL REQUIREMENTS;
8. THE INVALIDITY OR UNENFORCEABILITY OF THIS LEASE OR ANY OTHER INFIRMITY
HEREIN OR ANY LACK OF POWER OR AUTHORITY OF THE LESSOR OR THE LESSEE TO ENTER
INTO THIS CONTRACT;
9. THE INVALIDITY OR UNENFORCEABILITY OF ANY BILL OF SALE OF THE PROPERTY
EXECUTED IN CONNECTION WITH THIS LEASE OR ANY OTHER INFIRMITY THEREIN OR LACK OF
POWER OR AUTHORITY OF ANY PARTY THERETO TO ENTER INTO SUCH BILL OF SALE; OR
10. ANY OTHER CIRCUMSTANCES OR HAPPENING WHATSOEVER, WHETHER OR NOT SIMILAR
TO ANY OF THE FOREGOING.
THE LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY TIME HEREAFTER MAY BE
CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO TERMINATE, CANCEL, QUIT, RESCIND
OR SURRENDER THIS LEASE EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS HEREOF. Each
payment of Basic Rent, Additional Rent and any other amount due hereunder made
by the Lessee shall be final, and the Lessee, without waiving any other remedies
it may have, will not seek or have any right to recover all or any part of such
payment from the Lessor or any Assignee for any reason whatsoever, except as set
forth in the second succeeding sentence. Notwithstanding anything contained
herein to the contrary, the making of payments under this Lease by the Lessee
shall not be deemed to be a waiver of any claim or claims that the Lessee may
assert against the Lessor or any other Person. The Lessor agrees to repay the
Lessee amounts paid to the Lessor to the extent such payments were in error and
are not required by any of the terms and provisions of this Lease or the
Construction Agency Agreement.
<PAGE> 9
(d) Notwithstanding any other provision contained in this Lease, it is
specifically understood and agreed that neither the Lessor nor any Assignee nor
any Affiliate of either, nor anyone acting on behalf of any of them makes any
warranties or representations or has any responsibility to disclose any relevant
information, or has any other responsibility or duty, nor, except as set forth
in Section 21 of this Lease, has the Lessor or any Assignee or any Affiliate of
either, or anyone acting on behalf of any of them made any covenants or
undertakings, as to the accounting treatment to be accorded the Lessee or as to
the U.S. Federal or any state income or any other tax consequences, if any, to
the Lessee as a result of or by virtue of the transactions contemplated by this
Lease.
SECTION 6. LEASE TERM.
The Lease Term with respect to the Property leased hereunder shall commence
on the Effective Date and shall continue to and including the fifth anniversary
of the Effective Date, unless terminated earlier pursuant to Sections 12, 13,
14, 15, 16, 18, 19 or 28 hereof or unless extended as provided in Section 13(g).
SECTION 7. RENT AND OTHER PAYMENTS.
(a) The Lessee hereby agrees to pay the Lessor by wire transfer in
immediately available funds, not later than 1:00 P.M. New York time (i) on each
Basic Rent Payment Date, the amount of Basic Rent due and payable on such Basic
Rent Payment Date and (ii) on any termination date of this Lease, all accrued
and unpaid Basic Rent.
(b) The Lessor shall furnish a statement of Basic Rent due on any Basic
Rent Payment Date to the Lessee five (5) Business Days prior to such Basic Rent
Payment Date. Prior to each Basic Rent Payment Date, the Lessor shall furnish
the Lessee with a summary of the calculations of Basic Rent payable on such
Basic Rent Payment Date.
(c) The Lessee hereby agrees to pay on demand all amounts (other than Basic
Rent) payable hereunder, including, without limitation, all amounts payable to
any Indemnified Person pursuant to Section 11 hereof; provided that such
payments during the Construction Period shall be limited by the limitation on
Lessee's payment obligations under Section 5.04 of the Construction Agency
Agreement at all times prior to the Completion Date.
(d) Without prejudice to the full exercise by the Lessor of its rights
under Sections 18 and 19 hereof, the Lessee shall pay to the Lessor from time to
time, on demand, as additional rent ("Additional Rent") (i) amounts required to
reimburse the Lessor for its obligations, costs and expenses (not previously
included in Basic Rent) incurred in acquiring, financing (including equity
financing and maintaining security for and exercising remedies in connection
with any such financing) and leasing the Property (including, without
limitation, all uninsured losses and obligations of the Lessor under the Ground
Sublease and all obligations of the Lessor under or in respect of any interest
rate swap, cap, collar or other financial hedging arrangement and any amounts
payable by the Lessor under any such arrangement to reduce the notional amount
thereof by the amount of any prepayment of any borrowing to which such interest
rate swap, cap, collar or other
<PAGE> 10
financial hedging arrangement relates), (ii) all amounts, liabilities and
obligations (other than Basic Rent) which the Lessee assumes or agrees to pay
the Lessor, the Certificateholders, the Agent, the Lenders or any other Person
under this Lease or under any other Related Document, including without
limitation, payments of the Termination Value or the Surrender Payment, (iii)
and all indemnification amounts, liabilities and obligations of Lessee, and (iv)
to the extent legally enforceable, an amount computed by multiplying (A) all
sums not paid by the Lessee to the Lessor as provided in this Lease on or before
the date such payments are due, by (B) the percentage used to calculate Loan
Basic Rent as of the most recent Basic Rent Payment Date, and by (C) a fraction
having a numerator equal to the number of days in the period from but excluding
such due date to and including the date of payment thereof and a denominator of
365, or in a leap year, 366. The Lessee shall also pay to the Lessor on demand
an amount equal to any expenses incurred by the Lessor in collecting such unpaid
sums, provided that during the Construction Period, Lessee's obligations
hereunder shall be subject to the limitations of Section 5.04 of the
Construction Agency Agreement.
(e) Basic Rent and Additional Rent and any other amount payable by the
Lessee to the Lessor shall be paid such that immediately available funds in the
full amount due are available on the date due, to the account of the Lessor at
such bank, or to such account of such other Person at such bank, or otherwise as
the Lessor may from time to time designate.
(f) If any Basic Rent or Additional Rent is required hereunder on a day
that is not a Business Day, then such Basic Rent or Additional Rent shall be due
on the next succeeding Business Day.
<PAGE> 11
SECTION 8. RESTRICTED USE; COMPLIANCE WITH LAWS.
(a) So long as no Event of Default shall have occurred and be continuing,
the Lessee may use the Property or Equipment in the regular course of its
business for any lawful purpose which complies with Section 5.1 of the Ground
Sublease. The Lessee will not do or permit any act or thing which might impair,
other than normal wear and tear arising out of the proper and normal use
thereof, the value of the Property. Lessee, at its sole cost and expense, shall
(i) comply with all applicable laws (including without limitation all
Environmental Requirements) and all Insurance Requirements relating to the
Property, (ii) procure, maintain and comply with all licenses, permits, orders,
approvals, consents and other authorizations required for the acquisition,
installation, testing, use, development, construction, material operation,
material maintenance, repair, refurbishment and restoration of the Equipment and
Property and (iii) comply with all manufacturer's specifications and standards,
including without limitation the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Equipment and Property, whether or not compliance therewith
shall require structural or extraordinary changes in the Property or interfere
with the use and enjoyment of the Property, unless the failure to procure,
maintain and comply with such items identified in subparagraphs (ii) and (iii),
individually or in the aggregate, shall not have and could not reasonably be
expected to have a Material Adverse Effect. Lessor agrees to take such actions
as may be reasonably requested by Lessee in connection with the compliance by
Lessee of its obligations under this Section 8(a).
(b) The Lessee shall promptly and duly execute, deliver, file and record,
at the Lessee's expense, all such documents, statements, filings and
registrations, and take such further action, as the Lessor shall from time to
time reasonably request in order to establish, perfect and maintain the Lessor's
title to and interest in the Property and any Assignee's interest in this Lease
or the Property as against the Lessee or any third party in any applicable
jurisdiction. The Lessor agrees, at Lessee's request and expense, to confirm to
third parties the Lessee's rights and obligations in this regard. The Lessee
may, after notice in writing to the Lessor and upon Lessor's discretionary
consent and at the Lessee's own cost and expense, change the place of principal
location of any Equipment. Notwithstanding the foregoing, no change of location
shall be undertaken unless and until all Legal Requirements shall have been met.
At least once each year prior to the anniversary of the date of this Lease, and
more frequently at the reasonable request of the Lessor, the Lessee shall advise
the Lessor in writing where all Equipment leased hereunder as of such date is
located.
(c) The Lessee shall use every reasonable precaution consistent with
prudent business practices to prevent loss or damage to the Property and to
prevent injury to third persons or property of third persons. The Lessee shall
cooperate fully with the Lessor and all insurance companies providing insurance
pursuant to Section 10 hereof in the investigation and defense of any claims or
suits arising from the ownership, operation or use of any Equipment or
ownership, use, or occupancy of the Property; provided, that nothing contained
in this paragraph (c) shall be construed as imposing on the Lessor any duty to
investigate or defend any such claims or suits. The Lessee shall comply and
shall cause all Persons using or operating Equipment or using or occupying the
Property to
<PAGE> 12
comply with all Insurance Requirements and Legal Requirements applicable to such
Property or Equipment and to the acquiring, titling, registering, leasing,
insuring, using, occupying, operating and disposing of the Property or any
portion thereof, and the licensing of operators thereof.
(d) The Lessor or any Assignee or any authorized representative of either
may upon reasonable notice and during reasonable business hours from time to
time inspect the Property and deeds, registration certificates, certificates of
title and related documents covering the Property wherever the same may be
located, but neither the Lessor nor any Assignee shall have any duty to make any
such inspection.
(e) The Lessee shall not, without the prior written consent of the Lessor,
permit, or suffer to exist, any Lien, including mechanics' liens, other than
Permitted Liens or those Liens placed thereon by, or arising from, the Lessor's
own actions or which are subject to a Permitted Contest, nor may it assign any
right or interest herein or in the Property. The Lessee shall not, without the
prior written consent of the Lessor, which consent shall be withheld or denied
in the Lessor's or any Assignee's sole discretion, sublease or otherwise
relinquish possession of any Property or Equipment, except that (i) the Lessee
may relinquish possession of any portion of the Property to any contractor for
use in performing work for the Lessee on the Property; provided, that such
relinquishment of possession shall in no way affect the obligations of the
Lessee or the rights of the Lessor hereunder and with respect to the Property
and (ii) with respect to any sublease, the Lessee may sublease any portion of
the Property without Lessor or any Assignee's consent; provided, that (A) each
such permitted sublease shall expressly be made subject and subordinate to the
provisions hereof and shall by its terms be subject to termination upon the
termination for any reason of this Lease and shall expressly provide for the
surrender of the applicable portion of the Property by the sublessee at the
election of the Lessor or Assignee after the occurrence of an Event of Default
hereunder, (B) no such permitted sublease shall modify or limit any right or
power of the Lessor or Assignee hereunder or affect or reduce any obligation of
the Lessee hereunder, and all such obligations shall continue in full force and
effect as obligations of a principal and not of a guarantor or surety, as though
no such subletting had been made, and (C) any such permitted sublease made
otherwise than as expressly approved in writing by Lessor and any Assignee and
as permitted by this paragraph (e) shall be void and of no force and effect. As
additional security to the Lessor for the performance of the Lessee's
obligations under this Lease, the Lessee hereby assigns to the Lessor all of its
right, title and interest in and to all subleases permitted hereby and agrees to
cause any sublessee to enter into such commercially reasonable attornment
agreements with the Lessor as the Lessor may reasonably request. The Lessor
shall have the present and continuing right to collect and enjoy all rents and
other sums of money payable under any such sublease, and the Lessee hereby
irrevocably assigns such rents and other sums to the Lessor for the benefit and
protection of the Lessor; provided, that unless an Event of Default shall have
occurred and be continuing hereunder, the Lessee shall be entitled to collect
and enjoy such rents and other sums. The Lessee shall, within thirty (30) days
after the execution of any such permitted sublease, deliver a conformed copy
thereof to the Lessor and any Assignee. Nothing contained in this Lease shall be
construed as constituting the consent or request of the Lessor, express or
implied, to or for the performance by any contractor, laborer, materialman or
vendor of any labor or services or for the furnishing of any materials for
<PAGE> 13
any construction, alteration, addition, repair or demolition of or to the
Property or any part thereof. Notice is hereby given that the Lessor will not be
liable for any labor, services or materials furnished or to be furnished to the
Lessee, or to anyone holding any portion of the Property or any part thereof
through or under the Lessee, and that no mechanics' or other liens for any such
labor, services or materials shall attach to or affect the interest of the
Lessor therein.
(f) If any Lien or charge of any kind or any judgment, decree or order of
any court or other governmental authority (including, without limitation, any
state or local tax lien affecting the Property), whether or not valid, shall be
asserted or entered which might interfere with the due and timely payment of any
sum payable or the exercise of any of the rights or the performance of any of
the duties or responsibilities under this Lease, the Lessee shall, upon
obtaining knowledge thereof or upon receipt of notice to that effect from the
Lessor, promptly take such action as may be necessary to prevent or terminate
such interference.
(g) The address stated in Section 23 of this Lease is the principal 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 principal place of business or chief executive office. The
Equipment and Improvements respecting the Property will be located only at the
Property.
(h) Lessee covenants and agrees that it shall not, and that any sublease
shall provide that the Sublessee shall not, treat, use, store, dispose, release,
handle or otherwise manage Hazardous Materials (as defined in Section 6.7 of the
Ground Sublease) on the Property except in connection with any construction,
operation, maintenance or repair of the Improvements or in the ordinary course
of its business, and that such conduct shall be done in compliance with all
applicable federal, state and local laws, including all Environmental
Requirements. Lessee's violation of the foregoing prohibition shall constitute a
breach hereunder and Lessee shall indemnify, hold harmless and defend the Lessor
for such violation as provided below.
(i) Lessee, in the name and stead of Lessor, may enter into agreements
granting easements reasonably necessary for the development and operation of the
improvements, provided such agreements comply with Section 5.6 of the Ground
Sublease.
SECTION 9. CONSTRUCTION, IMPROVEMENT, MAINTENANCE AND REPAIR OF PROPERTY OR
EQUIPMENT.
(a) Lessee shall construct or cause the Construction Agent to construct or
cause to be constructed on the Property the Improvements necessary for Lessee to
develop and maintain its portion of the Property, all in substantial conformity
with the construction plans, drawings and related documents approved by Ground
Lessor in accordance with the Ground Sublease. The Ground Lessor has entered
into a joint powers agreement with the City (as defined in the Ground Sublease)
which sets forth the jurisdiction of those parties with respect to the
development of the Improvements. Lessee agrees that it will implement the
Mitigation Monitoring Plan (as defined in the Ground
<PAGE> 14
Sublease), attached as Attachment No. 5 to the JPA (as defined in the Ground
Sublease), and those portions of the Mitigation Measures (as defined in the
Ground Sublease) which the Ground Lessor has the obligation to perform pursuant
to the Mitigation Monitoring Plan (as defined in the Ground Sublease), and that
it will cause the construction, use and occupancy of the Improvements to comply
with the mitigation measures set forth in Attachment No. 6 attached to the JPA.
The parties acknowledge and agree that during the term of the JPA the standards
set forth in the JPA are the standards to be applied with respect to this Lease
for land use, environmental quality, building and design codes, seismic, life
safety, and any other matters described in the JPA, and that no modification
shall be made to the standards set forth therein without the written consent of
the Ground Lessor and the Lessor. The parties hereto acknowledge that in the
future it may be necessary or desirable for Lessee to obtain, on a voluntary
basis, certain permits, subdivision approvals, or other land use approvals, and
if the Lessee so desires to process and obtain such approvals, Lessor agrees to
cooperate and assist Lessee, in the filing of such applications including
signing any such applications if required, in connection with the development of
the Property.
(b) It is the intention of Lessor and Lessee that all Improvements with the
Property be constructed, installed, erected, operated and maintained so that the
Improvements shall be aesthetically and architecturally harmonious. Accordingly
, except as otherwise provided hereinafter, all Improvements within the
Property, including initial construction and any major alterations (but not
including tenant improvements other than as may be requested by Ground Lessor
pursuant to Section 5.1(c) of the Ground Sublease), additions, exterior
remodeling or reconstructions of any Improvements following the initial
construction thereof, shall be performed only in accordance with plans approved
by the Ground Lessor for such work. Lessee represents and warrants that as of
the Effective Date, the schematic design for the Improvements has been approved
by the Ground Lessor.
(c) Prior to the commencement of the construction and/or installation of
any Improvements whatsoever on the Property or any part thereof by Lessee
pursuant to the Construction Agency Agreement, Lessee shall deliver to the
Ground Lessor the Plans and Specifications including detailed plans through and
including construction drawings of scaled elevations, exterior design concepts,
material selection and color for the exterior surfaces of the proposed
Improvements (which Plans and Specifications shall include a grading plan and/or
a utility plan, to the extent applicable). Lessee shall obtain the approval of
the Plans and Specifications by the Ground Lessor unless the Ground Lessor fails
to approve or disapprove the Plans and Specifications in accordance with the
terms of the Ground Lease within such thirty (30) day period, the Plans and
Specifications shall be deemed disapproved by Ground Lessor. Upon a deemed
disapproval, Lessee shall comply with the provisions of the Ground Lease for
seeking Ground Lessor's approval.
(d) Upon the Completion of the initial construction and installation of the
Improvements, the same shall not be thereafter materially changed or materially
altered without the prior written approval of Lessor and Ground Lessor if such
changes or alterations would substantially modify the exterior appearance of
such Improvements, which approval shall be sought pursuant to the terms set
forth above and in the Ground Lease and shall not be unreasonably withheld in
accordance with the criteria set forth
<PAGE> 15
above. Lessor shall not withhold or delay its approval of any proposed changes
or alterations to any Improvements which are consistent with the architectural
design, aesthetic quality, and exterior materials of Improvements existing at
the Property and previously approved by Lessor. In addition, Lessor shall have
no approval rights with respect to changes to exterior plans or materials which
are required by any governmental authority. Nothing herein shall require Lessee
to obtain Lessor's approval of the interior designs of the Improvements.
(e) During the preparation of any revisions to the Plans and Specifications
or the preparation of any other submissions, Lessee shall hold progress meetings
with Ground Lessor to coordinate the preparation, submission and review thereof.
Lessor and Lessee shall communicate and consult informally as frequently as is
necessary to ensure that the formal submission of all documents and Plans and
Specifications to Lessor shall receive reasonably prompt and speedy
consideration.
(f) The parties hereto acknowledge that the preliminary Site Plan attached
to this Lease as Exhibit B is a conceptual Site Plan of the Improvements, which
Site Plan is hereby approved by Lessor. Any material modifications to the Site
Plan shall be subject to the approval of Lessor, which approval shall not be
unreasonably withheld or delayed. In the event Lessee submits a revised Site
Plan to Lessor, Lessor shall approve or disapprove the revised Site Plan within
thirty (30) days of Lessee's submittal. If Lessor fails to approve or disapprove
the revised Site Plan in accordance with the terms of this Lease within such
thirty (30) day period, the revised Site Plan shall be deemed disapproved. Upon
a deemed disapproval, Lessee may deliver a notice to Lessor which states that
there has been a deemed disapproval, requesting that Lessor approve or
disapprove the Site Plan, stating that Lessor must approve or disapprove the
Site Plan within 15 days, after Lessor's receipt of this notice, and that
failure by Lessor to either approve or disapprove the Site Plan within such 15
day period will result in deemed approval. Upon submission of any disapproval,
Lessor shall inform Lessee in writing with particularity of the reasons for
disapproval. Lessee acknowledges that any proposed increases in the scale,
density, square footage, bulk or other factors which may impact the environment
may require further review pursuant to the California Environmental Quality Act
prior to a grant of approval.
(g) If there is a dispute between the parties regarding an acceptable,
revised site plan, the parties shall attempt in good faith to mediate such
dispute and use their best efforts to reach agreement on the matters in dispute.
Within 5 days of the request of a party, the requesting party shall attempt to
employ the services of a third person mutually acceptable to the parties to
conduct such mediation within 5 days of his appointment. If on completion of
such mediation, the parties are unable to agree upon an acceptable, revised site
plan, then Lessee shall have those remedies available at law or equity.
(h) With respect to any Improvements which Lessee may elect to construct,
Lessee shall submit to Lessor for informational purposes only, a copy of the
final construction contracts relating thereto, which submission shall occur
prior to the commencement of any significant construction work pursuant to any
such construction contracts.
<PAGE> 16
(i) Prior to commencing construction of any of the Improvements, Lessee
shall have obtained (and delivered insurance certificates therefor to Lessor)
all insurance coverage required under Section 10 of this Lease.
(j) All Improvements, together with all off-site improvements that may be
constructed by reason of Governmental Requirements as a condition to the
construction of Improvements upon the Property, shall be constructed in a good
and workmanlike manner using materials of good quality and in substantial
compliance with the Plans and Specifications as modified pursuant hereto and to
the Ground Lease, and shall comply with all applicable governmental permits,
laws, ordinances and regulations.
(k) Lessee covenants that the Improvements to be constructed on the
Property, and all other construction thereon, when undertaken, while in progress
and as completed: (i) will comply with all Governmental Actions, including,
without limitation, all laws and ordinances necessary to permit the development,
completion and lease of the Property pursuant to this Lease and the Ground
Lease; (ii) will be entirely on the Property and will not encroach upon the land
of others; (iii) will be wholly within any enforceable building restriction
lines, however established, and will not violate any enforceable use restriction
or any applicable easement, license, covenant, condition or restriction of
record; and (iv) will comply in all material respects with the Site Plan (as may
be modified as provided herein), all Plans and Specifications approved for such
Improvements (as may be modified as provided herein), and all provisions of this
Lease and the Ground Lease. All work performed on the Property pursuant to this
Lease and the Ground Lease, or authorized by this Lease and the Ground Lease,
shall be done in a good workmanlike manner. The interior architectural design
and appearance and the interior improvements and finish of each of the
structures on the Property shall not be subject to the review and approval of
Lessor.
(l) Lessor shall bear the cost of developing the Property and constructing
the Improvements, including all fees and mitigation measures, provided however
that, Lessee will be responsible to pay for and to construct certain of those
mitigation measures (the "Mitigation Measures") applicable to the development of
the Property pursuant to the Ground Lease, and that Ground Lessor and Lessee
will share the cost of such mitigation measures; Ground Lessor's payment for
such mitigation measures will be by way of Rent credits, which are reflected in
the Rent Schedule (as defined in the Ground Sublease), as set forth at Article 4
of the Ground Sublease. The parties agree that Lessee will contribute $111,000
toward the cost of the Mitigation Measures. In addition, Lessee agrees that it
shall pay the cost of all Mitigation Measures that are the responsibility of the
Parent Guarantor pursuant to the terms of the Ground Sublease, including,
without limitation, in the event the cost of the Mitigation Measures exceeds
$2,481,000, the amount of such overage.
(m) Subject to Lessee's right to contest as hereinafter provided, at all
times after the Completion Date, Lessee shall keep the Property, including all
Improvements now or hereafter located on the Property, free and clear of all
liens and claims of liens for labor, services, materials, supplies, or equipment
performed on or furnished to the Property. Lessee shall (i) promptly pay and
discharge, or cause the Property to be released from, any such lien or claim of
lien, or, (ii) if Lessee decides to
<PAGE> 17
contest said lien, furnish Lessor such bond as may be required by law to free
the Property from the effect of such a lien and to secure Lessor against payment
of such lien, or provide Lessor with other assurances with respect thereto which
are satisfactory to Lessor, in its good faith discretion. Should Lessee fail to
pay and discharge, or cause the Property to be released from any such lien or
claim of lien or to provide a bond or other assurance as permitted hereunder
within thirty (30) days after service on Lessee by Lessor of a written request
to do so, Lessor may pay, adjust, compromise and discharge any such lien or
claim of lien on such terms and in such manner as Lessor may deem appropriate.
In such event, Lessee shall, following any such payment by Lessor, and after
receiving not less than thirty (30) days' written notice and reasonable evidence
of payment, reimburse Lessor for the full amount so paid by Lessor, including
any reasonable attorneys' fees or other costs expended by Lessor, and such
amount shall constitute Additional Rent and become a part of Lessee's
obligations hereunder.
(n) In the event that Lessee discovers the presence of Contaminants on or
under the Property subsequent to the Effective Date, Lessee shall, within five
(5) days of such discovery, notify Lessor and the Collateral Agent in writing of
such discovery and shall promptly thereafter provide a reasonably detailed
description of the location, extent and nature of the Contaminants discovered,
and Lessee must provide a plan to remediate such contamination. All remediation
which is undertaken with respect to the Property shall comply with all
Governmental Actions.
(o) Notwithstanding anything that is or appears to be to the contrary
herein, any and all Improvements erected on the Property as permitted by this
Lease, as well as any and all alterations or additions thereto or any other
Improvements or fixtures on the Property, shall be owned by Lessor until the
expiration of the Lease Term or sooner termination of this Lease. Upon the
expiration or sooner termination of this Lease, all Improvements and all
alterations, additions or improvements thereto that are made to or placed on the
Property by Lessee or any other person shall be considered part of the real
property of the Property and shall remain on the Property and become the
property of Lessor, provided that Lessee shall retain ownership of and shall be
required to remove furniture, equipment, machinery, trade fixtures and removable
personal property which are not part of the Property, except as may be left on
the Property with Lessor's prior written approval. Except as otherwise expressly
provided in this Lease, any non-disturbance agreement approved by Lessor, any
easement approved by Lessor, or any written instrument executed by Lessor which
expressly states that Lessor is waiving its rights under this Section (o) to
receive such Improvements free and clear of all other claims, said Improvements
shall become Lessor's property free and clear of any and all rights to
possession and all claims to or against them by Lessee or any third person or
entity.
(p) Subject to reasonable procedures regarding safety established by
Lessee, during normal construction hours, representatives of Lessor and Ground
Lessor shall have the reasonable right of access to the Property without charges
or fees for the purpose of inspecting the work being performed in constructing
the Improvements; provided, however, that such representatives shall present and
identify themselves at Lessee's construction office, be accompanied by a
representative of Lessee while on the Property and obey Lessee's, or its
contractor's safety rules and regulations. In addition, Lessor and Ground Lessor
shall have the right to authorize other public agencies to enter
<PAGE> 18
the Property, upon the same terms after reasonable prior notice to Lessee, for
the purpose of constructing, reconstructing, maintaining or repairing any public
improvements or public facilities located on the Property. Lessor hereby
indemnifies and holds Lessee, and its representatives, and the Property,
harmless from and against any loss, cost damage or liability, including, without
limitation, attorneys' fees and disbursements, which results from the exercise
by Lessor, or any party acting under Lessor's authority, of the rights granted
by this Section.
(q) If requested by Lessor, the Collateral Agent or Ground Lessor in
writing, Lessee covenants and agrees to deliver to Lessor, the Collateral Agent
or Ground Lessor, as applicable, conformed copies (and certified copies of all
recorded instruments) of all governmental approvals and permits obtained by
Lessee for the construction, alteration or reconstruction of any Improvements
upon the Property in accordance with this Section 9. In no event shall Lessee
commence construction of any Improvements pursuant to the provisions of this
Section 9 until such time as Lessee shall have obtained all necessary
governmental approvals and permits to so construct such Improvements.
(r) Upon the request of the Lessee, so long as no Event of Default shall
have occurred and be continuing, and, in any event, upon the Lessee's purchase
of the Property in accordance with Section 13 hereof, the Lessor will assign
without recourse or warranty or otherwise make available to the Lessee any and
all rights the Lessor may have under any vendor's or manufacturer's warranties
or undertakings with respect to any Property or Equipment.
(s) From and after the Completion Date, the Lessee shall pay all costs,
expenses, fees and charges (including, without limitation, charges of any
community or property owner to which any Property is subject) incurred in
connection with the ownership, use or occupancy of any Property or ownership,
use and operation of any Equipment. The Lessee shall operate and maintain the
Property in accordance with prudent industry standards and in a manner
reasonably consistent with that of similar property and equipment owned and
operated by the Parent Guarantor and its Affiliates. Except as otherwise
provided in Section 15 hereof, the Lessee shall at all times, at its own
expense, and subject to reasonable wear and tear, keep the Property in good
operating order, repair, condition and appearance and in compliance with (i) all
Governmental Restrictions and (ii) all applicable rules, orders and regulations
or any insurance company insuring all or any part of the Property, and Lessee
shall make or cause to be made whatever repairs and replacements are required by
such enactments or provisions or future enactments or provisions. Lessor shall
not be required to maintain or make any repairs or replacements of other nature
or description to the Property thereon, except as expressly provided herein. The
foregoing undertaking to maintain the Property in good repair shall apply
regardless of the cause necessitating repair and regardless of whether the
Lessee has possession of the Property, and as between the Lessor and the Lessee
all risks of damage to the Property are assumed by the Lessee except as
otherwise provided in Section 33. With respect to any Property, the undertaking
to maintain in good repair shall include, without limitation, all interior and
exterior repairs, whether structural or nonstructural, foreseen or unforeseen,
ordinary or extraordinary and all common area maintenance including, without
limitation, removal of dirt, snow, ice, rubbish and other obstructions and
maintenance of sidewalks and landscaping. The Lessee hereby agrees to indemnify
<PAGE> 19
and hold the Lessor and any Assignee harmless from and against all costs,
expenses, claims, losses, damages, fines or penalties, including reasonable
counsel fees, arising out of or due to the Lessee's failure to fulfill its
obligations under this paragraph (s).
(t) From and after the Rent Commencement Date with respect to the Property,
the Lessee shall pay, subject to the Lessee's rights under paragraph (a) of
Section 27 hereof relating to Permitted Contests: (i) all taxes, assessments,
levies, fees, water and sewer rents and charges, and all other governmental
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, which are, at any time, imposed or levied upon or assessed against
(A) the Property, (B) any Basic Rent, any Additional Rent or other sum payable
hereunder or (C) this Lease, the leasehold estate hereby created, or which
arises in respect of the ownership, operation, occupancy, possession or use of
the Property; (ii) all gross receipts or similar taxes (i.e., taxes based upon
gross income which fail to take into account all customary deductions (e.g.,
ordinary operating expenses, depreciation and interest) relating to the
Property) imposed or levied upon, assessed against or measured by any Basic
Rent, or any Additional Rent or other sum payable hereunder; (iii) all sales,
value added, use and similar taxes at any time levied, assessed or payable on
account of the acquisition, leasing or use of the Property; (iv) all
Impositions; (v) charges of utilities and communications services serving the
Property; and (vi) all taxes and assessments required to be paid by Lessor, as
tenant under the Ground Sublease. The Lessee shall not be required to pay any
franchise, estate, inheritance, transfer, income or similar tax of the Lessor
(other than any tax referred to in clause (ii) above) unless such tax is
imposed, levied or assessed in substitution for any other tax, assessment,
charge or levy which the Lessee is required to pay pursuant to this paragraph
(v); provided, however, that if at any time during the Lease Term, the method of
taxation shall be such that there shall be levied, assessed or imposed on the
Lessor a capital levy or other tax directly on the rents received therefrom, or
upon the value of any Property or any present or any future improvement or
improvements on any Property, then all such taxes, assessments, levies or
charges or the part thereof so measured or based, shall be payable by the
Lessee, but only to the extent that such taxes would be payable if the Property
affected were the only property of the Lessor, and the Lessee shall pay and
discharge the same as herein provided. The Lessee will furnish to the Lessor,
promptly after demand therefor, proof of payment of all items referred to above
which are payable by the Lessee. If any such Impositions payable hereunder may
legally be paid in installments, the Lessee may pay such Imposition in
installments. The Lessee will pay and discharge, or cause to be paid and
discharged, all Impositions imposed upon it or its income or properties, prior
to the date on which penalties attach thereto, except to the extent that any
such tax, assessment, governmental charge or levy is the subject of a Permitted
Contest.
(u) The Lessee may make alterations to any Equipment without the prior
written consent of the Lessor, provided that such alterations do not impair the
value or utility of such Equipment. Any improvements or additions to any
Equipment shall become and remain the property of the Lessor, except that any
addition to Equipment made by the Lessee shall remain the property of the Lessee
if it can be removed from such Equipment without impairing the functioning of
such Equipment or its resale value, excluding such addition.
<PAGE> 20
(v) Following completion of construction of the Improvements pursuant to
Section 9 of this Lease and the Construction Agency Agreement and so long as no
Event of Default shall have occurred and be continuing, the Lessee may, at its
expense, make or permit additions to and alterations to the Property; provided
Lessee complies with all terms and conditions of the Ground Sublease with
respect to such alterations and additions and, that upon completion of such
additions or alterations (i) neither the fair market value of the Property shall
be lessened thereby nor the utility of such Property impaired, below the value
or utility thereof immediately prior to such action (assuming such Property was
then of a condition and repair required to be maintained pursuant to paragraph
(s) of Section 9 hereof), (ii) such additions or alterations shall not result in
a change of use of such Property, (iii) such work shall be completed in a good
and workmanlike manner in accordance with generally accepted and prudent
engineering and construction practices and in compliance with all applicable
Legal Requirements and Insurance Requirements and (iv) no exterior walls of any
building or other improvement constituting a part of the Property shall be
demolished unless (A) the Lessee has made adequate provision according to
nationally recognized sound and prudent engineering and architectural standards
to preserve and maintain the structural integrity of the affected portion of the
Improvements and for the restoration of such Property to a structurally sound
architectural whole and (B) if such addition or alteration costs more than 10%
of the Acquisition Cost of the Property, the obligations of the Lessee to
preserve, maintain and restore are reasonably assured to the Lessor's
satisfaction. Any and all such additions and alterations shall be and remain
part of the Property and shall be subject to this Lease. Notwithstanding
anything contained herein, the Lessee shall not perform any addition or
alteration to any Property which would have an estimated cost in excess of 10%
of the Acquisition Cost of the Property, without the Lessor's and Collateral
Agent's prior written consent, which consent may be conditioned upon, among
other things, the Lessor's and Collateral Agent's approval of the plans and
specifications for such additions and alterations and the Lessee's furnishing of
such security as the Lessor may reasonably require to protect the Lessor against
any Liens or claims affecting the Property as a result of such addition or
alteration.
SECTION 10. INSURANCE.
(a) The Lessee shall cause the Construction Agent to maintain in full force
and effect at all times on or prior to the Completion Date the following
insurance with respect to the Property:
(i) Builder's all-risk insurance coverage against losses by
fire and lightning and other risks for the full insurable
replacement value of the Property and the Improvements, with
agreed amount endorsement or endorsements providing equivalent
protection, including loss by windstorm, flood, earthquake, hail,
explosion, riot (including a riot attending a strike), civil
commotion, aircraft, vehicles, smoke damage, vandalism and
malicious
<PAGE> 21
mischief in an amounts not less than the full insurable
replacement value of all Improvements on the Property, but in no
event less than the Project Cost. The term "full insurable
replacement value" as used herein means the actual replacement
cost of the Improvements on the Property, including the cost of
debris removal, capitalized accrued interest on the Notes and
accrued yield on the Certificates resulting from any delay.
(ii) Comprehensive general public liability insurance
covering the legal liability of the Lessor and the Lessee against
claims for bodily injury, death or property damage, occurring on
or about the Property or occurring as a result of the ownership
of the Property, the construction of the Improvements thereon in
a minimum amount of $1,000,000 with respect to any one occurrence
plus an "umbrella" policy insuring up to $11,000,000.
(iii) Explosion insurance in respect of any boilers and
similar apparatus located on the Property in a minimum amount of
the full replacement cost or in such greater amounts as are then
customary for a property similar in use to the Property.
(iv) Such other insurance, in such amounts and against such
risks as are customarily maintained.
(b) The Lessee will maintain or cause to be maintained
insurance of the following character with respect to the Property:
(i) All risk insurance coverage against losses by fire and
lightning and other risks for the full insurable replacement
value of each Parcel of Property, with agreed amount endorsement
or endorsements providing equivalent protection, including loss
by windstorm, flood, earthquake, hail, explosion, riot (including
riot attending a strike), civil commotion, aircraft, vehicles,
smoke damage, and vandalism and malicious mischief, in amounts
not less than the full insurable replacement value of all
buildings and other improvements on the Property, but in no event
less than the Project Cost. The term "full insurable replacement
value" as used herein means the actual replacement cost,
including the costs of debris removal, but excluding the cost of
constructing foundation and footings.
<PAGE> 22
(ii) Comprehensive general public liability insurance
covering the legal liability of the Lessor and the Lessee against
claims for bodily injury, death or property damage, occurring on,
in or about the Property or occurring as a result of ownership of
facilities located on the Property in the minimum amount of
$10,000,000 per occurrence.
(iii) Product liability insurance covering the legal
liability of the Lessor and the Lessee as a result of the use of
products or materials designed, developed, manufactured, stored,
processed, constructed or sold, or services rendered, on the
Property, in the minimum amount of $1,000,000 with respect to any
one occurrence or incidence of negligence plus an "umbrella"
policy insuring up to $11,000,000.
(iv) The Lessee shall comply with applicable workers'
compensation laws of the states where each Parcel of Property is
located, and shall maintain such insurance if and to the extent
necessary for such compliance.
(v) Explosion insurance in respect of any boilers and
similar apparatus located on the Property in the minimum amount
of the full replacement cost or in such greater amounts as are
then customary for property similar in use.
(vi) Such other insurance, in such amounts and against such
risks, as is customarily maintained by similarly situated
operators of similar properties for businesses similar to that
conducted by the Lessee.
The insurance required under this Section 10 shall be maintained in effect with
insurers of recognized responsibility satisfactory to the Lessor. Such insurance
may provide for such deductibles and the Lessee may self-insure with respect to
the required coverage only to the extent approved in writing by the Lessor and
Assignee. Insurance claims by reason of damage or destruction to the Property
shall be adjusted by the Lessee, subject to the approval of the Lessor and
Assignee, which approval the Lessor and Assignee agree not to unreasonably
withhold or delay; provided, that if the amount claimed exceeds $1,000,000, the
Lessor may participate in such adjustment to the extent necessary in the
Lessor's reasonable judgment to protect the Lessor's interest in the Property,
at the Lessee's expense and Lessee shall not adjust any such claim without the
prior written consent of the Lessor and Assignee.
<PAGE> 23
(c) Any policies of insurance carried in accordance with this Section 10
and any policies taken out in substitution or replacement for any such policies
(i) shall name the Lessor and each Assignee as additional Insured's, as their
respective interests may appear (but without imposing upon any such Person any
obligation imposed on the insured, including, without limitation, the liability
to pay the premium for any such policy), (ii) with respect to insurance carried
in accordance with the preceding paragraphs (a) and (b) shall name the Assignee
as loss payee, (iii) shall provide that as against the Lessor and Assignee, the
insurers shall waive any rights of subrogation, (iv) shall provide that if the
insurers cancel such insurance for any reason whatsoever, or any substantial
change is made in the coverage or the same is allowed to lapse for nonpayment of
premium or such insurance coverage is reduced, such cancellation, change, lapse
or reduction shall not be effective as to the Lessor or any Assignee for thirty
(30) days after receipt by the Assignee of written notice by such insurers of
such cancellation, change, lapse or reduction, and (v) shall provide that in
respect of the interest of the Lessor and each Assignee in such policies the
insurance shall not be invalidated by any action or inaction of the Lessee or
any other Person (other than of the Lessor or any such Assignee in respect of
its own interest) and shall insure the interests of the Lessor and each such
Assignee, as they appear, regardless of any breach or violation of any
warranties, declarations or conditions contained in such policies by the Lessee
or any other Person. Each liability policy (A) shall be primary without right of
contribution from any other insurance which is carried by the Lessor with
respect to its interest as such in the Property and (B) shall expressly provide
that all of the provisions thereof, except the limits of liability, shall
operate in the same manner as if there were a separate policy covering each
insured.
(d) As between the Lessor and the Lessee it is agreed that any insurance
payments received as the result of the occurrence of (i) any event of loss
described in paragraph (c) of Section 15 hereof with respect to the Property, or
(ii) any event of Taking described in Section 16 hereof shall be paid to an
account of the Lessor and disposed of, as set forth in paragraph (c) of Section
15 hereof.
(e) As between the Lessor and the Lessee, so long as no Event of Default
shall have occurred and be continuing, insurance proceeds of any property damage
loss to any Property will be held in an account of the Lessor and applied in
payment (or to reimburse the Lessee) for repairs or replacement in accordance
with the terms of paragraph (b) of Section 15 hereof. The Lessee shall be
entitled (i) to receive the amounts so deposited against certificates, invoices
or bills satisfactory to the Lessor, delivered to the Lessor from time to time
as such work or repair progresses, and (ii) to direct the investment of the
amounts so deposited as provided in paragraph (f) of this Section 10. If after
the Completion Date, the Lessor estimates that the cost of such work or repair
shall exceed the amount of proceeds, the Lessee shall make adequate provisions
for the payment thereof, which provisions shall be acceptable to the Lessor. Any
moneys remaining in the aforesaid account after final payment for repairs has
been made shall be paid to the Lessee.
(f) The Lessor, at the Lessee's instruction, may invest the amounts
deposited with the Lessor pursuant to paragraph (e) of this Section 10 in any
investments permitted under the Credit Agreement and the Participation
Agreement. Such investments shall mature in such amounts and on such dates so as
to provide that amounts shall be
<PAGE> 24
available on the draw dates sufficient to pay the amounts requested by and due
to the Lessee. Any interest earned on investments of such funds shall be paid to
the Lessee. The Lessor shall not be liable for any loss resulting from the
liquidation of each and every such investment and the Lessee shall bear the risk
of such loss, if any.
(g) Any amount referred to in paragraphs (c), (d) or (e) of this Section 10
which is payable to the Lessee shall not be paid to the Lessee or, if it has
been previously paid to the Lessee, shall not be retained by the Lessee, if at
the time of such payment an Event of Default shall have occurred and be
continuing. In such event, all such amounts shall be paid to and held by the
Lessor as security for the obligations of the Lessee hereunder or, at the
Lessor's option, applied by the Lessor toward payment of any of such obligations
of the Lessee at the time due hereunder as the Lessor may elect. At such time as
there shall not be continuing any Event of Default, all such amounts at the time
held by the Lessor in excess of the amount, if any, which the Lessor shall have
elected to apply as above provided shall be paid to the Lessee.
(h) On or before the execution of this Lease, on the Effective Date with
respect to the Property, and annually on or before the anniversary of the date
of this Lease, the Lessee will furnish to the Lessor certificates or other
evidence reasonably acceptable to the Lessor certifying that the insurance then
carried and maintained on the Property complies with the terms hereof.
(i) The Lessee covenants that it will not use or operate any equipment at
the Property or use or occupy the Property or permit the use or occupancy of the
Property or the use or operation of any equipment at the Property at a time when
the insurance required by this Section 10 is not in force with respect to such
Property.
(j) The Lessee may, at its cost and expense, prosecute any claim against
any insurer or contest any settlement proposed by any insurer, and the Lessee
may bring any such prosecution or contest in the name of the Lessor, the Lessee,
or both, and the Lessor will join therein at the Lessee's request; provided,
that the Lessee shall indemnify the Lessor against any losses, costs or expenses
(including reasonable attorneys' fees) which the Lessor may incur in connection
with such prosecution or contest.
SECTION 11. INDEMNITIES.
The Lessee shall indemnify, defend, protect and hold harmless the Lessor,
any Assignee, the Collateral Agent, any successor or successors, and any
Affiliate of each of them, and their respective officers, directors,
incorporators, shareholders, partners, employees, agents and servants (each of
the foregoing an "Indemnified Person") from and against all liabilities
(including, without limitation, Environmental Damages and strict liability in
tort), taxes, losses, obligations, claims (including, without limitation,
Environmental Damages and strict liability in tort), damages, penalties, causes
of action, suits, costs and expenses (including, without limitation, attorneys'
and accountants' fees and expenses) or judgments of any nature relating to or in
any way arising out of:
(a) The ordering, delivery, acquisition, purchase, or agreement for the
acquisition, construction, title on acquisition, rejection, installation,
possession, titling, retitling, registration, reregistration, custody by the
Lessee of title and registration
<PAGE> 25
documents, ownership, use, non-use, misuse, financing (including, without
limitation, all obligations of the Lessor under or in respect of any interest
rate swap, cap, collar or other financial hedging arrangement and any amounts
payable by the Lessor under any such arrangement to reduce the notional amount
thereof by the amount of any prepayment of any borrowing to which such interest
rate swap, cap, collar or other financial hedging arrangement relates), lease,
sublease, operation, transportation, repair or control of any Property or
Equipment or the past, present or future presence or the release of hazardous
substances on, under, to or from, or the generation or transportation of
hazardous substances to or from, or the failure to report, disclose or remediate
the foregoing with respect to any Property, leased or to be leased hereunder,
(i) except to the extent that such costs are included in the Acquisition Cost of
the Property within the limitations provided in paragraph (a)(iv) of Section 3
hereof (or within any change of such limitations agreed to in writing by the
Lessor and the Lessee), (ii) except for any general administrative expenses of
the Lessor and (iii) except the income taxes with respect to which
indemnification is excluded under paragraph (c) of this Section 11;
(b) The assertion of any claim or demand based upon any infringement or
alleged infringement of any patent or other right, by or in respect of the
Property; provided, however, that upon request of the Lessee, the Lessor will
make available to the Lessee the Lessor's rights under any similar
indemnification arising from any manufacturer's or vendor's warranties or
undertakings with respect to the Property;
(c) All U.S. Federal, state, county, municipal, foreign or other fees and
taxes of whatsoever nature, including but not limited to license, qualification,
franchise, withholding, sales, use, gross income, gross receipts, ad valorem,
business, personal property, real estate, value added, excise, motor vehicle,
occupation fees and stamp or other taxes or tolls of any nature whatsoever, and
penalties and interest thereon, whether assessed, levied against or payable by
the Lessor or otherwise, with respect to the Property or the acquisition,
purchase, sale, rental, use, operation, control, ownership or disposition of any
Property or Equipment (including, without limitation, any claim by any
Governmental Authority for transfer tax, transfer gains tax, mortgage recording
tax, filing or other similar taxes or fees in connection with the acquisition of
the Property by the Lessor or otherwise in connection with this Lease) or
measured in any way by the value thereof or by the business of, investment in,
or ownership by the Lessor with respect thereto; provided, that this indemnity
shall not apply to Federal net income taxes, or to state and local net income
taxes, except that such indemnity shall apply to state and local net income
taxes (A) to the extent imposed by reason in whole or in part of (1) a relation
or asserted relation of any such taxing jurisdiction to the Property or to the
transactions contemplated herein or (2) the actual or deemed use by any Person
of any portion of the Property in such taxing jurisdiction, other than in the
case of both clauses (1) and (2), taxes to the extent such taxes would have been
imposed by a taxing jurisdiction because of a relationship between the Lessor
and such taxing jurisdiction without regard to the circumstances described in
clauses (1) and (2), and (B) to the extent imposed as a result of the inability
to claim, disallowance or other loss by Lessor or any Assignee of deductions
customarily allowed in computing net income (e.g., interest expense, financing,
administrative, ordinary operating expenses and other fees and expenses); or
<PAGE> 26
(d) Any violation, or alleged violation by the Lessee, of the terms of the
Ground Lease to be performed by Lessor thereunder, this Lease or of any other
contracts or agreements to which the Lessee is a party or by which it is bound
or of any laws, rules, regulations, orders, writs, injunctions, decrees,
consents, approvals, exemptions, authorizations, licenses and withholdings of
objection, of any governmental or public body or authority and all other Legal
Requirements.
The Lessee shall forthwith upon demand reimburse any Indemnified Person for
any sum or sums expended with respect to any of the foregoing or, upon request
from any Indemnified Person, shall pay such amounts directly. Any payment made
to or on behalf of any Indemnified Person pursuant to this Section 11 shall be
increased to such amount as will, after taking into account all taxes imposed
with respect to the accrual or receipt of such payment (as the same may be
increased pursuant to this sentence), equal the amount of the payment, reduced
by the amount of any savings in such taxes actually realized by the Indemnified
Person as a result of the payment or accrual of the amounts in respect of which
the payment to or on behalf of the Indemnified Person hereunder is made. To the
extent that the Lessee in fact indemnifies any Indemnified Person under the
indemnity provisions of this Lease, the Lessee shall be subrogated to such
Indemnified Person's rights in the affected transaction and shall have a right
to determine the settlement of claims therein.
The indemnities contained in this Section 11 shall not be affected by any
termination of this Lease as a whole or in respect of any Property or Equipment
leased hereunder or any failure or refusal of the Lessee to accept any Property
or Equipment acquired or ordered pursuant to the terms hereof.
Notwithstanding any provisions of this Section 11 to the contrary, the
Lessee shall not indemnify and hold harmless any Indemnified Person against any
claims and liabilities arising from the gross negligence or willful misconduct
of such Indemnified Person. Additionally, notwithstanding any provisions of this
Section 11 to the contrary, at no time during the Construction Period shall
Lessee's indemnities contained in this Section 11 (i) include any
indemnification of any Indemnified Person with respect to any costs arising from
third-party damage claims other than those third-party damage claims caused by
or resulting from the actions or failure to act by Lessee, or any of its agents,
employees, consultants, contractors or subcontractors (or anyone else under the
control of Lessee), while Lessee is in possession or control of the Property,
nor (ii) result in the total amount payable by Lessee under this Lease and the
Related Documents to exceed the limitations on Lessee's payment obligations
under Section 5.04 of the Construction Agency Agreement. Without limiting the
express rights of the Indemnified Persons under this Section 11, the Lessee's
obligations under this Section 11 shall be construed as an indemnity only and
not a guaranty of the residual value of the Property or a guarantee of the
Outstanding Borrowings or Fundings.
In the event the Lessor shall be a party defendant to any litigation
arising out of any provision contained in this Lease for which the Lessee has
given indemnification, the Lessor shall give prompt notice thereof to the Lessee
by telephone and in writing and shall consult and cooperate, at the Lessee's
expenses with the Lessee, and if the Lessor shall not have appeared or pleaded
to any such action then the Lessor
<PAGE> 27
does hereby empower any attorney of any court of record appointed by the Lessee
(who shall give prompt written notice to the Lessor of such appointment) to
appear for the Lessor and in good faith and with due diligence defend such
action, to enter counterclaims, to institute actions against third parties and
to do all things necessary or desirable in the judgment of such attorney after
consultation with the Lessor and the Lessee to preserve the rights of the Lessor
and the Lessee, all at the Lessee's own cost and expense. No failure or delay of
the Lessor to give the notice required by this Section 11 shall excuse the
obligation of the Lessee to indemnify the Lessor with respect to such litigation
except to the extent that any increase in liability is a direct result of such
failure or delay.
SECTION 12. LESSEE'S RIGHT TO TERMINATE.
(a) The Lessee shall have the right, upon ninety (90) days' notice to the
Lessor (the "Termination Notice"), to terminate the lease of the Property on any
Basic Rent Payment Date during the Lease Term or on any Basic Rent Payment Date
during any Renewal Term, by arranging, at its own cost and expense, for the sale
of the Property and the Lessor's rights under the Ground Sublease in an
arm's-length transaction on the date of termination and the receipt by the
Lessor of cash in an amount equal to the sale price of such Property (the "Cash
Proceeds"); provided, however, that if such sale will result in cash proceeds
less than the Termination Value plus amounts due under paragraph (c) of this
Section 12, the Lessor and Assignees may elect in their sole discretion not to
proceed with such sale and the Lessee shall not terminate this Lease pursuant to
this paragraph (a) unless the Lessee has obtained the prior written consent, to
be granted or withheld in their sole discretion, of the Lessor and Assignees to
such termination of this Lease and the sale of such Property and the Lessor's
rights under the Ground Sublease; provided, further, that if an Event of Default
has occurred and is continuing, and, prior to the termination of this Lease
pursuant to this paragraph (a), the Lessor arranges for the sale of the Property
and the Lessor's rights under the Ground Sublease to a third party purchaser in
accordance with the provisions of Section 19 hereof, the Termination Notice
shall be invalidated and the Lessee shall no longer have the right to cause the
termination of the lease of the Property and sale of the Property and the
Lessor's rights under the Ground Sublease in accordance with the terms of this
paragraph (a) until such Event of Default has been effectively cured by the
Lessee. At the time the Property is sold pursuant to this Section 12, the
Lessor's rights and obligations in respect of the Ground Sublease shall be
assumed by the purchaser, with the Lessor released from liability in respect
thereof.
(b) In the event the Lessee exercises its right to terminate the lease of
the Property pursuant to this Section 12 or in the event a termination of the
lease of the Property occurs pursuant to Section 14 hereof and the Lessee
chooses to effect a sale pursuant to this Section:
(i) if the Cash Proceeds are greater than the Termination Value
plus the amounts due under paragraph (c) of this Section 12,
the Lessor shall pay to the Lessee the amount by which such
Cash Proceeds exceed the Termination Value plus the amounts
due under paragraph (c) of this Section 12;
<PAGE> 28
(ii) if the Cash Proceeds equal or exceed the Termination Value
plus the amounts due under paragraph (c) of this Section 12
less the Surrender Payment at such time but are less than
the Termination Value plus the amounts due under paragraph
(c) of this Section 12, the Lessee shall pay to the Lessor
an amount equal to (A) the Termination Value plus the
amounts due under paragraph (c) of this Section 12 less (B)
the Cash Proceeds; and
(iii) if the Cash Proceeds are less than the Termination Value
plus (without duplication) the amounts due under paragraph
(c) of this Section 12 less the Surrender Payment, the
Lessee shall pay to the Lessor an amount equal to the sum
of (A) the Surrender Payment, plus (B) the amounts due
under paragraph (c) of this Section 12 (without
duplication), plus (C) the amount by which the residual
value of the Property has been reduced by wear and tear in
excess of that attributable to normal and proper use (the
amount of such excess wear and tear to be such amount as
the Lessor and the Lessee agree, or if no agreement is
reached, the amount determined pursuant to the Appraisal
Procedure).
(c) All payments and credits referred to in paragraph (b) above shall be
made on the termination date of the lease of the Property pursuant to this
Section 12, and the parties shall account to each other for such payments and
credits, and the Lessee shall pay to the Lessor (without duplication) (i) all
Basic Rent payable, (ii) any Additional Rent owing, (iii) all amounts payable
pursuant to Sections 11, 25 and 27 hereof, (iv) all losses, damages, costs and
expenses (including, without limitation, attorneys' fees and expenses,
commissions, filing fees and sales or transfer taxes) sustained by the Lessor by
reason of such sale, and (v) all other amounts owing by Lessee hereunder and
under any Related Documents, each as of the termination date. Upon receipt by
the Lessor of the Cash Proceeds and all other amounts then due and owing
hereunder, including, without limitation, the amount of excess wear and tear
determined pursuant to paragraph (b)(iii) of this Section 12, the Lessor shall
transfer its interest in the Property and the Ground Sublease to the purchaser
at the sale designated by the Lessee. The "Cash Proceeds" referred to in
paragraph (b) hereof shall mean the cash proceeds of sale without reduction for
any amounts paid by the Lessee. In the event of a sale pursuant to this Section
12, neither the Lessee or any Affiliate of the Lessee shall purchase the
Property or the Lessor's interest in the Ground Sublease.
(d) In its notice given pursuant to paragraph (a) of this Section 12, the
Lessee shall advise the Lessor if the sale provided for in such notice will
result in the applicability of paragraph (b)(iii) of Section 12 hereof. If the
Lessee advises the Lessor that such paragraph will be applicable, the Lessor and
the Assignees shall have the right in their sole and absolute discretion (i) to
preclude such sale or (ii) to arrange for a sale of the Property and the
Lessor's interest in the Ground Sublease to be made to a purchaser designated by
the Lessor, if such purchaser will pay an amount greater than the amount
<PAGE> 29
offered by the Lessee's purchaser. If the Lessor shall fail to arrange for such
sale and shall give the Lessee notice that it is consenting to the sale
requested by the Lessee, the Lessee may proceed with the sale to the purchaser
designated by it. In the event the Lessor fails to consent to the sale requested
by the Lessee within sixty (60) days of the Lessor's receipt of the Lessee's
notice provided for in paragraph (a) of this Section 12, the Lessee may arrange
for such sale to be made to another purchaser designated by it, if such
purchaser shall pay an amount sufficient to render paragraph (b)(iii) of Section
12 hereof inapplicable.
SECTION 13. PURCHASE BY LESSEE, SURRENDER AND RENEWAL.
(a) The Lessee shall have the right, upon at least thirty (30) days'
written notice to the Lessor, to purchase the Property under this Lease and the
Lessor's interest in the Ground Sublease on any Basic Rent Payment Date during
the Lease Term or any Renewal Term for an amount equal to its Termination Value;
provided that the purchase option contained in this paragraph shall only be
available to the Lessee if in the reasonable judgment of the Lessor or any
Assignee, the purchase price and all other amounts paid by the Lessee will not
in the circumstances in which such payment is made constitute a preferential
payment or a voidable transfer or otherwise be subject to recapture pursuant to
the provisions of the Federal Bankruptcy Code in a bankruptcy proceeding by or
against the Lessee and will not otherwise result in the payment being subject to
recapture from the Lessor, provided, however, that notwithstanding the
foregoing, the Lessee's purchase option contained in this paragraph shall be
available to Lessee following delivery to Lessor of reasonable evidence that
Lessee will be solvent both before and after payment of the Termination Value.
In connection with, and as a condition to, any purchase under this Section 13,
on the Basic Rent Payment Date upon which such purchase occurs, the Lessee shall
pay to the Lessor (without duplication) (i) the Termination Value, (ii) all
Basic Rent payable, (iii) any Additional Rent owing, (iv) all amounts payable
pursuant to Sections 11, 25 and 27 hereof, (v) all losses, damages, costs and
expenses (including, without limitation, attorneys' fees and expenses,
commissions, filing fees and sales or transfer taxes) sustained by the Lessor by
reason of such purchase, and (vi) all other amounts owing by Lessee hereunder or
under any Related Documents.
(b) So long as no Potential Default or Event of Default has occurred and is
continuing, the Lessee shall by written notice given to the Lessor and the Agent
three hundred sixty-five (365) days prior to the end of the Lease Term (with a
second notice to be delivered to the Lessor one hundred eighty (180) days prior
to the expiration of such three hundred sixty-five (365) day period) elect to
either (1) purchase the Property and the Lessor's interest in the Ground
Sublease pursuant to clause 13(a) above or (2) subject to satisfaction of the
Surrender Covenants set forth in paragraph (c) below, terminate this Lease and
surrender the Property under this Lease and any rights Lessee may have with
respect to the Ground Sublease to the Lessor on the Basic Rent Payment Date of
the last month of the Lease Term or on any Basic Rent Payment Date during any
Renewal Term.
(c) In the event the Lessee provides the termination notice contemplated in
paragraph (b))(2) above, the Lessee hereby covenants to the Lessor (the
<PAGE> 30
"Surrender Covenants") as follows: (A) on the Surrender Date, (i) no Event of
Default or Potential Default hereunder or under the Ground Sublease shall have
occurred and be continuing, (ii) the Property shall not be undergoing any
repairs, additions or alterations that could reasonably be expected to diminish
the fair market value, utility or remaining economic useful life which the
Property would have had at such time had such repair, addition or alteration not
been undergoing (assuming the Property and Equipment is in the condition
required hereby), and (iii) the Property shall be in compliance with all Legal
Requirements, (B) on or prior to the Surrender Date, but in no event greater
than three hundred sixty-five (365) days prior to the Surrender Date, the Lessee
shall, at its expense, deliver to the Lessor an environmental audit satisfactory
in scope and content to the Lessor and Assignee in their reasonable discretion,
to the effect that the Property has been operated and maintained in compliance
with, and at the applicable time the Property is in compliance with, and is not
subject to any unperformed Remedial Actions with respect to, Environmental
Requirements, (C) on or prior to the Surrender Date, but in no event greater
than ninety (90) days prior to the Surrender Date, the Lessee shall deliver to
the Lessor and Assignee an appraisal from a nationally recognized appraisal firm
satisfactory to the Lessor and Assignee in their reasonable discretion, to the
effect that the Property has been maintained in accordance with the terms and
conditions of Section 9 of this Lease and prudent industry practices, (D) on the
Surrender Date, the Lessor shall have good and marketable title to the Property,
free and clear of all liens other than Permitted Liens, and (E) on the Surrender
Date, the Lessee shall provide evidence satisfactory in the reasonable
discretion of each of the Lessor and the Assignee that the Lessor has all rights
of way, easements, licenses, utilities, Governmental Actions, permits, services,
manuals, records and other information necessary to own, operate and maintain
the Property from and after the termination of this Lease.
(d) In the event the Lessee has elected to terminate pursuant to Section
13(b)(2) above and has complied with each of the Surrender Covenants, the Lessee
shall, on the Surrender Date, terminate this Lease, surrender the Property to
the Lessor and pay to the Lessor the Surrender Payment and all other amounts
owing by the Lessee hereunder or under any Related Documents. Upon such
surrender, the Lessor shall assume control of the Property, subject to the
provisions of this paragraph (d), the Lessor or Assignee (acting on behalf of
the Lessor) shall have the right to sell the Property and Ground Sublease to a
third party and the Lessee shall have no further right, claim or interest in the
Property and Ground Sublease (it being understood that the Lessor shall be
entitled to commence the marketing of the Property and Ground Sublease at any
time subsequent to the first day of the sixth month prior to the Surrender Date,
and the Lessee agrees that it shall cooperate in connection therewith). The
proceeds of sale received by the Lessor or Assignees, as the case may be, from
any sale of the Property and Ground Sublease shall be retained by the Lessor or
Assignees, as the case may be, provided that if the proceeds of sale exceed the
sum of (x) Termination Value and (y) all other amounts owing by the Lessee
hereunder or under any Related Documents, including, without limitation or
duplication, (i) all Basic Rent payable, (ii) any Additional Rent owing, (iii)
all amounts payable pursuant to Sections 11, 25 and 27 hereof, (iv) all losses,
damages, costs and expenses (including, without limitation, attorneys' fees and
expenses, commissions, filing fees and sales or transfer taxes) sustained by the
Lessor by reason of such sale, and (v) all other amounts owing by Lessee
hereunder or under any Related Documents, then, such excess and the Surrender
Payment previously paid by Lessee shall be paid by the Lessor or
<PAGE> 31
Assignee, as the case may be, to the Lessee. The Lessee shall use reasonable
efforts commencing six (6) months prior to the Surrender Date to seek on behalf
of the Lessor bona fide arm's-length bids for the Property from prospective
purchasers who are financially capable of purchasing the Property for cash, on
an as-is, non-installment sale basis, without warranty by, or recourse to, the
Lessor. The Lessee shall notify the Lessor of the amount of each such bid, and
the name and address of the Person submitting such bid.
(e) In the event the Lessee shall surrender the Property to the Lessor or
to a purchaser of the Property from the Lessor pursuant to the provisions of
this Section 13, on the Surrender Date, the Lessee shall pay to the Lessor
without duplication (i) the Surrender Payment, (ii) all Basic Rent payable and
accrued through the Surrender Date, (iii) any Additional Rent owing, (iv) all
amounts payable pursuant to Sections 11, 25 and 27 hereof, (v) all losses,
damages, costs and expenses (including, without limitation, attorneys' fees and
expenses, commissions, filing fees and sales or transfer taxes) sustained by the
Lessor by reason of such surrender, and (vi) any other amounts owing by Lessee
hereunder or under any Related Documents as of the Surrender Date. Upon payment
by the Lessee to the Lessor of all amounts owing under this Section 13 and
delivery of the Property to the Lessor or such purchaser, this Lease shall
terminate, except to the extent otherwise provided in this Lease.
(f) Upon the occurrence of an Event of Default and upon the written request
of the Lessee, which shall be received no later than fifteen (15) Business Days
subsequent to receipt of notice from the Lessor or any Assignee pursuant to this
Lease that an Event of Default has occurred, the Lessee shall have the right,
not later than thirty (30) Business Days after the Lessor's receipt of such
request, to purchase all Property under this Lease at a price equal to the
Termination Value; provided that the purchase option contained in this paragraph
shall only be available to the Lessee if in the reasonable judgment of the
Lessor or any Assignee, the purchase price and all other amounts paid by the
Lessee will not in the circumstances in which such payment is made constitute a
preferential payment or a voidable transfer or otherwise be subject to recapture
pursuant to the provisions of the Federal Bankruptcy Code in a bankruptcy
proceeding by or against the Lessee and will not otherwise result in the payment
being subject to recapture from the Lessor, provided, however, that
notwithstanding the foregoing, the Lessee's purchase option contained in this
paragraph shall be available to Lessee following delivery to Lessor of
reasonable evidence that Lessee will be solvent both before and after payment of
the Termination Value. In connection with, and as a condition to, the purchase
of the Property pursuant hereto, (i) the Lessee shall pay at the time of
purchase, in addition to the purchase price, (A) all Basic Rent payable, (B) any
Additional Rent owing, (C) all amounts payable pursuant to Sections 11, 25 and
27 hereof, (D) all losses, damages, costs and expenses (including, without
limitation, attorneys' fees and expenses, commissions, filing fees and sales or
transfer taxes), sustained by the Lessor by reason of such purchase, and (F) all
other amounts owing by the Lessee hereunder or under any Related Documents as of
the date of termination, including, without limitation, all Accrued Default
Obligations, and (ii) when the Lessor transfers title, such transfer shall be on
an as-is, non-installment sale basis, without warranty by, or recourse to, the
Lessor but free of any Lien created pursuant to the Credit Agreement.
<PAGE> 32
(g) The Lessee shall have the right, upon written notice to Lessor not more
than four hundred fifty-five (455) days and not less than three hundred
sixty-five (365) days prior to the end of the Lease Term, and provided no Event
of Default or Potential Event of Default exists and that the Parent Guarantor
has met the EBITDA Standards, to renew the lease of the Property for a term (the
"Renewal Term") of two separate one (1) year extensions commencing on the first
day of the calendar month following the last day of the Lease Term or the last
day of the previous one year extension, as the case may be.
(h) The Lessee's purchase rights described in this Section 13 shall be
secured by the Lessee's Deed of Trust.
SECTION 14. LESSOR'S RIGHT TO TERMINATE.
(a) The Lessor shall have the right, upon written notice to the Lessee, to
terminate this Lease with respect to all Property under this Lease as of the
date stipulated in such notice if, at any time, the Credit Agreement expires at
the end of its term, or the Credit Agreement is terminated by any Assignee as a
result of the introduction of, or any change in, any applicable law, rule or
regulation or in the interpretation or administration thereof by any
Governmental Authority which shall make it unlawful for the Lessor to borrow
funds under such Credit Agreement, and the Lessor cannot arrange for bank
borrowings to refinance its obligations hereunder with respect to all Property
under this Lease upon terms reasonably acceptable to the Lessor.
(b) In the event of a termination with respect to all Property pursuant to
paragraph (a) of this Section 14, the Lessee shall be required, at its option,
either (i) to arrange for such Property to be sold in accordance with the terms,
and subject to satisfying the conditions for the use, of Section 12 above and
with the consequences therein provided, except that such sale must occur on the
Basic Rent Payment Date stipulated in the written notice contemplated in
paragraph (a) of this Section 14, or (ii) to purchase, on the Basic Rent Payment
Date stipulated in the written notice contemplated by paragraph (a) of this
Section 14, such Property for cash at the Termination Value. In connection with,
and as a condition to any purchase or sale under this paragraph, on the Basic
Rent Payment Date upon which such purchase or sale occurs, the Lessee shall pay
to the Lessor, in addition to any purchase price payable, all other amounts
owing hereunder as of the date of such purchase or sale, including, without
limitation (and without duplication), (i) all Basic Rent payable and accrued
through the date of purchase, (ii) any Additional Rent owing, (iii) all amounts
payable pursuant to Sections 11, 25 and 27 hereof, (iv) all losses, damages,
costs and expenses (including, without limitation, attorney's fees and expenses,
commissions, filing fees and sales or transfer taxes) sustained by the Lessor by
reason of such purchase, and (v) all other amounts owing by Lessee hereunder or
under any Related Documents.
(c) If (i) as a result of the requirements of subsection (a) above with
respect to it becoming unlawful for the Lessor to borrow funds under the Credit
Agreement, then the Lessee shall be entitled to designate a replacement to such
Lender reasonably acceptable to the Collateral Agent, and such Lender shall
execute and deliver to such replacement Lender an assignment agreement between
such Lender and such replacement Lender as required in the Credit Agreement. If
the Lessee exercises its
<PAGE> 33
election under this subsection (c) to replace a Lender, the Lessee shall pay the
assignment fee payable to the Collateral Agent under Section 11.01 of the Credit
Agreement.
SECTION 15. LOSS OF OR DAMAGE TO PROPERTY OR EQUIPMENT.
(a) The Lessee hereby assumes all risk of loss of or damage to the
Property, however caused. No loss of or damage to the Property shall impair any
obligation of the Lessee under this Lease, which shall continue in full force
and effect with respect to any loss or damage to the Property.
(b) In the event of damage of any kind whatsoever to any portion of the
Property (unless the same is determined by the Lessor and Assignee to be damaged
beyond repair) the Lessee, at its own cost and expense, shall place the same in
good operating order, repair, condition and appearance. The Lessee's right to
any proceeds paid under any insurance policy or policies required under Section
10 of this Lease with respect to any such damage to the Property which has been
so placed by the Lessee in good operating order, repair, condition and
appearance is governed by paragraph (e) of Section 10 hereof.
(c) If any portion of the Property is lost, stolen, destroyed, seized,
confiscated, rendered unfit for use or damaged beyond repair (in the judgment of
the Lessor and Assignees), or if the use thereof by the Lessee in the ordinary
course of business is prevented by the act of any third Person or Persons or
governmental instrumentality for a period exceeding ninety (90) consecutive
days, or if such portion of the Property is attached (other than on a claim
against the Lessor as to which the Lessee is not obligated to indemnify the
Lessor) and the attachment is not removed within ninety (90) consecutive days,
or if a Taking as described in Section 16 shall occur, then in any such event,
(i) the Lessee shall promptly notify the Lessor in writing of such event, (ii)
on the Basic Rent Payment Date following such event the Lessee shall pay to the
Lessor an amount equal to the Acquisition Cost of the Property, any Additional
Rent and other amounts owing hereunder, (iii) this Lease shall thereupon
terminate with respect to such Property, and (iv) the Lessor shall on such Basic
Rent Payment Date transfer title to such affected Property to the Lessee, and
the Lessee shall be subrogated to the Lessor's rights resulting from such event.
Insurance and condemnation proceeds, if any, received by the Lessor in excess of
the Acquisition Cost of the affected Property, so long as no Event of Default
has occurred and is continuing, shall be paid by the Lessor to the Lessee upon
the payment by the Lessee of all amounts referred to in the preceding sentence.
(d) If any of the events described in paragraphs (b) and (c) above occur or
Lessor suffers a loss as a result thereof after the Effective Date but before
the Completion Date which are caused by or resulting from the Lessee's own
actions or failures to act during such period, including without limitation,
failure to maintain required insurance, then Lessee shall pay to Lessor the
Termination Value plus all other amounts due hereunder rather than the
Acquisition Cost as provided in clause (c) above and Lessee shall be entitled to
receive any excess above the Termination Value and all other amounts due
hereunder, rather than the excess above the Acquisition Cost, as provided in the
last sentence of paragraph (c) above.
<PAGE> 34
SECTION 16. CONDEMNATION AND DEDICATION OF PROPERTY.
(a) If the use, occupancy or title to all or a substantial portion of a
Parcel of Property is taken, requisitioned or sold in, by or on account of
actual or threatened eminent domain proceedings or other action by any person or
authority having the power of eminent domain (such events collectively referred
to as a "Taking"), then the Lease Term or Renewal Term shall terminate, as
provided in paragraph (c) of Section 15 hereof. Upon receipt of proceeds from
any award or sale made in connection with such Taking, if the Lessee has paid
all amounts owing under paragraph (c) of Section 15 hereof, so long as no Event
of Default or Potential Default has occurred and is continuing, the Lessor shall
remit to the Lessee the net amount of such proceeds remaining after
reimbursement for all costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by the Lessor in connection with the
negotiation and settlement of any proceedings related to such Taking. A Taking
shall be deemed to affect a "substantial portion" of a Unit if, after such
Taking, such Parcel of Property is unusable for the Lessee's ordinary business
purposes.
(b) If less than a substantial portion of a Parcel of Property is subject
to a Taking, then this Lease shall continue in effect as to the portion of the
Parcel not taken and, so long as no Event of Default or Potential Default has
occurred and is continuing, any net proceeds shall be paid to the Lessee.
SECTION 17. SURRENDER OF PROPERTY OR EQUIPMENT.
(a) Subject to the provisions of Sections 12, 13, 14, 15, 18, 19 and 28
hereof, upon termination of the lease of the Property hereunder, the Lessee
shall surrender the Property to the Lessor. The Property shall be surrendered in
the condition required by paragraph (s) of Section 9.
(b) Upon the surrender of the Property, the Lessee shall deliver to the
Lessor or its designee all logs, manuals, inspection data, books and records or
copies thereof and other information, which are necessary to operate the
Property and which are in accordance with sound industry practice customarily
retained (or that the Lessee actually did retain) or are required by law to be
retained with respect to similar property and equipment, including, without
limitation, all software and manuals applicable to the Property and all design
plans, know-how, records and information used by the Lessee during operation of
the Property.
SECTION 18. EVENTS OF DEFAULT.
Any of the following events of default shall constitute an "Event of
Default" and shall give rise to the rights on the part of the Lessor described
in Section 19 hereof:
(a) Failure of the Lessee to comply with paragraph (b) of Section 14
hereof, failure of the Lessee to pay amounts due to the Lessor at the time of
any scheduled sale of Property, failure of the Lessee to pay Basic Rent for more
than five (5) Business Days after such payment is due pursuant to Section 7
hereof, or failure of the Lessee to
<PAGE> 35
pay any other amount payable by the Lessee hereunder on or prior to ten (10)
days after written demand for such other payment from the Lessor; or
(b) Failure to maintain the insurance required by Section 10 hereof; or
(c) Default in the performance of any other obligation or covenant of the
Lessee pursuant to this Lease or any Consent or other Related Documents and the
continuance of such default for thirty (30) days after written notice to the
Lessee by the Lessor or any Assignee; provided that if such default is of such a
nature that it is not capable of being cured within such thirty (30) day period,
and the Lessee promptly commences appropriate steps to cure such default within
such thirty (30) day period and continues to pursue such cure with diligence and
good faith thereafter, such thirty (30) day period shall be extended to ninety
(90) days (unless the Lessor or Assignee determines that such delay could
reasonably be expected to have a Material Adverse Effect), or
(d) The entry of a decree or order for relief in respect of the Lessee or
any Guarantor by a court having jurisdiction in the premises or the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Lessee or Guarantor or of any substantial part of the
Lessee's or any Guarantor's property, or ordering the winding up or liquidation
of the Lessee's or any Guarantor's affairs, in an involuntary case under the
Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency or other similar law and such
decree or order remains unstayed and in effect for sixty (60) consecutive days;
or the commencement against the Lessee or Guarantor of an involuntary case under
the Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency or other similar law, and the
continuance of any such case unstayed and in effect for a period of sixty (60)
consecutive days; or
(e) The suspension or discontinuance of the Lessee's or any Guarantor's
business operations which are likely to have a Material Adverse Effect when
considered as a whole, the Lessee's or any Guarantor's insolvency (however
evidenced) or the Lessee's or any Guarantor's admission of insolvency or
bankruptcy, or the commencement by the Lessee or any Guarantor of a voluntary
case under the Federal bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or the consent by the Lessee or any Guarantor to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Lessee or any Guarantor or of any substantial
part of the Lessee's or any Guarantor's property, or the making by the Lessee or
any Guarantor of an assignment for the benefit of creditors, or the failure of
the Lessee or any Guarantor generally to pay their debts as such debts become
due, or the taking of corporate action by the Lessee or any Guarantor in
furtherance of any such action; or
(f) A default or event of default, the effect of which is to permit the
holder or holders of any Indebtedness, or a trustee or agent on behalf of such
holder or holders, to cause such Indebtedness to become due prior to its stated
maturity shall occur under the provisions of any agreement pursuant to which
such Indebtedness was created or instrument evidencing such Indebtedness in
excess of $1,000,000 in the aggregate of any Guarantor or any obligation of any
Guarantor for the payment of such Indebtedness
<PAGE> 36
shall become or be declared to be due and payable prior to its stated maturity,
or shall not be paid when due; or
(g) Any representation or warranty made by the Lessee in this Lease, any
Consent or any document contemplated hereby or thereby proves to be false or
inaccurate in any material respect on or as of the date made or deemed made; or
(h) Final non-appealable judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered against any Guarantor by
any court of competent jurisdiction and the same shall remain undischarged for a
period of thirty (30) days during which execution of such judgment or judgments
shall not be effectively stayed; or
(i) Any representation or warranty made by any Guarantor in any Guaranty,
any Consent, any Related Documents or any document contemplated hereby or
thereby proves to be false, misleading or inaccurate in any material respect or
any Guarantor shall fail to perform or observe any agreement or covenant
contained in any Guaranty; or
(j) Any Guaranty ceases to be in full force and effect; or
(k) Any Guarantor defaults in the performance of any obligation or covenant
contained in any Guaranty, any required notice of such default shall have been
given, and any applicable grace period shall be expired; or
(l) An Event of Default (as defined in the Construction Agency Agreement)
shall occur under the Construction Agency Agreement; or
(m) The Lessee shall fail to observe or perform, after the expiration of
any applicable grace period, any material term, covenant or condition of the
Ground Sublease on the part of the Lessor, as tenant thereunder, to be observed
or performed, unless any such observance or performance shall have been waived
or not required by the landlord under the Ground Sublease, or if any one or more
of the events referred to in the Ground Sublease shall occur which would cause
the Ground Sublease to terminate without notice or action by the landlord
thereunder or which would entitle the landlord under the Ground Sublease to
terminate the Ground Sublease and the term thereof by the giving of notice to
the Lessor without opportunity to cure, as tenant thereunder, or if any of the
terms, covenants or conditions of the Ground Sublease shall in any manner be
modified, changed, supplemented, altered or amended in any material respect
without the consent of the Lessor and Assignee; or
(n) The occurrence of any event or circumstance relating to Environmental
Matters with respect to the Property that could reasonably be expected to have a
Material Adverse Effect; or
(o) An Event of Default (as defined in the Participation Agreement, Credit
Agreement or the Revolving Credit Agreement) shall occur; or
<PAGE> 37
(p) A Change of Control shall occur, which is not a Permitted Change of
Control; or
(q) The failure to achieve Substantial Completion of all Improvements to
all Property and the delivery to the Property of substantially all Equipment
prior to the end of the Construction Period.
SECTION 19. RIGHTS UPON DEFAULT.
Subject in all cases to the Lessee's rights under paragraph (f) of Section
13 of this Lease and to the entirety of this Section 19, upon the occurrence and
continuation of any Event of Default the Lessor may do any one or more of the
following:
(a) Terminate the lease of any or all Property or Equipment leased
hereunder;
(b) Whether or not the lease of Property is terminated, take immediate
possession of and remove any or all Equipment and other equipment or property of
the Lessor in the possession of the Lessee, wherever situated, and for such
purpose, enter upon any premises without liability to the Lessee for so doing;
(c) Whether or not any action has been taken under paragraph (a) or (b)
above, sell any Property or Equipment (with or without the concurrence or
request of the Lessee) at public or private sale (judicially or non-judicially)
pursuant to such notices and procedures as may be required by law, to the extent
such requirements are not effectively waived by the Lessee hereunder, provided
that the disposition of any Property or Equipment shall take place in a
commercially reasonable manner;
(d) Hold, use, occupy, operate, repair, remove, lease or keep idle any or
all of the Property as the Lessor in its sole discretion may determine, without
any duty to account to the Lessee with respect to any such action or inaction or
for any proceeds thereof;
(e) Exercise any other right or remedy which may be available under
applicable law and in general proceed by appropriate judicial proceedings,
either at law or in equity, to enforce the terms hereof or to recover damages
for the breach hereof; and
(f) Continue this Lease in full force and effect and collect rent when due
and/or enter the Property and assemble the Equipment and relet for the Lessee's
account, with the Lessee liable for all costs incurred by the Lessor in
reletting the same.
Suit or suits for the recovery of any default in the payment of any sum due
hereunder or for damages may be brought by the Lessor from time to time at the
Lessor's election, and nothing herein contained shall be deemed to require the
Lessor to await the date whereon this Lease or the term hereof would have
expired by limitation had there been no such default by the Lessee or no such
termination or cancellation.
The receipt of any payments under this Lease by the Lessor with knowledge
of any breach of this Lease by the Lessee or of any default by the Lessee in the
<PAGE> 38
performance of any of the terms, covenants or conditions of this Lease, shall
not be deemed to be a waiver of any provision of this Lease.
Subject to the provisions of paragraph (f) of Section 13 hereof, no receipt
of moneys by the Lessor from the Lessee after the termination or cancellation
hereof in any lawful manner shall reinstate, continue or extend the Lease Term
or any Renewal Term, or affect any notice theretofore given to the Lessee, or
operate as a waiver of the right of the Lessor to enforce the payment of Basic
Rent or Additional Rent or other charges payable hereunder, or operate as a
waiver of the right of the Lessor to recover possession of any Unit of Equipment
or Parcel of Property by proper suit, action, proceedings or remedy; it being
agreed that, after the service of notice to terminate or cancel this Lease, and
the expiration of the time therein specified, if the default has not been cured
in the meantime, or after the commencement of any suit, action or summary
proceedings or of any other remedy, or after a final order, warrant or judgment
for the possession of any Unit of Equipment or Parcel of Property, the Lessor
may demand, receive and collect any moneys payable hereunder, without in any
manner affecting such notice, proceedings, suit, action, order, warrant or
judgment; and any and all such moneys so collected shall be deemed to be
payments on account for the use and operation of the Property, or at the
election of the Lessor, on account of the Lessee's liability hereunder.
Acceptance of the keys to the Property, or any similar act, by the Lessor, or
any agent or employee of the Lessor, during the term hereof, shall not be deemed
to be an acceptance of a surrender of the Property unless the Lessor and
Assignee shall consent thereto in writing.
After any Event of Default, the Lessee shall be liable for, and the Lessor
may recover from the Lessee (without duplication) (i) all Basic Rent accrued to
date of payment, (ii) any Additional Rent owing, (iii) all amounts payable
pursuant to Sections 11, 25 and 27 hereof, (iv) all losses, damages, costs and
expenses (including, without limitation, attorneys' fees and expenses,
commissions, filing fees and sales or transfer taxes) sustained by the Lessor by
reason of such Event of Default and the exercise of the Lessor's remedies with
respect thereto, including without limitation, in the event of a sale by the
Lessor of the Property pursuant to this Section 19, all costs and expenses
associated with such sale and (v) all other amounts owing hereunder. The amounts
payable in clauses (i) through (v) above are hereinafter sometimes referred to
as the "Accrued Default Obligations".
After an Event of Default, but subject to the provisions of paragraph (f)
of Section 13 hereof, the Lessor may sell its interest in the Property and the
Ground Sublease upon any commercially reasonable terms that the Lessor deems
satisfactory, free of any rights of the Lessee or any Person claiming through or
under the Lessee. In the event of any such sale, in addition to the Accrued
Default Obligations, the Lessor shall be entitled to recover from the Lessee, as
liquidated damages and not as a penalty, and subject to the second succeeding
sentence, an amount equal to the Termination Value. Proceeds of sale received by
the Lessor in excess of the Termination Value shall be credited against the
Accrued Default Obligations the Lessee is required to pay under this Section 19.
If such proceeds and/or payment of Termination Value under this Lease exceed the
sum of (i) the Accrued Default Obligations and (ii) the Termination Value, and
if the Lessee has paid the Termination Value, the Accrued Default Obligations
and all other amounts required to be
<PAGE> 39
paid by Lessee under the Related Documents, such excess shall be paid by the
Lessor to the Lessee. As an alternative to any such sale, in addition to the
Accrued Default Obligations, the Lessor may require the Lessee to pay to the
Lessor, and the Lessee shall pay to the Lessor, as liquidated damages and not as
a penalty, an amount equal to the Termination Value. If the Lessor subsequently
sells its interest in the Property, the proceeds of any such sale and/or any
such amounts realized (net of any unreimbursed costs or liabilities incurred by
the Lessor or Assignee with respect to the Property after the termination of the
Lease, which are not included in the Accrued Default Obligations) shall be
distributed as provided in the third and fourth sentences of this paragraph.
Notwithstanding anything to the contrary contained herein, if the Lessee
converts the Property or any part thereof after an Event of Default, or if the
Property is lost or destroyed by the Lessee at the time of the Event of Default,
in addition to the Accrued Default Obligations, the Lessor may require the
Lessee to pay to the Lessor, and the Lessee shall pay to the Lessor, as
liquidated damages and not as a penalty, an amount equal to the Termination
Value.
In addition to any other remedies available under this Lease to the Lessor,
the Lessor may choose, in its sole discretion, upon termination of this Lease to
recover the maximum amount (including interest) to which the Lessor is entitled
under applicable law with respect to rent accrued, or which would have accrued,
under this Lease as of the time of any award, and, with respect to the loss of
future rents, to recover from the Lessee the worth, at the time of the award, of
the amount by which the unpaid rent for the balance of the term after the time
of award exceeds the amount of the loss of rent that the Lessee proves could
have been reasonably avoided. "The worth at the time of award", as used herein,
is to be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award, plus one percent, or if
less, the minimum discount rate permitted by law.
In the event of a sale pursuant to this Section 19, upon receipt by the
Lessor of the amounts payable hereunder, the Lessor shall transfer all of the
Lessor's right, title and interest in and to the Property to a purchaser other
than the Lessee or to the Lessee, as the case may be.
No remedy referred to in this Section 19 is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to above
or otherwise available to the Lessor at law or in equity, and the exercise in
whole or in part by the Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by the Lessor of any or all such
other remedies.
No waiver by the Lessor of any Event of Default hereunder shall in any way
be, or be construed to be, a waiver of any future or subsequent Event of
Default.
With respect to the termination of this Lease as a result of an Event of
Default, the Lessee hereby waives service of any notice of intention to
re-enter. The Lessee hereby waives any and all rights to recover or regain
possession of the Property or to reinstate this Lease as permitted or provided
by or under any statute, law or decision now or hereafter in force and effect.
<PAGE> 40
SECTION 20. EQUIPMENT TO BE PERSONAL PROPERTY.
It is the intention and understanding of the Lessor and the Lessee that all
Equipment shall be and at all times remain personal property. The Lessee shall
obtain and record such instruments and take such steps as may be necessary to
prevent any Person from acquiring any rights in Equipment paramount to the
rights of the Lessor by reason of such Equipment being deemed to be real
property.
SECTION 21. SALE OR ASSIGNMENT BY LESSOR.
(a) The Lessor shall have the right to obtain equity and debt financing for
the acquisition and ownership of the Property by selling or assigning its right,
title and interest in any or all amounts due from the Lessee or any third party
under this Lease and granting a security interest in this Lease to the Agent or
a lender or lenders under the Credit Agreement; provided, that any such sale or
assignment shall be subject to the rights and interests of the Lessee under this
Lease.
(b) Any Assignee shall, except as otherwise agreed by the Lessor and such
Assignee, have all the rights, powers, privileges and remedies of the Lessor
hereunder, and the Lessee's obligations as between itself and such Assignee
hereunder shall not be subject to any claims or defense that the Lessee may have
against the Lessor; provided that the foregoing shall not be deemed to be a
waiver of any claims the Lessee may have against the Lessor. Upon written notice
to the Lessee of any such assignment, the Lessee shall thereafter make payments
of Basic Rent, Additional Rent and other sums due hereunder to the Assignee, to
the extent specified in such notice, and such payments shall discharge the
obligation of the Lessee to the Lessor hereunder to the extent of such payments.
Anything contained herein to the contrary notwithstanding, no Assignee shall be
obligated to perform any duty, covenant or condition required to be performed by
the Lessor hereunder, and any such duty, covenant or condition shall be and
remain the sole obligation of the Lessor.
SECTION 22. UTILITY SERVICES.
During the Lease Term, Lessee shall pay, or cause to be paid, and shall
indemnify, defend and hold Lessor and the property of Lessor harmless from all
charges for water, sewage, gas, heat, air conditioning, light, power, steam,
telephone service and all other services and utilities used, rendered or
supplied to, on or in the Property during the Lease Term. Lessor shall not be
required to furnish to Lessee or to any other occupant of the Property during
the Lease Term, any water, sewage, gas, heat, air conditioning, light, power,
steam, telephone or any other utilities, equipment, labor, materials or services
of any kind whatsoever.
<PAGE> 41
SECTION 23. NOTICES AND REQUESTS.
All notices, offers, acceptances, approvals, waivers, requests, demands and
other communications hereunder or under any other instrument, certificate or
other document delivered in connection with the transactions described herein
shall be in writing, shall be addressed as provided below and shall be
considered as properly given (a) if delivered in person, (b) if sent by express
courier service (including, without limitation, Federal Express, Emery, DHL,
Airborne Express, and other similar express delivery services), (c) in the event
overnight delivery services are not readily available, if mailed through the
United States Postal Service, postage prepaid, registered or certified with
return receipt requested, or (d) if sent by telecopy and confirmed; provided,
that in the case of a notice by telecopy, the sender shall in addition confirm
such notice by writing sent in the manner specified in clauses (a), (b) or (c)
of this Section 23. All notices shall be effective upon receipt by the
addressee; provided, however, that if any notice is tendered to an addressee and
the delivery thereof is refused by such addressee, such notice shall be
effective upon such tender. For the purposes of notice, the addresses of the
parties shall be as set forth below; provided, however, that any party shall
have the right to change its address for notice hereunder to any other location
by giving written notice to the other party in the manner set forth herein. The
initial addresses of the parties hereto are as follows:
If to the Lessor:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val T. Orton, Vice President
Telephone: 801-246-5300
Telecopy: 801-246-5053
With a copy of all notices under this Section 23 to be simultaneously given,
delivered or served to the Agent at the following respective addresses:
ING (U.S.) Capital LLC
200 Galleria Parkway, Suite 950
Atlanta, Georgia 30339
Attention: Darren J. Wells
Telephone: (770)984-4511
Telecopy: (770)951-1005
King & Spalding
191 Peachtree St.
Atlanta, Georgia 30305-1763
Attention: Walter Driver, Jr.
Telephone: 404-572-4600
Telecopy: 404-572-5100
If to the Lessee:
<PAGE> 42
MiniMed Development Corp.
12744 San Fernando Road
Sylmar, California 91342-3782
Attention: General Counsel
Telephone: (818) 362-2358
Telecopy: (818) 367-1460
With a copy to
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1200
San Diego, California 92101-3532
Attention: Scott Biel
Telephone: (619) 234-1966
Telecopy: (619) 234-3848
With a copy of all notices under this Section 23 to any Assignee at such address
as such Assignee may specify by written notice to the Lessor and the Lessee.
SECTION 24. COVENANT OF QUIET ENJOYMENT.
During the Lease Term or Renewal Term, if any, of the Property hereunder
and so long as no Event of Default shall have occurred and be continuing, the
Lessor recognizes the Lessee's right to quiet enjoyment of the Property on the
terms and conditions provided in this Lease and the Construction Agency
Agreement without any interference from the Lessor or anyone claiming through or
under the Lessor.
SECTION 25. RIGHT TO PERFORM FOR LESSEE.
(a) If the Lessee fails to perform or comply with any of its covenants or
agreements contained in this Lease, the Lessor may, upon at least ten (10) days'
advance written notice to the Lessee (or without notice to the Lessee if the
Lessor in its sole discretion determines that any delay in performing or
complying with such covenant or agreement could have a material adverse effect
on (a) the operation, maintenance, leasing, ownership, use or value of the
Property, (b) the ability of the Lessee to observe and perform its obligations
under this Lease or the Construction Agency Agreement in a timely manner or the
ability of any Guarantor to perform its obligations under any Guaranty in a
timely manner, (c) the business, assets, properties, financial condition,
operations or prospects of the Lessee or any Guarantor, or (d) the rights or
interests of the Lessor or Assignee under this Lease or the Construction Agency
Agreement) but without waiving or releasing any obligations or default, itself
perform or comply with such covenant or agreement, and the amount of the
reasonable expenses of the Lessor incurred in connection with such performance
or compliance, shall be payable by the Lessee, not later than ten (10) days
after written notice by the Lessor.
(b) Without in any way limiting the obligations of the Lessee hereunder,
the Lessee hereby irrevocably appoints the Lessor as its agent and attorney at
the time at which the Lessee is obligated to deliver possession of the Property
to the
<PAGE> 43
Lessor, to demand and take possession of the Property in the name and on behalf
of the Lessee from whomsoever shall be at the time in possession thereof.
SECTION 26. EXPENSES.
The Lessee shall pay all of the out-of-pocket costs and expenses incurred
by the Lessor, and any Assignee in connection with the management and operation
of the Property including, without limitation, the reasonable fees and
disbursements of counsel to the Lessor and counsel to any Assignee.
SECTION 27. PERMITTED CONTESTS.
(a) The Lessee shall not be required, nor shall the Lessor have the right,
to pay, discharge or remove any tax, assessment, levy, fee, rent, charge or
Lien, or to comply or cause the Property to comply with any Legal Requirements
applicable to the Property or the occupancy, use or operation thereof, so long
as no Event of Default exists under this Lease with respect to the Property,
and, in the reasonable judgment of the Lessee's counsel, the Lessee shall have
reasonable grounds to contest the existence, amount, applicability or validity
thereof by appropriate proceedings, which proceedings in the reasonable judgment
of the Lessor and Assignee, (i) shall not involve any material danger that the
Property or any Basic Rent or any Additional Rent would be subject to sale,
forfeiture or loss, as a result of failure to comply therewith, (ii) shall not
affect the payment of any Basic Rent or any Additional Rent or other sums due
and payable hereunder or result in any such sums being payable to any Person
other than the Lessor or any Assignee, (iii) will not place either the Lessor or
any Assignee in any danger of civil liability for which the Lessor or any
Assignee is not adequately indemnified (the Lessee's obligations under Section
11 of this Lease shall be deemed to be adequate indemnification if no Event of
Default or Potential Default exists and if such civil liability is reasonably
likely to be less than $500,000 in the aggregate) or to any criminal liability,
(iv) if involving taxes, shall suspend the collection of taxes, and (v) shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which the Lessee or the Property is subject and shall not
constitute a default thereunder (the "Permitted Contest"). The Lessee shall
conduct all Permitted Contests in good faith and with due diligence and shall
promptly after the final determination (including appeals) of any Permitted
Contest pay and discharge all amounts which shall be determined to be payable
therein. The Lessor shall cooperate in good faith with the Lessee with respect
to all Permitted Contests conducted by the Lessee pursuant to this Section 27.
(b) In the event the Lessor deems, in its reasonable discretion, that its
interests under this Lease or in the Property are not adequately protected in
connection with a Permitted Contest brought by the Lessee under this Section 27,
the Lessee shall give such reasonable security, as may be demanded by the Lessor
to ensure payment of such tax, assessment, levy, fee, rent, charge or Lien and
compliance with Legal Requirements and to prevent any sale or forfeiture of the
Property, any Basic Rent or any Additional Rent by reason of such nonpayment or
noncompliance. The Lessee hereby agrees that the Lessor may assign such security
provided by the Lessee to any Assignee.
(c) At least ten (10) days prior to the commencement of any Permitted
Contest, the Lessee shall notify the Lessor and any Assignee in writing thereof
if the
<PAGE> 44
amount in contest exceeds $100,000, and shall describe such proceeding in
reasonable detail. In the event that a taxing authority or subdivision thereof
proposes an additional assessment or levy of any tax for which the Lessee is
obligated to reimburse the Lessor under this Lease, or in the event that the
Lessor is notified of the commencement of an audit or similar proceeding which
could result in such an additional assessment, then the Lessor shall in a timely
manner notify the Lessee in writing of such proposed levy or proceeding.
SECTION 28. LEASEHOLD INTERESTS.
(a) The Lessee hereunder covenants and agrees to perform and to observe all
of the terms, covenants, provisions, conditions and agreements of the Ground
Subleases on the Lessor's part as lessee thereunder to be performed and observed
(including, without limitation, payment of all rent, additional rent and other
amounts payable by the Lessor as lessee under the Ground Sublease) to the end
that all things shall be done which are necessary to keep unimpaired the rights
of the Lessor as lessee under the Ground Sublease. Except as specifically
provided in this Lease, Lessee shall not be granted or have the right to
exercise any of the rights, remedies or elections granted to Lessor under the
Ground Sublease. Specifically, without limitation, Lessee shall not have the
right to exercise any of the renewal options or termination rights of Lessor in
the Ground Sublease.
(b) The Lessee covenants and agrees pursuant to Section 11 hereof to
indemnify and hold harmless the Lessor, the Collateral Agent and any Assignee
from and against any and all liability, loss, damage, suits, penalties, claims
and demands of every kind and nature (including, without limitation, reasonable
attorneys' fees and expenses) by reason of the Lessee's failure to comply with
the Ground Sublease or the provisions of this Section 28.
(c) The Lessor and the Lessee agree that the Lessor shall have no
obligation or responsibility to provide services or equipment required to be
provided or repairs or restorations required to be made in accordance with the
provisions of the Ground Sublease by the lessor thereunder. The Lessor shall in
no event be liable to the Lessee nor shall the obligations of the Lessee
hereunder be impaired or the performance thereof excused because of any failure
or delay on the part of the lessor under the Ground Sublease in providing such
services or equipment or making such restorations or repairs and such failure or
delay shall not constitute a basis for any claim against the Lessor or any
offset against any amount payable to the Lessor under this Lease.
(d) If the Lessor's interest under the Ground Sublease shall expire,
terminate or otherwise be extinguished, the lease of the Property shall
thereupon terminate as provided in this paragraph (d). Upon such expiration,
termination or extinguishment, the Lessee shall be required to purchase the
Lessor's interest in the Property at the Termination Value if such termination
or extinguishment is not caused by Lessor's actions or omissions, otherwise
Lessee may elect to pay the Surrender Payment. If the Lessee shall be required
to purchase the Lessor's interest in the Property, then (i) on the Basic Rent
Payment Date next succeeding such event, the Lessee shall pay to the Lessor an
amount equal to the Termination Value, (ii) the Lease Term of the Property shall
continue until the date on which the Lessor receives payment from the Lessee of
the amount
<PAGE> 45
payable pursuant to this paragraph (d) and of all Basic Rent payable, and any
Additional Rent and other amounts owing hereunder, and shall then terminate upon
the payment of such amounts, and (iii) the Lessor shall on such date transfer
title to the Lessor's interest in such Parcels to the Lessee.
(e) Notwithstanding anything contained herein to the contrary, in the event
that any of the terms and provisions of the Ground Subleases are inconsistent or
conflict with, and are more onerous than, the terms and provisions of the Lease,
the terms and provisions of the Ground Subleases shall control.
(f) This Lease is subject to and subordinate to the provisions of the
Ground Sublease.
SECTION 29. INTERRELATIONSHIP BETWEEN UNIVERSITY AND PROPERTY.
(a) The parties hereto acknowledge that the Property is currently located
on the campus of the University. It is the desire of Lessor and Lessee that the
services, goods and facilities of the Improvements will (a) relate to many
functions of the University, (b) provide and/or share services and facilities
needed for the students, faculty and employees of the University, and (c)
provide opportunities for student employment, materials and education. In
addition, it is the desire of Lessor and Lessee that the presence of the
Improvements will (i) enhance the attractiveness of the University campus; (ii)
encourage students, faculty and visitors to make increased use of present
University facilities; and (iii) allow some of the businesses operating at the
Improvements to interrelate with University activities.
(b) Lessee shall, subject to the qualifications set forth below, cooperate
with Lessor and Ground Lessor to provide the following:
(i) Provide internships for undergraduate and graduate students;
(ii) Participate in work-study programs for undergraduate and
graduate students;
(iii) Provide employment opportunities for undergraduate and
graduate students;
(iv) Undertake joint research programs with the University's
faculty;
(v) Co-sponsor research seminars or conferences;
(vi) Undertake such other academic activities as mutually agreed
upon; and
(vii) Make the Improvements available for University use in
accordance with Section 5.1(c) of the Ground Sublease.
<PAGE> 46
The above goals, purposes and programs shall be provided as long as they do
not unreasonably interfere with the operation and management of the
Improvements.
The above items shall be by way of example and, and not of the limitation,
with the understanding that such undertakings will relate to Lessee and any
sublessee which will operate their businesses in the Improvements pursuant to
subleases with Lessee. Lessee will incorporate provisions in its subleases to
accommodate these goals, purposes and programs, and to reasonably provided for
such accommodations in any conditions, covenants or restrictions governing the
Improvements.
(c) Lessee shall use its reasonable good faith efforts to agree to (a)
interact with the University business school, (b) make corporate and enterprise
personnel available for lecturing and instruction to the University, and (c)
provide intern programs to University students.
(d) Lessee shall (a) establish rules and regulations acceptable to Ground
Lessor and Lessor regarding the use of the Conference Center (as defined in the
Ground Sublease) on a non-interfering basis by faculty, staff and students of
the University which promote the integration of the Conference Center (as
defined in the Ground Sublease) into the University's activities, (b) engage in
advertising and public relations noting the University and the interface between
the research center and the University, (c) designate management personnel of
the research center to be coordinators and contacts with the University for
events and public relations, (d) subject to the terms of this lease, make
hardscape and landscape areas within the Improvements available for University
events and functions on a non-interfering basis as appropriate such an art
exhibits and displays featuring the University and it students, faculty and
programs, and (e) consult with and develop programs and public relations for
co-sponsored University and research center events with an event and information
officer of the University campus.
SECTION 30. MISCELLANEOUS.
(a) All agreements, indemnities, representations and warranties, and the
obligation to pay Additional Rent contained in this Lease shall survive the
expiration or other termination hereof.
(b) This Lease and the instruments, documents or agreements referred to
herein constitute the entire agreement between the parties and no
representations, warranties, promises, guarantees or agreements, oral or
written, express or implied, have been made by any party hereto with respect to
this Lease or the Property, except as provided herein or therein.
(c) This Lease may not be amended, modified or terminated, nor may any
obligation hereunder be waived orally, and no such amendment, modification,
termination or waiver shall be effective for any purpose unless it is in
writing, signed by the party against whom enforcement thereof is sought. A
waiver on one occasion shall not be construed to be a waiver with respect to any
other occasion.
<PAGE> 47
(d) The captions in this Lease are for convenience of reference only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof. Any provision of this Lease which is prohibited by law 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 the parties hereto shall negotiate in good
faith appropriate modifications to reflect such changes as may be required by
law, and, as nearly as possible, to produce the same economic, financial and tax
effects as the provision which is prohibited or unenforceable; and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Lessee and the Lessor hereby waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect. THIS LEASE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF NEW
YORK. THE LESSEE AND THE LESSOR AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY
THE LAW OF THE STATE OF NEW YORK, THIS LEASE, AND THE RIGHTS AND DUTIES OF THE
LESSEE AND THE LESSOR HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
IN ALL RESPECTS, INCLUDING WITHOUT LIMITATION IN RESPECT OF ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. THE LESSEE HEREBY IRREVOCABLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE SUPREME COURT OF THE STATE
OF NEW YORK IN THE COUNTY OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS LEASE OR THE TRANSACTIONS
CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE LESSEE
HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS LEASE OR ANY DOCUMENT OR ANY
INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED
IN OR BY SUCH COURT. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE LESSEE
AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF
ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE
CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. THE LESSEE AGREES THAT
SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE
ADDRESS FOR NOTICES SET FORTH IN THIS LEASE OR ANY METHOD AUTHORIZED BY THE LAWS
OF NEW YORK. THE LESSOR AND THE LESSEE EXPRESSLY WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM RELATED
<PAGE> 48
TO THIS LEASE OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE LESSOR AND THE LESSEE
ACKNOWLEDGE THAT THE PROVISIONS OF THIS PARAGRAPH (D) OF SECTION 30 HAVE BEEN
BARGAINED FOR AND THAT THEY HAVE BEEN REPRESENTED BY COUNSEL IN CONNECTION
THEREWITH.
(e) In connection with any sale of Property or Equipment pursuant to
Section 12, 13, 14, 15, 19, 20 or 28 of this Lease, when the Lessor transfers
title, such transfer shall be on an as-is, non-installment sale basis, without
warranty by, or recourse to, the Lessor. The purchase price for any such sale
shall be paid entirely in cash in immediately available funds.
(f) In connection with the sale or purchase of the Property pursuant to
Section 12, 13, 14, 15, 19, 20 or 28 of this Lease, the Lessee shall pay or
shall cause the purchaser of the Property to pay in addition to the purchase
price, all transfer taxes, transfer gains taxes, mortgage recording tax, if any,
recording and filing fees and all other similar taxes, fees (including, without
limitation, brokerage fees), expenses and closing costs (including reasonable
attorneys' fees) in connection with the conveyance of the Property or Equipment
to the Lessee or any purchaser.
(g) The Lessor and any Assignee shall, to the extent reasonably requested
by the Lessee, and at the Lessee's cost and expense, cooperate to allow the
Lessee to (a) perform its covenants contained in this Lease, including at any
time and from time to time, upon the reasonable request of the Lessee, and at
the Lessee's cost and expense, to execute and deliver any and all such further
instruments and documents as the Lessee may reasonably request in order to
perform such covenants, and (b) further the Lessee's requirements as lessee of
the Property, including, at the Lessee's cost and expense, to file any statement
with respect to any tax abatements or other tax requirements.
(h) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE
FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS LEASE AND FOR ANY COUNTERCLAIM THEREIN.
(i) Lessee hereby acknowledges and agrees that the rights and powers of
Lessor under this Lease have been assigned to the Agent pursuant to the terms of
the Security Agreement and the other Related Documents. Lessor and Lessee hereby
acknowledge and agree that (a) the Agent shall, in its discretion, direct and/or
act on behalf of Lessor pursuant to the provisions of Sections 8.2(h) and 8.6 of
the Participation Agreement, (b) all notices to be given to Lessor shall be
given to the Agent and (c) all notices to be given by Lessor may be given by the
Agent, at its election.
(j) THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION, VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
MUTANDIS.
(k) IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN
STRICT COMPLIANCE WITH APPLICABLE
<PAGE> 49
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 PARAGRAPH 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 WITHOUT LIMITATION
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 RELATED DOCUMENTS 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 RELATED DOCUMENTS 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 WITHOUT LIMITATION 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.
<PAGE> 50
(l) In the event that a court of competent jurisdiction rules that this
Lease constitutes a mortgage, deed of trust, security agreement or other secured
financing, then Lessor and Lessee agree that (a) the conveyance provided for in
Section 3 shall be deemed to be a Lien against the Property subject hereto WITH
POWER OF SALE, and that, upon the occurrence of any Event of Default, Lessor
shall have the power and authority, to the extent provided by applicable law,
after proper notice and lapse of such time as may be required by applicable law,
to sell such Property at the time and place of sale fixed by Lessor in said
notice of sale, either as a whole, or in separate lots or parcels or items and
in such order as Lessor may elect, at auction to the highest bidder for cash in
lawful money of the United States payable at the time of sale; accordingly, it
is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A
POWER OF SALE MAY ALLOW LESSOR TO TAKE THE APPLICABLE PROPERTY AND SELL IT
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY LESSEE UNDER THIS
INSTRUMENT, (b) upon the occurrence of an Event of Default, Lessor, in lieu of
or in addition to exercising any power of sale hereinabove given, may proceed by
a suit or suits in equity or at law, whether for a foreclosure hereunder, or for
the sale of the Property, or for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power herein
granted, or for the appointment of a receiver pending any foreclosure hereunder
or the sale of the Property, or for the enforcement of any other appropriate
legal or equitable remedy, (c) with respect to any personal property subject
hereto, (i) this Lease shall also be deemed to be a security agreement and
financing statement within the meaning of Article 9 of the Uniform Commercial
Code; (ii) the conveyance provided for in Section 4 shall be deemed to be a
grant by Lessee to Lessor of a security interest in all of Lessee's right, title
and interest in and to the Property and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, investments, securities or
other property, whether in the form of cash, investments, securities or other
property; (iii) the possession by Lessor or any of its agents of notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (iv) notifications to Persons holding such
property, and acknowledgments, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of Lessee shall be deemed to
have been given for the purpose of perfecting such security interest under
applicable law. Lessor and Lessee shall, to the extent consistent with this
Lease, take such actions as may be necessary to ensure that, if this Lease were
deemed to create a security interest in the Property in accordance with this
subsection (n), such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the Lease Term.
<PAGE> 51
SECTION 31. NO RECOURSE.
Notwithstanding anything contained in this Lease to the contrary, Lessee
agrees to look solely to Lessor's estate and interest in the Property and the
proceeds thereof, including, but not limited to, any sales proceeds, insurance
proceeds or any award or other compensation arising from a Taking (and in no
circumstance to the Collateral Agent, the Lenders, the Certificateholders, the
Revolving Credit Lenders 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 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 Property. Nothing in this
Section shall be interpreted so as to limit the terms of Section 14.13 of the
Participation Agreement.
SECTION 32. NO MERGER.
There shall be no merger of this Lease or of the leasehold estate hereby
created with the fee estate in the Property by reason of the fact that the same
person acquires or holds, directly or indirectly, this Lease or the leasehold
estate hereby created or any interest herein or in such leasehold estate as well
as the fee estate in the Property or any interest in such fee estate.
SECTION 33. CONSTRUCTION PERIOD PROVISIONS.
Notwithstanding any other provision of this Lease or any of the Related
Documents, the following shall apply and take priority over any other provision
hereof or any of the Related Documents from the date hereof until the earlier of
Completion or the Construction Period Termination Date:
(a) If Completion has not occurred prior to the Construction Period
Termination Date which failure is not accepted by the Lessor as provided in
Section 3(c) or extended to the extent provided in Section 2.06(c) of the
Construction Agency Agreement; or
(b) Upon the occurrence of an Event of Default which is based upon a breach
of Section 2.06(a) of the Construction Agency Agreement which is not funded as
provided in Section 2.01 of the Construction Agency Agreement; or
(c) Upon the occurrence of an Event of Default described in Section 18(c)
which is based upon the existence of any mechanics, materialmen or similar lien
based upon goods or services provided to the Property which is not a Permitted
Lien; or
(d) Upon the occurrence of an Event of Default described in Section 18(c)
which is based upon a casualty loss of all or substantially all of the Property
and Equipment;
which, in any event, is both (i) unrelated to any breach by the Lessee, any
Guarantor or the Construction Agent of any representation, warranty or
obligation under any Related
<PAGE> 52
Document, (ii) such event or circumstances are beyond the control of such
Persons, and (iii) not caused by any fraud, misrepresentation, misapplication of
funds or malfeasance of Lessee, then, in any such event, Lessee shall
immediately pay to Lessor the Construction Risk Payment, whereupon this Lease
shall terminate.
SECTION 34. WAIVER.
(a) The provisions of this Lease shall remain in full force and effect
notwithstanding (i) any release of Parent Guarantor of any of its subsidiaries
from its obligations under the Related Documents, (ii) any release of Lessee
from any liability with respect to the obligations hereunder; or (iii) any
release or subordination of any real or personal property now or hereafter held
by Lessor as security for the performance of the obligations hereunder:
(b) Lessee expressly waives any and all benefits which might otherwise be
available to Lessee under California Civil Code Sections 2809, 2810, 2819, 2839,
2845, 2849, 2850, 2899 and 3433;
(c) Lessee hereby waives any and all defenses, including but not limited to
Lessee's defense of estoppel discussed in Union Bank vs. Gradsky (1968) 265
Cal.App.2d 40, based upon a foreclosure against all or any part of the real
property leased hereby pursuant to the power of sale contained in this Lease as
opposed to proceeding by way of judicial foreclosure. Lessee waives all rights
and defenses arising out of an election of remedies by Lessor, even though that
election of remedies such as a nonjudicial foreclosure with respect to security
for a guaranteed obligation, has destroyed Lessee's rights of subrogation and
reimbursement by the operation of Section 580d of the Code of Civil Procedure or
otherwise;
(d) Lessee hereby waives all of the rights and defenses of Lessee as a
"guarantor" under Section 2856(a) of the California Civil Code. Lessee hereby
waives all rights and defenses that Lessee may have because any of Lessee's debt
is secured by real property. This means, among other things: (1) Lessor may
collect from Lessee without first foreclosing on any real or personal property
collateral pledged by any other borrower, including without limitation, Parent
Guarantor or any of its Subsidiaries (collectively, the "Other Borrowers" and
individually an "Other Borrower") (2) If Lessor forecloses on any real property
collateral pledged by Lessee or any one or more Other Borrowers: (A) the amount
of debt may be reduced only by the price for which the collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price, (B)
Lessor may collect from Lessee or each Other Borrower even if Lessor, by
foreclosing on the real property collateral, has destroyed any right such Other
Borrower may have to collect from any of the Other Borrowers. This is an
unconditional and irrevocable waiver of any rights and defenses Lessee may have
because Lessee's debt is secured by real property. These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d, or 726 of the Code of Civil Procedure.
(e) In the case of a power of sale foreclosure under this Lease, the fair
market value of the real property collateral shall be conclusively deemed to be
the amount of the successful bid at the foreclosure sale. Lessee waives any
rights or benefits it may now or hereafter have to a fair value hearing under
Section 580a of the California Code of
<PAGE> 53
Civil Procedure. Lessor shall have absolutely no obligation to make a bid at any
foreclosure sale, but rather may make no bid or bid any amount which Lessor, in
its sole discretion, deems appropriate.
(f) Lessee hereby irrevocably authorizes Lessor to apply any and all
amounts received by Lessee in repayment of the obligations hereunder first to
amounts which are guaranteed pursuant to the terms of the Lease and then to
amounts which are not guaranteed pursuant to the terms of the Lease, if any.
Lessee hereby waives any and all rights that it has or may hereafter have under
Section 2822 of the California Civil Code which provides that if a guarantor is
"liable upon only a portion of an obligation and the principal provides partial
satisfaction of the obligation, the principal may designate the portion of the
obligation that is to be satisfied."
(g) Lessor acknowledges that the provisions of this Section 35 are intended
to constitute a waiver of any rights and defenses Lessee may now or hereafter
have as a "guarantor" to the extent the Lease executed by Lessee is construed to
be in whole or in part a guaranty of the Other Borrowers' obligations under the
Related Documents. Nothing contained in this Section 35 shall be deemed to
constitute a waiver of the antideficiency or one action protections afforded
Lessee under Section 580a, 580d and 726 of the California Code of Civil
Procedure, as modified or recodified from time to time.
(h) Lessee warrants and represents to Lessor that (i) it now has or will
continue to have full and complete access to any and all information concerning
the transactions contemplated by the Related Documents referred to therein, the
value of the assets owned or to be acquired by any of the Other Borrowers under
the Related Documents, their financial status and their respective ability to
pay and perform their respective obligations under the Related Documents; and
(ii) Lessee has reviewed and approved copies of the Related Documents and is
fully informed of the remedies Lessor may pursue, with or without notice to
Lessee, in the event of default under the Related Documents. Lessee shall keep
fully informed as to all aspects of the financial condition of the Other
Borrowers and the performance of their respective obligations under the Related
Documents.
(i) Lessee agrees that Lessor may exercise any right or remedy hereunder or
under any of the Related Documents without the necessity of resorting to or
exhausting any security or collateral conveyed or assigned by Lessee or any of
the Other Borrowers or any guarantor of any of the obligations hereunder. Lessee
hereby waives any right it may now or hereafter have to require Lessor to
proceed against any of the Other Borrowers, to proceed against any guarantor of
any of the obligations hereunder, to foreclose any lien on any real or personal
property collateral conveyed or assigned to Lessor by Lessee or any of the Other
Borrowers, to exercise any right or remedy under the Related Documents, to draw
upon any letter of credit issued in connection with any of the obligations
hereunder, or to pursue any other remedy or to enforce any other right under the
Related Documents.
<PAGE> 54
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease to be
executed and delivered by their duly authorized officers as of the day and year
first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as
Owner Trustee under the
MiniMed Real Estate Trust 1999-1, as Lessor
By: /s/ VAL T. ORTON
--------------------------------------
Name: Val T. Orton
Title: Vice President
MINIMED DEVELOPMENT CORP.,
as Lessee
By: /s/ TERRANCE H. GREGG
-------------------------------
Name: Terrance H. Gregg
Title: President
<PAGE> 55
EXHIBIT A
Description of Property:
<PAGE> 56
EXHIBIT B
Site Plan
<PAGE> 57
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
SECTION 1. DEFINED TERMS. 1
SECTION 2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LESSEE. 1
SECTION 3. LEASE OF THE PROPERTY. 4
SECTION 4. INTENT OF THE PARTIES. 5
SECTION 5. DELIVERY. 5
SECTION 6. LEASE TERM. 8
SECTION 7. RENT AND OTHER PAYMENTS. 8
SECTION 8. RESTRICTED USE; COMPLIANCE WITH LAWS. 9
SECTION 9. CONSTRUCTION, IMPROVEMENT, MAINTENANCE AND
REPAIR OF PROPERTY OR EQUIPMENT. 12
SECTION 10. INSURANCE. 19
SECTION 11. INDEMNITIES. 22
</TABLE>
<PAGE> 58
<TABLE>
<S> <C> <C>
SECTION 12. LESSEE'S RIGHT TO TERMINATE. 25
SECTION 13. PURCHASE BY LESSEE, SURRENDER AND RENEWAL. 27
SECTION 14. LESSOR'S RIGHT TO TERMINATE. 30
SECTION 15. LOSS OF OR DAMAGE TO PROPERTY OR EQUIPMENT. 31
SECTION 16. CONDEMNATION AND DEDICATION OF PROPERTY. 32
SECTION 17. SURRENDER OF PROPERTY OR EQUIPMENT. 32
SECTION 18. EVENTS OF DEFAULT. 32
SECTION 19. RIGHTS UPON DEFAULT. 35
SECTION 20. EQUIPMENT TO BE PERSONAL PROPERTY. 37
SECTION 21. SALE OR ASSIGNMENT BY LESSOR. 38
SECTION 22. UTILITY SERVICES. 38
SECTION 23. NOTICES AND REQUESTS. 38
SECTION 24. COVENANT OF QUIET ENJOYMENT. 40
</TABLE>
<PAGE> 59
<TABLE>
<S> <C> <C>
SECTION 25. RIGHT TO PERFORM FOR LESSEE. 40
SECTION 26. EXPENSES. 40
SECTION 27. PERMITTED CONTESTS. 41
SECTION 28. LEASEHOLD INTERESTS. 42
SECTION 29. INTERRELATIONSHIP BETWEEN UNIVERSITY AND PROPERTY. 43
SECTION 30. MISCELLANEOUS. 44
SECTION 31. NO RECOURSE. 48
SECTION 32. NO MERGER. 48
SECTION 33. CONSTRUCTION PERIOD PROVISIONS. 48
SECTION 34. WAIVER. 49
EXHIBIT A Legal Description of Property
EXHIBIT B Site Plan
</TABLE>
<PAGE> 1
EXHIBIT 10.5
REVOLVING CREDIT AGREEMENT
dated as of May 18, 1999
among
MINIMED INC., as Borrower,
THE REVOLVING CREDIT LENDERS PARTIES HERETO
and
ING (U.S.) CAPITAL LLC,
as Agent
<PAGE> 2
<TABLE>
<CAPTION>
Section Page
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<S> <C> <C>
TABLE OF CONTENTS
ARTICLE I DEFINED TERMS 1
Section 1.02. Computations 1
Section 1.03. Interpretation 1
ARTICLE II REVOLVING CREDIT FACILITIES 2
Section 2.01. The Commitments 2
Section 2.02. Types and Amount of Revolving Credit Advances 2
Section 2.03. Manner of Borrowing 2
Section 2.04. Repayment of Principal 3
Section 2.05. Payment of Interest 3
Section 2.06. Optional Prepayment 4
Section 2.07. Funding Indemnities 4
Section 2.08. Revolving Notes 5
ARTICLE III CHANGE IN CIRCUMSTANCES 5
Section 3.01. Increased Costs 5
Section 3.02. Illegality 7
Section 3.03. Unavailability of LIBOR Advances 8
ARTICLE IV FEES; PAYMENTS; REDUCTION ANDINCREASE OF COMMITMENTS 9
Section 4.01. Fees 9
Section 4.02. Manner of Payments 9
Section 4.03. Extension of Payments 10
Section 4.04. Computation of Interest and Fees 10
Section 4.05. Reduction, Increase and Termination of the Commitments 10
Section 4.06. Intentionally Omitted. 11
ARTICLE V CONDITIONS PRECEDENT 11
Section 5.01. Initial Conditions 11
Section 5.02. Conditions to each Credit Event 13
ARTICLE VI REPRESENTATIONS AND WARRANTIES 14
Section 6.01. Corporate Existence 14
Section 6.02. Corporate Power; Authorization; Enforceable Obligations 14
Section 6.03. No Legal Bar 14
Section 6.04. Litigation 14
Section 6.05. ERISA 15
Section 6.06. Subsidiary Guarantors 15
Section 6.07. Taxes 15
Section 6.08. Financial Statements 16
Section 6.09. Compliance with Laws 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
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Section 6.10. No Default 16
Section 6.11. Labor Controversies 16
Section 6.12. Ownership of Properties; Collateral 16
Section 6.13. Intellectual Property 17
Section 6.14. Accuracy of Information 17
Section 6.15. Insurance 17
Section 6.16. Condition of Property 17
Section 6.17. Trade Relations 17
Section 6.18. Indebtedness 18
Section 6.19. Consents 18
Section 6.20. No Burdensome Agreement 18
Section 6.21. Year 2000 Compliance 18
ARTICLE VII AFFIRMATIVE COVENANTS 18
Section 7.01. Compliance with Laws 18
Section 7.02. Payment of Taxes 18
Section 7.03. Maintenance of Insurance 18
Section 7.04. Preservation of Corporate Existence, Etc 19
Section 7.05. Delivery of Financial Statements, Compliance Certificate
and Reporting Requirements 19
Section 7.06. Keeping of Books and Records 21
Section 7.07. Visitation Rights 21
Section 7.08. Foreign Qualification 22
Section 7.09. Maintenance of Properties, Etc 22
Section 7.10. Maintenance of Licenses and Permits 22
Section 7.11. Real Estate 22
Section 7.12. Employee Plans 22
ARTICLE VIII NEGATIVE COVENANTS 23
Section 8.01. Business Activities 23
Section 8.02. Limitation on Indebtedness 23
Section 8.03. Liens, Etc 24
Section 8.04. Capital Expenditures 25
Section 8.05. Investments 25
Section 8.06. Restricted Payments 26
Section 8.07. Limitation on Restrictions on Subsidiary Dividends 26
Section 8.08. Take or Pay Contracts; Sale/Leasebacks 27
Section 8.09. Change of Control 27
Section 8.10. Mergers, Etc 27
Section 8.11. Compliance with ERISA 28
Section 8.12. Subsidiaries 29
Section 8.13. Asset Dispositions, etc. 29
Section 8.14. Modification of Organic Documents, etc. 29
Section 8.15. Transactions with Affiliates 29
Section 8.16. Inconsistent Agreements 30
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
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<S> <C> <C>
Section 8.17. Change in Accounting Method 30
Section 8.18. Change in Fiscal Year End 30
Section 8.19. Amendments to Certain Agreements 30
Section 8.20. Financial Condition 30
ARTICLE IX EVENTS OF DEFAULT 34
Section 9.01. Events of Default 34
Section 9.02. Default Remedies 36
Section 9.03. Set-off 36
Section 9.04. Funding Indemnities 37
Section 9.05. Default Interest 37
ARTICLE X THE AGENT 37
Section 10.01. Appointment and Authorization. 37
Section 10.02. Same Rights as a Revolving Credit Lender 37
Section 10.03. Actions by the Agent 37
Section 10.04. Consultation with Experts 38
Section 10.05. Liability 38
Section 10.06. Indemnification 38
Section 10.07. Credit Decision 39
Section 10.08. Successor Agents; Removal 39
Section 10.09. Sharing by Revolving Credit Lenders 39
ARTICLE XI GENERAL PROVISIONS 40
Section 11.01. Assignment 40
Section 11.02. Amendments and Waivers 42
Section 11.03. Notices 42
Section 11.04 Cumulative Rights; No Waiver 44
Section 11.05 Counterparts 44
Section 11.06 Severability 44
Section 11.07 Headings 44
Section 11.08. Termination by Borrower 44
Section 11.09. Several Obligations; Remedies Independent 44
Section 11.11. Tax Forms 46
</TABLE>
<PAGE> 5
<TABLE>
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Section Page
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<S> <C> <C>
EXHIBITS
A Form of Revolving Credit Note
B Form of Notice of Borrowing
C Form of Notice of Continuation/Conversion
D Form of Revolving Credit Lender Assignment
Schedule 6.05 - ERISA
Schedule 6.12 - Ownership of Properties; Collateral
Schedule 6.13 - Intellectual Property
Schedule 6.15 - Insurance
Schedule 6.18 - Indebtedness
Schedule 6.19 - Consents
Schedule 8.04 - Investments
</TABLE>
<PAGE> 6
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT, dated as of May 18, 1999, by and among MINIMED
INC., a Delaware corporation (the "Borrower"), the Revolving Credit Lenders now
or hereafter parties hereto (as more fully defined below, the "Revolving Credit
Lenders"), and ING (U.S.) CAPITAL LLC, as the agent for the Revolving Credit
Lenders (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Revolving Credit Lenders
establish a $15,000,000 revolving credit facility in favor of the Borrower; and
WHEREAS, the Revolving Credit Lenders are willing to establish the
requested revolving credit facility in favor of the Borrower on the terms and
subject to the conditions contained herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
Section 1.01. Definitions Incorporated by Reference. For purposes of this
Agreement (including, without limitation, the "WHEREAS" clauses set forth
above), capitalized terms used in this Agreement and not otherwise defined shall
have the meanings assigned to them in Appendix A to the Participation Agreement.
Unless otherwise indicated, references in this Agreement to articles, sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in this Agreement.
Section 1.02. Computations. In the computation of interest and fees payable
from a specified date to a later specified date, unless otherwise indicated, the
word "from" means "from and including" and the words "to" and "until" both mean
"to but not including".
Section 1.03. Interpretation. The rules of usage set forth in Appendix A to
the Participation Agreement shall apply to this Agreement.
Section 1.04. Use of Defined Terms. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevant
class.
<PAGE> 7
Section 1.05. Exhibits and Schedules. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference.
Section 1.06. Miscellaneous Terms. The term "or" is disjunctive; the term
"and" is conjunctive. The term "shall" is mandatory; the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply to
males. The term "including" is by way of example and not limitation.
ARTICLE II
REVOLVING CREDIT FACILITIES
Section 2.01. The Commitments. On the terms and subject to the conditions
of this Agreement, each Revolving Credit Lender, for itself alone and not
jointly with any other Revolving Credit Lender, shall make Revolving Credit
Advances from time to time, from and after the Effective Date until the Final
Date, in an aggregate principal amount not to exceed the amount of its
Commitment. The Borrower shall be entitled to repay and reborrow under the terms
of this Agreement without premium or penalty (other than those amounts set forth
in Section 2.07 below), provided that (i) the sum of the aggregate principal
amount of all Outstanding Revolving Credit Advances immediately after the making
of each Revolving Credit Advance and giving effect to the application of the
proceeds thereof will not exceed the then applicable Total Revolving Credit
Commitment and (ii) the Borrower may neither borrow nor reborrow should there
exist a Potential Default or an Event of Default.
Section 2.02. Types and Amount of Revolving Credit Advances. Each Borrowing
shall consist of the same type of Revolving Credit Advances which shall, at the
option of the Borrower, be made or continued as part of one or more Borrowings
that shall consist entirely of Base Rate Advances or LIBOR Advances, as
specified by the Borrower in the Notice of Borrowing requesting such Borrowing.
Each Borrowing shall be in the minimum amount of not less than (a) $500,000 for
a Borrowing comprised of LIBOR Advances, and (b) $250,000 for a Borrowing
comprised of Base Rate Advances.
Section 2.03. Manner of Borrowing.
(a) Notice. The Borrower shall give the Agent a duly completed Notice of
Borrowing (i) for each Borrowing consisting of Base Rate Advances, not later
than 4:00 P.M. (New York time) one Business Day before the date of such
Borrowing, and (ii) for each Borrowing consisting of LIBOR Advances, not later
than 11:00 A.M. (New York time) three Business Days before the date of such
Borrowing (each a "Date of Borrowing"). Each such Notice of Borrowing shall be
in the form of Exhibit B hereto and shall specify: (i) the type of such
Revolving Credit Advances comprising such Borrowing; (ii) the amount of such
Borrowing; and (iii) the date of such Borrowing, which shall be a
<PAGE> 8
Business Day prior to the Final Date. Each Borrowing shall be made ratably from
the Revolving Credit Lenders in proportion to each Revolving Credit Lender's
Commitment Percentage. Upon receipt by the Agent of a Notice of Borrowing as
aforesaid, the Agent shall promptly advise each Revolving Credit Lender thereof
by telephone, telex or telecopier (which notice, if by telephone, shall be
promptly confirmed in writing). Each Revolving Credit Lender shall make the
Revolving Credit Advance to be made by it hereunder by transferring the proceeds
thereof in Dollars to the Agent not later than 2:00 P.M. (New York time) on the
relevant Date of Borrowing; provided, however, that the failure of any Revolving
Credit Lender to make any Revolving Credit Advance to be made by it on the Date
of Borrowing shall not relieve any other Revolving Credit Lender of its
obligation to make its Revolving Credit Advance on such date, but no Revolving
Credit Lender shall be responsible for the failure of any other Revolving Credit
Lender to make an Revolving Credit Advance. Not later than 11:00 A.M. (New York
time) on the day which is three Business Days prior to the end of the LIBOR
Period on each Borrowing of LIBOR Advances, the Borrower shall give the Agent a
duly completed Notice of Continuation/Conversion in the form of Exhibit C hereto
to continue such Borrowing as a Borrowing of LIBOR Advances for an additional
LIBOR Period or to convert such Borrowing of LIBOR Advances into a Borrowing of
Base Rate Advances; provided, however, that if the Borrower fails to so notify
the Agent such Borrowing of Revolving Credit Advances shall on the last day of
such LIBOR Period be continued as a Borrowing of LIBOR Advances for an
additional LIBOR Period. Not later than 11:00 A.M. (New York City time) on the
day which is three Business Days prior thereto, the Borrower may give the Agent
a duly completed Notice of Continuation/Conversion in the form of Exhibit C
hereto to convert any Borrowing of Advances that are Base Rate Advances to a
Borrowing of LIBOR Advances, subject in each case to the provisions of Section
2.02. The Borrower shall not be permitted to select LIBOR Periods to be in
effect at any one time which have expiration dates occurring on more than three
(3) different dates.
(b) Disbursement of Revolving Credit Advances. Subject to the conditions of
this Agreement, the Agent shall make the amounts received from the Revolving
Credit Lenders pursuant to Section 2.03(a) hereof available to the Borrower by
transferring the amount thereof on the Date of Borrowing to MiniMed, Inc.,
General Account, City National Bank, 400 North Roxbury Drive, 3rd Floor, Beverly
Hills, California 90210, A/C #001-979388, ABA #122016066, or as otherwise
instructed by the Borrower.
Section 2.04. Repayment of Principal.
(a) Payment on Final Date. To the extent any Revolving Credit Advance has
not been fully repaid by prepayment before the Final Date, the Borrower shall
repay the principal amount of each Revolving Credit Advance on the Final Date.
(b) Mandatory Payment upon Change of Control. To the extent any Revolving
Credit Advance has not been fully repaid by prepayment prior thereto, the
Borrower shall
<PAGE> 9
repay the principal amount of each Revolving Credit Advance upon the occurrence
of a Change of Control.
Section 2.05. Payment of Interest. The Borrower shall pay interest on the
unpaid principal amount of each Revolving Credit Advance from the date of such
Revolving Credit Advance to the date on which such Revolving Credit Advance is
paid in full at the applicable rate provided in this Section 2.05. Accrued
interest on each Revolving Credit Advance shall be payable (i) in the case of a
LIBOR Advance, on the last day of the applicable LIBOR Period (and, if such
LIBOR Period is longer than three (3) months, also on the numerically
corresponding day of the third calendar month after the commencement of such
LIBOR Period), (ii) in the case of a Base Rate Advance, on the last Business Day
of each calendar quarter and on the Final Date, commencing with the last
Business Day of the calendar quarter in which the Effective Date shall occur,
and (iii) in the case of a LIBOR Advance or Base Rate Advance, on any day on
which such Advance is repaid or prepaid on the amount so repaid or prepaid.
(a) Base Rate Advances. Each Base Rate Advance shall bear interest at a
fluctuating rate equal to (i) the Base Rate in effect from time to time plus
(ii) the Applicable Margin in effect from time to time for Base Rate Advances.
(b) LIBOR Advances. Each LIBOR Advance shall bear interest at a rate equal
to the sum of (i) LIBOR for such Revolving Credit Advance plus (ii) the
Applicable Margin in effect from time to time for LIBOR Advances.
The Agent shall promptly notify the Borrower and the Revolving Credit Lenders of
its determination of the interest rate applicable to each LIBOR Advance, which
determination shall be conclusive, absent manifest error. Upon the request of
the Borrower, the Agent shall advise the Borrower of the Base Rate from time to
time in effect.
Section 2.06. Optional Prepayment. The Borrower may, upon not less than two
(2) days' irrevocable prior notice to the Agent, prepay any Revolving Credit
Advances in whole or in part at any time without premium or penalty (other than
the amounts payable under Section 2.07 below), provided that (a) any partial
prepayment must be in a minimum principal amount of $250,000 or any greater
amount which is an integral multiple of $50,000, (b) each prepayment must be
accompanied by the payment of accrued interest on the amount prepaid to the date
of prepayment, (c) each prepayment shall be made to Agent, who shall be
responsible for distributing all amounts received from Borrower to each
Revolving Credit Lender ratably in accordance with its Commitment Percentage
actually funded and (d) each prepayment of a Borrowing comprised of LIBOR
Advances must be accompanied by the payment of any additional amount owing under
Section 2.07 hereof. In addition, the Borrower shall have the obligation to
prepay LIBOR Advances as required by Section 3.02 hereof.
Section 2.07. Funding Indemnities. The Borrower will indemnify and hold
harmless each Revolving Credit Lender against, and on demand reimburse each
Revolving
<PAGE> 10
Credit Lender for, any loss, premium, penalty or expense which such Revolving
Credit Lender may pay or incur (including, without limitation, any loss or
expense incurred by reason of the, depositing or other employment of
funds acquired by such Revolving Credit Lender to fund a LIBOR Advance) as a
result of (i) any prepayment, repayment or conversion of a LIBOR Advance on a
date prior to the last day of the LIBOR Period applicable thereto, (ii) any
failure by the Borrower to borrow any Revolving Credit Advance on a date
specified therefor in a Notice of Borrowing pursuant to Section 2.03 hereof,
except to the extent such failure results from a default by such Revolving
Credit Lender in making the requisite funds available to the Borrower hereunder
or (iii) any failure by the Borrower to prepay any Revolving Credit Advance on
the date specified therefor in a notice of prepayment pursuant to Section 2.06
hereof. Each Revolving Credit Lender shall furnish the Borrower with a
certificate setting forth the basis for determining any additional amount to be
paid to it hereunder, and such certificate shall be conclusive, absent manifest
error, as to the contents thereof.
Section 2.08. Revolving Notes. The Revolving Credit Advances by each
Revolving Credit Lender shall be evidenced by a Revolving Credit Note payable to
the order of such Revolving Credit Lender. The amount and type of each Revolving
Credit Advance, the LIBOR Period applicable thereto and each repayment or
prepayment of principal shall be endorsed by each Revolving Credit Lender on the
schedule annexed to and constituting a part of such Revolving Credit Lender's
Revolving Credit Note, provided that the failure to make or any error in making
any such endorsement on such schedule shall not limit, extinguish or in any way
modify the obligation of the Borrower to repay such Revolving Credit Advance.
Such endorsements shall be prima facie evidence of the aggregate unpaid
principal amount of all Revolving Credit Advances made by each Revolving Credit
Lender. Upon any increase in the Commitment of any Revolving Credit Lender
pursuant to Section 4.05(b) hereof, the Borrower will immediately deliver to
such Revolving Credit Lender a new Revolving Credit Note, having a maximum
principal amount equal to the amount of the Commitment as so increased, in
exchange for its Revolving Credit Note outstanding prior to such increase.
ARTICLE III
CHANGE IN CIRCUMSTANCES
Section 3.01. Increased Costs.
(a) If, after the date of this Agreement, (i) the introduction of, or any
change in, any applicable law, rule or regulation or in the interpretation or
administration thereof by any governmental authority or (ii) compliance by any
Revolving Credit Lender with any request, guideline, policy or directive of any
governmental authority (whether or not having the force of law) shall:
<PAGE> 11
(A) subject any Revolving Credit Lender to any tax, duty or
other charge or shall change the basis of taxation of payments to
any Revolving Credit Lender of any amount due under this
Agreement or any Revolving Credit Note (except for changes in the
taxes on the overall net income of any Revolving Credit Lender,
including, without limitation, taxes based on capital gains and
minimum taxes);
(B) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets or liabilities of,
deposits with or for the account of, or commitments issued by,
any Revolving Credit Lender (including, without limitation, any
such requirement imposed by the Board of Governors of the Federal
Reserve System); or
(C) impose on any Revolving Credit Lender any other
condition affecting any Commitment, any Revolving Credit Advance
or any Revolving Credit Note;
and the result of any of the foregoing is to increase the cost to any Revolving
Credit Lender of making or maintaining its Commitment or any Revolving Credit
Advance, or to reduce the amount of any sum received or receivable by any
Revolving Credit Lender under this Agreement or under any Revolving Credit Note,
then the Borrower shall from time to time pay to any such Revolving Credit
Lender within five Business Days of its demand therefor such additional amount
or amounts as will compensate it for such increased cost or reduction.
(b) If any Revolving Credit Lender shall have determined in good faith that
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, or compliance by any
Revolving Credit Lender (or, without duplication, the bank holding company of
which such Revolving Credit Lender is a Subsidiary) with any request, guideline,
policy or directive regarding capital adequacy (whether or not having the force
of law) of any such governmental authority, has or would have the effect of
reducing the rate of return on such Revolving Credit Lender's or such bank
holding company's capital as a consequence of the Revolving Credit Advances or
its obligations hereunder to a level below that which such Revolving Credit
Lender or such bank holding company could have achieved but for such adoption,
change or compliance (taking into consideration such Revolving Credit Lender's
or such bank holding company's policies with respect to capital adequacy), then
the Borrower shall from time to time pay to such Revolving Credit Lender within
five Business Days of its demand therefor such additional amount or amounts as
will compensate such Revolving Credit Lender or such bank holding company for
such reduction.
<PAGE> 12
(c) Each Revolving Credit Lender will promptly give the Borrower notice (a
copy of which shall be sent to the Agent and the other Revolving Credit Lenders)
of the occurrence of any event of which the Revolving Credit Lender has
knowledge which will entitle it to compensation pursuant to this Section 3.01,
and will designate a different Lending Office if, in the sole and absolute
opinion of such Revolving Credit Lender, such designation will avoid the need
for, or reduce the amount of, such compensation and will not be otherwise
disadvantageous to it, provided that the failure of such Revolving Credit Lender
so to notify timely the Borrower will not discharge the Borrower of its
obligations under this Section 3.01. Each Revolving Credit Lender shall furnish
the Borrower with a certificate setting forth the basis for determining any
additional amount or amounts to be paid to it hereunder, and such certificate
shall be conclusive, absent manifest error, as to the contents thereof.
(d) Each Revolving Credit Lender shall use its reasonable efforts to reduce
or eliminate any claim for compensation pursuant to this Section 3.01,
including, without limitation, any change in the office of such Revolving Credit
Lender at which its obligations related to this Agreement are maintained if such
change will avoid the need for, or reduce the amount of such compensation and
will not, in the sole judgement of such Revolving Credit Lender, be otherwise
disadvantageous to it.
(e) The Agent shall, at the request of the Borrower, demand that any
Revolving Credit Lender which has sent a certificate to the Borrower claiming
compensation as described in (a) or (b) above assign in accordance with Section
11.01(a) hereof, to one or more assignees designated by the Borrower and
reasonably satisfactory to the Agent, all (but not less than all) of such
Revolving Credit Lender's Commitment, Revolving Credit Advances, participations
and other rights and obligations hereunder. If any such assignee so designated
shall fail to consummate such assignment within 45 days of the demand by the
Agent, the Borrower may, at its sole discretion and so long as no Event of
Default has occurred and is continuing, prepay to the Agent for the account of
the relevant Revolving Credit Lender within ten Business Days after the end of
the 45-day period, all of such Revolving Credit Lender's Revolving Credit
Advances and all interest accrued thereon together with all other amounts owing
to such Revolving Credit Lender under this Agreement and the Related Documents
(including, without limitation, under this Section 3.01), whereupon such
Revolving Credit Lender's Commitment shall terminate and be canceled and such
Revolving Credit Lender shall cease to be a party to this Agreement; provided,
however, that the Borrower may not so prepay the amounts owing to such Revolving
Credit Lender or terminate and cancel such Revolving Credit Lender's Commitment
if, after giving effect thereto, the aggregate principal amount of Outstanding
Revolving Credit Advances would exceed the Total Revolving Credit Commitment.
(f) Notwithstanding anything in this Agreement to the contrary, the provisions
of this Section 3.01 shall survive the termination of this Agreement and of any
Revolving Credit Lender's Commitment.
Section 3.02. Illegality.
<PAGE> 13
(a) If, after the date of this Agreement, the introduction of, or any
change in, any applicable law, rule or regulation or in the interpretation or
administration thereof by any governmental authority shall, in the good faith
opinion of counsel to any Revolving Credit Lender, make it unlawful for such
Revolving Credit Lender to make or maintain any LIBOR Advance, then such
Revolving Credit Lender may, by notice to the Borrower and the Agent, declare
that such LIBOR Advance shall be converted to a Base Rate Advance. Any LIBOR
Advance which is so declared by a Revolving Credit Lender to be converted to a
Base Rate Advance shall be automatically converted to a Base Rate Advance on the
last day of the LIBOR Period applicable thereto unless such Revolving Credit
Advance is required by law to be sooner converted, in which case such Revolving
Credit Advance shall be converted into a Base Rate Advance on the date required
by law. Any such conversion shall, in any case, be made together with accrued
and unpaid interest on the LIBOR Advance so converted. Each Revolving Credit
Lender will promptly notify the Borrower (a copy of which shall be sent to the
Agent and the other Revolving Credit Lenders) of any event of which such
Revolving Credit Lender has knowledge which will require a conversion of LIBOR
Advances to Base Rate Advances pursuant to this Section 3.02(a) and will
designate a different Lending Office if, in the sole and absolute opinion of
such Revolving Credit Lender, such designation will avoid the need for such
conversion and will not be otherwise disadvantageous to such Revolving Credit
Lender. In the event of any such illegality, no such Revolving Credit Lender
shall be under any obligation to make additional LIBOR Advances unless such
Revolving Credit Lender shall have notified the Borrower and the Agent that such
illegality no longer prevents such Revolving Credit Lender from making or
maintaining LIBOR Advances. If in the good faith opinion of counsel to any such
Revolving Credit Lender (which opinion shall be requested by such Revolving
Credit Lender at the expense of Borrower, following the reasonable request by
Borrower therefor), any such illegality shall no longer impede the making or
maintenance of LIBOR Advances by such Revolving Credit Lender, then provided no
Event of Default shall have occurred and be continuing, such Revolving Credit
Lender shall notify the Borrower and the Agent that LIBOR Advances are again
available from such Revolving Credit Lender.
(b) If the Borrower is required under Section 3.02(a) above to convert any
LIBOR Advance on the last day of the LIBOR Period applicable thereto or to
convert any LIBOR Advance prior to the last day of the LIBOR Period applicable
thereto, then such Base Rate Advance shall be considered to be part of the same
Borrowing as the LIBOR Advance that was so converted, and the Borrower shall
repay the principal of and interest on such Base Rate Advance at the same time
or times as required for the other LIBOR Advances comprising such Borrowing.
Section 3.03. Unavailability of LIBOR Advances. If, with respect to any
Borrowing consisting of LIBOR Advances requested by the Borrower, the Agent or
the Majority Revolving Credit Lenders shall have determined in good faith (which
determination shall, save for manifest error, be conclusive and binding upon the
Borrower) that (a) deposits of sufficient amount and maturity for funding such
Borrowing are not
<PAGE> 14
available to the Revolving Credit Lenders in the relevant market in the ordinary
course of business or (b) by reason of circumstances affecting the relevant
market, adequate and fair means do not exist for ascertaining the rate of
interest to be applicable to such Borrowing, then (i) the Agent or the Majority
Revolving Credit Lenders, as the case may be, shall promptly give notice thereof
to the Borrower, (ii) the notice requesting such Borrowing shall, unless the
Borrower otherwise notifies the Agent, automatically be amended to request Base
Rate Advances instead of LIBOR Advances, and (iii) no Revolving Credit Lender
shall be under any obligation to make additional LIBOR Advances to the Borrower,
unless and until the Agent shall have notified the Borrower that such LIBOR
Advances are again available hereunder.
Section 3.04. Replacement of Revolving Credit Lender. If (i) as a result of
the requirements of Section 3.01 hereof or Section 13.2 of the Participation
Agreement the Borrower shall be required to pay any Revolving Credit Lender any
additional costs or taxes referred to herein or therein, which costs or taxes
are not imposed by the other Revolving Credit Lenders, and the Borrower deems
such additional amounts to be material, or (ii) any Revolving Credit Lender
shall fail to make available to the Agent such Revolving Credit Lender's ratable
portion of any Borrowing, then, in each such case, the Borrower shall be
entitled to designate a replacement to such Revolving Credit Lender reasonably
acceptable to the Agent, and such Revolving Credit Lender shall execute and
deliver to such replacement Revolving Credit Lender an assignment agreement
between such Revolving Credit Lender and such replacement Revolving Credit
Lender substantially in the form of Exhibit D hereto with respect to such
Revolving Credit Lenders' entire interest under this Agreement and such
Revolving Credit Lender's Notes and the other Related Documents, and upon the
execution by such replacement Revolving Credit Lender of such assignment
agreement in compliance with the requirements of Section 11.01 hereof, such
replacement Revolving Credit Lender shall succeed to all of such Revolving
Credit Lender's rights and duties under this Agreement and the other Related
Documents. If the Borrower exercises its election under this Section 3.04 to
replace a Revolving Credit Lender, the Borrower shall pay the assignment fee
payable to the Agent under Section 11.01 hereof.
Section 3.05. Notice of Certain Obligations; Survival. Notwithstanding
anything in this Agreement to the contrary, to the extent that notice is given
by any Revolving Credit Lender to the Borrower of any obligation owing to such
Revolving Credit Lender under Section 3.01 hereof or Section 13.2 of the
Participation Agreement, more than one (1) year after the occurrence of the
event giving rise to such obligation, such Revolving Credit Lender shall not be
entitled to compensation under Section 3.01 hereof or Section 13.2 of the
Participation Agreement, as the case may be, for any such amounts incurred or
accruing prior to one (1) year prior to the giving of such notice to the
Borrower. Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Section 3.01 hereof and Section 13.2 of the Participation Agreement, subject to
the limitations set forth above in this Section 3.05, shall survive the payment
in full of principal, interest and other amounts
<PAGE> 15
payable hereunder and under the Revolving Credit Notes and the other Related
Documents.
ARTICLE IV
FEES; PAYMENTS; REDUCTION AND
INCREASE OF COMMITMENTS
Section 4.01. Fees.
(a) Agent's Fee. The Borrower shall pay to the Agent for its own account
the fees set forth in the letter agreement, dated the date hereof, between the
Borrower and the Agent (the "Revolving Credit Fee Agreement").
(b) Unused Fees. The Borrower agrees to pay to the Agent for the account of
each Revolving Credit Lender, a nonrefundable fee for the period from the
Effective Date to and including the Final Date, equal to such Revolving Credit
Lender's Commitment Percentage of 1/2 of 1% (0.50%) per annum on the difference
between (A) the aggregate amount of the Commitment of such Revolving Credit
Lender and (B) the average daily aggregate Outstanding Revolving Credit Advances
of such Revolving Credit Lender. The fee described in this Section 4.01(b) shall
be calculated on a daily basis and shall be payable by the Borrower in arrears
on the last Business Day of each calendar quarter and on the Final Date,
commencing with the last Business Day of the calendar quarter in which the
Effective Date shall occur.
Section 4.02. Manner of Payments. Each payment required to be made by the
Borrower under this Agreement or the Revolving Credit Fee Agreement shall be
made by transferring the amount thereof in Dollars to the Agent not later than
2:00 P.M. (New York time) on the date on which such payment shall become due.
Each such payment shall be made without set-off or counterclaim provided that no
payment by the Borrower to the Agent pursuant to this Section 4.02 shall be
deemed a waiver of any rights the Borrower may have against any Revolving Credit
Lender or the Agent. Subject to Section 11.11 hereof, each such payment shall
also be made free and clear of, and without deduction for, any Impositions
except as required by law and, in the event that any deduction for any taxes
(other than taxes on overall net income and franchise taxes), duties, levies,
imposts or other charges shall be so required, the Borrower shall pay such
additional amounts as may be necessary so that the net amount of the payment
hereunder, after reduction by the amount of such Impositions is equal to the
amount that the Borrower was obligated to pay absent the requirement to deduct
such Impositions. The Agent shall have the right to determine the order in which
amounts paid by the Borrower are applied to the amounts then due and payable
hereunder, regardless of any application designated by the Borrower. Any payment
received after 2:00 P.M. (New York time) on any Business Day shall be deemed to
have been received on the next following Business Day. Each payment received by
the Agent for the account of the Revolving Credit
<PAGE> 16
Lenders or any of them shall be promptly distributed by the Agent to the
Revolving Credit Lenders in accordance with their entitlements thereto.
Section 4.03. Extension of Payments. If any payment under this Agreement or
the Revolving Credit Fee Agreement shall become due on a day which is not a
Business Day, the due date thereof shall be extended to the next following day
which is a Business Day, and such extension shall be taken into account in
computing the amount of any interest or fees then due and payable hereunder.
Section 4.04. Computation of Interest and Fees. Interest on LIBOR Advances
and all fees payable under this Agreement and the Revolving Credit Fee Agreement
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed. Interest on Base Rate Advances shall be computed on the basis of a
year of 365 or 366 days, as applicable, and the actual number of days elapsed.
Section 4.05. Reduction, Increase and Termination of the Commitments.
(a) The Borrower may, upon not less than three Business Days' irrevocable
prior notice to the Agent, reduce all or any portion of the unused Commitments,
provided that (i) any partial reduction of the unused Commitments must be in an
amount of $100,000 or any greater amount which is an integral multiple thereof,
(ii) each such reduction of the Commitments shall be applied to the Commitments
of the Revolving Credit Lenders pro rata to the respective amounts thereof, and
(iii) no such reduction shall result in the Total Revolving Credit Commitment
being less than the aggregate principal amount of Outstanding Revolving Credit
Advances. The Agent shall give prompt notice of any such reduction to the
Revolving Credit Lenders.
(b) The Commitments may be increased from time to time to such amount and
upon such terms as the Borrower and all of the Revolving Credit Lenders may
agree. Such consent may be given or withheld in the sole and absolute discretion
of each such party. Nothing contained herein shall be deemed to obligate any
party to agree to any increase proposed by any other party. Upon any such
increase, the Borrower will deliver a new Revolving Credit Note to each
Revolving Credit Lender whose Commitment has increased in exchange for the
Revolving Credit Note of such Revolving Credit Lender outstanding prior to such
increase.
(c) The Commitments shall be terminated upon the earlier of (i) the
occurrence of a Change of Control, and (ii) the Final Date.
Section 4.06. Intentionally Omitted.
Section 4.07. Assumed Payments. Unless the Agent shall have been notified
by a Revolving Credit Lender or the Borrower prior to 10:00 A.M. (New York time)
on the date on which such Revolving Credit Lender or the Borrower is scheduled
to make payment to the Agent of (in the case of a Revolving Credit Lender) the
proceeds of an
<PAGE> 17
Revolving Credit Advance to be made by it hereunder or (in the case of the
Borrower) a payment to the Agent for the account of one or more of the Revolving
Credit Lenders hereunder (such payment being herein called the "Required
Payment") that it does not intend to make the Required Payment to the Agent, the
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 such Revolving
Credit Lender or the Borrower (as the case may be) has not in fact made the
Required Payment to the Agent, the recipient(s) of such payment shall, on
demand, repay to the Agent the amount so made available. In addition, the party
that failed to make the Required Payment shall, on demand, pay interest to the
Agent for its own account in respect of each day during the period commencing on
the date such amount was so made available by the Agent until the date the Agent
recovers such amount at the Base Rate (in the case of any Required Payment of a
Revolving Credit Lender) and the Base Rate plus the Applicable Margin in effect
from time to time for Base Rate Advances (in the case of a Required Payment of
the Borrower). The obligation to pay interest to the Agent as provided in the
immediately preceding sentence shall, in the case of the Borrower, be in
addition to any obligation to pay default interest in respect of the Required
Payment as provided in Section 9.05 hereof.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Initial Conditions. As a condition precedent to the
occurrence of the initial Credit Event hereunder, the Agent and each Revolving
Credit Lender shall have received the following items in form and substance
satisfactory to it:
(a) Related Documents. A counterpart of this Agreement and of each of the
Related Documents, each duly executed by the Borrower and each of the other
respective parties thereto (except that counterpart number 1 of the Master Lease
shall be delivered to the Collateral Agent and counterparts of the Revolving
Credit Fee Agreement shall be delivered only to the Agent);
(b) Borrower. (i) A certificate from the Secretary of State of Delaware
certifying that the Borrower is in good standing in such state and certificates
from the Secretary of State of California and the Secretary of State of Florida
certifying that the Borrower is authorized to do business in such states; (ii) a
certificate from the Secretary or an Assistant Secretary of the Borrower
certifying (A) as to the incumbency and signature of the officer of the Borrower
authorized to execute and deliver this Agreement and the Related Documents to
which the Borrower is a party and any certificate to be furnished pursuant
thereto, (B) that attached thereto are true and complete copies of the charter
and by-laws of the Borrower and (C) that attached thereto is a true and complete
copy of the resolutions of the Board of Directors of the Borrower authorizing
the execution, delivery and performance of this Agreement and the Related
Documents to which the Borrower is
<PAGE> 18
a party and the transactions contemplated thereby, together with a certification
by another officer of the Borrower as to the incumbency and signature of such
Secretary or Assistant Secretary, and (iii) a certificate from an appropriate
officer of the Borrower certifying that, to the best knowledge of such officer,
the representations and warranties contained herein are Accurate and Complete
and that the Borrower is in compliance with each of the covenants set forth in
Articles VII and VIII of this Agreement;
(c) Subsidiary Guarantors. (i) A certificate from the Secretary of State of
the state of incorporation of each of the Subsidiary Guarantors certifying that
such Subsidiary Guarantor is in good standing in such state and certificates
from the Secretary of State of each state in which a Subsidiary Guarantor is
required to be in good standing, certifying that such Subsidiary Guarantor is
authorized to do business in such state; and (ii) a certificate from the
Secretary or an Assistant Secretary of each Subsidiary Guarantor certifying (A)
as to the incumbency and signature of the officer of such Subsidiary Guarantor
authorized to execute and deliver the Related Documents to which such Subsidiary
Guarantor is a party and any certificate to be furnished thereto, (B) that
attached thereto are true and complete of the charter and by-laws of such
Subsidiary Guarantor and (C) that attached thereto is a true and complete copy
of the Resolutions of the Board of Directors of such Subsidiary Guarantor
authorizing the execution, delivery and performance of the Related Documents to
which such Subsidiary Guarantor is a party and the transactions contemplated
thereby, together with a certification by another officer of such Subsidiary
Guarantor as to the incumbency and signature of such Secretary or Assistant
Secretary;
(d) Legal Opinions. Legal opinions, in form and substance acceptable to the
Agent, addressed to the Collateral Agent, the Agent and the Revolving Credit
Lenders from (i) Brobeck Phleger & Harrison LLP, California and New York counsel
for the Borrower and each of the Subsidiary Guarantors (ii) Eric Kentor, Esq.,
General Counsel to the Borrower and its Subsidiaries, and (iii) special Florida
counsel to the Collateral Agent, the Agent and the Revolving Credit Lenders;
(e) Filings. Evidence that (i) all filings necessary to perfect the
Collateral Agent's security interest in the Collateral in existence on the date
hereof have been made and (ii) the Lien perfected by such filings has priority
over any other Liens except as otherwise permitted under Section 8.03 hereof;
(f) Conditions in Participation Agreement. The conditions set forth in
Section 5.3 of the Participation Agreement shall have been satisfied.
(g) Supporting Documents. Such other documents, certificates, information,
or opinions as the Agent or any Revolving Credit Lender may reasonably request.
<PAGE> 19
Section 5.02. Conditions to each Credit Event. As a condition precedent to
the occurrence of each Credit Event hereunder, including the initial Credit
Event, the following conditions shall be satisfied on the date of such Credit
Event:
(a) Representations of Borrower True. The representations and warranties
made by the Borrower under Article VI hereof and in any other Related Document
to which the Borrower is a party shall be Accurate and Complete with the same
force and effect as though made on and as of such date, except to the extent
that such representations and warranties expressly relate to an earlier date;
(b) Representations of Lessee True. The representations and warranties made
by the Lessee in the Master Lease and in any other Related Document to which the
Lessee is a party shall be Accurate and Complete with the same force and effect
as though made on and as of such date;
(c) No Event of Default. No Event of Default shall have occurred and be
continuing, or would result from the occurrence of such Credit Event; and
(d) No Potential Default. No Potential Default shall have occurred and be
continuing, or would result from the occurrence of such Credit Event.
On the date of each Credit Event, the Borrower shall be deemed to have
represented that all of the conditions to the occurrence of such Credit Event
have been satisfied.
<PAGE> 20
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and Revolving Credit
Lenders that:
Section 6.01. Corporate Existence. The Borrower (i) is duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(ii) has the corporate power, authority and legal right to own or operate its
properties or to lease the properties it operates and to conduct the business in
which it is currently engaged, and (iii) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification, except where such failure to qualify would not have
a Material Adverse Effect.
Section 6.02. Corporate Power; Authorization; Enforceable Obligations. The
Borrower has the corporate power, authority and legal right to make, deliver and
perform this Agreement and the Revolving Credit Notes, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and the Revolving Credit Notes. No consent of any other Person
(including, without limitation, stockholders and creditors of the Borrower), and
no authorization of, notice to, or other act by any governmental authority,
agency or instrumentality is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement and the
Revolving Credit Notes. This Agreement and the Revolving Credit Notes have been
duly executed and delivered on behalf of the Borrower, and this Agreement and
the Revolving Credit Notes constitute legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their terms,
except as such enforceability may be limited by bankruptcy and other similar
laws affecting the rights of creditors generally or by general principles of
equity.
Section 6.03. No Legal Bar. The execution, delivery and performance by the
Borrower of this Agreement and the Revolving Credit Notes will not violate any
provision of any existing Law or regulation applicable to the Borrower or of any
award, order or decree applicable to the Borrower of any court, arbitrator or
governmental authority, or of the Certificate of Incorporation or By-Laws of the
Borrower, or of any security issued by the Borrower or of any mortgage,
indenture, lease, contract or other agreement or undertaking to which the
Borrower is a party or by which the Borrower or any of its properties or assets
may be bound.
Section 6.04. Litigation. Except as disclosed in Schedule 6.04, there is no
action, suit, proceeding or investigation at law or in equity by or before any
court, governmental body, agency, commission or other tribunal now pending or,
to the best knowledge of the Borrower, threatened against or affecting the
Borrower or any property
<PAGE> 21
or rights of the Borrower which questions the enforceability of this Agreement
and the Revolving Credit Notes or which as of the date hereof could reasonably
be expected to exceed $1,000,000, or after the date hereof could reasonably be
expected to have a Material Adverse Effect.
Section 6.05. ERISA. Except as disclosed on Schedule 6.05:
(a) neither the Borrower, its Subsidiaries nor any ERISA Affiliate
maintains or contributes to, or has during the past two years maintained or
contributed to, any Plan that is subject to Title IV of ERISA;
(b) each Plan maintained by the Borrower or any of its Subsidiaries has at
all times been maintained, by its terms and in operation, in compliance with all
applicable laws, and neither the Borrower nor any of its Subsidiaries is subject
to any tax or penalty with respect to any Plan of the Borrower, any of its
Subsidiaries or any ERISA Affiliate, including, without limitation, any tax or
penalty under Title I or Title IV of ERISA or under Chapter 43 of the Internal
Revenue Code, or any tax or penalty arising from a loss of deduction under
Sections 162, 404 or 419 of the Internal Revenue Code;
(c) neither the Borrower nor any of its Subsidiaries is subject to any
liabilities (including withdrawal liabilities) with respect to any Plans of the
Borrower, any of its Subsidiaries or any ERISA Affiliate, including, without
limitation, any liabilities arising under Titles I or IV of ERISA, other than
obligations to fund benefits under an ongoing Plan and to pay current
contributions, expenses and premiums with respect to such Plans;
(d) the Borrower and its Subsidiaries and, with respect to any Plan which
is subject to Title IV of ERISA, each ERISA Affiliate have made full and timely
payment of all amounts (A) required to be contributed under the terms of each
Plan and applicable law, and (B) required to be paid as expenses (including PBGC
or other premiums) of each Plan, and no Plan subject to Title IV of ERISA has an
"amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of
ERISA), determined as if such Plan terminated on any date on which this
representation or warranty is made or deemed to be made; and
(e) the Borrower and its Subsidiaries are subject to no liabilities with
respect to post-retirement medical benefits.
Section 6.06. Subsidiary Guarantors. The Borrower owns and holds,
beneficially and of record all of the issued and outstanding shares of capital
stock of each of the Subsidiary Guarantors. All such shares have been validly
issued, are fully paid and non-assessable, and are free and clear of any liens
or encumbrances.
Section 6.07. Taxes. The Borrower and each of its Subsidiaries has filed
all federal and other income tax returns and reports required by law to have
been filed by it
<PAGE> 22
and has timely paid all taxes and governmental charges thereby shown to be
owing, except any such taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.
Section 6.08. Financial Statements. The Borrower has furnished to the Agent
copies of its Annual Report on Form 10-K for the year ended January 1, 1999 and
copies of its Quarterly Report on Form 10-Q for the quarters ended April 3,
1998, July 3, 1998 and October 2, 1998. The financial statements contained in
such documents fairly present the financial position, results of operations and
consolidated statements of cash flows of the Borrower and its Subsidiaries as of
the dates and for the periods indicated therein and have been prepared in
accordance with GAAP applied on a consistent basis. Since the date of such
financial statements, there has been no material adverse change in the financial
condition or business of the Borrower and its Subsidiaries which could, when
taken as a whole, have a Material Adverse Effect.
Section 6.09. Compliance with Laws. The Borrower and each of its
Subsidiaries is in compliance with all applicable Laws (including, without
limitation, all Environmental Requirements and all applicable laws, rules,
regulations and orders relating to building and land use), except those the
non-compliance with which could not, either singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 6.10. No Default. No Event of Default has occurred and no condition
exists which, after notice and expiration of any cure period, would constitute,
an Event of Default under this Agreement.
Section 6.11. Labor Controversies. There are no organized labor
controversies pending or, to the best knowledge of the Borrower, threatened,
relating to the Borrower or any of its Subsidiaries. There is (i) no unfair
labor practice complaint pending against the Borrower or any of its Subsidiaries
or, to the best knowledge of the Borrower, threatened against any of them,
before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower, threatened against any of them, (ii) no strike, labor
dispute, slowdown or stoppage is pending against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries, and (iii) no union representation question
existing with respect to the employees of the Borrower or any of its
Subsidiaries. The Borrower and each of its Subsidiaries is in compliance in all
material respects with all collective bargaining agreements to which it is
subject.
Section 6.12. Ownership of Properties; Collateral.
(a) Each of the Borrower and its Subsidiaries has good title to all of its
material properties and assets of any nature whatsoever, free and clear of all
Liens except as
<PAGE> 23
permitted pursuant to Section 8.03. All Liens attaching to property or assets of
the Borrower or any of its Subsidiaries as of the date hereof are identified in
Schedule 6.12.
(b) The provisions of the Security Agreement are effective to create in
favor of the Collateral Agent for the benefit of the Collateral Agent and the
Secured Parties (as such term is defined therein), a legal, valid and
enforceable security interest in all right, title and interest of the Borrower
and each of its Subsidiaries party thereto in the Collateral described therein,
and, upon the filing of the Financing Statements, the Security Agreement will
create a fully perfected first priority security interest in all right, title
and interest of the Borrower and each of its Subsidiaries party thereto in all
of the Collateral, subject to no other Liens other than Liens permitted by
Section 8.03.
Section 6.13. Intellectual Property. Except as disclosed on Schedule 6.13,
the Borrower owns, beneficially and of record, or licenses pursuant to valid and
binding licenses, all such Intellectual Property, and has obtained assignments
of all licenses and other rights, as the Borrower considers necessary for or as
are otherwise material to the conduct of the business of the Borrower as now
conducted without any infringement upon rights of other Persons.
Section 6.14. Accuracy of Information. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Agent and the Revolving Credit Lenders for
purposes of or in connection with this Agreement or any transaction contemplated
hereby is true and accurate in every material respect on the date as of which
such information is dated or certified and as of the date of execution and
delivery of this Agreement, and such information is not incomplete by omitting
to state any material fact necessary to make such information not misleading.
Neither this Agreement nor any document or statement furnished to the Agent and
the Revolving Credit Lenders by or on behalf of the Borrower or any of its
Subsidiaries contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein or
therein not materially misleading.
Section 6.15. Insurance. All policies of insurance in effect of any kind or
nature owned by or issued to the Borrower or any of its Subsidiaries, including
policies of life, fire, theft, product liability, public liability, property
damage, other casualty, employee fidelity, workers' compensation, property and
liability insurance, (a) as of the Effective Date are listed in Schedule 6.15,
(b) are, together with all policies of employee health and welfare and title
insurance, in full force and effect, (c) comply in all respects with the
applicable requirements set forth herein and in the Related Documents, and (d)
are of a nature and provide such coverage as is customarily carried by companies
engaged in similar businesses and owning similar properties in the same general
areas in which the Borrower and its Subsidiaries operate their respective
businesses.
Section 6.16. Condition of Property. All of the assets and properties owned
by, leased to or used by the Borrower or any of its Subsidiaries and material to
the
<PAGE> 24
conduct of the business of the Borrower and its Subsidiaries, taken as a whole,
are in good operating condition and repair, ordinary wear and tear excepted, and
are free and clear of known defects except for defects which do not
substantially interfere with the use thereof in the conduct of normal
operations.
Section 6.17. Trade Relations. As of the Effective Date, there exists no
actual or, to the best of Borrower's knowledge, threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship of the Borrower or any of its Subsidiaries with any material
customer or group of customers of the Borrower or any of its Subsidiaries or any
material supplier of goods or services to the Borrower which could reasonably be
expected to have a Material Adverse Effect.
Section 6.18. Indebtedness. Schedule 6.18 specifies all Indebtedness of the
Borrower and its Subsidiaries as of the Effective Date.
Section 6.19. Consents. Except as disclosed in Schedule 6.19, each of the
Borrower and its Subsidiaries has all material permits and governmental consents
and approvals necessary under all applicable Laws or, in the reasonable business
judgment of the Borrower, deemed advisable under all applicable Laws, in
connection with the transactions contemplated hereby and the ongoing business
and operations of the Borrower and its Subsidiaries.
Section 6.20. No Burdensome Agreement. Neither the Borrower nor any of its
Subsidiaries is a party to or has assumed any indenture, loan or credit
agreement or any lease or other agreement or instrument or is subject to any
charter or other corporate restriction that could reasonably be expected to have
a Material Adverse Effect.
Section 6.21. Year 2000 Compliance. The software and the hardware operated
by the Borrower and the Subsidiaries are capable of providing or being adapted
to provide the ability to process dates or store data within the twenty-first
century or between the twentieth and twenty-first century, or otherwise operate
without error with respect to twenty-first century dates in substantially the
same manner and with the same functionality as such software records, stores
processes and presents such data as of the date hereof ("Y2K Compliance"). All
adaptations and replacements of software and hardware required to achieve full
Y2K Compliance will be completed on or before September 30, 1999, except where a
failure to achieve full Y2K Compliance will not have a Materially Adverse
Effect.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that until the Obligations and all
obligations of the Borrower under this Agreement have been paid or discharged in
full:
<PAGE> 25
Section 7.01. Compliance with Laws. The Borrower shall comply, and shall
cause each of its Subsidiaries to comply, in all material respects with all
applicable Laws (including Environmental Requirements).
Section 7.02. Payment of Taxes. The Borrower shall, and shall cause each
Subsidiary to pay and discharge, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its property, and (ii) all lawful claims which, if unpaid, might become a
Lien upon its property; provided, however, that neither the Borrower nor any
Subsidiary shall be required to pay or discharge any such tax, assessment,
charge or claim which is being diligently contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained,
including, without limitation, a Permitted Contest.
Section 7.03. Maintenance of Insurance. The Borrower shall (i) maintain or
cause to be maintained, with financially sound and reputable independent
insurers, insurance with respect to its or any of its Subsidiaries' business or
material properties, as the case may be, against loss or damage of the kinds
customarily insured against by entities engaged in the same or similarly
situated business, and of such types and amounts (subject to customary
deductibles and retentions) as are customarily carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which the Borrower and its Subsidiaries operate their respective businesses,
including, without limitation, such insurance as is required under Section 10 of
the Master Lease and such insurances as is described on Schedule 6.15, and (ii)
furnish to the Agent following written request therefor, a certificate of an
authorized officer setting forth the nature and extent of all insurance
maintained by the Borrower and its Subsidiaries in accordance with this section.
Each such policy shall be issued by an insurance company with a Best's rating of
"A" or better and a financial size category of not less than VII in the case of
Medmarc or a financial size category of not less than VIII in the case of all
other such insurance companies, shall be in effect on the Effective Date and the
premiums for each such policy shall be paid as such premiums shall come due. All
policies of casualty insurance shall contain an endorsement, in the form
submitted to the Borrower by the Collateral Agent, showing loss payable to the
Collateral Agent. All policies of liability insurance, including, without
limitation, all primary and umbrella liability policies, shall name the
Collateral Agent, as additional insured. The Borrower shall retain all the
incidents of ownership of the insurance maintained pursuant to this Section
7.13, but shall not borrow upon or otherwise impair its right to receive the
proceeds of such insurance.
Section 7.04. Preservation of Corporate Existence, Etc. The Borrower shall
preserve and maintain, and shall cause each Subsidiary to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises, except
as permitted under Section 8.10 below.
<PAGE> 26
Section 7.05. Delivery of Financial Statements, Compliance Certificate and
Reporting Requirements. The Borrower shall furnish to the Agent on behalf of the
Revolving Credit Lenders, each of following:
(a) as soon as available, but in any event within 90 days after the end of
each Fiscal Year of the Borrower, a copy of the audited consolidated balance
sheet of the Borrower as at the end of such Fiscal Year and the related audited
consolidated statements of income, stockholders' investment and cash flows for
such year, in each case which shall be (A) in reasonable detail and set forth in
comparative form the figures as of the end of and for the previous year, (B)
certified without qualification by a firm of independent accountants of
nationally recognized standing, and (C) complete and correct in all material
respects and prepared in accordance with GAAP; (b) as soon as available, but in
any event not later than 45 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Borrower, a copy of the unaudited
consolidated balance sheet of the Borrower as at the end of each such Fiscal
Quarter and the related unaudited consolidated statements of income,
stockholders' investment and cash flows of the Borrower for such quarter and the
portion of the fiscal year through such date, in each case which shall be (A) in
reasonable detail and set forth in comparative form the figures as of the end of
and for the corresponding period of the previous Fiscal Year, (B) certified as
to fairness of presentation by the Chief Financial Officer, the Vice President
of Finance or the Controller of the Borrower, and (C) complete and correct in
all material respects (subject to normal year-end audit adjustments) and
prepared in accordance with GAAP (except that such financial statements need not
contain footnotes and shall be prepared substantially in accordance with GAAP);
(c) concurrently with the delivery of the financial statements referred to
in clauses (i) and (ii) above, a certificate signed by the Chief Financial
Officer, the Vice President of Finance or the Controller of the Borrower setting
forth computations in reasonable detail demonstrating compliance with the
financial covenants set forth in Section 8.20 hereof, together with a statement
that, to the best of such officer's knowledge, the Borrower during the relevant
period has observed and performed all of its covenants and other agreements
hereunder, and satisfied every condition contained herein to be observed,
performed or satisfied by it, and that such officer has obtained no knowledge of
any Potential Default or Event of Default hereunder except as described in such
certificate (any such description to be in reasonable detail and to include a
description of any action to be taken with respect to such default);
(d) as soon as possible and in any event within five days after the
occurrence of each Potential Default and each Event of Default continuing on the
date of such statement, a statement of the Chief Financial Officer, the Vice
President of Finance, the Controller or other responsible officer of the
Borrower setting forth details of such Potential Default and Event of Default
and the action which the Borrower has taken and proposes to take with respect
thereto;
<PAGE> 27
(e) promptly and in any event within 30 days after the filing thereof with
the Internal Revenue Service, copies of each Schedule B (Actuarial Information)
to the annual report (Form 5500 Series) with respect to each Plan;
(f) promptly and in any event within 10 days after the Borrower or any
ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a
statement of the Chief Financial Officer, the Vice President of Finance, the
Controller or other responsible officer of the Borrower describing such ERISA
Event and the action, if any, which the Borrower or such ERISA Affiliate
proposes to take with respect thereto;
(g) promptly and in any event within two Business Days after receipt
thereof by the Borrower or any ERISA Affiliate, copies of each notice from the
PBGC stating its intention to terminate any Plan or to have a trustee appointed
to administer any Plan;
(h) promptly and in any event within five Business Days after receipt
thereof by the Borrower or any ERISA Affiliate from the sponsor of a
Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA
Affiliate concerning (A) the imposition of Withdrawal Liability by a
Multiemployer Plan, (B) the reorganization or termination, within the meaning of
Title IV of ERISA, of any Multiemployer Plan, or (C) the amount of liability
incurred, or which may be incurred, by the Borrower or any ERISA Affiliate in
connection with any event described in clause (A) or (B) above;
(i) promptly after the commencement thereof, notice of all actions, suits
and proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Borrower
or any Subsidiary which could reasonably be expected to have a Material Adverse
Effect;
(j) within ninety (90) days after the end of each Fiscal Year of the
Borrower, a business plan of the Borrower and its Subsidiaries, in form, scope
and detail reasonably satisfactory to the Agent and the Revolving Credit Lenders
for the twelve (12) months following the end of such Fiscal Year, including
consolidated and consolidating operating budgets prepared on a quarterly basis
for such Fiscal Year, which budgets shall include estimated Consolidated Capital
Expenditures and Research and Development Expenses and other costs to be
incurred by the Borrower and its Subsidiaries, on a consolidated and
consolidating basis, during such Fiscal Year, in each case, with accompanying
detail, together with a report containing management's discussion and analysis
of the projected financial condition and results of operations of the Borrower
and its Subsidiaries;
(k) within ninety (90) days after the end of each Fiscal Year of the
Borrower, projected balance sheets, statements of operations and changes in cash
flows of the Borrower and its Subsidiaries for such Fiscal Year and each of the
Fiscal Years of the Borrower hereafter commencing prior to May 18, 2004 prepared
on a quarterly basis for
<PAGE> 28
the upcoming Fiscal Year and on an annual basis for all Fiscal Years thereafter,
together with supporting details and a statement of underlying assumptions;
(l) promptly after approval by the Borrower's Board of Directors, any
updates or revisions to any business plan described in the preceding clause (x)
of this Section 7.05;
(m) promptly upon the sending or filing thereof, copies of all reports that
the Borrower or any of its Subsidiaries sends to its security holders generally,
and copies of all reports and registration statements that the Borrower or any
of its Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange;
(n) the condemnation or threat of condemnation with respect to any property
used or necessary in the conduct of the business of the Borrower or any of its
Subsidiaries (including, without limitation, the Property) which condemnation
could reasonably have a Material Adverse Effect; and
(o) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as the Agent
or any Revolving Credit Lender may from time to time reasonably request.
Section 7.06. Keeping of Books and Records. The Borrower shall keep, and
shall cause each Subsidiary that is not an Inactive Subsidiary to keep, proper
books of record and accounts, in which full, true and correct entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary in accordance with GAAP consistently applied.
Section 7.07. Visitation Rights. The Borrower shall and shall cause each
Domestic Subsidiary, upon at least two (2) Business Days' notice, to permit the
Agent, on behalf of the Revolving Credit Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Borrower and
any Subsidiary, and to discuss the affairs, finances and accounts of the
Borrower and any Subsidiary with any of their officers or directors and with
their independent certified public accountants. The Borrower will pay all
reasonable costs and expenses incurred by the Agent or any Revolving Credit
Lender or their respective agents or representatives in connection with the
exercise of rights under this Section 7.07 during the existence of an Event of
Default.
Section 7.08. Foreign Qualification. The Borrower will, and will cause each
Subsidiary to, cause to be done at all times all things necessary to be duly
qualified to do business and be in good standing as a foreign corporation in
each jurisdiction where the failure to so qualify could have a Material Adverse
Effect.
Section 7.09. Maintenance of Properties, Etc. The Borrower will maintain
and preserve, and cause each of its Subsidiaries to maintain and preserve, all
of its
<PAGE> 29
properties (real and personal and including all intangible assets), except
obsolete properties which are not used or necessary in the conduct of its
business, in good working order and condition, ordinary wear and tear excepted.
Section 7.10. Maintenance of Licenses and Permits. The Borrower will
maintain and preserve, and will cause each of its Subsidiaries to maintain and
preserve, all material Intellectual Property, rights, permits, licenses,
approvals and privileges issued under or arising under any applicable Law.
Section 7.11. Real Estate. If the Borrower or any of its Domestic
Subsidiaries shall acquire a fee or leasehold interest in real estate which the
Agent determines to be material to the Borrower or such Subsidiary, then the
Borrower or such Subsidiary, as the case may be, will execute a first priority
mortgage in favor of the Collateral Agent, in form and substance reasonably
satisfactory to the Collateral Agent, and shall deliver to the Collateral Agent
such title insurance policies, surveys and landlords' estoppel agreements with
respect thereto as the Collateral Agent shall reasonably request; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be required
to execute any such mortgage or deliver any other items required under this
Section 7.11 (i) in respect of any such real estate purchased with the proceeds
of purchase money Indebtedness permitted to be incurred under Section 8.02
hereof or (ii) in respect of real estate purchased or leased by the Borrower or
any of its Subsidiaries (other than real estate described in clause (i)) if the
aggregate consideration paid or payable by the Borrower or such Subsidiary,
together with the aggregate consideration paid or payable by the Borrower and
its Subsidiaries in respect of all other real estate that is not subject to a
first-priority mortgage in favor of the Collateral Agent (other than real estate
described in clause (i)), does not exceed $5,000,000.
Section 7.12. Employee Plans. The Borrower will, and will cause each
Subsidiary to, comply in all material respects with the provisions of ERISA and
the Code which are applicable to any Plan.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that until the Obligations and all
obligations of the Borrower under this Agreement have been paid or discharged in
full:
Section 8.01. Business Activities. The Borrower will not, and will not
permit any Subsidiary to, engage in any business activity, except those in which
the Borrower is engaged on the Effective Date, such activities as may be
incidental or related thereto and any line of business that is similar or
complimentary to the business of the Borrower and its Subsidiaries as of the
Effective Date.
<PAGE> 30
Section 8.02. Limitation on Indebtedness. The Borrower shall not create,
assume, incur, suffer to exist or otherwise become or remain liable in respect
of, or permit any of its Subsidiaries to create, assume, incur, suffer to exist
or otherwise become or remain liable in respect of, any Indebtedness except (i)
Indebtedness arising under the Related Documents, (ii) Indebtedness existing on
the date hereof and reflected in the financial statements delivered pursuant to
Section 7.05 hereof, and any extension, renewal or replacement of such
Indebtedness provided, that the principal amount thereof upon any such
extension, renewal or replacement shall not exceed the principal amount of
Indebtedness at the time of such extension, renewal or replacement or the terms
thereof, (iii) Indebtedness of a Person existing at the time such Person becomes
a Subsidiary of the Borrower and not incurred in connection with or in
contemplation of such Person becoming a Subsidiary of the Borrower, provided
that all such Indebtedness permitted under this clause (iii) does not exceed
$3,000,000 at any one time outstanding, and any extension, renewal or
replacement of such Indebtedness provided, that the principal amount thereof
upon any such extension, renewal or replacement shall not exceed the principal
amount of Indebtedness at the time of such extension, renewal or replacement,
(iv) Indebtedness of the Borrower or any of its Subsidiaries secured by a Lien
permitted under Section 8.03(d) or Capitalized Lease Obligations, provided that
the principal amount thereof (and the amount of such Capitalized Lease
Obligations attributable to principal) does not exceed in the aggregate
$3,000,000 at any one time outstanding, (iv) Indebtedness which, together with
all other Indebtedness permitted under clauses (ii), (iii) and (iv) of this
Section 8.02, does not exceed $5,000,000 at any one time outstanding, and (v)
Indebtedness that is subordinated to the obligations of the Credit Parties under
the Related Documents on terms and conditions satisfactory to the Majority
Secured Parties in their commercially reasonable discretion provided that no
Potential Default or Event of Default shall have occurred and be continuing or
would result therefrom and after giving pro forma effect to the incurrence of
such Indebtedness the Borrower shall be in compliance with and shall be
projected to be in compliance with each of the financial covenants set forth in
Section 8.20.
Section 8.03. Liens, Etc. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its
property, revenues or assets, whether now owned or hereafter acquired, except:
(a) Liens in favor of the Collateral Agent;
(b) Liens for taxes or assessments or other governmental charges or levies
not yet due or payable;
(c) Liens created by or resulting from obligations of the Borrower or any
Subsidiary as lessee under operating leases;
(d) (1) Liens on any property, acquired, constructed or improved by the
Borrower or its Subsidiaries after the date of this Agreement which are created
or assumed contemporaneously with, or within 120 days after, such acquisition or
<PAGE> 31
completion of such construction or improvement, or within six months thereafter
pursuant to a firm commitment for financing arranged with a lender or investor
within such 120-day period, to secure or provide for the payment of all or any
part of the purchase price of such property or the cost of such construction or
improvement incurred after the date of this Agreement; (2) Liens on any property
of a corporation securing Indebtedness of such corporation which is merged into
the Borrower or a Subsidiary; or (3) Liens on property securing indebtedness of
a corporation existing at the time such corporation becomes a Subsidiary of the
Borrower; provided, that such Liens referred to in (1) shall not extend to any
property theretofore owned by the Borrower or any such Subsidiary other than, in
the case of any such construction or improvement, any theretofore unimproved
real property on which the property is so constructed or the improvement is
located and; provided, further, that the fair market value of the property or
assets subject to any of the Liens referred to in (1), (2) or (3) above is not
less than the related Indebtedness secured by any such Lien and such
Indebtedness is permitted under clause (iv) of Section 8.02 hereof.
(e) Liens incidental to and made in the ordinary course of business of the
Borrower or any Subsidiary (other than to secure Indebtedness) which consists of
(1) Liens of carriers, warehousemen, mechanics and materialmen incurred in the
ordinary course of business for sums not overdue or being diligently contested
in good faith by appropriate proceedings, (2) Liens (other than Liens arising
under ERISA or under Section 412(n) of the Internal Revenue Code in respect of
deposits made in connection with workmen's compensation, unemployment insurance
or other forms of governmental insurance or benefits, or to secured performance
of tenders, statutory obligations, leases and contracts or to secure obligations
on surety or appeal bonds, (3) Liens which arise by operation of law under
Article 2 of the Uniform Commercial Code in favor of unpaid sellers of goods, or
Liens in items or accompanying documents or proceeds of either arising by
operation of law under Article 4 of the Uniform Commercial Code in favor of a
collecting bank, (4) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other restrictions, charges or
encumbrances (whether or not recorded) effecting the use of property, which do
not materially detract from the value of such property or impair the use
thereof, (5) Liens in the nature of leases and subleases granted to others which
do not interfere in any material respect with the business, and do not detract
in any material respect from the value of any property of the Borrower or any of
its Subsidiaries, and (6) Liens which constitute rights of set-off of a
customary nature or bankers' liens with respect to amounts on deposit, whether
arising by operation of law or by contract, in connection with deposit accounts
established at banks, in each case which do not materially and adversely affect
the financial condition, results of operations, operations, business, properties
or prospects of the Borrower and its Subsidiaries, taken as a whole and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books;
(f) Liens created by or resulting from any litigation or legal proceedings
(including without limitation any taxes or assessments), which are at such time
being diligently contested in good faith by the Borrower or any Subsidiary by
appropriate
<PAGE> 32
proceedings, which proceedings in the reasonable judgment of Agent and any
assignee, (1) shall not involve any material danger that any Property or any
portion thereof would be subject to sale, forfeiture or loss, as a result of
failure to comply therewith, (2) shall not affect the payment of any sums due
and payable hereunder or result in any such sums being payable to any Person
other than the Agent or Revolving Credit Lenders or any assignee thereof, (3)
will not place Agent or any Revolving Credit Lender or any assignee thereof in
any danger of civil liability for which it is not adequately indemnified for or
to any criminal liability, (4) if involving taxes, shall suspend the collection
of the taxes and (E) do not result in an Event of Default;
(g) Liens existing on the date of this Agreement as set forth on Schedule
6.12 hereto; and
(h) Liens for the sole purposes of securing Indebtedness permitted by
clause (iii) of Section 8.02 hereof.
Section 8.04. Capital Expenditures. The Borrower will not, and will not
permit any of its Subsidiaries to, make or commit to make any Consolidated
Capital Expenditures, except the Borrower and its Subsidiaries may make
Consolidated Capital Expenditures during any Fiscal Year provided (x) no
Potential Default or Event of Default has occurred and is continuing, and (y)
the aggregate amount of Consolidated Capital Expenditures made during such
Fiscal Year does not exceed the greater of (i) $20,000,000 or (ii) twenty
percent (20%) of EBITDA for the immediately preceding Fiscal Year.
Section 8.05. Investments. The Borrower will not, and will not permit any
of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in
any other Person except:
(a) Permitted Investments;
(b) deposits for utilities, security deposits under leases and similar
prepaid expenses;
(c) accounts receivable arising in the ordinary course of business;
(d) Investments existing on the Effective Date and disclosed on Schedule
8.05 hereto;
(e) Investments by the Borrower and its Subsidiaries in Domestic
Subsidiaries that are not Inactive Subsidiaries;
(f) Investments by the Borrower and its Subsidiaries in Foreign
Subsidiaries, provided that the aggregate consideration paid for such
Investments during the term of this Agreement shall not exceed an amount equal
to five percent (5%) of the Tangible Net Worth of the Borrower;
<PAGE> 33
(g) Investments by the Borrower and its Subsidiaries in Inactive
Subsidiaries provided that the aggregate amount of such Investments during the
term of this Agreement shall not exceed $1,000,000;
(h) Investments by the Borrower and its Subsidiaries consisting of minority
investments in and joint ventures with Persons that are engaged in business
activities and lines of businesses that are incidental or related to, or similar
or complimentary with, the business of the Borrower and its Subsidiaries as of
the Effective Date, provided that the aggregate monetary consideration paid by
Borrower and its Subsidiaries for such Investments during the term of this
Agreement shall not exceed an amount equal to five percent (5%) of the Tangible
Net Worth of the Borrower;
(i) Investments arising under any interest rate swap, cap, collar or other
hedging arrangement provided that the net obligations of the Borrower and its
Subsidiaries thereunder constitute Indebtedness permitted under Section 8.02
hereof; and
(j) Investments consisting of deposit accounts of the Borrower and its
Subsidiaries maintained with banks in the ordinary course of business.
Section 8.06. Restricted Payments. The Borrower will not declare, pay or
make any dividend or distribution (in cash, property or obligations) on any
shares of any class of Capital Stock (now or hereafter outstanding) of the
Borrower or on any warrants, options or other rights in respect of any class of
Capital Stock (now or hereafter outstanding) of the Borrower or apply, or permit
any Subsidiary to apply, any of its funds, property or assets to the purchase,
redemption, sinking fund or other retirement of any shares of any class of
Capital Stock (now or hereafter outstanding) of the Borrower or any rights,
options or warrants to subscribe for or purchase any shares of any class of
Capital Stock of the Borrower, or make any deposit for any of the foregoing.
Section 8.07. Limitation on Restrictions on Subsidiary Dividends. Except as
otherwise provided in this Agreement or any other Related Document, the Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make other distributions on its Capital Stock or other interests or
participations in profits owned by the Borrower or any Subsidiary of the
Borrower or pay any Indebtedness owed to the Borrower or any Subsidiary of the
Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the
Borrower or (c) transfer any of its property or assets to the Borrower or any
Subsidiary of the Borrower, except for such encumbrances and restrictions
existing under or by reason of this Agreement and the other Related Documents.
Section 8.08. Take or Pay Contracts; Sale/Leasebacks.
<PAGE> 34
(a) The Borrower will not, and will not permit any of its Subsidiaries to,
enter into or be a party to any arrangement for the purchase of materials,
supplies, other property or services if such arrangement by its express terms
requires that payment be made by the Borrower or such Subsidiary regardless of
whether or not such materials, supplies, other properties or services are
delivered or furnished to it; and
(b) The Borrower will not, and will not permit any Subsidiary to, enter
into any arrangement with any Person providing for the leasing by the Borrower
or any of its Subsidiaries of any property or assets, which property or assets
has been or is to be sold or transferred by the Borrower or such Subsidiary to
such Person.
Section 8.09. Change of Control. The Borrower shall not permit a Change of
Control to occur.
Section 8.10. Mergers, Etc. The Borrower shall not merge into or
consolidate with, or convey, transfer, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, or purchase or
otherwise acquire all or substantially all of the assets of any Person (or of
any division or business unit thereof), or permit any of its Subsidiaries to do
any of the foregoing, except that:
(a) any Subsidiary of the Borrower (other than the Guaranteed Subsidiary),
may merge into or consolidate with or transfer all or substantially all of its
assets to any wholly-owned Domestic Subsidiary of the Borrower that is not an
Inactive Subsidiary (so long as such wholly-owned Domestic Subsidiary is the
surviving corporation);
(b) any Subsidiary of the Borrower (other than the Guaranteed Subsidiary)
may merge into or consolidate with or transfer all or substantially all of its
assets to the Borrower (so long as the Borrower is the surviving corporation);
(c) the Borrower or any of its Subsidiaries may purchase or otherwise
acquire all or substantially all of the assets of any Person (or of any division
or business unit thereof) provided that (1) such Person or division or business
unit is in the same or similar or complementary lines of businesses as the
business of the Borrower and its Subsidiaries, (2) if the aggregate
consideration to be paid by the Borrower or any of its Subsidiaries in
connection with such purchase or other acquisition (including the fair market
value of any consideration payable other than in cash) is greater than
$5,000,000, the Borrower shall have given the Agent not less than 10 days prior
written notice thereof, (3) if the aggregate consideration payable by the
Borrower and its Subsidiaries in connection with any such purchase or
acquisition (including the fair market value of all consideration payable other
than in cash) exceeds $10,000,000, the Borrower shall have received the prior
written consent of the Majority Revolving Credit Lenders and (4) if the
aggregate amount of consideration for all such purchases and acquisitions
(including the fair market value of all consideration payable other than in
cash) exceeds $5,000,000, the Borrowers and its Subsidiaries shall execute and
deliver to the Collateral Agent such
<PAGE> 35
additional Security Documents as the Collateral Agent shall deem reasonably
necessary or appropriate in order to obtain and effect a first-priority Lien on
all such assets and Capital Stock so acquired (including the assets of any
Person whose Capital Stock is so acquired);
(d) any Subsidiary may convey, transfer, lease or otherwise dispose of all
or substantially all of its assets to the extent such transaction is permitted
under clause (c) of Section 8.13; and
(e) the Borrower may merge with or consolidate into any other Person
provided that (1) (A) if the holders, immediately prior to such merger or
consolidation, of shares of Capital Stock of the Borrower entitled to vote in
the election of directors of the Borrower hold, immediately after giving effect
to such merger or consolidation, a majority of the issued and outstanding shares
of Capital Stock of the surviving corporation entitled to vote in the election
of directors of such surviving corporation, (B) such merger or consolidation
shall comply with the requirements of clause (iii) of this Section 8.10 as if
such merger or consolidation were the acquisition by the Borrower of the Capital
Stock of the surviving corporation, and (C) the surviving corporation shall have
assumed, pursuant to an instrument in form and substance reasonably satisfactory
to the Collateral Agent, all of the obligations of the Borrower under this
Agreement and the other Related Documents, or (2) the surviving corporation
shall have an unsecured long-term debt rating of not less than "BBB" (or its
equivalent) from Standard & Poors Corporation and not less than Baa2 (or its
equivalent) from Moodys Investors Service and such surviving corporation shall
have assumed, pursuant to an instrument in form and substance reasonably
satisfactory to the Collateral Agent, all of the obligations of the Borrower
under this Agreement and the other Related Documents (any such transaction
described in clause (2) of this Section 8.10(e), a "Permitted Change of
Control");
provided that in each such case, immediately after giving effect thereto, (x) no
Event of Default or Potential Default shall occur and be continuing or could
result therefrom, and (y) after giving pro forma effect to any such merger,
consolidation or transfer under this Section 8.10 the Borrower (or any successor
corporation) is, and is projected to be in compliance with Section 8.20.
Section 8.11. Compliance with ERISA. The Borrower shall not (i) terminate,
or permit any ERISA Affiliate to terminate, any Plan so as to result in any
material (in the opinion of the Agent and any assignee) liability of the
Borrower or any ERISA Affiliate to the PBGC or (ii) permit to exist any
occurrence of any Reportable Event (as defined in Title IV of ERISA), or any
other event or condition, that presents a material (in the opinion of the Agent
and any assignee) risk of such a termination by the PBGC of any Plan.
Section 8.12. Subsidiaries. The Borrower will not, and will not permit any
Subsidiary to create or acquire any Subsidiary, or to transfer assets to any
Subsidiary other than in compliance with Section 8.10 hereof.
<PAGE> 36
Section 8.13. Asset Dispositions, etc. The Borrower will not, and will not
permit any Subsidiary to, sell, transfer, lease or otherwise dispose of, or
grant options, warrants or other rights with respect to, any of its assets to
any Person, unless (a) such disposition consists of the sale or lease of
inventory in the ordinary course of business, (b) such disposition constitutes a
disposition of obsolete or retired assets not used in the business of the
Borrower and its Subsidiaries, (c) the disposition is in the ordinary course of
business and the net book value of the asset to be disposed, together with the
net book value of all other assets disposed by the Borrower or any Subsidiary
pursuant to this clause (c) during any Fiscal Year does not exceed $10,000,000
and during the term of this Agreement, does not exceed $20,000,000 or (d) such
disposition consists of the sale by the Borrower of real property and
improvements comprising its current manufacturing facility and corporate
headquarters located at 12744 San Fernando Road, Sylmar, California.
Section 8.14. Modification of Organic Documents, etc. The Borrower will not
consent to any amendment, supplement or other modification of any of the terms
or provisions contained in, or applicable to, the Certificate of Incorporation
or the By-Laws of the Borrower, except for any amendment, supplement or other
modification which does not adversely affect the Borrower's ability to pay or
perform its obligations under this Agreement.
Section 8.15. Transactions with Affiliates. The Borrower will not, and will
not permit any Subsidiary to, enter into, or cause, suffer or permit to exist
any transaction, arrangement or contract with any of its Affiliates other than
any such transaction arrangement or contract which is on terms substantially as
favorable to the Borrower or such Subsidiary as would be obtainable by the
Borrower or such Subsidiary in a comparable arms-length transaction with a
Person that is not an Affiliate of the Borrower. To the extent that any
transactions or agreements between Borrower and any other Affiliate are
permitted by this Agreement or are consented to in writing by the Majority
Revolving Credit Lenders, with respect to such transaction or agreement,
Borrower will (a) reflect the separate legal existence of each entity party to
the transaction or agreement, (b) formally document such transaction or
agreement in writing, and (c) cause such transaction or agreement to be approved
in advance by the board of directors of Borrower. The pricing and other material
terms of all such transactions and agreements will be established at the
inception of the particular transaction or agreement on commercially reasonable
terms (substantially similar to the terms that would have been established in a
transaction between unrelated third parties) by written agreement and will not
be amendable except with the written consent of both Borrower and any Affiliates
party to the transaction or agreement.
Section 8.16. Inconsistent Agreements. The Borrower will not, and will not
permit any Subsidiary to, enter into any material agreement containing any
provision which would be violated or breached in any material respect by this
Agreement or any Related Document or by the performance by the Borrower or any
Subsidiary of its obligations hereunder or under any Related Document.
<PAGE> 37
Section 8.17. Change in Accounting Method. The Borrower will not, and will
not permit any Subsidiary to, make any change in accounting treatment and
reporting practices except as required by GAAP.
Section 8.18. Change in Fiscal Year End. The Borrower will not change its
Fiscal Year end without the prior written consent of the Majority Revolving
Credit Lenders.
Section 8.19. Amendments to Certain Agreements. The Borrower will not, and
shall not permit any Subsidiary to, amend, restate or otherwise modify any
Related Document except as provided in the Participation Agreement.
Section 8.20. Financial Condition. The Borrower hereby covenants and agrees
as set forth below:
(a) Total Debt to EBITDA Ratio. The Borrower will not permit its Total Debt
to EBITDA Ratio with respect to the four consecutive Fiscal Quarter period
ending on the last day of any Fiscal Quarter to be greater than the ratio set
forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Ratio
----------- -------------- -----
<S> <C> <C>
1999 First 3.0 to 1
Second 2.9 to 1
Third 2.7 to 1
Fourth 2.5 to 1
2000 First 2.4 to 1
Second 2.4 to 1
Third 2.3 to 1
Fourth 2.2 to 1
2001 First 2.1 to 1
Second and each Fiscal Quarter
thereafter through the Final Date 2.0 to 1.
</TABLE>
<PAGE> 38
(b) Fixed Charge Coverage Ratio. The Borrower will not permit its Fixed
Charge Coverage Ratio with respect to the four consecutive Fiscal Quarter period
ending on the last day of any Fiscal Quarter to be less than the ratio set forth
below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Ratio
---------- -------------- -----
<S> <C> <C>
1999 First .8 to 1
Second .9 to 1
Third 1.1 to 1
Fourth 1.2 to 1
2000 First 1.2 to 1
Second 1.2 to 1
Third 1.2 to 1
Fourth 1.3 to 1
2001 First 1.3 to 1
Second 1.3 to 1
Third 1.3 to 1
Fourth 1.3 to 1
2002 First 1.3 to 1
Second 1.3 to 1
Third 1.3 to 1
Fourth 1.3 to 1
2003 First 1.3 to 1
Second 1.3 to 1
Third 1.3 to 1
Fourth 1.3 to 1
2004 First and each Fiscal Quarter
thereafter through the Final Date 1.5 to 1.
</TABLE>
(c) Interest Coverage Ratio. The Borrower will not permit its Interest
Coverage Ratio with respect to the four consecutive Fiscal Quarter period ending
on the last day of any Fiscal Quarter to be less than the ratio set forth below
opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Ratio
---------- -------------- -----
<S> <C> <C>
1999 First 10.0 to 1
Second 10.0 to 1
Third 10.0 to 1
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C>
Fourth 10.0 to 1
2000 First 10.0 to 1
Second 10.0 to 1
Third 10.0 to 1
Fourth 10.0 to 1
2001 First 10.0 to 1
Second 9.0 to 1
Third 8.0 to 1
Fourth 8.0 to 1
2002 First 8.2 to 1
Second 8.5 to 1
Third 9.0 to 1
Fourth 9.5 to 1
2003 First 10.0 to 1
Second 10.5 to 1
Third 11.0 to 1
Fourth 11.5 to 1
2004 First 12.0 to 1
Second 12.5 to 1
Third 13.0 to 1
Fourth 13.5 to 1
2005 First 14.0 to 1
Second 14.5 to 1
Third 15.0 to 1
Fourth 15.5 to 1
2006 First 15.5 to 1
</TABLE>
(d) Minimum EBITDA. The Borrower will not permit EBITDA for the four
consecutive Fiscal Quarter period ending on the last day of any Fiscal Quarter
to be less than the amount set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Minimum EBITDA
---------- -------------- --------------
<S> <C> <C>
1999 First $20,000,000
Second $22,000,000
Third $24,000,000
Fourth $29,000,000
2000 First $30,000,000
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C>
Second $31,000,000
Third $32,000,000
Fourth $35,000,000
2001 First $36,000,000
Second $38,000,000
Third $40,000,000
Fourth $45,000,000
2002 First $46,000,000
Second $48,000,000
Third $50,000,000
Fourth $55,000,000
2003 First $56,000,000
Second $58,000,000
Third $60,000,000
Fourth and each Fiscal Quarter
thereafter through the Final Date $65,000,000
</TABLE>
(e) Minimum Tangible Net Worth. The Borrower will not permit its Tangible
Net Worth on the last day of any Fiscal Quarter to be less than the amount set
forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Quarter Minimum Tangible Net Worth
---------- -------------- --------------------------
<S> <C> <C>
1999 First $115,000,000
Second $115,000,000
Third $115,000,000
Fourth $125,000,000
2000 First $130,000,000
Second $135,000,000
Third $140,000,000
Fourth $150,000,000
2001 First $155,000,000
Second $160,000,000
Third $165,000,000
Fourth $175,000,000
2002 First $180,000,000
Second $185,000,000
Third $190,000,000
Fourth $200,000,000
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
<S> <C> <C>
2003 First $205,000,000
Second $210,000,000
Third $215,000,000
Fourth $225,000,000
2004 First $230,000,000
Second $235,000,000
Third $240,000,000
Fourth and each Fiscal Quarter
thereafter through the Final Date $250,000,000
</TABLE>
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01. Events of Default. If any one or more of the following events
(an "Event of Default") shall occur and be continuing, the Agent on behalf of
the Revolving Credit Lenders shall be entitled to exercise the remedies set
forth in Section 9.02 hereof.
(a) Any representation or warranty made or deemed made by the Borrower in
this Agreement, any Related Document to which it is a party, or any certificate,
financial statement or other document delivered pursuant hereto or thereto shall
not be Accurate and Complete on any date as of which made or deemed made; or
(b) The Borrower shall default in the payment when due of (i) the principal
of or interest on any Revolving Credit Advance, (ii) any fee payable hereunder
or (iii) any other amount payable to the Agent, the Collateral Agent or the
Revolving Credit Lenders hereunder or under any Related Document to which it is
a party, and the failure to pay such other amount referred to in this clause
(iii) shall continue for 10 days after receipt of notice thereof; or
(c) The Borrower shall fail to perform or observe (i) any covenant or
obligation contained in Article VII and such failure shall continue for a period
of thirty (30) days after the Borrower becomes aware of such failure or (ii) any
covenant or obligation contained in Article VIII hereof; or
(d) The Borrower shall fail to perform or observe any other covenant or
obligation of the Borrower the performance or observance of which is owed to the
Agent, the Collateral Agent or the Revolving Credit Lenders hereunder or under
any Related Document to which it is a party (other than any default described in
Subsection 9.01(b) or (c) above) , and such failure shall continue for thirty
(30) days after the Borrower becomes aware of such failure, provided that if
such failure is of such a nature that it is not capable
<PAGE> 42
of being cured within such 30-day period, and the Borrower promptly commences
appropriate steps to cure such failure within such 30-day period and continues
to pursue such cure with diligence and good faith thereafter, unless the
Majority Revolving Credit Lenders shall determine that such delay could
reasonably be expected to have a Material Adverse Effect, such 30-day period
shall be extended to 90 days; or
(e) The Borrower shall default in the payment when due of any principal of
or premium (if any) or interest on any Indebtedness (other than Indebtedness
owing to the Revolving Credit Lenders under this Agreement) of $1,000,000 or
more and such default shall continue beyond any applicable grace period, or
shall fail to observe or perform any terms of any instrument pursuant to which
any such Indebtedness was created or of any mortgage, indenture or other
agreement relating thereto if the effect of such failure is to cause or permit
the acceleration of such Indebtedness and such failure shall not have been
waived pursuant thereto; or
(f) The entry of a decree or order for relief in respect of the Borrower by
a court having jurisdiction in the premises, or the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Borrower or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, in an involuntary case
under the Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency or other similar law; or the
commencement against the Borrower of an involuntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or state bankruptcy, insolvency or other similar law, and the
continuance of any such case unstayed and in effect for a period of 60
consecutive days; or
(g) The commencement by the Borrower of a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or state bankruptcy, insolvency or other similar law, or the consent by
it to the entry of an order for relief in an involuntary case under any such law
or the consent by it to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Borrower or of any substantial part of its property, or the
making by it of a general assignment for the benefit of creditors, or the
failure of the Borrower generally to pay its debts as such debts become due or
the taking of any corporate action in furtherance of any of the foregoing; or
(h) An "Event of Default" shall occur under Section 18 of the Master Lease
or Section 5.01 of the Construction Agency Agreement or an "Event of Default"
shall occur under any Security Document; or
(i) One or more final judgments for the payment of money shall be rendered
against the Borrower in an aggregate amount in excess of $1,000,000 and the same
shall remain undischarged for a period of 30 days during which execution of such
judgment shall not be effectively stayed; or
<PAGE> 43
(j) The Master Lease, the Construction Agency Agreement, the Security
Agreement, the Guaranties or any of the other Security Documents shall cease to
be in full force and effect (except for any termination of the Construction
Agency Agreement or Master Lease in accordance with its terms not due to the
occurrence of a default thereunder).
Section 9.02. Default Remedies. If any Event of Default shall occur and be
continuing, then and in every such event, and at any time thereafter during the
continuance of such Event of Default, the Agent may, and at the request of the
Majority Revolving Credit Lenders shall, by written notice to the Borrower and
each Revolving Credit Lender, take one or more of the following actions: (a)
terminate the Commitments, and (b) declare the Obligations to be forthwith due
and payable, whereupon the Obligations shall become forthwith due and payable
both as to principal and interest together with all other amounts payable by the
Borrower under this Agreement which may be due or accrued and unpaid, without
presentment, demand, protest or any other notice of any kind, all of which are
expressly waived; provided, however, that if any of the Events of Default set
forth in paragraphs (f) or (g) of Section 9.01 hereof shall occur with respect
to the Borrower, then without any notice to the Borrower or any other act by the
Agent or any other Person (i) the Commitments shall immediately become
terminated, and (ii) the Obligations shall become forthwith due and payable, all
without presentment, demand, protest or notice of any kind, all of which are
expressly waived. In the event of a declaration by the Agent pursuant to clause
(b) above, the Agent may enforce its rights hereunder and under any other
instrument or agreement delivered in connection herewith and take any other
action to which it is entitled hereunder, thereunder, or by law, whether for the
specific performance of any covenant or agreement contained in this Agreement,
in any such instrument or agreement or to enforce payment as provided herein,
therein, or by law.
Section 9.03. Set-off. (a) The Agent and each Revolving Credit Lender
(without duplication) are hereby authorized at any time and from time to time,
upon the occurrence and during the continuance of any Event of Default, without
prior notice to the Borrower, to the fullest extent permitted by law, to set-off
and apply any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or monies at any time held and other
indebtedness at any time owing by the Agent or such Revolving Credit Lender at
any of its branches or affiliates to or for the account of the Borrower,
including any Permitted Investments held therein, against any and all of the
amounts owing by the Borrower under this Agreement or the Related Documents to
which it is a party, whether or not the Agent or such Revolving Credit Lender
shall have made any demand hereunder or thereunder. The rights of the Agent and
each Revolving Credit Lender under this Section 9.03 are in addition to, and do
not derogate from or impair, other rights and remedies (including, without
limitation, other rights of set-off) which the Agent or such Revolving Credit
Lender may have.
(b) Each Revolving Credit Lender agrees that if it shall, by exercising any
right of set-off or counterclaim or otherwise receive payment of a proportion of
the aggregate amount of principal and interest due with respect to any Revolving
Credit Note held by it which is greater than the proportion received by any
other Revolving Credit Lender in respect of the aggregate amount of principal
and interest due with respect to any Revolving Credit Note
<PAGE> 44
held by such other Revolving Credit Lender, the Revolving Credit Lender
receiving such proportionately greater payment shall purchase participations in
the Revolving Credit Notes held by the other Revolving Credit Lenders and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Revolving Credit Notes held by the
Revolving Credit Lenders shall be shared by the Revolving Credit Lenders pro
rata. The Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Revolving Credit Note,
whether or not acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other collection rights with respect to
such participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
Section 9.04. Funding Indemnities. The Borrower will indemnify and hold
harmless each Revolving Credit Lender against, and on demand reimburse each
Revolving Credit Lender for, any loss, premium, penalty or expense which such
Revolving Credit Lender may pay or incur (including, without limitation, any
loss or expense incurred by reason of the relending, depositing or other
employment of funds acquired by such Revolving Credit Lender to fund a LIBOR
Advance) as a result of any acceleration of the Revolving Credit Advances
pursuant to Section 9.02 hereof. Each Revolving Credit Lender shall furnish the
Borrower with a certificate (a copy of which shall be sent to the Agent and the
other Revolving Credit Lenders) setting forth the basis for determining any
additional amount to be paid to it hereunder, and such certificate shall be
conclusive, absent manifest error, as to the contents thereof.
Section 9.05. Default Interest. Notwithstanding any other provision of this
Agreement to the contrary, to the extent permitted by law upon the occurrence
and during the continuance of an Event of Default, the Borrower will pay on
demand to the Revolving Credit Lenders interest on the principal amount of all
Outstanding Revolving Credit Advances at a rate equal to the rate otherwise
applicable plus an additional 2.00% per annum.
ARTICLE X
THE AGENT
Section 10.01. Appointment and Authorization. Each Revolving Credit Lender
appoints the Agent to act as its agent in connection herewith and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the Related Documents as are delegated to the Agent by
the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto.
Section 10.02. Same Rights as a Revolving Credit Lender. The Agent and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of
<PAGE> 45
business with the Borrower, the Lessee or the Subsidiary Guarantor or any
affiliate of the foregoing as if it were not the Agent hereunder.
Section 10.03. Actions by the Agent. The obligations of the Agent hereunder
are only those expressly set forth herein or in the Related Documents. As to any
matters not expressly provided for by this Agreement or the Related Documents,
the Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Revolving Credit Lenders, and such instructions shall be binding upon
all Revolving Credit Lenders; provided, however, that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or applicable law. The Agent agrees to give
to each Revolving Credit Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement or the Related Documents.
Without limiting the generality of the foregoing, the Agent shall not be
required to take any action with respect to any Potential Default or Event of
Default, except as expressly provided in Article IX.
Section 10.04. Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for the Borrower), independent public accountants
and other experts selected by it and, as between the Agent and the Revolving
Credit Lenders, shall not be liable for any action taken or omitted to be taken
by it in good faith in accordance with the advice of such counsel, accountants
or experts.
Section 10.05. Liability. Neither the Agent nor any of its directors,
officers, agents, or employees shall be liable to any Revolving Credit Lender
for any action taken or not taken by it in connection herewith or with any
Related Document (a) with the consent or at the request of the Majority
Revolving Credit Lenders or (b) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its directors, officers, agents
or employees shall be responsible for or have any duty to ascertain, inquire
into or verify: (i) any statement, warranty or representation made by the
Borrower, or the Lessee or the Subsidiary Guarantors in connection with this
Agreement, any Related Document or any Credit Event hereunder; (ii) the
performance or observance of any of the covenants or agreements of the Borrower,
the Lessee or the Subsidiary Guarantors herein or in any Related Document; (iii)
the satisfaction of any condition specified in Article V, except receipt of
items required to be delivered to the Agent; or (iv) as between the Agent and
the Revolving Credit Lenders, the validity, effectiveness or genuineness of this
Agreement, any Related Document or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement or other writing
(which may be a bank wire, facsimile or similar writing) reasonably believed by
it to be genuine or to be signed by the proper party or parties.
Section 10.06. Indemnification. Each Revolving Credit Lender shall, ratably
in accordance with its Commitment Percentage, indemnify the Agent (to the extent
not reimbursed by the Borrower) on demand from and against any and all costs,
expenses (including counsel fees and disbursements), claims, demands, actions,
losses or liabilities
<PAGE> 46
(except such as result from the Agent's own gross negligence or willful
misconduct) that the Agent may suffer or incur in connection with this Agreement
or any Related Document or any action taken or omitted by the Agent hereunder or
thereunder. The obligations of each Revolving Credit Lender set forth in this
Section 10.06 shall survive any termination of this Agreement.
Section 10.07. Credit Decision. Each Revolving Credit Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Revolving Credit Lender, and based on such financial statements and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Revolving Credit Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Revolving Credit 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 any action permitted to be taken or
omitted under this Agreement and the Related Documents.
Section 10.08. Successor Agents; Removal. (a) The Agent may resign at any
time by giving written notice thereof to the Revolving Credit Lenders and the
Borrower, provided that no such resignation shall take effect until a successor
agent has been appointed and agreed to act as such under this Agreement. Upon
any such resignation, the Majority Revolving Credit Lenders shall appoint a
successor to the Agent.
(b) Upon the written request of Lenders holding not less than 80% of the
Total Commitment or, if all Commitments have been terminated, not less than 80%
of the aggregate amount of all Outstanding Advances, and provided that
immediately upon the effectiveness of such resignation, such Lenders appoint a
successor to the Agent, the Agent shall resign and effective immediately upon
such resignation, the Agent shall no longer be the Agent under this Agreement
and the successor to the Agent so appointed shall immediately and thereafter
become the Agent.
(c) The decision of the Majority Revolving Credit Lenders shall be binding
upon all of the Revolving Credit Lenders. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article X shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent.
Section 10.09. Sharing by Revolving Credit Lenders. (a) If any Revolving
Credit Lender shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) on account of an obligation
owed to it under Section 2.01 hereof in excess of its ratable share, determined
in relation to the aggregate Commitment of all Revolving Credit Lenders, of
payments on account of like Obligations obtained by all Revolving Credit
Lenders, such Revolving Credit Lender shall immediately so notify (the
"Information Notice") the Agent. Promptly upon its receipt of an Information
Notice from any Revolving Credit Lender, the Agent shall notify (the "Sharing
Notice") all of the Revolving Credit Lenders (based upon information contained
in all Information Notices received by the Agent from the Revolving Credit
Lenders) of the amount or amounts (the "Excess Payment") received by one or more
of the Revolving
<PAGE> 47
Credit Lenders in excess of its or their ratable share of payments received by
all of the Revolving Credit Lenders on account of the Obligations. Within two
Business Days of the giving of a Sharing Notice by the Agent, each Revolving
Credit Lender which has received an Excess Payment (each, an "Excess Revolving
Credit Lender") shall purchase from Revolving Credit Lenders which have not
received an Excess Payment (each, a "Deficit Revolving Credit Lender") such
participations in the Obligations, as the case may be, owed to each Deficit
Revolving Credit Lender as shall be necessary to cause such Excess Revolving
Credit Lender to share its Excess Payment ratably with each Deficit Revolving
Credit Lender; provided, however, that if all or any portion of such Excess
Payment is thereafter recovered from an Excess Revolving Credit Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(b) The Borrower agrees that any Revolving Credit Lender so purchasing a
participation from another Revolving Credit Lender pursuant to this Section
10.09 may exercise all its rights of payment with respect to such participation
as fully as if such Revolving Credit Lender were the direct creditor of the
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Revolving Credit Lender
receives a secured claim in lieu of a set-off to which this Section 10.09 would
apply, such Revolving Credit Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Revolving Credit Lenders entitled under this Section 10.09 to
share in the benefits of any recovery on such secured claim.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Assignment. (a) The Borrower may not assign its rights or
obligations under this Agreement or any Related Documents except to the
surviving entity of any merger or consolidation of the Borrower with or into any
Person to the extent such constitutes a Permitted Change of Control, without the
prior written consent of the other parties hereto, which consent may be given or
withheld in the sole and absolute discretion of each such Person. Any Revolving
Credit Lender may, in the ordinary course of its business and in accordance with
applicable Law including, but not limited to, the Securities Act of 1933, and
with the prior written consent of the Borrower (which consent shall not be
unreasonably withheld or delayed) at any time assign to any Revolving Credit
Lender or to one or more additional banks or financial institutions (each an
"Assignee") all or a part of its rights and obligations under this Agreement
pursuant to an assignment agreement between such Assignee and such transferor
Revolving Credit Lender substantially in the form of Exhibit D hereto, provided
that (i) without the written consent of the Agent, any partial assignment shall
be in a minimum amount of $1,000,000 and immediately following any partial
assignment, the remaining Commitment of the transferor Revolving Credit Lender
shall not be less than$1,000,000 and (ii) the transferor Revolving Credit Lender
shall pay to the Agent an assignment fee of $3,000. Such
<PAGE> 48
assignment agreement shall be executed by such Assignee and such transferor
Revolving Credit Lender and shall be delivered to the Agent for acceptance by
the Borrower before the proposed effective date of such assignment. Upon such
execution, delivery and acceptance, from and after the effective date specified
in such assignment agreement, (x) the Assignee thereunder shall be a party
hereto and, to the extent of the portion of the Commitment of the transferor
Revolving Credit Lender purchased by it, have the rights and obligations of a
Revolving Credit Lender hereunder and (y) the transferor Revolving Credit Lender
thereunder shall, to the extent of the portion of its Commitment so sold, be
released from its obligations under this Agreement (and, in the case of an
assignment agreement covering all or the remaining portion of a transferor
Revolving Credit Lender's rights and obligations under this Agreement, such
transferor Revolving Credit Lender shall cease to be a party hereto). On or
prior to the effective date specified in such assignment agreement, the Borrower
shall execute and deliver to the Agent in exchange for the Revolving Credit Note
previously delivered to such transferor Revolving Credit Lender a new Revolving
Credit Note to the order of such Assignee in an amount based upon the Commitment
assumed by it pursuant to such assignment agreement and, unless the transferor
Revolving Credit Lender has not retained a Commitment hereunder, a new Revolving
Credit Note to the order of the transferor Revolving Credit Lender in an amount
based upon the Commitment retained by it hereunder. Each such new Revolving
Credit Note shall be dated the effective date of such assignment and shall
otherwise be in the form of the Revolving Credit Note replaced thereby. The
Revolving Credit Note surrendered by the transferor Revolving Credit Lender
shall be returned by the Agent to the Borrower. Subject to the foregoing, all
provisions contained in this Agreement or any document or agreement referred to
herein or relating hereto shall inure to the benefit of, and shall be binding
upon, the Borrower, the Agent, the Revolving Credit Lenders and their respective
successors and permitted assigns.
(b) Any Revolving Credit Lender may from time to time change the Lending
Office of such Revolving Credit Lender at which the Revolving Credit Advances
are made or carried, provided that if at the time of any change from one Lending
Office to another, the effect thereof would be to increase any amount payable by
the Borrower under this Agreement then such change shall not be made without the
prior written consent of the Borrower, and no such change shall affect the
obligation of such Revolving Credit Lender to make Revolving Credit Advances in
accordance with the terms hereof. As between the Borrower and any Revolving
Credit Lender, it is understood that any action taken hereunder on behalf of
such Revolving Credit Lender by any Lending Office of such Revolving Credit
Lender shall be binding on such Revolving Credit Lender.
(c) Any Revolving Credit Lender may grant one or more financial
institutions (each, a "Participant"), on a participating basis but not as a
party to this Agreement, a participation or participations in all or any part of
such Revolving Credit Lender's rights and benefits under this Agreement or any
Related Document (a "Participation"). Ten days prior to granting any
Participation, the granting Revolving Credit Lender shall notify the Borrower
and the Agent of the identity of such Participant, provided, however, that the
failure to notify timely the Borrower or the Agent shall not affect the validity
of such Participation. In the event of any such grant by a Revolving
<PAGE> 49
Credit Lender of a Participation to a Participant, such Revolving Credit Lender
shall remain responsible for the performance of its obligations hereunder, and
the Borrower and the Agent shall continue to deal solely and directly with such
Revolving Credit Lender in connection with such Revolving Credit Lender's rights
and obligations under this Agreement. Any agreement pursuant to which any
Revolving Credit Lender may grant such a participating interest shall provide
that such Revolving Credit Lender shall retain the sole right and responsibility
to enforce the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such participation agreement may
provide that such Revolving Credit Lender will not agree to any modification,
amendment or waiver of this Agreement described in clauses (a) through (h),
inclusive, of the proviso contained in Section 11.02 without the consent of the
Participant. The Borrower agrees that each Participant shall, to the extent of
its Participation, be entitled to the benefits of Sections 3.01, 4.02 and 9.04
hereof as if such Participant were a Revolving Credit Lender; provided, however,
the amount of such benefit shall be limited to the amount in respect of the
interest sold to which the seller of such Participation would have been entitled
had it not sold such interest.
(d) Notwithstanding anything to the contrary contained in this Agreement,
any Revolving Credit Lender may at its sole cost and expense pledge, hypothecate
or otherwise grant a security interest in all or any part of its rights
hereunder or under its Revolving Credit Note to any Federal Reserve Bank;
provided that no such pledge, hypothecation or grant shall relieve such
Revolving Credit Lender of any of its obligations under this Agreement.
(e) Notwithstanding anything to the contrary contained in this Agreement,
(i) any Revolving Credit Lender may sell all or any part of its rights and
obligations hereunder and under its Revolving Credit Note and the other Related
Documents to any of its Affiliates and (ii) upon the occurrence and during the
continuance of an Event of Default, any Revolving Credit Lender may sell all or
any part of its rights and obligations hereunder and under its Revolving Credit
Notes and the other Related Documents to any third party, in each such case,
notwithstanding that the Borrower does not consent to such sale, provided that
such Revolving Credit Lender has obtained the consent of the Agent and otherwise
meets the requirements of this Section 11.01.
Section 11.02. Amendments and Waivers. Any provision of this Agreement or
any Related Document may be amended or waived if, but only if, such amendment or
waiver is in accordance with the provisions of Section 14.2 of the Participation
Agreement, in writing and is signed by the Borrower and the Agent, with the
approval of the Majority Revolving Credit Lenders (and, if the rights,
obligations or duties of the Agent are affected thereby, by the Agent); provided
that no such amendment or waiver shall, unless approved by all the Revolving
Credit Lenders, (a) increase the amount of any Commitment or the Commitment
Percentage of any Revolving Credit Lender or subject any Revolving Credit Lender
to any additional obligation, (b) reduce the principal of or rate of interest on
any Revolving Credit Advance or the rate at which any fees are payable
hereunder, (c) postpone the date fixed for any payment of principal of or
interest on any
<PAGE> 50
Revolving Credit Advance or any fees hereunder or for any reduction or
termination of any Commitment, (d) change the percentage of the aggregate
Commitment Percentages which shall be required for the Revolving Credit Lenders
or any of them to take any action under this Section 11.02 or any other
provision of this Agreement, or (e) amend this Section 11.02, (f) release all or
any substantial portion of the Collateral, except as permitted under any of the
Related Documents. Any amendment or waiver made pursuant to the previous
sentence shall be binding upon the Revolving Credit Lenders upon delivery of an
executed or conformed copy of such waiver to the Revolving Credit Lenders.
Section 11.03. Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing (including telecopier
or similar writing) and shall be given to such party and the Borrower at its
address or telecopier number set forth below or such other address or telecopier
number as such party may hereafter specify by notice to the other parties listed
below. Any notice, request, demand or other communication sent by telecopier
shall be promptly confirmed with a copy of such notice sent by courier or by
first class mail.
If to the Agent: ING (U.S.)
Capital LLC
55 East 52nd Street, 33rd Floor
New York, New York 10055
Attention: Chief Credit Officer
Telecopier: (212) 750-8935
With copies of each such notice to be simultaneously given, delivered or
served to the following addresses:
ING (U.S.) Capital LLC
Atlanta Office
200 Galleria Parkway, Suite 950
Atlanta, Georgia 30339
Attention: Darren J. Wells
Telecopier: (770) 951-1005
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens
Telecopier: (404) 572-5100
<PAGE> 51
If to a Revolving Credit
Lender: At the address set
forth on the signature pages hereof or
in the assignment agreement pursuant
to which such Revolving Credit
Lender became a party hereto
If to the Borrower: MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telecopier: (818) 367-1460
With a copy of each such notice to be simultaneously given, delivered or
served to the following address:
Brobeck, Phleger & Harrison
550 West C Street, Suite 1300
San Diego, California 92101
Attention: Scott Biel, Esq.
Telecopier: (619) 234-3848
Each such notice, request or other communication shall be effective when
actually received.
Section 11.04 Cumulative Rights; No Waiver. The rights, powers and remedies
of the Agent and each Revolving Credit Lender hereunder are cumulative and in
addition to all rights, powers and remedies provided under any and all
agreements between the Borrower and the Agent and each Revolving Credit Lender
relating hereto, at law, in equity or otherwise. Neither any delay nor any
omission by the Agent or any Revolving Credit Lender to exercise any right,
power or remedy shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise thereof or any exercise
of any other right, power or remedy.
Section 11.05 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts, when executed and delivered, shall be deemed an original and
all of which counterparts, taken together, shall constitute one and the same
Agreement.
Section 11.06 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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
<PAGE> 52
Section 11.07 Headings. The Article and Section headings in this Agreement
are for convenience of reference only and shall not affect the interpretation
hereof.
Section 11.08. Termination by Borrower. The Borrower may terminate this
Agreement upon not less than 30 days' prior written notice to the Agent at any
time; provided, however, that on the date specified by the Borrower for
termination (a) there shall not be any Revolving Credit Advances then
Outstanding and (b) all amounts then due and payable to the Agent, the
Collateral Agent and the Revolving Credit Lenders under this Agreement or the
Related Documents shall have been paid in full. No termination of this
Agreement, for whatever reason, shall affect the obligations and liabilities of
the Borrower hereunder which arose prior to such termination or the Agent's or
any Revolving Credit Lender's rights, powers and remedies with respect thereto.
Section 11.09. Several Obligations; Remedies Independent. The failure of
any Revolving Credit Lender to make any Revolving Credit Advance to be made by
it on the date specified therefor shall not relieve any other Revolving Credit
Lender of its obligation to make its Revolving Credit Advance on such date, but
no Revolving Credit Lender shall be responsible for the failure of any other
Revolving Credit Lender to make an Revolving Credit Advance. The amounts payable
by the Borrower at any time hereunder and under a Revolving Credit Note to each
Revolving Credit Lender shall be a separate and independent debt and each
Revolving Credit Lender shall be entitled to protect and enforce its rights
arising out of this Agreement and its Revolving Credit Note, and it shall not be
necessary for any other Revolving Credit Lender or the Agent to consent to, or
be joined as an additional party in, any proceedings for such purposes.
SECTION 11.10. GOVERNING LAW AND CONSENT TO JURISDICTION, WAIVER OF JURY
TRIAL, SERVICE OF PROCESS.
(a)THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF NEW YORK.
THE BORROWER, THE REVOLVING CREDIT LENDERS AND THE AGENT AGREE THAT, TO THE
MAXIMUM EXTENT PERMITTED BY THE LAWS OF THE STATE OF NEW YORK, THIS AGREEMENT,
AND THE RIGHTS AND DUTIES OF THE BORROWER, THE REVOLVING CREDIT LENDERS AND THE
AGENT HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401
AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITATION, IN RESPECT OF ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THE BORROWER HEREBY IRREVOCABLY SUBMITS, FOR ITSELF AND ITS
PROPERTIES, TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND THE SUPREME COURT OF THE STATE OF NEW YORK IN
THE COUNTY OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND
RELATED TO OR IN
<PAGE> 53
CONNECTION WITH THIS AGREEMENT, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE BORROWER HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING, IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE
SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT OR THE SUBJECT
MATTER HEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURT. THIS SUBMISSION TO
JURISDICTION IS NONEXCLUSIVE AND DOES NOT PRECLUDE THE REVOLVING CREDIT LENDERS
OR THE AGENT FROM OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT
OTHERWISE HAVING JURISDICTION. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE
JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION
WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. THE BORROWER
AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED
MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD
AUTHORIZED BY THE LAWS OF NEW YORK. THE BORROWER , THE REVOLVING CREDIT LENDERS
AND THE AGENT EXPRESSLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM RELATED TO THIS AGREEMENT. THE BORROWER, THE
REVOLVING CREDIT LENDERS AND THE AGENT ACKNOWLEDGE THAT THE PROVISIONS OF THIS
SECTION 11.10 HAVE BEEN BARGAINED FOR AND THAT THEY HAVE BEEN REPRESENTED BY
COUNSEL IN CONNECTION THEREWITH.
(b) The Borrower hereby irrevocably designates, appoints and empowers CT
Corporation System, whose present address is 1633 Broadway, New York, New York
10019, as its authorized agent to receive, for and on its behalf and its
property, service of process in the State of New York when and as such legal
actions or proceedings may be brought in the courts of the State of New York or
of the United States of America sitting in New York, and such service of process
shall be deemed complete upon the date of delivery thereof to such agent whether
or not such agent gives notice thereof to the Borrower, or upon the earliest of
any other date permitted by applicable law. It is understood that a copy of said
process served on such agent will as soon as practicable be forwarded to the
Borrower, at its address set forth in Section 11.03, but its failure to receive
such copy shall not affect in any way the service of said process on said agent
as the agent of the Borrower. The Borrower irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of the copies thereof by certified mail, return
receipt requested, postage prepaid, to it at its address set forth in Section
11.03, such service to become effective upon the earlier of (i) the date ten
(10) calendar days after such mailing or (ii) any earlier date permitted by
applicable law. The Borrower agrees that it will at all times continuously
maintain an
<PAGE> 54
agent to receive service of process in the State of New York on behalf of itself
and its properties and in the event that, for any reason, the agent named above
or its successor shall no longer serve as its agent to receive service of
process in the State of New York on its behalf, it shall promptly appoint a
successor so to serve and shall advise the Agent and the Revolving Credit
Lenders thereof (and shall furnish to the Agent and the Revolving Credit Lenders
the consent of any successor agent so to act). Nothing in this Section 11.10
shall affect the right of the Agent or the Revolving Credit Lenders to bring
proceedings against the Borrower in the courts of any other jurisdiction or to
serve process in any other manner permitted by applicable law.
Section 11.11. Tax Forms. On or before the date hereof or, if later, the
date on which it acquires the rights and obligations of a Revolving Credit
Lender pursuant to this Agreement, each Revolving Credit Lender which is not a
United States person (within the meaning of Section 7701 of the Internal Revenue
Code of 1986) will deliver to each of the Borrower and the Agent a fully
completed and duly executed copy of United States Internal Revenue Service Form
4224 or Form 1001 confirming that such Revolving Credit Lender is entitled under
Section 1442 of the Internal Revenue Code or any other applicable provision
thereof or under any applicable tax treaty or convention to receive payments
under this Agreement without deduction or withholding of United States federal
income tax. So long as the Commitments are outstanding and until the Obligations
have been paid and performed in full, each such Revolving Credit Lender shall
also deliver a further copy of such Form 4224 or Form 1001 or any successor
forms thereto to the Borrower and the Agent upon expiration of the form
previously delivered by such Revolving Credit Lender hereunder, unless any
change in law or regulation of the United States or any taxing authority thereof
has occurred prior to the date on which such delivery would otherwise be
required which renders such form inapplicable or which would prevent such
Revolving Credit Lender from completing and delivering such form.
Notwithstanding anything to the contrary in this Agreement, the Borrower shall
not be required to gross-up any payment for withholding taxes imposed on any
Revolving Credit Lender which has failed to comply with its obligations under
this Section 11.11 if such compliance would have avoided such withholding taxes.
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date first above written.
MINIMED INC., a Delaware corporation,
as Borrower
By: /s/ TERRANCE H. GREGG
--------------------------------------
Name: Terrance H. Gregg
Title: President
ING (U.S.) CAPITAL LLC,
as Agent
By: /s/ DARREN J. WELLS
--------------------------------------
Darren J. Wells
Managing Director
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 56
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $2,339,062.00 ING (U.S.) CAPITAL LLC
Commitment Percentage: 15.59%
By: /s/ MIKE GARVIN
-----------------------------
Name: Mike Garvin
Title: Director
Address: 55 East 52nd Street, 33rd Floor
New York, New York 10055
Attention: Chief Credit Officer
Telecopier: (212) 750-8935
With a copy to: ING (U.S.) Capital LLC
Atlanta Office
200 Galleria Parkway, Suite 950
Atlanta, Georgia 30339
Attention: Darren J. Wells
Telecopier: (770) 951-1005
and King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens
Telecopier: (404) 572-5100
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 57
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $937,500.00 CIBC INC.
Commitment Percentage: 6.25%
By: /s/ JUDITH KIRSHNER
------------------------------
Name: Judith Kirshner
Title: Executive Director
Address: 425 Lexington Avenue
New York, New York 10017
Attention: Jewel Smith, Associate
Telecopier: (212) 856-6565
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 58
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $2,460,938.00 THE BANK OF NOVA SCOTIA
Commitment Percentage: 16.41%
By: /s/ R. P. REYNOLDS
-------------------------------
Name: R. P. Reynolds
Title: Relationship Manager
Address: 580 California Street, Suite 2100
San Francisco, California 94104
Attention: Robert P. Reynolds,
Relationship Manager
Telecopier: (415) 397-0791
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 59
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $1,640,625.00 MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
Commitment Percentage: 10.94%
By: /s/ TED G. KOPCZYNSKI
-------------------------------
Name: Ted G. Kopczynski
Title: Vice President
Address: 222 North LaSalle Street
17th Floor
Chicago, Illinois 60601
Attention: Jeremy Dhein,
Asst. Vice President
Telecopier: (312)269-5457
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 60
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $2,460,937.00 COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
Commitment Percentage: 16.41%
By: /s/ CAROLINE M. HASTINGS
--------------------------------
Name: Caroline M. Hastings
Title: Vice President
By: /s/ W. PIETER C. KODDE
--------------------------------
Name: W. Pieter C. Kodde
Title: Vice President
Address: 4 Embarcadero Center, Suite 3200
San Francisco, California 94111
Attention: Richard Cerf,
Vice President
Telecopier: (415)986-8349
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 61
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $1,640,625.00 SANWA BANK CALIFORNIA
Commitment Percentage: 10.94%
By: /s/ TED A. DUNN
------------------------------
Name: Ted A. Dunn
Title: Vice President
Address: 15165 Ventura Blvd, Suite 445
Sherman Oaks, California 91403
Attention: Ted A. Dunn,
Vice President
Telecopier: (818)905-1002
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 62
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $1,059,375.00 COMERICA WEST INCORPORATED
Commitment Percentage: 7.06%
By: /s/ EMMANUEL M. SKEVOFILAX
-------------------------------
Name: Emmanuel M. Skevofilax
Title: Assistant Vice President
Address: 1920 Main Street, Suite 1150
Irvine, California 92614
Attention: Emmanuel M. Skevofilax,
Asst. Vice President
Telecopier: (949)476-1222
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 63
COMMITMENTS AND
COMMITMENT PERCENTAGES REVOLVING CREDIT LENDERS
Commitment: $2,460,938.00 CITY NATIONAL BANK
Commitment Percentage: 16.41%
By: /s/ ARMAN K. WALKER
-----------------------------
Name: Arman K. Walker
Title: Vice President
Address: 400 North Roxbury Drive, Floor 5
Beverly Hills, California 90210
Attention: Arman Walker,
Vice President
Telecopier: (310)888-6152
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
<PAGE> 1
EXHIBIT 10.6
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 18, 1999, among MINIMED INC., a
Delaware corporation ("MiniMed"), and each of the Subsidiaries of MiniMed listed
on Schedule I attached hereto (the "Grantor Subsidiaries"; the Grantor
Subsidiaries, together with the Owner Trustee and MiniMed shall be collectively
known as the "Grantors" and individually as a "Grantor"), and ING (U.S.) CAPITAL
LLC (the "Collateral Agent"), as collateral agent for the Secured Parties
referenced below.
W I T N E S S E T H:
RECITALS
A. The Secured Parties proposed to make certain financial accommodations
to MiniMed and certain of its Subsidiaries pursuant to the Related Documents (as
such term in defined in the Participation Agreement; and
B. In connection with the making of such financial accommodations to
MiniMed and certain of its Subsidiaries pursuant to the Related Documents and as
condition precedent thereto, the Collateral Agent and the Secured Parties are
requiring that the Grantors execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the foregoing, each Grantor
hereby agrees with the Collateral Agent, for the benefit of the Secured Parties,
as follows:
SECTION 1. Definitions. Terms defined in the Participation
Agreement and not otherwise defined herein, when used in this Agreement
including its preamble and recitals, shall have the respective meanings provided
for in the Participation Agreement. The following additional terms (whether or
not underscored), when used in this Agreement, shall have the following
meanings:
"Account Debtors" means any Person who is obligated under an
Account.
"Accounts" means all "accounts" (as defined in the UCC), now or
hereafter owned or acquired by a Person or in which a Person now or hereafter
has or acquires any rights, and, in any event, shall mean and include, without
limitation, (a) all accounts receivable, contract rights, book debts, notes,
drafts and other obligations or indebtedness owing to such Person arising from
the sale or lease of goods or other property by it or the performance of
services by it (including, without limitation, any such obligation which might
be characterized as an account, contract right or general intangible under the
Uniform Commercial Code in effect in New York), (b) all of such Person's rights
in, to and under all purchase and sales orders for goods, services or other
property,
<PAGE> 2
and all of such Person's rights to any goods, services or other property
represented by any of the foregoing (including returned or repossessed goods and
unpaid sellers' rights of rescission, replevin, reclamation and rights to
stoppage in transit), (c) all monies due to or to become due to such Person
under all contracts for the sale, lease or exchange of goods or other property
or the performance of services by it (whether or not yet earned by performance
on the part of such Person), and (d) all collateral security and guarantees of
any kind given by such Person with respect to any of the foregoing, in each case
whether now in existence or hereafter arising or acquired.
"Chattel Paper" means any "chattel paper" (as defined in the
UCC) now or hereafter owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights.
"Collateral" means, collectively:
i. Accounts;
ii. Inventory;
iii. Chattel Paper;
iv. Documents;
v. Equipment;
vi. Instruments;
vii. General Intangibles;
viii. All other goods and personal property, whether
tangible or intangible;
ix. All books and records pertaining to any of the
Collateral (including, without limitation, customer lists, credit files,
computer programs, printouts and other computer materials and records);
x. The Master Lease, the Construction Agency Agreement
and the Lessee's Deed of Trust including, without limitation, (i) all rights of
the Lessee under Section 13 of the Master Lease to purchase the Property and
Equipment, and (ii) all rights of the Lessee under Section 19 of the Master
Lease to receive the excess proceeds or payments upon an Event of Default under
the Master Lease and sale by the Lessor of the Lessee's interest in the Property
and Equipment.
xi. All products and Proceeds of all or any of the
Collateral described
-2-
<PAGE> 3
in clauses (i) through (x) hereof.
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now or hereafter
owned or acquired by a Person or in which a Person now or hereafter has or
acquires rights.
"Equipment" means all "equipment" (as defined in the UCC), now
or hereafter owned or acquired by a Person or in which a Person now or hereafter
has or acquires rights, and, in any event, shall mean and include, without
limitation, all telephones, cables, telephone components (whether assembled or
disassembled), handsets, cords, microprocessors, machinery, equipment,
furnishings, fixtures, vehicles and computers and other electronic data
processing and other office equipment and any and all additions, substitutions
and replacements of any of the foregoing, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto.
"General Intangibles" means all "general intangibles" (as
defined in the UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires any rights, and, in any event, shall
mean and include, without limitation, all obligations or indebtedness owing to a
Person (other than Accounts) from whatever source arising, and all rights, title
and interest which a Person may now or hereafter have in or under all contracts
(in addition to contracts described in the definition of Accounts), causes of
action, franchises, tax refund claims, customer lists, Intellectual Property,
license royalties, goodwill, trade secrets, proprietary or confidential
information, data bases, business records, data, skill, expertise, experience,
processes, models, drawings, materials and records, permits and licenses,
warranties, manuals, software and all other intangible property of every kind
and nature.
"Instruments" means all "instruments" or "letters of credit"
(each as defined in the UCC), including, without limitation, instruments, and
letters of credit evidencing, representing, arising from or existing in respect
of, relating to, securing or otherwise supporting the payment of, any of the
Accounts, including (but not limited to) promissory notes, drafts, bills of
exchange and trade acceptances, now or hereafter owned or acquired by a Person
or in which a Person now or hereafter has or acquires any rights.
"Intellectual Property" means, collectively, (a) all systems
software and applications software, including, but not limited to, source code,
object code, screen displays and formats, program structure, sequence and
organization, and audiovisual elements, all formulas, processes, ideas and
know-how embodied in any of the foregoing, and all documentation and program
materials, user manuals, operations manuals, flowcharts, programer's notes,
outlines and specifications created in connection with any of the foregoing,
whether or not patentable or copyrightable, (b) concepts, discoveries,
improvements and ideas, (c) Patents, patent rights and patent applications,
copyrights and copyright applications, Trademarks, and (d) Patent Licenses,
Trademark Licenses, copyright licenses and other licenses to use any of the
items described in the foregoing clauses (a), (b) and (c).
-3-
<PAGE> 4
"Inventory" means all "inventory" (as defined in the UCC), now
or hereafter owned or acquired by a Person or in which a Person now or hereafter
has or acquires any rights, wherever located, and, in any event, shall mean and
include, without limitation, all raw materials, inventory and other materials
and supplies, work-in-process, finished goods, and any products made or
processed therefrom and all substances, if any, commingled therewith or added
thereto.
"Patent License" means any written agreement now or hereafter in
existence granting to the Grantor any right to practice any invention on which a
Patent is in existence.
"Patents" means all of the following: (i) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any
other country, including, without limitation registrations, recordings and
applications in the office or agency of the United States, any State thereof or
any other country or any political subdivision thereof listed on Schedule II
hereto, and (ii) all reissues, continuations, continuations-in-part or
extensions thereof.
"Perfection Certificates" means collectively, the certificates
dated as of even date herewith, setting forth the corporate names, chief
executive office or principal places of business in each State and other current
locations of each of the Grantors and such other information as the Collateral
Agent deems reasonably pertinent to the perfection of security interests,
completed and supplemented with the schedules and attachments contemplated
thereby to the satisfaction of the Collateral Agent, and duly executed by an
authorized officer of each such Grantor.
"Permitted Liens" means the Security Interests and the Liens on
the Collateral permitted to be created, to be assumed or to exist pursuant to
Section 14(c) of the Parent Guaranty and Section 8.03 of the Revolving Credit
Agreement.
"Proceeds" means all proceeds of, and all other profits, rentals
or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or realization upon,
Collateral, including, without limitation all claims of a Person against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral and the following types of property acquired with cash proceeds:
Accounts, Inventory, General Intangibles, Documents, Instruments and Equipment.
"Secured Obligations" means:
(a) with respect to MiniMed, the full and punctual payment and
performance in full of all obligations and liabilities now or hereafter existing
of MiniMed and each of MiniMed's Subsidiaries under the Related Documents,
including, without limitation, all principal of, and interest (including,
without limitation, any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of MiniMed or any of its Subsidiaries) on, any Revolving Credit
Note issued pursuant to the
-4-
<PAGE> 5
Revolving Credit Agreement, and all other amounts due from and obligations to be
performed by MiniMed or any of its Subsidiaries under the Revolving Credit
Agreement, any Guaranty or any other Related Document;
(b) with respect to each Subsidiary of MiniMed other than
MiniMed Development Corp., the full and punctual payment and performance in full
of all obligations and liabilities now or hereafter existing of such Subsidiary
under the Subsidiary Guaranty and each other Related Document to which such
Subsidiary is a party; and
(c) with respect to MiniMed Development Corp., the full and
punctual payment and performance in full of all obligations and liabilities now
or hereafter existing of MiniMed Development Corp. under the Master Lease, the
Construction Agency Agreement, the Subsidiary Guaranty and each other Related
Document to which MiniMed Development Corp. is a party;
in each case whether primary or secondary, absolute or
contingent, liquidated or unliquidated, and whether for the payment of money or
the performance of other obligations (monetary or otherwise).
"Secured Parties" means collectively:
(a) the Owner Trustee, as Lessor under the Master Lease, as
beneficiary of the Parent Guaranty and the Subsidiary, and as a party to each of
the other Related Documents;
(b) the Agent and the Lenders from time to time party to the
Credit Agreement and each of the other Related Documents;
(c) the Certificateholders from time to time party to the Trust
Agreement and each of the other Related Documents;
(d) the Agent and the Revolving Credit Lenders from time to time
party to the Revolving Credit Agreement and each of the other Related Documents;
and
(e) the Collateral Agent under each of the Related Documents.
"Security Interests" means the security interests granted
pursuant to Section 2, as well as all other security interests created or
assigned as additional security for the Secured Obligations pursuant to the
provisions of this Agreement.
"Trademark License" means any written agreement now or hereafter
in existence granting to a Person any right to use any Trademark.
"Trademarks" means all of the following: (i) all trademarks,
trade names, corporate names, company names, business names, fictitious business
names, trade styles, service
-5-
<PAGE> 6
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles of
like nature, whether now existing or hereafter adopted or acquired, all
registrations and recordings thereof, (ii) all applications in connection
therewith, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof listed on Schedule III hereto, and (iii) all
reissues, extensions or renewals thereof.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, "UCC" means
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. Grant of Security Interests. Each Grantor hereby
grants, mortgages, assigns, pledges, transfers, hypothecates, sets over and
conveys to the Collateral Agent, for the benefit of the Secured Parties, a
continuing security interest in and to, and a lien upon, all Collateral now or
hereafter accrued or acquired by such Grantor or in which such Grantor now has
or hereafter has or acquires any rights, and wherever located, to secure the
full and punctual payment and performance of all Secured Obligations of such
Grantor. The Security Interests are granted as security only and shall not
subject the Collateral Agent or any Secured Party to, or transfer to the
Collateral Agent or any Secured Party, or in any way effect or modify any
obligation or liability of any Grantor with respect to any Collateral or any
transaction in connection therewith.
SECTION 3. Security for Obligations. With respect to each
Grantor, this Security Agreement secures the full and punctual payment and
performance in full of all Secured Obligations of such Grantor.
SECTION 4. Representations and Warranties. Each Grantor
represents and warrants as follows:
(a) Such Grantor has good and marketable title to all of its
Collateral, free and clear of any Liens other than the Permitted Liens. Except
as listed on Schedule IV attached hereto, none of such Collateral consists of
material contracts, agreements or other documents which by their terms prohibit
an assignment or pledge of such Collateral nor is any Collateral subject to any
agreement which prohibits assignment or pledge of such Collateral by such
Grantor.
(b) Such Grantor has not performed any act or acts that, to the
best knowledge of the Grantors, could prevent the Collateral Agent from
enforcing any of the terms of this Agreement. Other than financing statements or
other similar or equivalent documents or instruments with respect to Permitted
Liens, to such Grantor's knowledge no financing statement,
-6-
<PAGE> 7
mortgage, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of record in any
jurisdiction, and no Collateral is subject to any Lien other than Permitted
Liens. Except as disclosed on Schedule V, no material amount of Collateral is in
the possession of a Person (other than such Grantor or) asserting any claim
thereto or security interest therein, except that the Collateral Agent or its
designee may have possession of Collateral as contemplated hereby.
(c) All of the information set forth in the Perfection
Certificates is true and correct as of the date hereof.
(d) When the UCC financing statements in appropriate form are
filed in the offices specified in the Perfection Certificates, the Security
Interests shall constitute valid and perfected security interests in the
Collateral, prior to all other Liens and rights of others therein except for the
Permitted Liens, to the extent that a security interest therein may be perfected
by filing pursuant to the UCC.
(e) As of the date hereof, no Grantor has any rights in or to
any Patent, Patent License, Trademark or Trademark License except those
reflected in Schedules II and III hereto.
(f) The Inventory and Equipment are insured in accordance with
the requirements of the Related Documents.
SECTION 5. Further Assurances; Covenants.
(a) Each Grantor agrees that from time to time, at its own cost
and expense, such Grantor will promptly execute and deliver and will cause to be
executed and delivered all further instruments and documents (including, without
limitation, financing and continuation statements, any filings with the United
States Patent and Trademark Office) and will take all further action and will
cause all further action to be taken, that the Collateral Agent may reasonably
request in order to create, preserve, perfect and protect the security interest
in the Collateral or to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder or to preserve, perfect and protect each Grantor's
right, title and interest in and to the Collateral.
(b) Each Grantor hereby authorizes the Collateral Agent to file
one or more financing or continuation statements, and amendments thereto, and
take all such further action and execute all such further documents and
instruments as may be reasonably necessary or desirable in order to create,
preserve, perfect and protect the security interest in the Collateral without
the signature of such Grantor where permitted by law. Whenever applicable law
requires the signature of such Grantor on a document to be filed to preserve,
perfect or protect the security interest in the Collateral, such Grantor hereby
appoints the Collateral Agent as such Grantor's attorney-in-fact, with full
power of substitution, to sign such Grantor's name on any such document. Each
Grantor agrees that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement may be used as a financing statement.
The
-7-
<PAGE> 8
Grantors shall, jointly and severally, pay the reasonable costs of, or
incidental to, any recording or filing of any financing statements, financing
statement amendments or continuation statements concerning the Collateral. In
addition, each Grantor will immediately deliver and pledge each Instrument to
the Collateral Agent, appropriately endorsed to the Collateral Agent, provided
that so long as no Event of Default shall have occurred and be continuing, such
Grantor may retain for collection in the ordinary course any Instruments (other
than checks and drafts constituting payments in respect of Accounts) received by
it in the ordinary course of business and the Collateral Agent shall, promptly
upon request of such Grantor, make appropriate arrangements for making any other
Instrument pledged by such Grantor available to it for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent deemed
appropriate to the Collateral Agent, against trust receipt or like document).
(c) MiniMed shall deliver to the Collateral Agent the duly
executed counterpart number 1 of the Master Lease and the Construction Agency
Agreement after the execution and delivery thereof, together with a duly
executed counterpart of the Parent Guaranty and Subsidiary Guaranty, which
counterparts at all times shall be retained in the custody and possession of the
Collateral Agent. In addition, MiniMed shall deliver to the Collateral Agent the
duly executed counterpart number 1 of each amendment, modification, supplement
or waiver made of or to the Master Lease or the Construction Agency Agreement
and a duly executed counterpart of each amendment, modification, supplement or
waiver made with respect to the Parent Guaranty and Subsidiary Guaranty,
immediately after the execution and delivery thereof.
(d) Each Grantor will at all times keep accurate and complete
books and records with respect to the Collateral and agrees that the Collateral
Agent or its representative shall have the right at any time and from time to
time to call at such Grantor's place of business during normal business hours to
inspect and examine the books and records of the Grantor relating to the
Collateral and to make extracts therefrom and copies thereof.
(e) No Grantor will change the location of its chief executive
office or principal place of business in any state unless it shall have given
the Collateral Agent thirty (30) days prior notice thereof, executed and
delivered to the Collateral Agent all financing statements and financing
statement amendments which the Collateral Agent may request in connection
therewith and delivered an opinion of counsel with respect thereto in accordance
with Section 5(j) below. No Grantor shall change the locations, or establish new
locations, where it keeps or holds any Collateral or any records relating
thereto from the applicable locations described in the applicable Perfection
Certificate unless such Grantor shall have given the Collateral Agent fifteen
(15) days prior notice of such change of location, executed and delivered to the
Collateral Agent all financing statements and financing statement amendments
which the Collateral Agent may reasonably request in connection therewith and
delivered an opinion of counsel with respect thereto in accordance with Section
5(j) below, and such Grantor shall have complied with any other requirement in
this Agreement or any other Related Document relating to the location of any
Collateral, provided, however, that each Grantor may keep Collateral at, or in
transit to, any location described in the applicable Perfection Certificate. No
Grantor shall in any event change the location, or establish new locations, of
any Collateral if such change would cause the Security
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Interests in such Collateral to lapse or cease to be a perfected first priority
Security Interest.
(f) No Grantor will change its name, identity or corporate
structure in any manner unless it shall have given the Collateral Agent thirty
(30) days prior notice thereof, executed and delivered to the Collateral Agent
all financing statements and financing statement amendments which the Collateral
Agent may reasonably request in connection therewith.
(g) If any Grantor's Collateral exceeding in value $500,000 in
the aggregate is at any time in the possession or control of any warehouseman,
bailee (other than a carrier transporting Inventory to a purchaser in the
ordinary course of business) or any of such Grantor's agents or processors, such
Grantor shall notify in writing such warehouseman, bailee, agent or processor of
the Security Interests created hereby, shall obtain such warehouseman's,
bailee's, agent's or processor's agreement in writing to hold all such
Collateral for the Collateral Agent's account subject to the Collateral Agent's
instructions, and shall cause such warehousemen, bailee, agent or processor to
issue and deliver to the Collateral Agent warehouse receipts, bills of lading or
any similar documents relating to such Collateral in the Collateral Agent's name
and in form and substance acceptable to the Collateral Agent.
(h) No Grantor will (A) sell, transfer, lease, exchange, assign
or otherwise dispose of, or grant any option, warrant or other right with
respect to, any Collateral except that, subject to the rights of the Collateral
Agent and the Secured Parties hereunder if an Event of Default shall have
occurred and be continuing, the Grantors may dispose of assets if such
disposition is not prohibited by Section 14(m) of the Parent Guaranty or Section
8.13 of the Revolving Credit Agreement, whereupon, in the case of such a
disposition, sale or exchange, the Security Interests created hereby in such
item (but not in any Proceeds arising from such disposition, sale or exchange)
shall cease immediately without any further action on the part of the Collateral
Agent; or (B) create, incur or suffer to exist any Lien with respect to any
Collateral, except for the Permitted Liens.
(i) Each Grantor will, promptly upon request, provide to the
Collateral Agent all information and evidence it may reasonably request
concerning the Collateral, to enable the Collateral Agent to enforce the
provisions of this Agreement.
(j) Prior to each date on which any Grantor proposes to take any
action contemplated by Section 5(e), upon the reasonable request of the Majority
Secured Parties such Grantor shall, at its cost and expense, cause to be
delivered to the Collateral Agent and the Secured Parties an opinion of counsel,
reasonably satisfactory to the Collateral Agent, to the effect that all
financing statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in order to
perfect and protect the Security Interests and priority thereof against all
creditors of and purchasers from such Grantor have been filed in each filing
office necessary for such purposes and that all filing fees and taxes, if any,
payable in connection with such filings have been paid in full. Collateral Agent
and the Secured Parties shall only be entitled to the legal opinion referenced
in this paragraph 5(j) if they determine that any change in location discussed
in Section 5(e) will affect the security
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interest of the Secured Parties reflected in the applicable financing
statements.
(k) Accounts, Etc.
i. Each Grantor shall use all reasonable efforts
consistent with prudent business practice to cause to be collected from its
Account Debtors, as and when due, any and all amounts owing under or on account
of each Account (including, without limitation, Accounts which are delinquent,
such Accounts to be collected in accordance with lawful collection procedures)
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Account. The reasonable costs and expenses
(including, without limitation, reasonable attorney's fees) of collection of
Accounts incurred by the Grantors or the Collateral Agent, shall be borne by the
Grantors, jointly and severally.
ii. Upon the occurrence and during the continuance of
any Event of Default, upon request of the Collateral Agent, each Grantor will
promptly notify (and each Grantor hereby authorizes the Collateral Agent so to
notify) each Account Debtor in respect of any Account or Instrument that such
Collateral has been assigned to the Collateral Agent hereunder, and that any
payments due or to become due in respect of such Collateral are to be made
directly to the Collateral Agent or its designee.
iii. Each Grantor will perform and comply in all
material respects with all of its obligations in respect of Accounts,
Instruments and General Intangibles.
(l) Inventory, Etc. Each Grantor shall notify the Collateral
Agent promptly of any additional location where Inventory is stored which is not
listed in the applicable Perfection Certificate.
(m) Equipment, Etc. Each Grantor shall, no more than one (1)
time per calendar year, (i) within ten (10) days after a request by the Majority
Secured Parties, in the case of Equipment now owned, and (ii) following a
request by the Majority Secured Parties pursuant to subclause (i) above, within
ten (10) days after acquiring any other Equipment, deliver to the Collateral
Agent, for the benefit of the Secured Parties, any and all certificates of
title, and applications therefor, if any, of such Equipment and shall cause the
Collateral Agent, for the benefit of the Secured Parties, to be named as
lienholder on any such certificate of title and applications. Each Grantor shall
not permit any such items to become a fixture to real estate or an accession to
other personal property.
(n) Patents, Trademarks, Etc. Each Grantor shall notify the
Collateral Agent promptly of its acquisition after the Effective Date of any
Patent, Patent License, Trademark or Trademark License. In the event that any
Patent, Patent License, Trademark or Trademark License is infringed,
misappropriated or diluted by a third party, each Grantor shall notify the
Collateral Agent promptly after they learn thereof and shall, if such Grantor
reasonably determines that inaction would materially affect the economic value
of such item(s), promptly sue for infringement, misappropriation or dilution and
to recover any and all damages for such
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infringement, misappropriation or dilution, or take such other actions as such
Grantor shall reasonably deem appropriate under the circumstances to protect
such Patent, Patent License, Trademark or Trademark License. In no event shall
any Grantor, either itself or through any agent, employee or licensee, file an
application for the registration of any Patent or Trademark with the United
States Patent and Trademark Office, unless, upon issuance such Grantor shall
deliver such documents and papers that the Collateral Agent may reasonably
request to evidence the Security Interests in such Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
SECTION 6. Collateral Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time after the occurrence
and during the continuation of an Event of Default, to take any action, to
execute any instruments and to exercise any rights, privileges, options,
elections or powers of such Grantor pertaining or relating to the Collateral
which the Collateral Agent may deem necessary or desirable to preserve and
enforce its security interest in the Collateral and otherwise to accomplish the
purposes of this Security Agreement. The Collateral Agent shall not have any
duty to take any such action, to execute any such instrument, to exercise any
such rights, privileges, options, including, without limitation, termination
options, elections or powers or to sell or otherwise to realize upon any of the
Collateral, as hereinafter authorized, and the Collateral Agent shall not be
responsible for any failure to do so or delay in so doing.
SECTION 7. Reporting and Recordkeeping. Each Grantor covenants
and agrees with the Collateral Agent and the Secured Parties that from and after
the date of this Agreement and until the payment and performance in full of all
Secured Obligations:
(a) Maintenance of Records Generally. Such Grantor will keep and
maintain at its own cost and expense records of the Collateral, in substantially
the form, scope and detail as Grantor currently keeps such records, including,
without limitation, a record of all payments received and all credits granted
with respect to the Collateral. For the Collateral Agent's and the Secured
Parties' further security, such Grantor agrees that the Collateral Agent and the
Secured Parties shall have a security interest in all of the Grantor's books and
records pertaining to the Collateral and, upon the occurrence and during the
continuation of any Potential Default or Event of Default, the Grantor shall
deliver and turn over full and complete copies of any such books and records to
the Collateral Agent or to its representatives at any time on demand of the
Collateral Agent. Prior to the occurrence of a Potential Default or an Event of
Default and upon reasonable notice from the Collateral Agent, such Grantor shall
permit any representative of the Collateral Agent, at reasonable times and
reasonable intervals upon one Business Day's notice, to inspect such books and
records and will provide photocopies thereof to the Collateral Agent.
(b) Further Identification of Collateral. Following the
occurrence and during the continuation of an Event of Default, such Grantor will
if so requested by the Collateral Agent furnish to the Collateral Agent, as
often as the Collateral Agent reasonably requests, statements and schedules
further identifying and describing the Collateral and such other reports in
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connection with the Collateral as the Collateral Agent may reasonably request,
all in reasonable detail.
(c) Notices. Each Grantor will advise the Collateral Agent
promptly, in reasonable detail, (i) of any material Lien or claim made or
asserted against any of the Collateral, (ii) of any material adverse change in
the composition of the Collateral, and (iii) of the occurrence of any other
event which would have a substantial likelihood of having a material adverse
effect on the aggregate value of the Collateral or on the validity, perfection
or priority of the Security Interests.
SECTION 8. Collateral Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Collateral Agent may (but shall not
be obligated to) itself perform, or cause performance of, such agreement. The
Grantors shall reimburse the Collateral Agent on demand for any reasonable
amounts paid or any reasonable expenses incurred by the Collateral Agent in good
faith in connection therewith.
SECTION 9. Collateral Agent's Duties. The powers conferred on
the Collateral Agent hereunder are solely to protect its interest in the
Collateral for the benefit of the Secured Parties and shall not impose any duty
upon it to exercise any such powers. Except as expressly provided herein, the
Collateral Agent shall have no duty to take any steps to preserve the security
interest granted hereby.
SECTION 10. Realization upon Collateral. (a) If an Event of
Default shall occur and be continuing, the Collateral Agent may, and at the
request of the Majority Secured Parties shall, (i) take any and all action
necessary or appropriate to collect any and all amounts payable under or with
respect to the Collateral, (ii) apply any and all amounts in the Collateral
Account to the Secured Obligations in accordance with Section 11 hereof, (iii)
take possession of the Collateral forthwith or at any time thereafter, in which
case the Grantor shall marshal and deliver the Collateral to the Collateral
Agent at such time and place as the Collateral Agent may reasonably specify, and
(iv) sell the whole or, from time to time, any part of the Collateral, by
private or public sale, in such order or otherwise in such manner as the
Majority Secured Parties may elect in their sole discretion. The Collateral
Agent shall have, with respect to the Collateral, in addition to any other
rights and remedies which may be available to it at law or in equity or pursuant
to this Security Agreement, any Related Document or any other contract or
agreement, all rights and remedies of a secured party under any applicable
version of the Uniform Commercial Code of the relevant jurisdictions relating to
the Collateral, and it is expressly agreed that if the Collateral Agent should
proceed to dispose of or utilize the Collateral, or any part thereof, in
accordance with the provisions of said versions of the Uniform Commercial Code,
ten days' notice by the Collateral Agent to each Grantor of the intended
disposition of such Grantor's collateral shall be deemed to be reasonable notice
under any such provision requiring such notice. Any sale of Collateral by the
Collateral Agent may be made on such terms as the Majority Secured Parties may
reasonably specify, without assuming any credit risk and without any obligation
to advertise or give notice of any kind other than that necessary under
applicable law. The Collateral Agent and the Secured Parties shall incur no
liability as a result of the sale of the Collateral, or any part
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thereof, at any private or public sale. Except as otherwise stated herein each
Grantor hereby waives, to the extent permitted by applicable law, any claims
against the Collateral Agent and the Secured Parties arising by reason of the
fact that the price at which Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations, even if the
Collateral Agent accepts the first offer received and does not offer such
Collateral to more than one possible purchaser. In exercising its rights under
this Section 10, the Collateral Agent will act in a commercially reasonable
manner and comply with all applicable laws, including Section 9-207 of the
Uniform Commercial Code.
The Collateral Agent or any Secured Party may be the purchaser
of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations or if
otherwise permitted under applicable law, at any private sale) and thereafter
hold the same, absolutely, free from any right or claim of whatsoever kind. The
Grantors will execute and deliver such documents and take such other action as
the Collateral Agent deems reasonably necessary or advisable in order that any
such sale may be made in compliance with law. Upon any such sale the Collateral
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold to it absolutely, free from any claim or right of any kind,
including any equity or right of redemption of the Grantors. To the extent
permitted by law, each Grantor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale shall (1) in
case of a public sale, state the time and place fixed for such sale, and (2) in
the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix in the notice of such sale. At any such sale the Collateral may be sold in
one lot as an entirety or in separate parcels, as the Collateral Agent may
determine. The Collateral Agent shall not be obligated to make any such sale
pursuant to any such notice. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Collateral
Agent until the selling price is paid by the purchaser thereof, but the
Collateral Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The Collateral
Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction. The Grantors shall remain
liable, jointly and severally, for any deficiency.
(b) Following the occurrence and during the continuation of an
Event of Default, for the purpose of enforcing any and all rights and remedies
under this Agreement, the Collateral Agent may (i) require the Grantors to, and
the Grantors agree that they will, at their
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expense and upon the request of the Collateral Agent, forthwith assemble all or
any part of the Collateral as directed by the Collateral Agent and make it
available at a place designated by the Collateral Agent which is, in the
Collateral Agent's reasonable opinion, reasonably convenient to the Collateral
Agent and the Grantors, whether at the premises of a Grantor or otherwise, (ii)
to the extent permitted by applicable law, enter, with or without process of law
and without breach of the peace, any premise where any of the Collateral is or
may be located and, without charge or liability to the Collateral Agent, seize
and remove such Collateral from such premises, (iii) have access to and use the
Grantors' books and records, computers and software relating to the Collateral,
and (iv) prior to the disposition of the Collateral, store or transfer such
Collateral without charge in or by means of any storage or transportation
facility owned or leased by the Grantors, process, repair or recondition such
Collateral or otherwise prepare it for disposition in any manner and to the
extent the Collateral Agent deems appropriate and, in connection with such
preparation and disposition, use without charge any trademark, trade name,
copyright, patent or technical process used by the Grantors (at the expense of
the Grantors).
(c) Without limiting the generality of the foregoing, if any
Event of Default has occurred and is continuing:
(i) the Collateral Agent may license, or sublicense,
consistent with such Grantor's rights therein, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any Patents or
Trademarks included in the Collateral throughout the world for such term or
terms, on such conditions and in such manner as the Collateral Agent shall in
its sole discretion determine;
(ii) the Collateral Agent may (without assuming any
obligations or liability thereunder), at any time and from time to time, enforce
(and shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of the Grantors in, to and under any Patent
Licenses or Trademark Licenses and take or refrain from taking any action under
any thereof, and each Grantor hereby releases the Collateral Agent and each of
the Secured Parties from, and agrees to hold the Collateral Agent and each of
the Secured Parties free and harmless from and against any claims arising out
of, any lawful action so taken or lawfully omitted to be taken with respect
thereto except for the Collateral Agent's or such Secured Parties' bad faith,
negligence or wilful misconduct as determined by a final and nonappealable
decision of a court of competent jurisdiction; and
(iii) upon request by the Agent, the Grantors will
execute and deliver to the Collateral Agent powers of attorney, in form and
substance satisfactory to the Collateral Agent, for the implementation of any
lease, assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark. In the event of any such disposition
pursuant to this Section 10, the Grantors shall to the extent possible, supply
their know-how and expertise relating to the manufacture and sale of the
products bearing Trademarks or the products or services made or rendered in
connection with Patents, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products, to the
Collateral Agent.
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SECTION 11. Application of Proceeds. The Collateral Agent shall
apply the proceeds of any realization upon or sale of the whole or any part of
the Collateral, after deducting all reasonable costs and expenses of collection,
retaking, handling, storage, preparation, sale and delivery (including, without
limitation, reasonable counsel's fees and expenses) incurred by it in connection
with such realization or sale to the payment of the Secured Obligations in
accordance with the Participation Agreement, and the Grantors shall remain in
all respects liable to the Collateral Agent and the Secured Parties for any
unrecovered balance owing to them.
SECTION 12. Waiver of Stays, etc. To the fullest extent that the
Grantors may lawfully so agree, each Grantor agrees that it will not at any time
plead, claim or take the benefit of any appraisement, valuation, stay,
extension, moratorium or redemption law now or hereafter in force to prevent or
delay the enforcement of this Security Agreement or the absolute sale of any
portion of or all of the Collateral or the possession thereof by any purchaser
at any sale under this Security Agreement, and each Grantor, for itself and all
who may claim under each Grantor, as far as each Grantor now or hereafter
lawfully may do so, hereby waives the benefit of all such laws.
SECTION 13. Continuing Security Interest. This Security
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment and performance in
full of the Secured Obligations, (b) be binding upon each Grantor and its
successors and assigns, and (c) inure to the benefit of the Collateral Agent,
each of the Secured Parties and their respective successors, transferees and
assigns. At any time and from time to time prior to termination of the Security
Interests, the Collateral Agent may release any of the Collateral with the prior
written consent of the Majority Secured Parties; provided, however, that the
Security Interest of the Collateral Agent in any Collateral constituting an
asset of which the Grantors may dispose under the Related Documents shall
automatically terminate and be released upon such disposition by any such
Grantor without the necessity of any further action or consent by the Collateral
Agent or any Secured Party. Upon the payment and performance in full of the
Secured Obligations and termination of all Commitments of the Secured Parties to
extend credit or provide financing, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the Grantors. Upon
any such termination, the Collateral Agent will deliver to MiniMed counterpart
No. 1 of the Master Lease and Construction Agency Agreement, the original
executed counterpart of the Parent Guaranty and Subsidiary Guaranty delivered to
it and any amendments or supplements thereto held by the Collateral Agent and
will, at the expense of the Grantors, execute and deliver to the Grantors such
other documents as the Grantor shall reasonably request to evidence such
termination and release of all security interests held for the benefit of the
Secured Parties.
SECTION 14. Obligations Under the Master Lease, the Construction
Agency Agreement and Subordinated Mortgage. Anything herein contained to the
contrary notwithstanding, (i) the Lessee and Construction Agent, as applicable,
shall remain liable under the Master Lease, the Construction Agency Agreement
and the Subordinated Mortgage to perform all of its obligations and agreements
thereunder, (ii) if an Event of Default shall occur and
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be continuing, the obligations of the Lessee, Construction Agent and Mortgagee,
as applicable, under the Master Lease, the Construction Agency Agreement and the
Subordinated Mortgage may be performed by the Collateral Agent or its nominee or
other assignee of the Collateral Agent without releasing the Lessee,
Construction Agent and Mortgagee, as applicable, therefrom, and (iii) neither
the Collateral Agent nor the Secured Parties shall have any obligation or
liability under the Master Lease, the Construction Agency Agreement or the
Subordinated Mortgage by reason of, or arising out of, this Security Agreement
or be obligated to perform any of the obligations or agreements of the Lessee
and Construction Agent, as applicable, thereunder or to make any payment or to
make any inquiry of the sufficiency of any payment received by the Lessee, the
Construction Agent, the Mortgagee or the Collateral Agent or to present or file
any claim or to take any other action to enforce any right, title or interest
assigned hereunder.
SECTION 15. Intentionally Omitted.
SECTION 16. No Action Contrary to Lessee's Rights under the
Master Lease or Lessee's Rights, as agent, under the Construction Agency
Agreement. So long as no Event of Default has occurred and is continuing and
subject respectively to the terms and conditions of the Master Lease and the
Construction Agency Agreement, the Collateral Agent shall not take or cause to
be taken any action contrary to the rights of the Lessee under the Master Lease
and the Construction Agency Agreement; provided, however, that nothing contained
herein shall limit any rights the Secured Parties and the Collateral Agent may
have against the Lessee pursuant to any of the other Related Documents to which
it is a party.
SECTION 17. GOVERNING LAW AND CONSENT TO JURISDICTION, WAIVER OF
JURY TRIAL, SERVICE OF PROCESS. (a) THIS AGREEMENT HAS BEEN EXECUTED AND
DELIVERED IN THE STATE OF NEW YORK. EACH GRANTOR AGREES THAT, TO THE MAXIMUM
EXTENT PERMITTED BY THE LAWS OF THE STATE OF NEW YORK, THIS AGREEMENT, AND THE
RIGHTS AND DUTIES OF EACH GRANTOR HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT
LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, IN RESPECT OF ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. EACH GRANTOR HEREBY IRREVOCABLY SUBMITS,
FOR ITSELF AND ITS PROPERTIES, TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE SUPREME COURT OF THE STATE
OF NEW YORK IN THE COUNTY OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT, AND TO THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH GRANTOR HEREBY WAIVES AND AGREES NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
SUCH COURT, THAT THE SUIT, ACTION OR
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PROCEEDING, IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURT. THIS SUBMISSION TO JURISDICTION
IS NONEXCLUSIVE AND DOES NOT PRECLUDE THE COLLATERAL AGENT OR ANY SECURED PARTY
FROM OBTAINING JURISDICTION OVER ANY GRANTOR IN ANY COURT OTHERWISE HAVING
JURISDICTION. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GRANTOR AGREES NOT
TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH
COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON
TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. EACH GRANTOR AGREES THAT SERVICE OF
PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR
NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW
YORK. EACH GRANTOR EXPRESSLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM RELATED TO THIS AGREEMENT. EACH GRANTOR ACKNOWLEDGES
THAT THE PROVISIONS OF THIS SECTION 17 HAVE BEEN BARGAINED FOR AND THAT THEY
HAVE BEEN REPRESENTED BY COUNSEL IN CONNECTION HEREWITH.
(b) Each Grantor hereby irrevocably designates, appoints and
empowers CT Corporation System, whose present address is 1633 Broadway, New
York, New York 10019, as its authorized agent to receive, for and on its behalf
and its property, service of process in the State of New York when and as such
legal actions or proceedings may be brought in the courts of the State of New
York or of the United States of America sitting in New York, and such service of
process shall be deemed complete upon the date of delivery thereof to such agent
whether or not such agent gives notice thereof to such Grantor, or upon the
earliest of any other date permitted by applicable law. It is understood that a
copy of said process served on such agent will as soon as practicable be
forwarded to such Grantor, at its address set forth on the signature pages
attached hereto, but its failure to receive such copy shall not affect in any
way the service of said process on said agent as the agent of any such Grantor.
Each Grantor irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of the
copies thereof by certified mail, return receipt requested, postage prepaid, to
it at its address set forth in Section 19(c), such service to become effective
upon the earlier of (i) the date ten (10) calendar days after such mailing or
(ii) any earlier date permitted by applicable law. Each Grantor agrees that it
will at all times continuously maintain an agent to receive service of process
in the State of New York on behalf of itself and its properties and in the event
that, for any reason, the agent named above or its successor shall no longer
serve as its agent to receive service of process in the State of New York on its
behalf, it shall promptly appoint a successor so to serve and shall advise the
Lessor thereof (and shall furnish to the Lessor the consent of any successor
agent so to act). Nothing in this Section 17(b) shall affect the right of the
Collateral Agent to bring proceedings against any Grantor in the courts of any
other jurisdiction or to serve process in any other manner permitted by
applicable law.
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SECTION 18. Expenses. In the event that any Grantor fails to comply with
the provisions of any Related Documents, such that the value of any Collateral
or the validity, perfection, rank or value of the Security Interests are thereby
diminished or potentially diminished or put at risk, the Collateral Agent, if
requested by the Majority Secured Parties may, but shall not be required to,
effect such compliance on behalf of such Grantor, and the Grantors shall
reimburse the Collateral Agent, jointly and severally, for the reasonable costs
thereof on demand. All reasonable insurance expenses and all reasonable expenses
of protecting, storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral, any and all excise, stamp, intangibles, transfer,
property, sales, and use taxes imposed by any state, federal, or local authority
or any other governmental authority on any of the Collateral, or in respect of
periodic appraisals and inspections of the Collateral to the extent the same may
be requested by the Majority Secured Parties from time to time, or in respect of
the sale or other disposition thereof, shall be borne and paid by the Grantors;
and if the Grantors fail promptly to pay any portion thereof when due, the
Collateral Agent or such Secured Party may, at its option, but shall not be
required to, pay the same and charge the Grantors' accounts therefor, and the
Grantors agree to reimburse the Collateral Agent or such Secured Party therefor
on demand. All sums so paid or incurred by the Collateral Agent or such Secured
Party for any of the foregoing and any and all other sums for which the Grantors
may become liable hereunder and all reasonable costs and expenses (including
reasonable attorneys' fees, legal expenses and court costs) incurred by the
Collateral Agent or such Secured Party in enforcing or protecting the Security
Interests or any of their rights or remedies thereon shall be payable by the
Grantors on demand and shall bear interest (after as well as before judgment)
until paid at a rate equal to the Base Rate plus an additional 2.00% per annum,
and shall be additional Secured Obligations hereunder.
SECTION 19. Additional Grantors. In the event that any Subsidiary of
MiniMed is required, under the terms of the Parent Guaranty, the Revolving
Credit Agreement or any other Related Document or otherwise, to become a Grantor
hereunder, such Subsidiary shall so become a Grantor hereunder, and be bound by
all of the terms and conditions hereof, upon delivering to the Collateral Agent
an executed counterpart of a Supplement to Security Agreement in the form of
Exhibit A attached hereto.
SECTION 20. Miscellaneous.
(a) Assignment. No Grantor may assign its rights or obligations
under this Agreement except as provided in the Participation Agreement. The
Collateral Agent may assign its rights under this Agreement in accordance with
the provisions of the Participation Agreement, and no such assignment or
delegation shall diminish any Grantor's obligations hereunder.
(b) Amendments and Waivers. The provisions of this Agreement may
from time to time be amended, modified or waived solely in accordance with the
provisions of the Participation Agreement. No failure of delay on the part of
the Collateral Agent or any Secured Party in exercising any power or right under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
-18-
<PAGE> 19
exercise thereof or the exercise of any other power or right.
(c) Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing (including telex,
telecopier or similar writing) and shall be given to such party at its address
or telecopier number set forth below or such other address, telex or telecopier
number as such party may hereafter specify by notice to the other parties listed
below. Any notice, request, demand or other communication sent by telex or
telecopier shall be promptly confirmed with a copy of such notice sent by
courier or by first class mail.
If to the Collateral Agent:
ING (U.S.) Capital LLC
55 East 52nd Street, 33rd Floor
New York, New York 10055
Attention: Chief Credit Officer
Telecopier: (212) 750-8935
With copies of each such notice to be simultaneously given, delivered or
served to the following addresses:
ING (U.S.) Capital LLC
Atlanta Office
200 Galleria Parkway, Suite 950
Atlanta, Georgia 30339
Attention: Darren G. Wells
Telecopier: (770) 951-1005
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens
Telecopier: (404) 572-5100
If to the Grantor:
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telecopier: (818)367-1460
With a copy of each such notice to be simultaneously given, delivered or
served
-19-
<PAGE> 20
to the following addresses:
Brobeck Phleger & Harrison
550 West C Street, Suite 1300
San Diego, California 92101
Attention: Scott Biel
Telecopier: (619) 234-3848
Each such notice, request or other communication shall be effective when
actually received.
(d) Cumulative Rights; No Waiver. The rights, powers and
remedies of the Collateral Agent hereunder are cumulative and in addition to all
rights, powers and remedies provided under any and all agreements between the
Grantors and the Collateral Agent relating hereto, at law, in equity or
otherwise. Neither any delay nor any omission by the Collateral Agent to
exercise any right, power or remedy shall operate as a waiver thereof, nor shall
a single or partial exercise thereof preclude any other or further exercise
thereof or any exercise of any other right, power or remedy.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which counterparts, when executed and delivered, shall be deemed an original
and all of which counterparts, taken together, shall constitute one and the same
Agreement.
(f) 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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
(g) Headings. The Article and Section headings in this Agreement
are for convenience of reference only and shall not affect the interpretation
hereof.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the date first above written.
ING (U.S.) CAPITAL LLC,
as Collateral Agent
By: /s/ DARREN J. WELLS
---------------------------------
Name: Darren J. Wells
Title: Managing Director
MINIMED INC.,
a Delaware corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
MINIMED DEVELOPMENT CORP.,
a Delaware corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
MINIMED DISTRIBUTION CORP.,
a Delaware corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
<PAGE> 22
CLARK FINANCIAL SERVICES, INC.,
a Florida corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
CLARK WHOLESALE CO.,
a Florida corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
HOME MEDICAL SUPPLY, INC.,
a California corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
HOME MEDICAL SUPPLY, INC.,
a Georgia corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
<PAGE> 23
HOME MEDICAL SUPPLY OF
MICHIGAN, INC., a Michigan
corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
PHARMAX, INC., a Florida corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
CLARK PHARMACY, INC.,
a Georgia corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
DIABETIX DEPOT, INC., a Florida
corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
HMS, INC., an Alabama corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
<PAGE> 24
HOME MEDICAL SUPPLY, INC.,
a Florida corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
HOME MEDICAL SUPPLY, INC.,
a Tennessee corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
MEDICAL MANAGEMENT & MARKETING
OF SOUTH FLORIDA, INC., a Florida
corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
SOUTH BROWARD MEDICAL ARTS
PHARMACY, INC., a Florida
corporation
By: /s/ TERRANCE H. GREGG
---------------------------------
Name: Terrance H. Gregg
Title: President
<PAGE> 1
EXHIBIT 10.7
LICENSE, SUPPLY AND DISTRIBUTION
AGREEMENT
BETWEEN
ELI LILLY AND COMPANY
"Lilly"
AND
MINIMED INC.
"MiniMed"
<PAGE> 2
LICENSE, SUPPLY AND DISTRIBUTION AGREEMENT
AGREEMENT made between Eli Lilly and Company, an Indiana corporation, whose
principal place of business is Lilly Corporate Center, Indianapolis, Indiana
46285 and MiniMed Inc., a Delaware corporation, whose principal place of
business is 12744 San Fernando Road, Sylmar, California 91342.
WITNESSETH
WHEREAS, Eli Lilly and Company and its Affiliates ("Lilly") are a global
research-based corporation that develops, manufactures, and sells pharmaceutical
and animal health products; and
WHEREAS, MiniMed and its Affiliates ("MiniMed") desire to obtain a license
to certain Lilly intellectual property and for certain manufacturing and selling
activities of certain Lilly products;
NOW, THEREFORE, Lilly and MiniMed agree as follows:
1 DEFINITIONS:
1.1 "ADVERSE EVENT" shall mean any untoward happening in a patient or
subject during or after administration of Products via Device, without regard to
causal relationship between Products, Device and the event.
1.2 "AFFILIATE" shall mean any entity which controls ("control" meaning
command of at least 50% of the voting shares or ownership interests) is
controlled by, or is under common control with, a party to this Agreement, and
in countries where 50% control is not permitted by law or administrative
practice, the maximum permitted.
1.3 "AGREEMENT PRODUCTION FORECAST" shall have the meaning as set forth in
Section 3.5 of this Agreement.
1.4 "BASAL INFUSER" shall mean a mechanical or electro-mechanical device
for continuous subcutaneous delivery of drugs without bolus capability.
1.5 "BULK MATERIAL" shall mean the Lilly Insulin Analog, known as insulin
lispro of rDNA origin, in bulk crystal form.
1.6 "cGCP" shall mean the then current Good Clinical Practices as defined
in U.S. Regulations 21 CFR Section 50, 54, 56, 312 and 314, (or in the case of
foreign jurisdictions, comparable Section regulatory standards), including those
procedures
<PAGE> 3
expressed or implied in the regulatory filings made with respect to the Product
with the FDA or foreign regulatory agents.
1.7 "cGMP" shall mean current Good Manufacturing Practices as defined in
the U.S. regulations 21 CFR Section 210, 211 et seq., and the EEC Guide to Good
Manufacturing Practices for Medicinal Products (Vol. IV Rules Governing
Medicinal Products in the European Community 1992) and other regulations
pertaining to Good Manufacturing Practices in other countries as amended or
re-enacted from time to time.
1.8 "CALENDAR YEAR" shall mean the twelve month period ending on December
31.
1.9 "CONFIDENTIAL INFORMATION" shall mean each Party's confidential
information, inventions, know-how or data, and shall include, without
limitation, manufacturing, marketing, financial, regulatory, personnel and other
business information and plans, whether in oral, written, graphic or electronic
form and whether in existence as of the Effective Date or developed or acquired
in the future, except where such information: (i) is public knowledge at the
time of disclosure by the disclosing Party; (ii) becomes public knowledge
through no fault of the receiving Party; (iii) was in the possession of the
receiving Party at the time of disclosure by the disclosing Party as evidenced
by proper business records, (iv) is obtained by the receiving party from a third
party who is not under an obligation of confidentiality and has a lawful right
to make such disclosure. Notwithstanding any other terms in this Agreement
relating to confidentiality and/or non-disclosure of information, either Party
shall be permitted and allowed to provide a copy of the Agreement to the
appropriate U.S. and/or foreign tax authorities, if requested, without advance
written notice or approval of the other Party.
1.10 "CONTINUOUS INFUSION DELIVERY" refers to a device for continuously
administering a fluid to a patient parenterally for an extended period of time
or for intermittently administering a fluid to a patient parenterally over an
extend period of time without having to establish a new site of administration
each time the fluid is administered. Continuous Infusion Delivery as used herein
shall include, without limitation, pulsatile delivery in which such pulses are
sufficiently frequent to physiologically simulate continuous infusion delivery.
1.11 "DEVICE" shall mean any device designed and/or manufactured by or for
MiniMed as identified in the Plan for the Continuous Infusion Delivery of
Product for the Field. The term "Device" shall not include diffusion patch
devices, Basal Infuser devices, pens or other non-continuous or non-pulsatile
infusion delivery devices. Unless otherwise noted, the use of the term "device"
in this Agreement is not intended to indicate thereby the definition of "device"
in the Federal Food, Drug and Cosmetic Act, as amended.
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<PAGE> 4
1.12 "EFFECTIVE DATE" shall mean the last date of signature below.
1.13 "FDA" shall mean the United States Food and Drug Administration, or
any successor entity thereto, or any equivalent body elsewhere in the Territory
which is responsible for approval of human drug and device applications.
1.14 "FIELD" shall mean only internal (e.g., implantable) infusion pumps
(the "Internal Infusion Pump Field"), or external infusion pumps (e.g.,
MiniMed's Model 507c) (the "External Infusion Pump Field"), with a useful life
of at least one year, such pumps providing delivery into the human body through
a cannula, microcannulae, or tube and used for the Continuous Infusion Delivery
of insulin or Insulin Analogs for the treatment of diabetes, and not other
devices, like, but not limited to, diffusion patches (including
iontophoresis-assisted delivery), Basal Infusers (except as provided for
herein), pens, etc.
1.15 "GOVERNMENT APPROVALS" shall mean the official authorizations required
as necessary to manufacture, use, distribute, market and sell Products in
countries in the Territory.
1.16 "IMPROVEMENTS" shall mean a patentable invention made during the term
of this Agreement by either Lilly, or a third party pursuant to the authority of
Lilly ("Lilly Improvement"), or MiniMed, or a third party pursuant to the
authority of MiniMed ("MiniMed Improvement"), or jointly by Lilly, or a third
party pursuant to the authority of Lilly, and MiniMed, or a third party pursuant
to the authority of MiniMed ("Joint Improvement"), that is, at the time the
invention is made, dominated by a Valid Claim of Licensed Patents.
1.17 "INITIAL EXPIRATION DATE" shall mean the date 5 years from the
Effective Date.
1.18 "INSULIN ANALOG" shall mean any protein having an amino acid sequence
not corresponding identically to natural human insulin, having functional
activity similar to human insulin and having a greater tendency, as compared to
natural human insulin, to dissociate to less aggregated states.
1.19 "LATENT DEFECTS" shall mean defects that exist at time of delivery of
Bulk Material to MiniMed that cause Bulk Material to fail to conform to the
Specifications or otherwise fail to conform to the warranties provided by Lilly
hereunder.
1.20 "LICENSED CLAIMS" shall have the meaning ascribed to in Appendix I,
and all amendments to such Licensed Claims made hereafter in any continuing
application and/or any patents issuing on said applications or continuing
applications, including, without limitation, any divisions, renewals,
continuations, continuations-in-part,
4
<PAGE> 5
substitutions, extensions, re-examinations or re-issues thereof in the
Territory.
1.21 "LICENSED PATENTS" shall mean Lilly's U.S. Patent Application Serial
No. 09/096,247 (attached as Appendix H), and any patents issuing on such
applications, and any and all divisions, continuations, continuations-in-part,
substitutions, extensions, renewals or reissues thereof and any corresponding
foreign or United States patent rights thereof in the Territory which claim
formulations of Bulk Material or methods of formulating Bulk Material for the
Field.
1.22 "LILLY KNOW-HOW" shall mean all Lilly information, including, without
limitation, Confidential Information, tangible materials including Proprietary
Materials, ideas, inventions (including patentable inventions), practices,
methods, knowledge, know-how, skill, experience, documents, clinical and
regulatory strategies, including pharmacological, toxicological and clinical
test data, analytical and quality control data, patent and legal data or
descriptions, chemical formulations, processes, techniques, data, rights of
reference and trade secrets which are owned or controlled by Lilly on the
Effective Date or developed by Lilly during the Agreement; which are transferred
by Lilly to MiniMed and which are pertinent to the development, use, formulation
and obtaining and/or maintaining Governmental Approvals and marketing of
Products; which are not the subject of Licensed Patents or Improvements; and
which Lilly is not precluded by law or contract (prior to the Effective Date)
from transferring to MiniMed.
1.23 "LILLY PATENTABLE INVENTION" shall mean a patentable invention made by
Lilly or a third party pursuant to the authority of Lilly during the term of
this Agreement which is not a Lilly Improvement but is useful in the formulation
of Products.
1.24 "LOSSES" shall mean any liabilities, damages, fines, penalties, costs
or expenses, including reasonable attorneys' and experts' fees, incurred by
either Party which arise from any claim, lawsuit or other action by a third
party.
1.25 "MAJOR MARKET COUNTRY" shall mean at least one of the following: the
United States of America, Germany, France or, provided that Reimbursement
Approvals are obtained for MiniMed pumps and Products in Japan, Japan.
1.26 "MANUFACTURING ACTIVITIES" shall mean the activities listed in
Appendix A.
1.27 "MANUFACTURING RESPONSIBILITIES DOCUMENT" ("MRD") shall mean a manual
containing certain specifications, procedures, methods and personnel contacts
relating to the manufacture and supply of Bulk Material by Lilly to MiniMed that
will be compiled and agreed upon prior to the supply of Bulk Material to MiniMed
as described according to Section 9.1 of this Agreement. A copy of the table of
contents
5
<PAGE> 6
of such MRD is attached hereto as Appendix G. Sections of the MRD may be
modified from time to time through the issuance of a revised section
incorporating the modification and stating the effective date of the
modification. Each such revised section shall be signed on behalf of each of the
Parties by a duly authorized representative. The authorized representative shall
be of a management level no lower than the management level of the authorized
representative who signed that section of the original MRD.
1.28 "MARKET DATE" shall mean the date of MiniMed's first marketing or
first commercial sale of Products in a Major Market Country
1.29 "MINIMED KNOW-HOW" shall mean all MiniMed information, including
Confidential Information, tangible materials including Proprietary Materials,
ideas, inventions (including patentable inventions), practices, methods,
knowledge, know-how, skill, experience, documents, clinical and regulatory
strategies, including pharmacological, toxicological and clinical test data,
analytical and quality control data, manufacturing, patent and legal data or
descriptions, chemical formulations, processes, techniques, data, rights of
reference and trade secrets which are owned or controlled by MiniMed on the
Effective Date or developed by MiniMed during the Agreement; which are
transferred by MiniMed to Lilly; which are pertinent to the development,
manufacture, use, formulation and obtaining and/or maintaining Governmental
Approvals and marketing of Products; which are not the subject of Licensed
Patents or Improvements; and which MiniMed is not precluded by law or contract
(prior to the Effective Date) from transferring to Lilly.
1.30 "MINIMED PATENTABLE INVENTION" shall mean a patentable invention made
by MiniMed, or a third party pursuant to the authority of MiniMed, during the
term of this Agreement which is not a MiniMed Improvement but is useful in the
manufacture and/or formulation of Products.
1.31 "NDA" shall mean (a) the single application or set of applications for
Products and/or pre-market approvals to make and sell commercially Products and
compatible commercial Devices, filed by MiniMed or sublicensee thereof with the
FDA having the administrative authority to regulate the approval for marketing
of new human pharmaceutical or biological therapeutic products, delivery systems
and devices and (b) any related registrations with or notifications to the FDA.
1.32 "PARTY" shall mean Lilly or MiniMed and when used in the plural
("Parties") shall mean both Lilly and MiniMed.
1.33 "PHASE III CLINICAL TRIALS" shall mean large scale human clinical
trials conducted in patients in accordance with cGCPs to achieve a statistically
significant level of efficacy and a level of safety in the particular indication
tested and required to obtain registration of product with health regulatory
authorities.
6
<PAGE> 7
1.34 "PLAN" shall mean MiniMed's research, development, Government
Approvals and marketing program and timetable leading to the successful
registration and marketing of Products in conformance with the objectives of
this Agreement. The Plan is appended to this Agreement as Appendix D and will be
updated by MiniMed no less frequently than annually until Product marketing has
commenced in the USA and the European Union.
1.35 "PROPRIETARY MATERIALS" shall mean tangible materials or substances,
including, but not limited to chemicals, metabolites, biological materials, and
formulations, which are owned or controlled by Lilly or MiniMed on the Effective
Date and/or developed by Lilly or MiniMed, or a third party pursuant to the
authority of Lilly or MiniMed, during the Agreement, which are transferred
between Lilly and MiniMed and which are pertinent to the development,
manufacture, use, formulation and obtaining and/or maintaining Government
Approvals and/or sale of Products.
1.36 "PRODUCT(S)" shall mean formulations of Bulk Material pursuant to the
teachings of the Licensed Claims, Improvements and Lilly Know-How in the forms
listed in Appendix B for use only in the Field and manufactured and/or
marketed/sold by MiniMed and/or any sublicensee of MiniMed.
1.37 "PURCHASE PRICE" shall mean the price at which Lilly sells the Bulk
Material to MiniMed as set forth in Appendix C of this Agreement.
1.38 "RECALL" shall mean a recall as defined in the RCD.
1.39 "REGULATORY AND CLINICAL DOCUMENT (RCD)" shall mean a manual
containing any protocols or procedures and personnel contacts associated with or
necessary for the successful registration and marketing of Products in the
Territory, e.g., management of Adverse Events, management of Recalls, compliance
with FDA requirements and any other issues related to regulatory affairs and
clinical plans as described according to Section 4.2 of this Agreement.
1.40 "REIMBURSEMENT APPROVALS" shall mean the official authorizations
required as necessary to obtain reimbursement from third party payers in the
Territory other than the United States.
1.41 "SELLING ACTIVITIES" shall mean the activities listed in Appendix A.
1.42 "SEVEN YEAR ROLLING PRODUCTION FORECAST" shall have the meaning as set
forth in Section 3.5 of this Agreement.
1.43 "SPECIFICATIONS" shall mean the then-current Lilly specifications
applicable to the manufacture of Bulk Material. As of the Effective Date the
Lilly
7
<PAGE> 8
specifications applicable to the manufacture of Bulk Material are as set forth
in Appendix F.
1.44 "TERRITORY" shall mean the world.
1.45 "TOXICOLOGY STUDIES" shall mean all toxicology and absorption,
distribution, metabolism and elimination (ADME) studies which are needed to
register Products in the Territory.
1.46 "VALID CLAIM" shall mean a claim included in Licensed Patents that has
not expired or been held invalid or unenforceable by a court of competent
jurisdiction in a final and non-appealable judgment.
2 GRANT
2.1 GRANT AND TERRITORY. Lilly hereby grants to MiniMed the non-exclusive
right to conduct the Manufacturing Activities and the Selling Activities of the
Products for the Field in the Territory. MiniMed is granted no rights to
products, or manufacture of products, other than set forth in Appendix B.
Further, in accordance with the terms of this Agreement, Lilly grants to
MiniMed, solely with respect to the Products for the Field in the Territory the
following: (i) an exclusive license, except as to Lilly for Lilly research
purposes only, to the Licensed Claims (Appendix I) of Licensed Patents (Appendix
H) solely for purposes of performing its obligations under this Agreement; (ii)
a right of first negotiation for a period of six (6) months following notice to
MiniMed of the existence of a Lilly Patentable invention for use in the Field to
an exclusive license including commercially reasonable royalty terms; (iii) a
non-exclusive royalty-free license in the Field, solely for purposes of
performing its obligations under this Agreement, to Lilly Improvements and to
the Lilly Know-How. MiniMed shall have the right to sublicense its rights under
Licensed Claims of the Licensed Patents under the same terms and conditions of
this Agreement, subject to the provisions of Section 2.3 below.
2.2 GRANT BACK. (a) In the event that one or more employees of MiniMed or
of a third party pursuant to the authority of MiniMed, makes or creates a
MiniMed Improvement, MiniMed shall grant to Lilly a worldwide, royalty-free
(solely as to MiniMed), nonexclusive license, without the right to sublicense,
other than to a commercial partner of Lilly (so long as such commercial partner
does not manufacture, market, promote or label products using the Improvements
for use in the Field), to such MiniMed Improvement, such grant back being
non-terminable under Section 13.5 below.
(b) In the event that one or more employees of MiniMed or of a third party
pursuant to the authority of MiniMed, makes or creates a MiniMed Patentable
Invention, MiniMed shall grant to Lilly a worldwide, nonexclusive license,
without the
8
<PAGE> 9
right to sublicense, other than to a commercial partner of Lilly (so long as
such commercial partner does not manufacture, market, promote or label products
using the MiniMed Patentable Invention for use in the Field), to such MiniMed
Patentable Invention, such nonexclusive license including commercially
reasonable royalty terms. In addition, MiniMed grants to Lilly a right of first
negotiation, for a period of six (6) months following notice to Lilly of the
existence of a MiniMed Improvement or MiniMed Patentable Invention, for an
exclusive license to such MiniMed Improvement and such MiniMed Patentable
Invention, such exclusive licenses to include commercially reasonable royalty
terms.
2.3 SUBLICENSES. MiniMed shall provide to Lilly a copy of all proposed
sublicense agreements to be granted by MiniMed under 2.1 of this Agreement prior
to their execution by MiniMed and/or the sublicensee. MiniMed shall include in
all sublicense agreements provisions substantially equivalent to its obligations
under this Agreement and shall use commercially reasonable efforts to enforce
such obligations. No sublicensing shall be permitted by the sublicensee.
MiniMed's right to grant a sublicense is contingent upon obtaining prior written
approval of Lilly, such approval not to be unreasonably withheld.
2.4 LILLY'S RETAINED RIGHTS. (a) Subject only to the grant in Section 2.1
above, Lilly shall maintain its unrestricted right in the Territory to supply,
distribute, market and/or sell insulin or Insulin Analogs to any third party in
any form.
(b) In addition, upon Lilly's providing MiniMed with notice of its decision
to pursue the marketing of products containing Insulin Analogs manufactured in
accordance with the teachings of the Licensed Patents, the Improvements or Lilly
Know-How (the "Lilly Products"), the rights granted to MiniMed in this Agreement
for the External Infusion Pump Field shall become non-exclusive. Lilly will
provide MiniMed with eighteen (18) months advance notice of its decision to
pursue the marketing of Lilly Products, such notice to include identification of
those countries or territories in which Lilly intends to launch Lilly Products.
After receipt of such notice from Lilly, MiniMed shall have the option of
pursuing the marketing of Insulin Analogs other than the Bulk Material purchased
from Lilly in the External Infusion Pump Field (the "Non-Lilly Insulin
Analogs"). MiniMed shall provide Lilly with twelve (12) months notice of its
decision to pursue the marketing of the Non-Lilly Insulin Analogs. In the event
that Lilly exercises its rights under this Section 2.4(b), and MiniMed
determines not to pursue the marketing of the Non-Lilly Insulin Analogs, then
Lilly will consult with MiniMed concerning the labeling for any Lilly Products
intended for use in the External Infusion Pump Field.
(c) Concurrently with the twelve-month notice required by Section 2.4(b),
MiniMed shall provide a forecast of its requirements for Bulk Material for the
following twelve months. Lilly shall supply MiniMed with Bulk Material for that
twelve-month period. MiniMed's requirements forecast, issuance of purchase
orders,
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<PAGE> 10
and Lilly's fulfillment of such orders shall be consistent, to the extent
applicable, with the provisions of Sections 3.5 and 3.6.
(d) Sixty (60) days prior to the expiration of the twelve-month notice
period, MiniMed shall provide Lilly a list of its inventory of Product and Lilly
shall have, at its option, the right to purchase such Product from MiniMed at a
price to be negotiated in good faith between the Parties.
(e) MiniMed's rights under this Agreement in the External Infusion Pump
Field shall terminate twelve (12) months following MiniMed's providing Lilly
with notice of its decision to pursue the marketing of the Non-Lilly Insulin
Analogs. In the event of such termination, MiniMed's Binding Forecast and the
Reserved Capacity shall be equitably adjusted to reflect the elimination of
MiniMed's Products in the External Infusion Pump Field.
2.5 MINIMED'S PREEMPTIVE RIGHTS. If Lilly desires to sell products
utilizing the Licensed Patents for use with Basal Infusers, it shall promptly
notify MiniMed of such desire. For the one hundred and eighty (180) days
following such notice, Lilly shall negotiate exclusively with MiniMed, in good
faith, to license MiniMed the rights to conduct the Manufacturing and Selling
Activities with products utilizing the Licensed Patents for use in Basal
Infusers.
2.6 LILLY'S PREEMPTIVE RIGHTS. If MiniMed decides to engage in the
marketing and promotion of products containing human insulin for use in the
External Infusion Pump Field, it shall promptly notify Lilly of such decision.
For the one hundred and eighty (180) days following such notice, MiniMed shall
negotiate exclusively with Lilly, in good faith, a supply agreement for such
human insulin.
3 LILLY'S SALES
3.1 LILLY'S SALES. Lilly shall sell to MiniMed the Bulk Material. MiniMed
shall purchase its entire requirements of the Bulk Material from Lilly or from a
supplier approved in writing by Lilly. MiniMed shall use the Bulk Material
supplied by Lilly exclusively for the purpose of formulation research and
development, evaluation or manufacturing Products for the Field pursuant to this
Agreement solely in accordance with the teachings of the Licensed Patents, the
Improvements and Lilly Know-How for the Field and the manufacturing requirements
set forth in the MRD and in the RCD.
3.2 DELETION OF PRODUCTS. If Lilly is required by any regulatory agency to
withdraw the Bulk Material from the market in any country, Lilly shall have the
right to terminate this Agreement in accordance with the terms of Section
13.6(e) of this Agreement for any country or territory in which, at its sole
discretion, Lilly decides to withdraw the Product, no matter if the country or
territory was included in the
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<PAGE> 11
regulatory agency request. Should Lilly withdraw Bulk Material from the market
on a country by country (or territory by territory) basis, MiniMed's minimum
purchase requirements pursuant to Sections 3.5 and 3.7 of this Agreement shall
be changed to an amount equal to the product of such minimum purchase
requirements multiplied by a fraction the numerator of which is the difference
between (x) the total dollar amount of MiniMed's worldwide sales of Products in
the immediately preceding 12 months and (y) the total dollar amount of Products
sold by MiniMed in the immediately preceding 12 months in such country or
territory and the denominator of which is the total dollar amount of MiniMed's
worldwide sales of Products in the immediately preceding 12 months.
3.3 PRICES, CURRENCY, AND PAYMENT TERMS. The prices, currency, and payment
terms of the Bulk Material are set out in Appendix C. MiniMed shall remit
payment of invoices to Lilly upon such terms and conditions. MiniMed shall pay
any duties or tax imposed on the importation, exportation or sales of the
Products or Bulk Material. Notwithstanding the foregoing, Lilly shall pay all
applicable import tax and duties levied on Bulk Product delivered to MiniMed in
the United States.
3.4 MINIMED'S ORDERS OF BULK MATERIAL FOR CLINICAL TRIALS.
3.4.1. Subject to the completion and execution of the MRD and the RCD,
MiniMed shall submit to Lilly an estimate of its quarterly needs of Bulk
Material for each ensuing twelve (12) month period for performance of all
preclinical and clinical research and development studies leading to
commercialization of Products. MiniMed will revise these estimates
semiannually or more frequently as appropriate.
3.4.2. Lilly will promptly meet MiniMed's reasonable requirements for
research &development supplies of Bulk Material in accordance with the
estimates provided in the Plan and the RCD.
3.4.3. Lilly shall supply to MiniMed sufficient quantities of Bulk Material
necessary for the completion of all testing and clinical trials as agreed
in the RCD for Products at no cost to MiniMed.
3.4.4. Not withstanding anything in this Section 3.4, Lilly will provide no
more than 100 Base Grams (as defined in Exhibit C) of Bulk Material at no
cost to MiniMed for completion of all testing and clinical trials for
Products and an additional 50 Base Grams of Bulk Material from each of
three different production lots for validation testing.
3.5 MINIMED'S FORECASTS OF BULK MATERIAL FOR COMMERCIAL SALE.
(a) AGREEMENT PRODUCTION FORECAST. As of the Effective Date, MiniMed shall
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provide Lilly with a good faith forecast of its anticipated Bulk Material
commercial sale purchase requirements for the term of the Agreement (the
"Agreement Production Forecast"). Attached hereto as Appendix E is the Agreement
Production Forecast.
(b) SEVEN YEAR ROLLING PRODUCTION FORECAST. MiniMed shall furnish to Lilly
a seven (7) year rolling forecast of its anticipated Bulk Material purchase
requirements ("the Seven Year Rolling Production Forecast") of which the first
three years of each such forecast will be binding (i.e., the "Binding Forecast")
within the limits described below. The first Seven Year Rolling Production
Forecast shall be provided to Lilly no later than one hundred eighty (180) days
prior to the first anticipated Market Date. That forecast should be for the
partial Calendar Year immediately commencing on the first day of the Market Date
and cover the six full Calendar Years thereafter. The initial partial Calendar
Year and next two full Calendar Year forecasts will be binding within the limits
set forth hereafter. At least one hundred eighty (180) days prior to the end of
the initial partial Calendar Year and three hundred sixty five (365) days prior
to the commencement of each Calendar Year thereafter, MiniMed will furnish Lilly
with an updated Seven Year Rolling Production Forecast. The Seven Year Rolling
Production Forecast shall be updated each Calendar Year thereafter.
For the Seven Year Rolling Production Forecasts after the initial Seven
Year Rolling Production Forecast, the first (1st) Calendar Year forecast of each
Seven Year Rolling Production Forecast, as updated, shall be binding on both
Parties but only to the extent that the forecast for such Calendar Year would
not cause the quantity of Bulk Material supplied by Lilly to MiniMed during such
Calendar Year to exceed the Reserve Capacity tolerance limit as defined in
Appendix E.
In updating the Seven Year Rolling Production Forecast, the revised first
(1st) Calendar Year of each updated Seven Year Rolling Production Forecast shall
only be revised by MiniMed within a range of plus or minus ten percent (+ or
- -10%) of the second (2nd) Calendar Year of the Seven Year Rolling Production
Forecast immediately preceding the updated Seven Year Rolling Production
Forecast at issue. Similarly, the revised second (2nd) Calendar Year of each
updated Seven Year Rolling Production Forecast shall only be revised by MiniMed
within a range of plus or minus twenty percent (+ or - 20%) of the third (3rd)
Calendar Year of the Seven Year Rolling Production Forecast that immediately
preceded the updated Seven Year Rolling Production Forecast at issue.
For example, if the first Seven Year Rolling Production Forecast provided
for the following requirements:
<TABLE>
<CAPTION>
YEAR REQUIREMENT
<S> <C>
1 A
2 B
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
YEAR REQUIREMENT
<S> <C>
3 C
4 D
5 E
6 F
7 G
</TABLE>
Then the next revised Seven Year Rolling Production Forecast shall be:
<TABLE>
<CAPTION>
YEAR REQUIREMENT
<S> <C>
1 B +/- 10%
2 C +/- 20%
3 H
4 I
5 J
6 K
7 L
</TABLE>
To the extent that such revisions to the first (1st) and (2nd) Calendar
Year of the Seven Year Rolling Production Forecast exceed the foregoing
prescribed ranges (+/- 10% and +/- 20%, respectively) during any Calendar Year
and as long as it is within the tolerance limits as defined in Appendix C, such
amount in excess of the prescribed ranges shall not be binding on Lilly. Any
amount in excess of the maximum range will be considered as an offer to Lilly to
supply such additional amount which Lilly may accept, in its sole discretion,
and supply if Lilly determines that it has Bulk Material available. Any amount
less than the minimum amount in the range shall not be accepted and MiniMed
shall be required, at MiniMed's option, either to purchase the Bulk Material in
the prescribed amount at the low end of the range or pay the Penalty (as
described below).
For the next Seven Year Rolling Production Forecast, the forecasted amount
for the First Year of the Seven Year Rolling Production Forecast will be based
on the forecast for the Second Year of the previous Seven Year Rolling
Production Forecast within the required range so that forecasts above the
maximum amount will be deemed to be at the maximum amount in the range and
forecasts below the minimum amount in the range will be deemed to be at the
minimum amount. Similar adjustments will be made to the forecast for the Third
Year of the previous Seven Year Rolling Production Forecast in order to
establish the forecast range for the Second Year of the subsequent Seven Year
Rolling Production Forecast.
The first (1st) Calendar Year forecast of each Seven Year Rolling
Production Forecast, as updated, shall be binding on both Parties but only to
the extent that the forecast for such Calendar Year would not cause the quantity
of Bulk Material supplied by Lilly to MiniMed during such Calendar Year to
exceed the Agreement
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Production Forecast by the limits defined in Appendix E for that specific
Calendar Year.
For each Calendar Year following the Market Date until termination of the
Agreement, MiniMed shall purchase from Lilly, at least an amount of Bulk
Material equal to the amount forecasted within the mandated ranges in the
Binding Forecast. In the event that during any particular Calendar Year MiniMed
fails to purchase a quantity of Bulk Material at least equal to the Binding
Forecast, within thirty (30) days after the end of such Calendar Year, MiniMed
shall advise Lilly in writing of whether it would like Lilly to: (a) have Bulk
Material shipped to MiniMed under the terms described hereunder; or (b) pay
Lilly a penalty (the "Penalty") equal to the volume shortfall multiplied by the
prices defined in Appendix C times 0.6. Failure of MiniMed to do one of either
to meet its purchase requirements as set forth in the Binding Forecast in any
Calendar Year or to pay Lilly the Penalty is a material breach of the Agreement.
(c) RESERVED CAPACITY. If at any time MiniMed's Seven Year Rolling
Production Forecasts call for quantities of Bulk Material that exceed the
maximum tolerance limit above the Agreement Production Forecast as defined in
Appendix E ("Reserved Capacity"), Lilly shall not be obligated to supply MiniMed
with such desired increased quantities of Bulk Material. Lilly, at its
discretion, will consider, on a case-by-case basis, supplying MiniMed some or
all of this additional request for Bulk Material at such time. If Lilly cannot
supply some or all of MiniMed's request for Bulk Material above the Reserved
Capacity, then MiniMed has the option to meet with Lilly to discuss whether
MiniMed would be willing to assume a pro rata portion of any costs incurred by
Lilly to increase its manufacturing capacity.
(d) MINIMUM CAPACITY. If at any time MiniMed's Seven Year Rolling
Production Forecasts call for quantities of Bulk Material that fall below the
lowest tolerance limit below the Agreement Production Forecast as defined in
Appendix E ("Minimum Capacity"), MiniMed shall pay Lilly an amount equal to the
sum of unmitigated and/or unavoidable costs incurred by Lilly with respect to
idle capacity that would have been utilized had the Seven Year Rolling
Production Forecast equaled the Minimum Capacity plus the allocable annual
straight-line depreciation computed in accordance with U.S. Generally Accepted
Accounting Principles (U.S. GAAP) allocated with respect to such idle capacity;
multiplied by 1.1. For example, the arithmetic formula illustrating the
foregoing is [(unmitigated and/or unavoidable cost + depreciation) x (1.1)].
3.6 MINIMED'S PURCHASE ORDERS OF BULK MATERIAL FOR COMMERCIAL SALE.
Within ninety (90) days of Lilly's receipt of a purchase order that does
not exceed the Binding Forecast, Lilly shall use commercially reasonable effort
to meet such requested shipment date and MiniMed shall purchase Bulk Material in
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<PAGE> 15
accordance with the terms of this Agreement. Each purchase order shall not be
less than 20% and not more than 60% of the total requirements for that Calendar
Year. Each purchase order shall indicate the delivery date and location within
the continental United States for Bulk Material to be supplied to MiniMed.
Moreover, except for writings specifying quantity ordered, delivery dates, and
invoice information set forth in each purchase order that are not in conflict
with the terms of this Agreement, supply and purchase obligations related to
such purchase orders shall be solely by the terms of this Agreement and none of
the terms or conditions of MiniMed's purchase orders, Lilly's acknowledgment
forms or any other forms shall be applicable. Lilly shall not be required to
make more than four shipments per Calendar Year.
3.7 MINIMED MINIMUM PURCHASE OF BULK MATERIAL. Subject only to the
provisions of Sections 3.2 and 13.6(a) of this Agreement, MiniMed agrees to
purchase at least fifteen (15) kilograms of Bulk Material under the terms of
this Agreement. Should this Agreement expire or terminate (other than under the
provisions of Section 13.6(a)) without MiniMed having met the minimum Bulk
Material purchase requirement of this Section 3.7, MiniMed shall purchase the
amount of such short fall within ten (10) days of such notice of termination. In
the event that Lilly withdraws Bulk Material from a country or territory prior
to the Market Date, then MiniMed's minimum purchase requirement for that country
or territory shall be adjusted pursuant to the formula set forth in Section 3.2.
4 MINIMED'S GENERAL PERFORMANCE
4.1 PLAN MANAGEMENT. So that Lilly may be kept informed as to the progress
of the Plan, upon execution of this Agreement and the subsequent agreement upon
the RCD and the MRD, Lilly and MiniMed shall promptly thereafter organize a Plan
Committee with two (2) members from each company. MiniMed will use commercially
reasonable efforts to implement the Plan as amended from time to time by the
Plan Committee and only MiniMed shall have the responsibility for implementation
of the Plan. MiniMed, however, will have no obligation to implement provisions
of the Plan that relate to countries or sovereign jurisdictions in which
MiniMed's rights hereunder are not exclusive. The Parties will hold regular
meetings of the Plan Committee (no fewer than two (2) annually) to review the
Plan and conduct telephonic conferences as needed. The Plan Meetings will
alternate between MiniMed's designated facility and Lilly's designated facility.
Minutes of all such meetings will be prepared. Responsibility for the minutes
will alternate between the Parties, MiniMed being responsible for the minutes of
the first meeting, but minutes will not become official until agreed upon by a
majority of the members of the Plan Committee. Each Party will bear all expenses
associated with attendance of its employees at such meetings held at the other
Party's designated facility.
4.2 CREATION AND REVIEW OF THE RCD. Following the Effective Date,
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MiniMed shall prepare an initial draft of the RCD. Lilly shall assist MiniMed,
as MiniMed may from time to time request, in the preparation of this draft.
MiniMed shall then submit such draft to Lilly for Lilly's review and approval.
The Parties shall then each appoint one medical and one regulatory person to
meet at least two times per year to review, discuss, update, and implement the
RCD. In the event that during such a meeting, issues arise which must be
decided, decisions will be reached by a simple majority vote of those present.
In the event of a tie vote, a Vice President or higher of both Lilly and MiniMed
shall negotiate in good faith to reach a decision. All meetings will be
summarized and documented in confidential written minutes.
4.3 DILIGENCE REGARDING GOVERNMENT APPROVALS AND MARKETING OF PRODUCTS.
(a) In accordance with the Plan, and subject to the compilation, execution
and continued renewal of the RCD, MiniMed, at its own cost and expense, shall
use commercially reasonable efforts to develop, obtain Government Approvals,
obtain Reimbursement Approvals, market Products, maximize sales in the Territory
and secure the proper use and efficient distribution of Products. MiniMed agrees
to pursue these efforts at least as diligently as it develops its other products
of similar commercial potential and at similar stages of development. Lilly
further covenants to take all other actions reasonably requested by MiniMed, at
MiniMed's cost, and in accordance with Section 9.3, to assist MiniMed in its
efforts to obtain Government Approvals and Reimbursement Approvals.
(b) Within sixty (60) days of each anniversary of the Effective Date of
this Agreement until onset of marketing of Products in a Major Market Country,
MiniMed will provide Lilly with written reports which summarize the results of
MiniMed's research, development, registration and marketing efforts respecting
the Products.
(c) Lilly will provide to MiniMed the FDA toxicology information available
to Lilly relating to Products. Lilly also agrees to conduct a toxicology study
on the Products not to exceed thirty (30) days in duration if such additional
toxicology information is required by the FDA. So long as Lilly's efforts with
respect to toxicology are limited to the foregoing, Lilly, at its own cost and
expense, shall have the responsibility of managing any toxicology issues related
to the Products associated with those efforts. Should FDA indicate that
additional toxicology studies other than the thirty (30) day toxicology study
are necessary, both Lilly and MiniMed shall have the right to terminate this
Agreement within ninety (90) days of such indication by the FDA in accordance
with the terms of Section 13.6(e) of this Agreement.
(d) MiniMed shall have the responsibility of organizing, managing,
conducting and funding any clinical trials for Products in the Territory in
accordance with the RCD. Further, MiniMed shall utilize Lilly's analytical
methods, which Lilly shall make available to MiniMed in written form, for
assaying/approving the Products and
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will provide Lilly with the results of these tests. MiniMed shall keep Lilly's
analytical methods and the results of these tests confidential, except as the
disclosure of such analytical methods and results are required by FDA. Lilly
will provide to MiniMed the Bulk Material, and any information and documentation
on such Bulk Material, necessary to do the clinical trials. MiniMed shall file
for Government Approvals of Products in the United States, Germany and France,
and in Japan if MiniMed obtains Reimbursement Approval for a Device, in
accordance with the obligations of the Plan, and will begin to market Products
in each such country within six (6) months of receipt of Government Approvals
and Reimbursement Approvals in such country. MiniMed represents and warrants
that it will use commercially reasonable efforts to obtain Government Approvals
and Reimbursement Approvals in the United States, Germany, France and in Japan
in accordance with the Plan and the RCD.
(e) Nonperformance by MiniMed of the obligations of this Section 4.3, the
obligations of the Plan, or a failure by MiniMed to launch in each country where
Government Approvals and Reimbursement Approvals have been granted within the
period prescribed in the Plan or, if the Plan is silent on such time period,
within six months of such Approvals, which failure continues for six (6) months
after written notice from Lilly, shall cause, at Lilly's option (i) conversion
of the exclusive license to a nonexclusive license in such country and a 15%
increase in the price of Bulk Material purchased for distribution in such
country, or (ii) termination of the Agreement for such country; or (iii) the
termination of the Agreement in the Territory if such failure to launch occurs
in the U.S, France or Germany. Under any option, MiniMed agrees to provide any
future licensee of the Licensed Patents, the Know-How and the Lilly Improvements
the ability to reference the regulatory filings made by MiniMed in that country,
and a non-exclusive, royalty free license to the MiniMed Know-How and MiniMed
Improvements in that country. Should Lilly exercise its right to terminate the
Agreement under Section 4.3(e)(ii) or Section 4.3(e)(iii), the termination shall
be in accordance with the terms of Section 13.6(e) of this Agreement.
4.4 PRODUCT REGISTRATION, NECESSARY DOCUMENTS AND LICENSES. Subject to
definitive approval from the FDA and approval from the Regulatory Steering
Committee, MiniMed shall be responsible for preparing, filing and maintaining,
at all times any governmental, public health, import permits, licenses and
approvals required to enable it lawfully to perform Selling Activities and
Manufacturing Activities of the Products in the Field in the Territory in
accordance with the Plan and the RCD. MiniMed shall be responsible for the
preparation of any regulatory filings required in order to conduct clinical
trials on Products and shall be the owner and party of record for all such
regulatory filings. Specifically, MiniMed will hold both the NDA related to the
Device (FDA 510k filing) and the NDA for the use of the Product in the Field.
Lilly must review all submissions prior to being submitted to the FDA and the
proposed submission will only be considered approved upon written confirmation
from Lilly, which confirmation shall not be unreasonably withheld or delayed.
Lilly will use reasonable efforts to provide MiniMed with such written
confirmation within
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thirty (30) days (but in no event longer than sixty (60) days) from receipt of
MiniMed's proposed submission. MiniMed shall provide Lilly permission to provide
FDA with reference access to any MiniMed NDA filed relating to this Agreement.
MiniMed shall further provide Lilly with access to all MiniMed's data and work
relating to the Product. Such access, however, will exclude use of MiniMed NDA
for Products to be used in the Field. The Products shall be registered in
MiniMed's name or in the name of its designee. Upon termination or expiration of
the Agreement, MiniMed shall forthwith take commercially reasonable efforts to
transfer all registrations and regulatory filings of Products to Lilly or
Lilly's designee at Lilly's cost. This covenant shall survive termination or
expiration of this Agreement.
4.5 MINIMED'S MAINTENANCE OF SUFFICIENT STOCK OF BULK MATERIAL AND
PRODUCTS. MiniMed shall maintain in a suitable warehouse in the Territory,
properly rotated stocks of Products and Bulk Material (in those countries where
Manufacturing Activities are conducted) under proper storage and security
conditions that comply with cGMPs and Government Approvals. MiniMed also shall
maintain an efficient system of stock control and shall permit Lilly
representatives upon prior request, and at all reasonable business hours, to
have access to all stocks supplied under this Agreement and all stock records
relating thereto for purposes of inspection, to insure adequate stock levels,
dates of rotation, audit inventory records for Bulk Material, manufacturing,
distribution and proper storage and security conditions. As part of the MRD and
under Section 9.3, Lilly agrees to provide MiniMed with recommendations
regarding a system of stock control.
4.6 NON-COMPETITION. Subject to Section 2.4 hereof, during the term of this
Agreement, MiniMed shall not in any way be involved or connected with the
manufacture or use for clinical or post-clinical development, sale, distribution
or promotion, either directly or indirectly, of Insulin Analogs in the Field,
other than the Bulk Material purchased from Lilly and used in the Products, nor
shall they use or consent to the use by any person of any trademarks, business
names or packaging that may result in confusion to the public or unfair
competition to Products. Failure of MiniMed to keep this covenant is a material
breach of this Agreement and Lilly shall have the right to terminate this
Agreement in accordance with the terms of Section 13.2 of this Agreement.
During the term of this Agreement, Lilly shall not be in any way involved
or connected with the commercialization of Lilly Patentable Inventions conceived
after the Effective Date of this Agreement for the Field other than through
MiniMed. Failure of Lilly to keep this covenant is a material breach of this
Agreement and MiniMed shall have the right to terminate this Agreement in
accordance with the terms of Section 13.2 of this Agreement.
During the term of this Agreement, MiniMed's pharmacy businesses shall
continue to be able to advertise, distribute and sell commercially available
finished
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pharmaceutical products, including Insulin Analogs. Upon launch of Products for
the Internal Infusion Pump Field, and in addition to the above non-competition
prohibitions of this Section 4.6, MiniMed covenants that its pharmacy businesses
will not engage in the marketing and promotion of any products containing human
insulin or Insulin Analogs for use in the Internal Infusion Pump Field. Further,
MiniMed covenants that its pharmacy businesses will not engage in the pharmacy
filling of pump cartridges with Insulin Analogs. Failure of MiniMed to keep
these covenants is a material breach of this Agreement and Lilly shall have the
right to terminate this Agreement in accordance with the terms of Section 13.2
of this Agreement.
4.7 LILLY'S CO-MARKETING/CO-PROMOTION OPTION. Pursuant to this Agreement,
and subject to Section 2.4 hereof, MiniMed warrants that it has the right to
grant and hereunder so grants Lilly the world-wide exclusive right to match any
bona fide offer to co-market / co-promote Products directly to physicians that
MiniMed contemplates entering into with any third party to co-market/co-promote
Products with MiniMed (the "Option to Match"), provided, however, that the
Option to Match shall not apply to promotions with a term of less than one year,
that encompass less than substantially all of any given country, or pertain to
countries where MiniMed's rights under Section 2.1 are no longer exclusive.
To ensure that Lilly has adequate time to consider whether it should
exercise the Option to Match with respect to a particular
co-marketing/co-promotion arrangement at issue, MiniMed, prior to entering into
any such arrangement with any third party for Products, shall provide Lilly with
written notification of its intent to enter into such arrangement and the terms
related thereto, together with other relevant information that would be
reasonably useful to a potential co-marketing/co-promotion partner of Products
to assess the commercial Products co-marketing/co-promotion opportunity at
issue. Upon receipt of such notice Lilly shall have forty-five (45) days in case
MiniMed receives a co-marketing/co-promotion offer and ninety (90) days in case
MiniMed desires to make a co-marketing/co-promotion offer to any other party,
including Lilly, to exercise the Option to Match (the "Option Period").
In the event that Lilly exercises this Option to Match under this Section
4.7, Lilly shall be MiniMed's co-marketer/co-promoter of Products pursuant to
the terms substantially similar to the material terms set forth in the bona fide
offer at issue and the Parties hereto shall prepare and enter into an agreement
of essentially the same terms. Conversely, if Lilly does not exercise the Option
to Match within the Option Period with respect to a particular
co-marketing/co-promotion arrangement, MiniMed will be free to enter into the
particular arrangement disclosed to Lilly pursuant to the written notice
described above in this Section 4.7. If MiniMed does not enter into the
particular arrangement at issue, Lilly's Option to Match any new proposal under
this Section 4.7 shall be maintained. If MiniMed enters into the particular
arrangement at issue, Lilly's Option to Match under this Section 4.7 shall be
maintained for all
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countries and regions of the Territory that are not part of the
co-marketing/co-promotion at issue.
This Section 4.7 does not apply either to MiniMed symposia promoting
diabetes education and management and/or Devices or to MiniMed's existing
contractual agreements with Roche Diagnostics/Boehringer Mannheim Corporation.
5 PATENTS
5.1 INVENTIONS, PATENTS AND IMPROVEMENTS PROSECUTION, MAINTENANCE AND
PAYMENTS
(a) Inventorship shall be determined under the patent law of the United
States of America. Inventions made by employees of Lilly or third parties
pursuant to the authority of Lilly shall be assigned to and prosecuted by Lilly,
inventions made by employees of MiniMed or third parties pursuant to the
authority of MiniMed shall be assigned to and prosecuted by MiniMed and
inventions made jointly by employees of Lilly and MiniMed or third parties
pursuant to the authority of Lilly and MiniMed shall be assigned jointly to
Lilly and MiniMed. Unless otherwise agreed to, in writing, by the Parties prior
to filing, Lilly shall be responsible for filing and prosecution of joint (Lilly
and MiniMed) applications which encompass an Improvement, while the Parties will
agree as to prosecution of any other joint applications arising under this
Agreement.
(b) Lilly will file, prosecute, and maintain the Licensed Patents and all
patent applications and patents enabling the Lilly Improvements consistent with
and pertinent to the license rights granted under this Agreement. MiniMed will
file, prosecute, and maintain all patent applications and patents enabling the
MiniMed Improvements and MiniMed Patentable Inventions consistent with and
pertinent to the license rights granted under this Agreement.
5.2 DISCONTINUATION OF PATENT PROSECUTION BY LILLY. In the event that Lilly
elects not to continue to prosecute or maintain any patent or patent application
included in the Licensed Patents or Lilly Improvements, it shall notify MiniMed
at least sixty (60) days prior to taking, or not taking, any action which would
result in abandonment, withdrawal, or lapse of a patent or patent application.
MiniMed shall then have the right to continue maintenance or prosecution of the
patent or application at its own expense, and Lilly will assign, or use
reasonable efforts to have assigned, any such application or patent to MiniMed,
and such application or patent shall cease to be encompassed by Licensed Patents
or Lilly Improvements. However, Lilly will retain a royalty-free, non-exclusive,
worldwide license, without the right to sublicense, under any such patents or
patent applications.
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5.3 DISCONTINUATION OF PATENT PROSECUTION BY MINIMED. In the event that
MiniMed elects not to continue to prosecute or maintain any patent or patent
application included in the MiniMed Improvements or MiniMed Patentable
Inventions, it shall notify Lilly at least sixty (60) days prior to taking, or
not taking, any action which would result in abandonment, withdrawal, or lapse
of a patent or patent application. Lilly shall then have the right to continue
maintenance or prosecution of the patent or application at its own expense, and
MiniMed will assign, or use reasonable efforts to have assigned, any such
application or patent to Lilly, and such application or patent shall cease to be
encompassed by MiniMed Improvements or MiniMed Patentable Inventions. However,
MiniMed will retain a royalty-free, non-exclusive, worldwide license, without
the right to sublicense, under any such patents or patent applications for
Products for the Field.
5.4 ACTION FOR INFRINGEMENT OF PATENTS. Subject to the provisions of
Section 2.4 of this Agreement, if any infringement or possible infringement of
any patent included within Licensed Patents or Lilly Improvements concerning the
Field comes to the attention of either Party, the Party will promptly notify the
other Party of such event. Lilly shall have the right but not the obligation at
its expense to initiate legal action against the alleged infringer. If within
ninety (90) days from the date on which Lilly is notified or otherwise becomes
aware of any such infringement, Lilly has not terminated such infringement, or
initiated legal action against the alleged infringer aimed at ending such
infringement, Lilly, will, upon written request by MiniMed, grant to MiniMed the
right to prosecute an action against the alleged infringer and, at MiniMed's
request, Lilly agrees to be joined as a party plaintiff and to cooperate with
MiniMed in such action. Out of any damages or awards recovered by MiniMed in
such action conducted by MiniMed, Lilly will recover any expenses which it
incurred on behalf of the litigation. Any amount remaining belongs to MiniMed.
5.5 NON-ISSUANCE OF LICENSED PATENT. If the Licensed Patent (including all
of the Licensed Claims) does not issue in one or more of the Major Market
Countries, MiniMed's minimum purchase requirement will be decreased according to
the formula set forth in Section 3.2.
6. SHIPPING
6.1 SHIPMENT. All shipments of Bulk Material from Lilly to MiniMed will be
shipped in accordance with the shipping and packaging instructions mutually
agreed upon by the Parties pursuant to the MRD to MiniMed's facility in Sylmar,
California or such other destination in the United States as may be set forth in
the applicable purchase order. Each shipment from Lilly to MiniMed shall be
accompanied by a Certificate of Analysis ("COA"). Lilly and MiniMed will discuss
in good faith Lilly shipping Bulk Material to MiniMed for destinations outside
the United States. Both Parties must agree with the shipping and packaging
instructions before Lilly will be
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obligated to make any shipments of Bulk Material outside the United States.
6.2 SHIPPING COSTS. Delivery of Bulk Material by Lilly shall be made Free
On Board (FOB) shipping point - Lilly's manufacturing facility, to such common
carrier as MiniMed shall designate. Lilly shall arrange the transportation of
Bulk Material to MiniMed on terms of shipment desired by MiniMed on the
understanding that all costs and risks involved shall be solely borne by
MiniMed.
6.3 TITLE AND RISK OF LOSS. Title and risk of loss or damage to the Bulk
Material shall pass to MiniMed upon delivery of the Bulk Material by Lilly to
such common carrier designated by MiniMed, FOB shipping point - Lilly's
manufacturing facility.
VII AUDIT RIGHTS
7.1 MANUFACTURING AUDIT RIGHTS. Upon Lilly's written request and at Lilly's
sole expense, MiniMed will allow Lilly, or Lilly's representatives, to review
MiniMed's cGMP processes and procedures as such processes relate to Bulk
Material, as well as documents relating to the inventory control process. The
confidentiality provisions of this Agreement shall apply to such an audit. Such
review may occur no more frequently than once every year with at least a minimum
of fourteen (14) days advance written notice. MiniMed shall be obligated to act
on such review. All information gathered from such review including, without
limitation, the findings and results related thereto shall be deemed
Confidential Information as that term is defined under Section 12.1 of this
Agreement.
7.2 PURCHASE RECORD AUDIT RIGHT. In connection with the sales information
provided by MiniMed as described in Appendix C (i.e., Estimated and Actual
Geographic Quantities (U.S., European Union, Japan and rest of the world), such
information shall be open to review and verification for up to two (2) years
following the Calendar Year to which such records relate, by Lilly or its
representatives. Such review may include examination of sales registers,
customer invoices, shipping logs, bills of ladings, sales forecasts and
examination of external auditor workpapers. Lilly may request these reviews no
more frequently than on an annual basis in connection with the calculation of
the Weighted Average Price as described in Appendix C. The costs of such reviews
shall be borne solely by Lilly unless such audit results in an increase in
payment to Lilly of more than 5% over any Calendar Year, in which case the
documented costs of such audit shall be borne solely my MiniMed. All information
gathered from such review including, without limitation, the findings and
results related thereto shall be deemed Confidential Information as that term is
defined under Section 12.1 of this Agreement.
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8. BULK MATERIAL TESTING/INSPECTION
8.1 QUALITY ASSURANCE. Lilly shall perform in-processing testing on Bulk
Material to ensure compliance with cGMP and the Specifications.
8.2 BULK MATERIAL INSPECTION. MiniMed shall have a period of thirty (30)
days from the date of MiniMed's receipt of Bulk Material and the related
Certificate of Analysis (COA) (the "Testing Period"), to inspect any shipment of
Bulk Material to determine whether such shipment conforms to the Specifications
in accordance with tests as mutually agreed upon by the Parties pursuant to the
MRD. MiniMed will run tests only as agreed by Lilly and MiniMed in the MRD. If
MiniMed determines that the Bulk Material does not conform to the Specifications
based on the test(s) defined in the MRD, it shall immediately notify Lilly by
telephone, and shall send Lilly written confirmation of such notice as soon as
reasonably possible but in no event in excess of five (5) business days
thereafter (the '`Notification Period"). Except for claims under Sections 9.7
and 11.1 and claims resulting from Latent Defects, MiniMed's failure to inspect
the Bulk Material within the Testing Period or notify Lilly within the
Notification Period will be deemed, for purposes of this Agreement, as MiniMed's
acceptance of such shipment and shall constitute a waiver of any claims MiniMed
may have against Lilly with respect to such shipment subject, however, to
MiniMed's right to reject Bulk Material for Latent Defects discovered by MiniMed
or MiniMed's customer(s) after such stipulated periods have expired. If Lilly
agrees that the Bulk Material does not conform to the Specifications based on
the test(s) run by MiniMed as defined in the MRD, MiniMed shall return the
non-conforming Bulk Material to Lilly at a location designated by Lilly and at
Lilly's expense. Lilly shall use commercially reasonable efforts to replace any
non-conforming Bulk Material within the shortest possible time. MiniMed shall
have no financial responsibility to Lilly for this non-conforming Bulk Material
but shall pay Lilly the Purchase Price for acceptable replacement Bulk Material.
8.3 TRANSFER OF BULK MATERIAL. MiniMed, and/or any sublicensee(s) of
MiniMed of marketing rights related to the Product, shall not sell or otherwise
transfer Bulk Material to third parties without the express written consent of
Lilly.
8.4 INVENTORY CONTROL PROCESS. Prior to commencement of shipment of Bulk
Material for commercial sale, MiniMed shall have in place and shall institute
and maintain an inventory control process reasonably necessary to track and
monitor Bulk Material as is ordinary and customary under industry standards
under the circumstances.
8.5 BULK MATERIAL QUALITY DISPUTES. In the event Lilly does not agree with
MiniMed's determination that the Bulk Material fails to meet Specifications, the
Parties shall, in good faith, attempt to resolve such dispute. In the event the
Parties cannot resolve such dispute among themselves they may submit the matter
to an
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independent third party testing laboratory agreeable to both Lilly and MiniMed
for a binding advisory opinion. The expenses of obtaining the advisory opinion
shall be equally shared by Lilly and MiniMed. The Parties will identify the
agreed upon independent third party testing laboratory in the MRD.
8.6 PROCESS CHANGES. Subject to the other provisions of this Agreement,
Lilly shall have the sole right and responsibility to make any and all process
changes with respect to Bulk Material as it may deem appropriate. Lilly shall
have process change procedures in place to ensure that appropriate personnel
(including quality control) assess proposed process changes to ensure that they
are within the registration and do not adversely impact the quality or stability
(as defined in the MRD) of the Bulk Material, together with procedures that help
it determine if process changes are occurring and guide it in administering such
changes. If, in Lilly's reasonable belief, any proposed bulk manufacturing
process change relating to the Bulk Material would require prior submission to
the FDA for its approval, then Lilly shall notify MiniMed of the existence of
such proposed change (the "Change Notice") no less than ninety (90) days prior
to Lilly's submitting it to the FDA. Notwithstanding the foregoing, in the event
that Lilly makes a change to its processes related to Bulk Material, MiniMed
shall be solely responsible for any impact such change may have on the
regulatory costs associated with MiniMed's use of Bulk Material in the Product
(e.g., MiniMed's FDA responsibility/interaction with respect to its Product that
uses Bulk Material).
8.7 STOCKPILING OF BULK MATERIAL.
8.7.1 Should MiniMed determine that the Change Notice will render the Bulk
Material commercially unusable in Internal Pumps, MiniMed shall provide Lilly
notice of such determination and the data upon which it is based. MiniMed may
terminate this Agreement within thirty (30) days receipt of the Change Notice.
8.7.2 Alternatively, upon MiniMed's receipt of the Change Notice, MiniMed
may submit to Lilly a firm order to purchase Bulk Material made under the old
bulk manufacturing process in advance from Lilly (the "Advance Purchased Bulk")
not to exceed up to three (3) times the actual amount of Bulk Material purchased
by MiniMed in the twelve (12) months immediately preceding receipt of such
Change Notice in accordance with the terms of this Agreement.
8.7.3 Lilly shall use commercially reasonable efforts to supply MiniMed
with the Advance Purchased Bulk subject to Lilly's capacity constraints.
8.7.4 In addition, in the event that MiniMed determines, in its sole
discretion, that such a process change renders the Bulk Material unusable in
Internal Pumps, the parties shall, in good faith, collaborate in an attempt to
develop and validate a new process for the manufacture or formulation of the
Bulk Material that is suitable. Notwithstanding the foregoing, Lilly shall not
be obligated to implement any such new
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process.
8.7.5 Should MiniMed terminate this Agreement under this Section 8.7,
MiniMed's sole remedy for this termination is to purchase Bulk Material in
advance from Lilly.
8.7.6 Lilly shall have no obligation to MiniMed for any damages or
indemnification for any losses incurred by MiniMed by reason of such termination
of the Agreement.
9 MANUFACTURE OF PRODUCTS AND REGULATORY
9.1 CREATION OF MANUFACTURING RESPONSIBILITY DOCUMENT. Prior to the first
shipment of Bulk Material by Lilly to MiniMed, MiniMed and Lilly shall compile
and agree upon a Manufacturing Responsibilities Document (an outline of which is
attached hereto as Appendix G) and such other terms to be mutually agreed upon
in good faith, including, without limitation, refrigeration requirements,
environmental assessment, inspection of MiniMed and/or its designated third
party manufacturing facilities to confirm that they conform to cGMP, and
MiniMed's responsibilities with respect to compliance with global governmental
regulations (e.g., regulatory and environmental).
9.2 MINIMED'S MANUFACTURING FACILITY. MiniMed shall maintain at all
relevant times all governmental permits, licenses, approval, and authorities to
the extent required to enable it lawfully to properly perform the Manufacturing
Activities of the Products. Lilly shall approve of the facility that performs
the Manufacturing Activities.
9.3 LILLY'S TECHNICAL ASSISTANCE. Lilly shall supply MiniMed technical
assistance, information relating to the Manufacturing Activities,
recommendations regarding a system of stock control per Section 4.5, and such
other information as MiniMed shall reasonably request, at the rate of $125/hour
for the first 150 hours per Calendar Year and at the rate of $250/hour for all
additional time thereafter. MiniMed shall reimburse Lilly for all out-of-pocket
expenses associated with providing MiniMed with such technical assistance.
MiniMed shall treat and keep all information provided by Lilly to MiniMed as
confidential. The MRD shall address the tracking and billing of Lilly's time on
these matters.
9.4 MANUFACTURING STANDARDS. MiniMed, or its designated third party, shall
perform the Manufacturing Activities of the Products in accordance with the
Specifications, the packaging and labeling practices, and quality stipulations
set forth in the MRD attached as Appendix G to this Agreement and as reasonably
supplied and/or specified by Lilly from time to time. MiniMed, or its designated
third party, shall at all times
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comply with cGMP and all regulatory commitments. Prior to compilation and
execution of the MRD, MiniMed shall permit authorized representatives of Lilly
to enter and inspect any and all manufacturing facilities relating to the
Products. As part of the MRD, MiniMed shall permit authorized representatives of
Lilly at all reasonable times and upon reasonable prior notice to MiniMed:
9.4.1 to enter and inspect any and all manufacturing facilities relating to
the Products,
9.4.2 to inspect copies of relevant batch documentation thereof to
ascertain whether MiniMed complies with the covenants set forth in this
Section.
Lilly will need to approve all analytical methods that MiniMed develops and/or
uses to test the quality of the Product Specifications. MiniMed shall be
responsible for all product testing and batch release for clinical trials and
commercial activities and shall make the results of any such tests available to
Lilly. In accordance with Section 9.3, Lilly will provide MiniMed technical
assistance in curing deficiencies of lots or batches of Products not meeting
Specifications.
9.5 NOTICE OF INSPECTIONS. MiniMed shall provide Lilly with immediate
notice of any governmental or regulatory review, audit or inspection of its
facility, processes, or products that might relate to the Products. MiniMed
shall provide Lilly with the results of any such review, audit or inspection.
Lilly shall be given the opportunity to provide reasonable assistance to MiniMed
in responding to any such review, audit or inspection relating to the Products.
9.6 RIGHT OF REFERENCE ACCESS TO LILLY NDA. In accordance with the terms
set forth herein and subject to the approval of the Steering Committee, Lilly
shall provide MiniMed permission to provide FDA with reference access to Lilly's
NDA granted by FDA covering Bulk Material, solely for the purpose of reviewing
MiniMed's pump formulation/infusion pump FDA registration submission, which
shall be done in MiniMed's name. MiniMed agrees that any reference(s) to the NDA
does not give to MiniMed any right whatsoever to obtain access to the NDA absent
the express prior written consent of Lilly.
9.7 RECALLS. In the event of a Recall, the Parties will follow the recall
procedure as identified in the MRD.
9.8 REIMBURSEMENT APPROVALS. At Lilly's sole discretion, Lilly shall make
available to MiniMed, and shall authorize MiniMed to use, Confidential
Information in support of MiniMed's efforts to obtain reimbursement for the
Products.
10 APPROVAL OF PROMOTIONAL MATERIAL
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10.1 APPROVAL OF PROMOTIONAL MATERIAL. MiniMed shall submit to Lilly, or
its designee, for prior written approval all advertising, technical information,
promotional materials, labeling, package inserts, and other written materials
which MiniMed proposes to use for the purpose of the Manufacturing Activities
and Selling Activities of the Products for the Field in the Territory. Lilly
shall identify any portions of such materials that it considers objectionable
and state the basis for such objection. Unless rejected by Lilly within thirty
(30) days of the submitted written materials for distribution in the U.S. and
sixty (60) days of receipt of the submitted written materials for distribution
outside the U.S., these materials will be deemed to have been approved by Lilly.
11 PRODUCT INQUIRIES
11.1 PRODUCT INQUIRIES.
11.1.1 MiniMed will do all regulatory reporting (including Adverse Events)
for MiniMed's Device and Products during the clinical trial phase and the post
approval phase.
11.1.2 Lilly will do all regulatory reporting of Adverse Events where only
Lilly's Bulk Material is implicated.
11.1.3 MiniMed will forward all Adverse Event information obtained on
Lilly's Bulk Material, or the Products and Device, to Lilly within 72 hours of
initial receipt.
11.1.4 Lilly will report to MiniMed all Adverse Events associated with the
Bulk Material that Lilly has reported to the relevant regulatory authorities
according to the applicable regulations.
11.1.5 The RCD will identify the specifics regarding the exchange of
Adverse Event information between the Parties.
11.2 PRODUCT QUALITY COMPLAINTS. As defined in the MRD, MiniMed shall
report to Lilly, on a quarterly basis, a summary of Product quality complaints
received by MiniMed.
12 TRADE SECRETS AND CONFIDENTIAL INFORMATION
12.1 TRADE SECRETS AND CONFIDENTIAL INFORMATION. MiniMed and Lilly
acknowledge that during the term of this Agreement either
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Party may acquire, either from the other Party or otherwise, Confidential
Information. MiniMed and Lilly shall, during the term of this Agreement and for
a period of ten (10) years following termination or expiration thereof,
howsoever caused, hold in confidence and will not communicate or divulge to any
other person and will not use for its own benefit, or the benefit of any third
person any such Confidential Information which may come howsoever into its
possession. MiniMed and Lilly each shall use commercially reasonable efforts to
see that each employee to whom Confidential Information is imparted does not
disclose such information, during or subsequent to his or her employment by
MiniMed or Lilly as the case may be, to any person who is not entitled to have
access to such information. Upon termination of this Agreement, howsoever
caused, MiniMed and Lilly shall each forthwith return to the other any physical
manifestations of such Confidential Information then or thereafter in its
possession or control provided that one complete set of all such information,
secrets and know-how can be retained for legal archival purposes. The foregoing
obligations of confidentiality and non-use shall not apply to information that
the receiving Party can demonstrate:
12.1.1 is independently developed without reliance on such information; or
12.1.2 must be disclosed pursuant to an order of a court or regulatory
agency of competent jurisdiction or pursuant to applicable laws,
regulations or pursuant to rules of Nasdaq or an applicable stock exchange.
13 TERM AND TERMINATION OF AGREEMENT
13.1 TERM OF AGREEMENT. Subject to the provisions contained herein which
provide for earlier termination, this Agreement shall commence on the Effective
Date, and shall remain in effect for a period of five (5) years until the
Initial Expiration Date. MiniMed may, at its sole discretion, upon notice to
Lilly from MiniMed at least one hundred eighty (180) days prior to the Initial
Expiration Date, either extend the Agreement for a period of three (3)
additional years or elect to terminate the Agreement at the end of the Initial
Term. If no such notice is given, the Agreement will automatically renew for an
additional five (5) year term. Following extension of the Agreement for an
additional term, the Agreement will automatically extend for successive periods
of one (1 ) additional year unless either of the Parties gives written notice to
the other Party of its intention not to renew at least one hundred eighty (180)
days prior to the Agreement's expiration (including any applicable extensions).
Upon expiration of this Agreement, neither Party shall owe to the other any
damages, or indemnification resulting from such expiration.
13.2 BREACH OF AGREEMENT. The foregoing notwithstanding, if either MiniMed
or Lilly breaches any of the terms and conditions of this Agreement, the other
Party may give notice of the breach to the Party in default. If the defaulting
Party does not rectify the breach within ninety (90) days after receipt of the
notice, the Party who gave
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notice may terminate this Agreement upon the expiration of the ninety (90) day
period without prejudice to such Party's claims for damages, or indemnification
for the losses incurred by reason of such termination or breach of the
Agreement. If the breach is of a type that cannot be cured within such ninety
(90) day period, the Party who gave notice shall not have the right to terminate
this Agreement so long as the breaching Party begins bona fide, commercially
reasonable efforts to cure such breach within such ninety (90) day period and
continues such efforts in a reasonably expeditious manner until such breach is
cured or within one hundred eighty (180) days after receipt of the notice,
whichever is shorter. If the defaulting Party does not rectify the breach within
such one hundred eighty (180) day period, the Party who gave notice may
terminate this Agreement upon the expiration of the one hundred eighty (180) day
period without prejudice to such Party's claims for damages, or indemnification
for the losses incurred by reason of such termination or breach of the
Agreement.
13.3 INSOLVENCY OF A PARTY. In the event either Party becomes the subject
of proceedings involving bankruptcy, insolvency, moratorium of payment,
reorganization or liquidation, or if either Party makes any assignment for the
benefit of its creditors, then this Agreement may by immediate notice be
terminated forthwith by the other Party by written notice, without prejudice to
its claims for damage, reimbursement or indemnification for losses incurred by
reason of such termination.
13.4 CHANGE IN MINIMED'S OWNERSHIP. MiniMed shall promptly report to Lilly
the acquisition, by any entity beneficially owning less than 5% (including 0%)
of the outstanding voting securities of MiniMed on the Effective Date, of
beneficial ownership of at least 40% of the outstanding voting securities of
MiniMed (not including any entity who acquires such beneficial ownership via a
gift, bequest or through the laws of descent, from Alfred E. Mann) (an
"Accumulation"). If (a) an Accumulation is made by a competitor of Lilly's in
the diabetes field or if (b) Lilly makes a good faith determination that such
Accumulation will significantly impair Lilly's interests, Lilly shall have
forty-five (45) days from its receipt of notice of such Accumulation to
terminate this Agreement by giving written notice to MiniMed thereof. Such
notice shall state the basis and justification for such termination. If Lilly
has not so notified MiniMed of its decision to terminate this Agreement within
such forty-five (45) day period, Lilly shall be deemed to have consented to such
Accumulation.
13.5 RIGHTS AND DUTIES UPON TERMINATION. Following expiration or
termination of this Agreement, and subject to the provisions of the paragraph
immediately following this, all licenses and rights granted hereunder shall
terminate except for rights in respect of licenses and rights granted under
Sections 2.2, 4.3(e) and 4.4, and jointly-owned property referred to in Section
5.1(a). Following expiration or termination of this Agreement, MiniMed's
obligations under Sections 3.1, 3.4, 3.5, 4.1, 4.2, 4.3, 4.4 (except for
obligations relating to the orderly transfer of rights back to Lilly), 4.5, 4.6,
4.7, 5.1 and 5.3 shall terminate. Within ninety (90) days of such
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expiration or termination, MiniMed or Lilly shall, at the request of the other
Party, either destroy, return, transfer or provide to such requesting Party all
Confidential Information obtained from such requesting Party, except for a
single copy of such Confidential Information which may be retained solely for
legal archival purposes to determine the scope of each Party's obligations under
this Agreement. In addition, within ninety (90) days of such expiration or
termination, MiniMed shall provide Lilly with access to Government Approvals,
developed under the obligations of this Agreement and MiniMed shall use its
reasonable best efforts to transfer all Government Approvals to Lilly within one
year of such expiration or termination.
In addition, following termination of this Agreement under any one of
Sections 13.4, 13.6(a) or 13.6(d) or by Lilly pursuant to Sections 13.2 or 13.3,
MiniMed shall immediately stop manufacturing and selling the Products and within
ninety (90) days deliver to Lilly a list of its inventory of Bulk Material and
Products. Lilly may, at its option, require MiniMed to either destroy and/or
deliver any such Bulk Material and Products to Lilly or to a third party named
by Lilly and MiniMed shall promptly destroy and/or deliver these items as
instructed by Lilly. As soon as practicable thereafter, Lilly shall reimburse
MiniMed for these items at MiniMed's landed cost (i.e., Purchase Price plus
shipping); provided, however, that in the event a termination is pursuant to
Section 13.4, Lilly shall reimburse MiniMed for these items at its variable cost
(cost of materials and allocation of people) for such items.
Notwithstanding the foregoing, following expiration or termination of this
Agreement under either Section 13.1, 13.6(b) or 13.6(c), or by MiniMed pursuant
to Sections 13.2 or 13.3, MiniMed's licenses under this Agreement shall become
non-exclusive. Further, MiniMed shall have eighteen (18) months from expiration
or termination of this Agreement to complete fill/finish of Products and shall
have thirty-six (36) months to finish selling Products. After such thirty-six
(36) month period, all licenses granted by Lilly to MiniMed under this Agreement
shall terminate.
13.6 OTHER EARLY TERMINATION RIGHTS.
(a) If MiniMed cannot obtain Governmental Approvals and Reimbursement
Approvals for Products within five years of the Effective Date of this Agreement
in the United States, Germany and France, then Lilly and MiniMed shall each have
the option of terminating the Agreement upon 30 days prior written notice. Upon
such termination under this Section 13.6(a), if such failure to obtain
Governmental Approvals and Reimbursement Approvals for Products is due to an
Adverse Event related to the Bulk Material and MiniMed has not met its minimum
requirements under Section 3.7, then, in lieu of such requirements, MiniMed
shall pay Lilly $3 million within 10 days of notice of termination.
(b) If Lilly determines that this Agreement is no longer profitable for
Lilly, Lilly shall have the right to terminate the Agreement with one hundred
eighty (180) days notice
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with no obligation to MiniMed for any damages or indemnification for any losses
incurred by MiniMed by reason of such termination of the Agreement.
(c) If Lilly determines, in its sole discretion, to cease production of
Bulk Material, Lilly shall have the right to terminate the Agreement with one
hundred eighty (180) days notice with no obligation to MiniMed for any damages
or indemnification for any losses incurred by MiniMed by reason of such
termination of the Agreement.
(d) If MiniMed determines that this Agreement is no longer profitable for
MiniMed, MiniMed shall have the right to terminate the Agreement with one
hundred eighty (180) days notice and suspend all further deliveries of Bulk
Material with no obligation to Lilly for any damages or indemnification for any
losses incurred by Lilly by reason of such termination of the Agreement.
(e) If Lilly terminates this Agreement under Sections 3.2, 4.3(c) and
4.3(e)(iii), Lilly shall have the right to terminate the Agreement with ninety
(90) days notice. In such instance, Lilly shall not be liable to MiniMed, or any
third parties, for any damages or indemnification resulting from such
termination.
13.7 SUPPLY OF BULK MATERIAL FOLLOWING TERMINATION.
(a) Lilly shall immediately have the right not to supply Bulk Material to
MiniMed following termination of this Agreement under any one of Sections 13.4,
13.6(d), 13.6(e) or by Lilly under Sections 13.2 or 13.3.
(b) Following expiration or termination of this Agreement under either
Sections 13.1, 13.6(a), 13.6(b) or 13.6(c) or by MiniMed under Sections 13.2 or
13.3, MiniMed may purchase Bulk Material in advance from Lilly not to exceed up
to three (3) times the actual amount of Bulk Material purchased by MiniMed in
the twelve (12) months immediately preceding such termination in accordance with
the terms of this Agreement. Should this Agreement expire or terminate under
Sections 13.1, 13.6(b) or 13.6(c), MiniMed's sole remedy for this expiration or
termination is to purchase Bulk Material in advance from Lilly. Lilly shall have
no obligation to MiniMed for any damages or indemnification for any losses
incurred by MiniMed by reason of such expiration or termination of the
Agreement.
13.8 SURVIVAL OF CONTENTS. Obligations incurred by the Parties under
Sections 2.2, 3.7, 4.4, 5.1(a), 8.1, 8.2, 8.3, 8.5, 8.7.6, 9.5, 9.7, 11.1.3,
11.1.4, 11.2, 12.1, 13.5 through 13.8, 15.1, 15.2, 16.1(b) through 16.3, 17.1
through 17.5, and 18.1 through 18.13, and MiniMed's payment obligations which
accrue prior to the effective date of termination, or due to termination, shall
survive the termination of the Agreement.
14 GENERAL REPRESENTATIONS AND WARRANTIES. Each Party hereby represents and
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warrants to the other Party as of the Effective Date as follows:
14.1 CORPORATE EXISTENCE AND POWER. Such Party (a) is a corporation duly
organized, validly existing and in good standing under the laws of the state in
which it is incorporated, and (b) has full corporate power and authority and the
legal right to own and operate its property and assets and to carry on its
business as it is now being conducted and is contemplated in this Agreement.
14.2 AUTHORIZATION. Such Party (a) has the corporate power and authority
and the legal right to enter into the Agreement and perform its obligations
hereunder, and (b) has taken all necessary corporate action on its part required
to authorize the execution and delivery of the Agreement and the performance of
its obligations hereunder. The Agreement has been duly executed and delivered on
behalf of such Party and constitutes a legal, valid, binding obligation of such
Party and is enforceable against it in accordance with its terms subject to the
effects of bankruptcy, insolvency or other laws of general application affecting
the enforcement of creditor rights and judicial principles affecting the
availability of specific performance and general principles of equity whether
enforceability is considered a proceeding at law or equity.
15 LILLY REPRESENTATIONS, WARRANTIES, INDEMNIFICATION'S AND DISCLAIMERS.
15.1 LILLY'S BULK MATERIAL. Lilly represents and warrants that, on the date
of shipment, the Bulk Material will conform to the Specifications for the Bulk
Material that Lilly provides to MiniMed, such Specifications attached hereto as
Appendix F. Lilly further warrants that the Bulk Material is adequately
contained, packaged and labeled in accordance with the Specifications and the
MRD, conforms to the affirmations of fact on the container and that the Bulk
Material as so packaged has been shipped in accordance with the MRD. Lilly
warrants that it will convey good title to the Bulk Material free of all liens
of any kind whatsoever.
15.2 LILLY'S REPRESENTATIONS. Lilly represents and warrants and agrees as
of the Effective Date as follows:
(a) that to the best of its knowledge and belief all information provided
to MiniMed in connection with this transaction is true and correct in all
material respects;
(b) that Lilly owns or controls the Licensed Patents, Lilly Know-How,
Proprietary Materials, Bulk Material, Lilly's trademarks and the like licensed
hereunder and that Lilly is not precluded by law or contract from granting to
MiniMed the rights specified in this Agreement to the Licensed Patents, Lilly
Know-How, Proprietary Materials, Bulk Material, Lilly's trademarks and the like
licensed hereunder and that Lilly is not aware of any information which would
adversely impact the development, Government Approvals, commercialization and/or
marketing of Products by MiniMed
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hereunder;
(c) that Lilly is not aware of existing prior art that would make the
Licensed Patents invalid, unenforceable or any claims in the Licensed Patents
not suitable for issue; and
(d) that Lilly is not aware of existing patents or patent applications to
which royalty-bearing licenses from third parties will be necessary to obtain in
order to exercise the rights granted under this Agreement.
16 MINIMED'S REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS.
16.1 REPRESENTATIONS AND WARRANTIES
MiniMed represents, warrants and agrees as of the Effective Date as
follows:
(a) that MiniMed shall purchase its entire requirements of the Bulk
Material from Lilly or from a supplier approved in writing by Lilly;
(b) that MiniMed shall use the Bulk Material supplied by Lilly exclusively
for the purpose of formulation research and development, evaluation or
manufacturing Products for the Field pursuant to this Agreement;
(c) that MiniMed shall manufacture the Products solely in accordance with
the teachings of the Licensed Patents, the Improvements, Lilly Know-How and
MiniMed Patentable Inventions;
(d) that MiniMed shall obtain all required Governmental Approvals necessary
to market and sell Products; and
(e) that MiniMed shall market, promote, distribute and sell the Products
solely for the Field.
16.2 CERTIFICATION - GENERIC DRUG ENFORCEMENT ACT. MiniMed represents and
warrants that it is not debarred and has not and will not use in any capacity,
the services of any person debarred under subsections 306(a) or (b) of the
Generic Drug Enforcement Act of 1992. If at any time this certification is no
longer accurate, MiniMed shall immediately notify Lilly of such changed
circumstances.
16.3 PRODUCTS. MiniMed represents and warrants that, on the date of release
for sale, the Products will conform to the Specifications, practices and
stipulations referred to in Section 9.4 and the MRD. MiniMed further warrants
that the Products, on the date of release for sale, will be adequately
contained, packaged and labeled and
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conform to the affirmations of fact on the container.
17 INDEMNIFICATION AND INSURANCE
17.1 LILLY'S INTELLECTUAL PROPERTY INDEMNIFICATION. Lilly will, at its own
cost, settle or defend any third party suit or proceeding brought against
MiniMed to the extent based on a claim that the Bulk Material infringes an
issued or granted patent. Lilly shall pay all damages and costs finally awarded
against MiniMed. For this paragraph to apply, MiniMed must inform Lilly within
10 days of any claim or suit being made or brought, and give Lilly sole
authority to defend or settle any such suit or proceeding, and all authority,
information, and assistance reasonably necessary to settle or defend such suit
or proceeding at Lilly's cost. Prior to settlement by Lilly of any claim against
MiniMed pursuant to this Section 17.1, Lilly shall obtain the express written
consent of MiniMed, which consent shall not be unreasonably withheld or delayed.
In the event that the Bulk Material is held to infringe and its use is enjoined,
Lilly may at its option obtain for MiniMed the right to continue using such Bulk
Material at no additional cost to MiniMed. If Lilly is unable to obtain such
rights for MiniMed, Lilly shall grant MiniMed a credit and accept return of
unused Bulk Material. Lilly has no liability under this section if the alleged
infringement arises out of non-compliance with the Specifications, compliance
with MiniMed's specifications, any addition or modification by MiniMed, or
MiniMed's use of Bulk Material with other products, and MiniMed shall indemnify
Lilly for all of the foregoing. Lilly's obligation under this paragraph shall
not apply to any alleged infringement after MiniMed has received written notice
of such infringement unless Lilly gives written consent for such continuing
alleged infringement. THIS PARAGRAPH STATES THE ENTIRE LIABILITY FOR
INFRINGEMENT OF INTELLECTUAL PROPERTY AND IS IN LIEU OF ALL OTHER WARRANTIES OF
NON-INFRINGEMENT, EXPRESS OR IMPLIED.
17.2 LILLY INDEMNITY. Lilly shall indemnify, defend and hold MiniMed
harmless from and against all Losses resulting from or arising out of: (i)
Lilly's manufacturing, testing, packaging, storage and handling of Bulk Material
that occurs prior to Lilly's delivery of Bulk Material to MiniMed's designated
common carrier as described in Section 6.2; (ii) the breach by Lilly of its
representations, warranties or obligations under this Agreement; (iii) the
violation of any Law by Lilly; or (iv) the negligence or willful misconduct of
Lilly, its employees or its agents (collectively "Lilly Activities"), except to
the extent such Losses result from MiniMed Activities (as defined in Section
17.3).
17.3 MINIMED INDEMNITY. MiniMed shall indemnify, defend and hold Lilly
harmless from and against all Losses resulting from or arising out of (i)
MiniMed's manufacturing of the Products, packaging, testing, labeling, storage,
handling, marketing, promotion, distribution, delivery and/or sale of the
Products/Bulk Material
34
<PAGE> 35
that occurs after Lilly's delivery of Bulk Material to MiniMed's designated
common carrier as described in Section 6.2, (ii), the breach by MiniMed of its
representations, warranties or obligations under this Agreement, (iii) the
violation of any Law by MiniMed, or (iv) the negligence or willful misconduct of
MiniMed, its employees or its agents (collectively "MiniMed Activities"), except
to the extent such Losses result from Lilly Activities (as defined in Section
17.2).
17.4 INDEMNIFICATION PROCEDURE. A Party seeking indemnification
("Indemnified Party") shall notify, in writing, the other Party ("Indemnifying
Party") within fifteen (15) days of the assertion of any claim or discovery of
any fact upon which the Indemnified Party intends to base a claim for
indemnification. An Indemnified Party's failure to so notify the Indemnifying
Party shall not, however, relieve such Indemnifying Party from any liability
under this Agreement to the Indemnified Party with respect to such claim except
to the extent that such Indemnifying Party is actually denied, during the period
of delay in notice, the opportunity to remedy or otherwise mitigate the event or
activity(ies) giving rise to the claim for indemnification and thereby suffers
or otherwise incurs additional liquidated or other readily quantifiable damages
as a result of such failure. The Indemnifying Party, while reserving the right
to contest its obligations to indemnify hereunder, shall be responsible for the
defense of any claim, demand, lawsuit or other proceeding in connection with
which the Indemnified Party claims indemnification hereunder. The Indemnified
Party shall have the right at its own expense to participate jointly with the
Indemnifying Party in the defense of any such claim, demand, lawsuit or other
proceeding, but with respect to any issue involved in such claim, demand,
lawsuit or other proceeding with respect to which the Indemnifying Party has
acknowledged its obligation to indemnity the Indemnified Party hereunder, the
Indemnifying Party shall have the right to select counsel, settle, try or
otherwise dispose of or handle such claim, demand, lawsuit or other proceeding
on such terms as the Indemnifying Party shall deem appropriate, subject to any
reasonable objection of the Indemnified Party.
17.5 INSURANCE. MiniMed shall, throughout the term of this Agreement,
obtain and maintain at its own cost and expense from a qualified insurance
company, comprehensive general liability insurance including standard product
liability insurance designating Lilly as an additional insured. Such policy
shall provide protection against any and all claims, demands and causes of
action arising out of any defects, alleged or otherwise, of the Products. The
amount of coverage shall be a minimum of One Million Dollars ($1,000,000.00)
combined single limit coverage, for each occurrence for bodily injury and/or for
property damage. MiniMed shall furnish Lilly a certificate of insurance
evidencing such insurance within thirty (30) days after execution of this
Agreement.
18 TRADEMARK
35
<PAGE> 36
(a) Lilly and MiniMed agree that a new brand name/trademark for the
Products for use in MiniMed pumps (hereafter the "Trademarks") will be
developed and used by MiniMed on the Products.
(b) Lilly and MiniMed agree jointly to create name candidates promptly
after this Agreement is signed by both parties for which Lilly's legal
department will search, review and provide an opinion. Selection of
the Trademark(s) to adopt will be made by consensus agreement by both
Lilly and MiniMed. Notwithstanding the foregoing, Lilly and MiniMed
agree that the preferred name to adopt will draw on Lilly's franchise
in Huma marks, and will consist of a name that begins with Huma_____,
unless otherwise agreed to by the parties.
(c) Lilly and MiniMed agree that Lilly will own the Trademark(s).
(d) Lilly agrees to license the right to use the Trademark(s) to MiniMed
by executing a license agreement with MiniMed substantially in
conformity with Appendix J to this Agreement and such other provisions
to which the Parties may agree. Lilly further agrees to take the same
actions to secure, maintain, and protect the Trademark(s) in all
countries in the Territory that Lilly ordinarily takes with regard to
its pharmaceutical trademarks, and Lilly also agrees to bear all
expenses associated with such actions. Lilly and MiniMed further agree
to execute such documents, such as, but not limited to, registered
user agreements, as may be necessary or helpful from time to time to
comply with licensing or other trademark regulations, laws or other
requirements applicable in the Territory.
(e) MiniMed's license to the Trademark(s) will/shall expire upon the
termination of this Agreement. Upon such termination, MiniMed shall
have the right to pay Lilly 50% of Lilly's direct costs in obtaining
and maintaining the Trademark(s) in exchange for Lilly's covenant not
to use the Trademark(s) for two (2) years in the United States and for
five years (5) outside the United States.
19 MISCELLANEOUS
19.1 FORCE MAJOR. Neither Party to this Agreement shall be liable for
failure to perform if the failure is attributable to any cause which is
reasonably beyond the Party's control, including:
19.1.1 war (declared or undeclared), riot, political insurrection,
rebellion, revolution;
19.1.2 acts or orders of or expropriation by any government (whether de
facto
36
<PAGE> 37
or de jure) prohibiting the import or export of the goods covered hereby
imposing or rationing;
19.1.3 inability to procure, after exertion of reasonable best efforts, or
shortage of supplies of necessary materials, equipment, or production
facilities;
19.1.4 quarantine restrictions;
19.1.5 fuel shortage;
19.1.6 strike, lockout, or other labor troubles which interfere with the
manufacture, sale or transportation of the goods covered hereby or with the
supply of raw materials necessary for their production;
19.1.7 fire, flood, explosion, earthquake, tornadoes or other natural
events.
19.2 RELATIONSHIP BETWEEN PARTIES. Nothing in this Agreement or in the
activities engaged in by Lilly or MiniMed hereunder shall create an agency,
partnership, employment or joint venture relationship between the Parties.
19.3 NON-DISCLOSURE OF AGREEMENT. Neither Party to this Agreement may
release any information to any third party regarding the terms or existence
(including results derived therefrom) of this Agreement without the prior
written consent of the other Party. In order to obtain a Party's consent, the
other Party should provide such information as will enable the other Party to
evaluate issues relating to the disclosure; provided, however, that in the event
a Party is engaged in bona fide discussions relating to a possible business
combination, the Party shall not be required to disclose to the other Party the
specific identity of the entity with whom the Party is engaged in discussions.
Without limitation, this prohibition applies to press releases, educational and
scientific conferences, quarterly investor updates, promotional materials,
governmental filings and discussions with public officials, the media, security
analysts and investors. However, this provision does not apply to any
disclosures regarding this Agreement or related information which may be
required by law or the rules of Nasdaq or an applicable stock exchange,
including requests for a copy of this Agreement or related information by tax
authorities. If any Party to this Agreement determines a release of information
regarding the existence or terms of this Agreement is required by law, that
Party will notify the other Party as soon as practicable and give as much detail
as possible in relation to the disclosure required. The Parties will then
cooperate with respect to determining what information should actually be
released.
19.4 LEGAL COMPLIANCE. MiniMed shall ensure that it and its importing,
Manufacturing Activities and Selling Activities shall at all times comply with
all applicable laws, including but not limited to packaging and labeling laws.
19.5 NOTICES. Any notice authorized or required to be given under the terms
of this Agreement shall be given by facsimile transmission, registered mail,
telex or adequately prepaid cable or telegram sent to the above principal place
of business of the addressee (or such other address as the addressee may
previously by notice to the other Party have stipulated) or by hand delivering
the same to such address.
37
<PAGE> 38
Notices shall be deemed to be given in the case of a facsimile transmission when
sent provided it is confirmed by registered mail not later than the next
business day, in the case of registered mail upon the receipt by the other
Party, in the case of a telex upon the receipt of the addressee's answer-back at
the foot of the sender's copy thereof, in the case of a cable or telegram upon
the expiration of forty-eight (48) hours after lodgment with the official
sending body, and in the case of hand delivery upon the hand delivery of the
notice.
19.6 ASSIGNMENT. Either Party may assign this Agreement, in whole or in
part, without the prior written consent of the other to any of its direct or
indirect wholly-owned subsidiaries or parent companies. No other assignment by
any Party without the consent of the other Party hereto shall be valid.
19.7 WAIVER. The failure of either Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or conditions on any future
occasion.
19.8 ENTIRE AGREEMENT. This Agreement constitutes the definitive agreement
of the Parties on the subject matter hereof and supersedes, cancels and annuls
all prior agreements, understandings and undertakings relating to the subject
matter hereof. This Agreement shall not be modified or amended except by a
written document signed by a duly authorized officer of the Parties. There are
no verbal agreements, warranties, representations or understandings affecting
this Agreement and all previous or other negotiations, representations, and
understandings between the Parties are merged herein.
19.9 CHOICE OF LAW AND JURISDICTION. This Agreement shall be governed by
and interpreted in accordance with the substantive laws of the State of Indiana,
without regard to its choice of law rules.
19.10 SEVERABILITY. Whenever possible, each provision of the Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of the
Agreement. In the event of such invalidity, the Parties shall seek to agree on
an alternative enforceable provision that preserves the original purpose of this
Agreement.
19.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
19.12 HEADINGS. All titles, headings and captions are placed in this
Agreement
38
<PAGE> 39
merely as a matter of convenience and shall not affect the construction or
interpretation of any of its provisions.
19.13 NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is
intended or should be construed to confer upon or give to any person other than
the Parties hereto and their successors and permitted assigns any rights or
remedies under or by reason of this Agreement.
20 CONTINGENCY OF AGREEMENT
20.1 CONTINGENCY OF AGREEMENT. With reference to Sections 4.2 and 9.1 of
this Agreement, the Parties acknowledge that the obligations of the Parties
under this Agreement are contingent upon the Parties compiling and agreeing upon
a Manufacturing Responsibility Document and a Regulatory and Clinical Document
within six (6) months of the Effective Date.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives, on the date written below.
ELI LILLY AND COMPANY MINIMED INC.
Signature: /s/ MICHAEL L. EAGLE Signature: /s/ ALFRED E. MANN
Name: Michael L. Eagle Name: Alfred E. Mann
Title: V.P. for Manufacturing Title: Chairman and CEO
Date: February 1, 1999 Date: January 29, 1999
39
<PAGE> 1
EXHIBIT 10.8
AMENDMENT TO LICENSE, SUPPLY AND DISTRIBUTION AGREEMENT
WITNESSETH
WHEREAS, Eli Lilly and Company, an Indiana corporation ("Lilly") and
MiniMed Inc., a Delaware corporation ("MiniMed") entered into that certain
License, Supply and Distribution Agreement dated February 1, 1999 (the
"Agreement"); and
WHEREAS, Lilly and MiniMed desire to create a Development Responsibility
Document ("DRD") prior to the finalization of a Manufacturing Responsibility
Document ("MRD"); and
WHEREAS, in order to expedite commercial introduction of the Products,
Lilly and MiniMed desire to amend the Agreement to include the development of
the DRD;
NOW, THEREFORE, Lilly and MiniMed agree as follows:
1. The Agreement shall be amended to add a Section 1.47 which shall read in its
entirety as follows:
"1.47 "DEVELOPMENT RESPONSIBILITIES DOCUMENT (DRD)" shall mean a document
outlining the responsibilities of the Parties relating to certain development,
manufacturing and other activities. The DRD shall govern these activities until
an MRD is agreed upon by both parties pursuant to Section 9.1 hereof."
1. Section 3.1 shall be deleted and replaced in its entirety with the following:
"3.1 LILLY'S SALES. Lilly shall sell to MiniMed the Bulk Material. MiniMed
shall purchase its entire requirements of the Bulk Material from Lilly or from a
supplier approved in writing by Lilly. MiniMed shall use the Bulk Material
supplied by Lilly exclusively for the purpose of formulation research and
development, evaluation or manufacturing Products for the Field pursuant to this
Agreement solely in accordance with the teachings of the Licensed Patents, the
Improvements and Lilly Know-How for the Field and the manufacturing requirements
set forth in the RCD and the DRD or the MRD (whichever is in effect)."
1. Section 3.4.1 shall be amended such that the reference therein to "MRD" shall
be replaced with "DRD."
4. Section 4.1 shall be amended such that the reference therein to "MRD" shall
be replaced with "DRD."
1. A Section 4.8 shall be added to the Agreement that shall read in its entirety
as follows:
"4.8 CREATION OF DEVELOPMENT RESPONSIBILITIES DOCUMENT. As soon as
practicable Following the Effective Date, Lilly and MiniMed shall agree upon a
DRD. Lilly shall prepare and submit to MiniMed an initial draft of the DRD by
May 31, 1999."
5. Section 6.1 shall be amended such that the reference therein to "MRD" shall
be replaced with
<PAGE> 2
"DRD or the MRD (whichever is in effect)".
5. Section 8.2 shall be amended such that all references therein to "MRD" shall
be replaced with "DRD or the MRD (whichever is in effect)".
5. Section 8.5 shall be amended such that the reference therein to "MRD" shall
be replaced with "DRD or the MRD (whichever is in effect)".
5. Section 8.6 shall be amended such that the reference to "MRD" shall be
replaced with "DRD or the MRD (whichever is in effect)".
5. Section 9.1 shall be amended such that the words "Prior to the first shipment
of Bulk Material by Lilly to MiniMed," in the first sentence of such Section 9.1
shall be deleted.
5. Section 9.3 shall be amended such that the reference therein to "MRD" shall
be replaced with "DRD or the MRD (whichever is in effect)".
5. Section 9.4 shall be deleted and replaced in its entirety with the following:
"9.4 MANUFACTURING STANDARDS. MiniMed, or its designated third party, shall
perform the Manufacturing Activities of the Products in accordance with the
Specifications, the packaging and labeling practices, and quality stipulations
set forth in the DRD or the MRD (whichever is in effect) and as reasonably
supplied and/or specified by Lilly from time to time. MiniMed, or its designated
third party, shall at all times comply with cGMP and all regulatory commitments.
Prior to compilation and execution of the MRD, MiniMed shall permit authorized
representatives of Lilly to enter and inspect any and all manufacturing
facilities relating to the Products. As part of the DRD or the MRD (whichever is
in effect), MiniMed shall permit authorized representatives of Lilly at all
reasonable times and upon reasonable prior notice to MiniMed:
9.4.1 to enter and inspect any and all manufacturing facilities
relating to the Products,
9.4.2 to inspect copies of relevant batch documentation thereof to
ascertain whether MiniMed complies with the covenants set forth in
this Section."
5. Section 15.1 shall be amended such that all references therein to "MRD" shall
be replaced with "DRD or the MRD (whichever is in effect)".
5. Section 20.1 shall be deleted and replaced in its entirety with the
following:
"20.1 CONTINGENCY OF AGREEMENT. With reference to Sections 4.2 and 4.8 of
this Agreement, the Parties acknowledge that the obligations of the Parties
under this Agreement are contingent upon the Parties compiling and agreeing upon
an DRD and a RCD within six (6) months of the Effective Date."
13. All other terms in the Agreement unaffected by this Amendment shall remain
in full force and effect.
[Signature page follows]
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to the
Agreement to be executed by their duly authorized representatives, on the date
written below.
ELI LILLY AND COMPANY MINIMED INC.
Signature: /s/ JAMES A. HARPER Signature: /s/ ERIC S. KENTOR
--------------------- -------------------------
Name: James A. Harper Name: Eric S. Kentor
------------------------- ----------------------------
President Diabetes and
Title: Growth Disorder Products Title: Sr. V.P. and General Counsel
------------------------- ----------------------------
Date: June 24, 1999 Date: June 28, 1999
------------------------- ----------------------------
<PAGE> 1
EXECUTION COPY EXHIBIT 10.9
CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH
RESPECT TO THE PORTIONS
OF THIS EXHIBIT AS
INDICATED HEREIN.
Dated 11th June, 1999
ELAN PHARMACEUTICAL TECHNOLOGIES
A DIVISION OF ELAN CORPORATION, PLC
AND
ELAN PHARMA INTERNATIONAL LIMITED
AND
MINIMED INC.
DEVELOPMENT, LICENCE AND SUPPLY AGREEMENT
Page 1 of 44
<PAGE> 2
CONTENTS
CLAUSE 1 Preliminary
CLAUSE 2 The Licence
CLAUSE 3 Intellectual Property
CLAUSE 4 Competing Products
CLAUSE 5 Development of the system and Product
CLAUSE 6 Project Team and Project Management
CLAUSE 7 Registration of the Product
CLAUSE 8 Marketing and Promotion of the Product
CLAUSE 9 Supply of the system
CLAUSE 10 Manufacture of the product
CLAUSE 11 Financial Provisions
CLAUSE 12 Payments, Reports and Audits
CLAUSE 13 Duration and Termination
CLAUSE 14 Warranty and Indemnity
CLAUSE 15 Customer Complaints and Product Recall
CLAUSE 16 Miscellaneous Provisions
CLAUSE 17 Conditions
Schedule 1 Elan Patent Rights
Schedule 2 Evaluation study
Schedule 3 The Project
Page 2 of 44
<PAGE> 3
Schedule 4 Current System Specifications
Schedule 5 Project System Specifications
Schedule 6 Product Specifications
Schedule 7 Royalty Payments
Page 3 of 44
<PAGE> 4
THIS AGREEMENT is made on 11th June, 1999.
BETWEEN:
(1) ELAN PHARMACEUTICAL TECHNOLOGIES, a division of Elan Corporation, a
company incorporated in Ireland having its registered office at Lincoln
House, Lincoln Place, Dublin 2, Ireland;
(2) ELAN PHARMA INTERNATIONAL LIMITED, a company incorporated in Ireland
having its registered office at WIL House, Shannon Business Park,
Shannon, Co. Clare, Ireland; and
(3) MINIMED INC., a company incorporated under the laws of the State of
Delaware having its principal place of business at 12744 San Fernando
Road, Sylmar, California CA 91342, United States of America.
RECITALS:
A. ELAN is beneficially entitled to the use of various patents, including
the ELAN PATENTS, which have been granted or are pending under the
International Convention in relation to the development and production
of subcutaneous micro-infusion pump devices, methods of drug delivery
using such devices and drug specific dosage forms for pharmaceutical
products, devices and processes.
B. ELAN is knowledgeable in the development of subcutaneous micro-infusion
drug delivery systems, methods of drug delivery using such devices and
drug specific dosage forms and has developed a unique range of delivery
systems and devices designed to provide improved delivery of newer and
better formulations of medicaments.
C. MINIMED is a world leader in the design, development and manufacture of
advanced infusion systems, primarily for the treatment of diabetes.
D. ELAN has developed a subcutaneous micro-infusion drug delivery system
as a method of drug delivery. MINIMED wishes ELAN to further develop
the SYSTEM for MINIMED as a method of drug delivery incorporating the
COMPOUND. ELAN is willing to use its technology to do so and to grant
MINIMED an exclusive licence of the ELAN PATENTS and ELAN KNOW-HOW to
package, import, use, offer for sale, distribute and sell the PRODUCT
in the TERRITORY.
E. ELAN and MINIMED are desirous of entering into an agreement to give
effect to the arrangements described at Recitals C and D.
Page 4 of 44
<PAGE> 5
NOW IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1 - PRELIMINARY
1.1 DEFINITIONS: In this Agreement unless the context otherwise requires:
AFFILIATE shall mean any corporation or entity controlling or
controlled or under common control with ELAN or MINIMED, as the case
may be. For the purposes of this Agreement, "control" shall mean the
direct or indirect ownership of more than 50% of the issued voting
shares or other voting rights of the subject entity to elect directors,
or if not meeting the preceding criteria, any entity owned or
controlled by or owning or controlling at the maximum control or
ownership right permitted in the country where such entity exists.
BASAL AND BOLUS SYSTEM shall mean ELAN's ambulatory subcutaneous
infusion drug delivery system for direct attachment to the body of a
patient, which is capable of delivering factory pre-programmed
continuous amounts combined with incremental amounts of drug upon
activation, either manually or automatically, as disclosed and
described in the ELAN PATENTS set forth in Schedule 1.
CFR shall mean the US Code of Federal Regulations 21, as amended from
time to time.
cGCP, cGMP, cGLP shall mean respectively current Good Clinical
Practice, current Good Manufacturing Practice and current Good
Laboratory Practice, respectively, as defined in the FFDCA.
COMPOUND shall mean formulations of insulin and/or its analogues,
either alone or in combination with each other. Insulin analogues shall
include any insulin peptide fragments that possess significant effects
on blood glucose and which are for the treatment of diabetes.
CONTINUOUS SYSTEM shall mean ELAN's ambulatory subcutaneous infusion
drug delivery system for direct attachment to the body of a patient
having a flexible diaphragm drug reservoir, which is capable of
delivering factory pre-programmed continuous amounts of drug upon
activation as disclosed and described in the ELAN PATENTS set forth in
Schedule 1 attached hereto.
CURRENT SYSTEM SPECIFICATIONS shall mean the existing specifications
for the SYSTEM as set forth in Schedule 4.
DEVELOPMENT COST shall mean the fully allocated cost, which is the sum
total of all development and other related costs for the SYSTEM
incurred after the EFFECTIVE DATE, including direct labour, direct
materials and supplies,
Page 5 of 44
<PAGE> 6
variable labour, overhead and attributable administration, quality
control, quality assurance and other costs, whether incurred by ELAN,
its agents or any sub-contractor of ELAN; such costs to be calculated
in accordance with generally accepted accounting principles and such
costs shall only be incurred as the parties shall from time to time
agree.
DEVICE REGULATORY APPLICATION shall mean applications for approval to
market the SYSTEM with the COMPOUND which MINIMED will file with the
RHA in any country of the TERRITORY as the parties may from time to
time determine hereunder, including any supplements or amendments
thereto.
DEVICE REGULATORY APPROVAL shall mean the final approval by the RHA to
market the SYSTEM with the COMPOUND in any country of the TERRITORY,
including pricing and reimbursement approval and any other approval
which is required to launch the SYSTEM with the COMPOUND in the normal
course of business.
DMF shall mean Device or Drug Master File, as defined in the CFR
Section 314.420 or 814 and/or its equivalent in the other countries of
the TERRITORY.
EFFECTIVE DATE shall mean 11th June, 1999.
ELAN shall mean Elan Pharmaceutical Technologies, a division of Elan
Corporation, plc, Elan Pharma International Limited and any of their
AFFILIATES.
ELAN BACKGROUND TECHNOLOGY shall mean ELAN PATENTS, and/or ELAN KNOW
HOW. Notwithstanding anything contained in this Agreement to the
contrary, ELAN BACKGROUND TECHNOLOGY shall consist of ELAN KNOW-HOW,
and ELAN PATENTS controlled by Elan Corporation plc doing business as
Elan Pharmaceutical Technologies, and shall exclude (a) inventions,
patents and know-how owned, licensed or controlled by AFFILIATES of
Elan Corporation, plc (other than Elan Pharmaceutical Technologies),
including, without limitation, Elan Pharmaceuticals Inc., Athena
Neurosciences, Inc., Carnrick Laboratories, Targon Corporation and
Neurex Corporation, and (b) the Nanosystems Technology (as defined in
Clause 4.2.).
ELAN IMPROVEMENTS shall mean any and all improvements or enhancements,
patentable or otherwise, that have been conceived, created, developed
and/or otherwise invented solely by ELAN or jointly by at least one
employee of ELAN and at least one employee of MINIMED, and which can be
usefully applied to the SYSTEM and/or the PRODUCT, including the
manufacture thereof, except for (i) improvements relating exclusively
to the COMPOUND, (ii) any improvements that are subject to contractual
obligations of ELAN to third parties or (iii) improvements or
enhancements based on MINIMED BACKGROUND INFUSION SYSTEM TECHNOLOGY
made solely by MINIMED. If the inclusion of an ELAN IMPROVEMENT is
restricted or limited by a third
Page 6 of 44
<PAGE> 7
party agreement, ELAN shall use reasonable commercial efforts to
exclude or where applicable minimize any such restriction or
limitation.
ELAN KNOW-HOW shall mean all knowledge, information, trade secrets,
data and expertise which is not generally known to the public, owned by
ELAN, or to which ELAN has rights under the terms of a licence or
licences in force on the EFFECTIVE DATE or developed or to be developed
before or during the TERM, which permit(s) disclosure of same to
MINIMED, relating to the SYSTEM and/or the PRODUCT, whether or not
covered by any patent, copyright, design patent, trademark, trade
secret or other industrial or any intellectual property rights.
In the event that ELAN acquires or merges with a third party entity,
ELAN KNOW-HOW shall not include any know-how to the extent that such
know-how relates to a product containing the COMPOUND which has been
approved for marketing or is in development by the said third party
entity. For the avoidance of doubt, the occurrence of any such
acquisition or merger shall not affect the licence of the ELAN KNOW-HOW
granted to MINIMED hereunder. Notwithstanding the foregoing, to the
extent ELAN KNOW-HOW is acquired or otherwise accessed by ELAN after
the EFFECTIVE DATE which in good faith is determined could be
beneficial to the parties relative to the PRODUCT, the parties shall in
good faith endeavour to incorporate such ELAN KNOW-HOW into the
PRODUCT.
ELAN PATENTS shall mean the patents and patent applications as set
forth in Schedule 1, that are owned or licensed by or on behalf of
ELAN. ELAN PATENTS shall also include all extensions, continuations,
continuations-in-part, divisionals, patents-of-additions,
re-examinations, re-issues, supplementary protection certificates and
foreign counterparts of such patents and patent applications and any
patents issuing thereon and extensions of any patents licensed
hereunder.
In the event that ELAN acquires or merges with a third party entity,
ELAN PATENTS shall not include any patent rights to the extent that
such patent rights relate to a product containing the COMPOUND which
has been approved for marketing or is in development by the said third
party entity. For the avoidance of doubt, the occurrence of any such
acquisition or merger shall not affect the licence of the ELAN PATENTS
granted to MINIMED hereunder. Notwithstanding the foregoing, to the
extent any ELAN PATENT is acquired or otherwise accessed by ELAN after
the EFFECTIVE DATE which in good faith is determined could be
beneficial to the parties relative to the PRODUCT, the parties shall in
good faith endeavour to incorporate any such patents into the PRODUCT.
ENFORCEMENT PROCEEDINGS shall mean the proceedings referred to in
Clause 3.4.2.
EVALUATION STUDY shall mean the study which shall be attached as
Schedule 2 which will be performed by MINIMED on the SYSTEM in
accordance with Clause 2.2.
Page 7 of 44
<PAGE> 8
FFDCA shall mean the US Federal Food, Drug and Cosmetic Act of 1934,
and the regulations promulgated thereunder, as may be amended from time
to time.
FIELD shall mean the treatment or amelioration of diabetes by
subcutaneously delivering the COMPOUND using the SYSTEM.
GROSS INCOME shall mean the monetary amount or non cash consideration
payable by an independent third party to MINIMED:-
(i) for the granting of rights, whether by license, sublicense or
otherwise, by MINIMED to any independent third party relating
to the PRODUCT, including license fees, royalties on sales and
other ongoing fees, and
(ii) the NSP of the PRODUCT.
GROSS PROFIT shall mean GROSS INCOME less MANUFACTURING COST.
IN MARKET shall mean the sale of the PRODUCT by MINIMED or its
AFFILIATES to an unaffiliated third party such as (i) an end-user
consumer of the PRODUCT or (ii) a wholesaler, distributor, managed care
organisation, hospital or pharmacy or other third party payor for final
commercial sale by such party to the consumer, and shall exclude in any
event the transfer pricing of the PRODUCT by MINIMED to an AFFILIATE or
a permitted sub-licensee.
IND shall mean Investigational New Drug Application as such term is
defined in the CFR Section 312 and/or its equivalent in the other
countries of the TERRITORY.
INITIAL PERIOD shall mean the initial period of this Agreement, as more
fully described in Clause 13.
MAJOR MARKETS shall mean the USA, Germany, France and Japan and such
additional countries as may be agreed by the parties from time to time.
MANUFACTURING AGREEMENT shall mean the License and Manufacturing
Agreement of even date entered into between ELAN and MINIMED.
MANUFACTURING COST shall have the meaning assigned to it in the
MANUFACTURING AGREEMENT.
MINIMED shall mean MINIMED and any of its AFFILIATES.
MINIMED BACKGROUND COMPOUND TECHNOLOGY shall mean MINIMED COMPOUND
PATENTS and MINIMED COMPOUND KNOW HOW conceived prior to the EFFECTIVE
DATE or independently developed by MINIMED. For purposes of
Page 8 of 44
<PAGE> 9
clarity, the parties acknowledge that MINIMED SYSTEM IMPROVEMENTS shall
not constitute MINIMED BACKGROUND INFUSION SYSTEM TECHNOLOGY hereunder.
MINIMED BACKGROUND INFUSION SYSTEM KNOW-HOW shall mean all knowledge,
information, trade secrets, data and expertise which is not generally
known to the public, owned or licensed by MINIMED prior to the
EFFECTIVE DATE or independently developed by MINIMED, relating to
infusion systems, whether or not covered by any patent, copyright,
design, trademark or other industrial or intellectual property rights.
MINIMED BACKGROUND INFUSION SYSTEM PATENTS shall mean all patents and
patent applications that are owned by, or licensed to MINIMED prior to
the EFFECTIVE DATE or independently developed by MINIMED, relating to
infusion systems but excluding any MINIMED SYSTEM IMPROVEMENTS. MINIMED
PATENTS shall also include all extensions, continuations,
continuations-in-part, divisionals, patents-of-additions,
re-examinations, re-issues, supplementary protection certificates and
foreign counterparts of such patents and patent applications and any
patents issuing thereon and extensions of any patents licensed
hereunder.
MINIMED BACKGROUND INFUSION SYSTEM TECHNOLOGY shall mean MINIMED
INFUSION SYSTEM PATENTS and MINIMED INFUSION SYSTEM KNOW HOW conceived
prior to the EFFECTIVE DATE or independently developed by MINIMED.
MINIMED COMPOUND IMPROVEMENTS shall mean any improvements or
enhancements, patentable or otherwise, relating exclusively to the
COMPOUND which are owned or licensed by MINIMED.
MINIMED COMPOUND KNOW-HOW shall mean all knowledge, information, trade
secrets, data and expertise which is not generally known to the public,
owned or licensed by MINIMED or to be developed or licensed by MINIMED
prior to the EFFECTIVE DATE relating exclusively to the COMPOUND,
whether or not covered by any patent, copyright, design, trademark or
other industrial or intellectual property rights.
MINIMED COMPOUND PATENTS shall mean all patents and patent
applications, that are owned by, or licensed to MINIMED relating
exclusively to the COMPOUND. MINIMED PATENTS shall also include all
extensions, continuations, continuations-in-part, divisionals,
patents-of-additions, re-examinations, re-issues, supplementary
protection certificates and foreign counterparts of such patents and
patent applications and any patents issuing thereon and extensions of
any patents licensed hereunder.
MINIMED SYSTEM IMPROVEMENTS shall mean any and all improvements or
enhancements, patentable or otherwise, that have been conceived,
created,
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<PAGE> 10
developed and/or otherwise invented solely by MINIMED which can be
usefully applied to the SYSTEM and/or the PRODUCT and which is based
upon ELAN BACKGROUND TECHNOLOGY and/or ELAN IMPROVEMENTS. For purposes
of clarity, the parties acknowledge that (i) MINIMED COMPOUND
IMPROVEMENTS, and (ii) any such improvements or enhancements that are
based on MINIMED BACKGROUND INFUSION SYSTEM TECHNOLOGY made solely by
MINIMED do not constitute MINIMED SYSTEM IMPROVEMENTS hereunder.
NDA shall mean the new drug application, abbreviated new drug
application, or any other application acceptable to the RHA for
marketing approval for the COMPOUND with the SYSTEM, which MINIMED will
file with the RHA in the TERRITORY, including any supplements or
amendments thereto.
NDA APPROVAL shall mean the final approval of an NDA by the RHA to
market a the COMPOUND with the SYSTEM in the TERRITORY.
NSP shall, subject to the provisions of Clauses 11.3.5, mean in the
case of PRODUCT sold by MINIMED or an AFFILIATE or a permitted
sub-licensee, that sum determined by
Confidential portion omitted and filed separately with the Commission
PRODUCT shall mean the SYSTEM containing, or packaged with, the
COMPOUND.
PRODUCT SPECIFICATIONS shall mean the specifications for the PRODUCT
set by the parties for the DEVICE REGULATORY APPLICATIONS and which
shall be attached as Schedule 6, as well as such other specifications
such as interim specifications which may be required during the PROJECT
and such additional specifications for the PRODUCT as may be agreed by
the parties in writing.
PROJECT shall mean all activity in order to develop the SYSTEM and the
PRODUCT in accordance with the plan shown in Schedule 3, as may be
amended from time to time as agreed by the parties in writing.
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<PAGE> 11
PROJECT SYSTEM SPECIFICATIONS shall mean the specifications for the
SYSTEM which shall be set by the parties for the DEVICE REGULATORY
APPLICATIONS and which shall be attached as Schedule 5, as well as such
other specifications such as interim specifications which may be
required during the PROJECT and such additional specifications for the
SYSTEM as may be agreed by the parties in writing.
PROJECT TEAM shall mean the group to be established pursuant to
Clause 6.
RHA shall mean any relevant government health authority (or successor
agency thereof) in any country of the TERRITORY whose approval is
necessary to market the SYSTEM, COMPOUND and/or PRODUCT, as applicable,
in the relevant country of the TERRITORY.
SYSTEM shall mean the CONTINUOUS SYSTEM and/or, subject to Clause 2.2,
the BASAL AND BOLUS SYSTEM.
TECHNOLOGICAL COMPETITOR shall mean, with respect to ELAN, a
pharmaceutical company or corporation having a substantial or primary
part of its business in research, development and manufacturing of
oral, transdermal or device drug delivery systems and which licenses
such drug delivery systems to third parties for the development of
pharmaceutical products. TECHNOLOGICAL COMPETITOR shall mean, with
respect to MINIMED, a company or corporation having a substantial or
primary part of its business in research, development and
manufacturing, or distributing, devices or products (a) for the
infusion or injection of insulin or insulin analogues or (b) for the
measurement of glucose in the treatment of diabetes.
TERM shall mean the term of this Agreement, as set out in Clause 13.
TERRITORY shall mean all of the countries of the world.
$ shall mean United States Dollars.
"US" or "USA" shall mean the United States of America.
1.2 INTERPRETATION: In this Agreement:
1.2.1 the singular includes the plural and vice versa, the masculine
includes the feminine and vice versa and references to natural
persons include corporate bodies, partnerships and vice versa.
1.2.2 any reference to a Clause or Schedule, unless otherwise
specifically provided, shall be respectively to a Clause or
Schedule of this Agreement.
1.2.3 the headings of this Agreement are for ease of reference only
and shall not affect its construction or interpretation.
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<PAGE> 12
CLAUSE 2 - THE LICENCE
2.1 LICENCE TO MINIMED:
2.1.1 Subject to the terms of this Agreement, ELAN hereby grants to
MINIMED and MINIMED hereby accepts for the TERM an exclusive
licence to the ELAN BACKGROUND TECHNOLOGY and ELAN
IMPROVEMENTS to package, import, use, offer for sale and sell
and otherwise distribute the PRODUCT for the FIELD in the
TERRITORY.
2.2. PROOF OF CONCEPT STUDY
2.2.1 As soon as is reasonably practicable, ELAN shall supply a
maximum of 100 units of the CONTINUOUS SYSTEM which have been
modified to an agreed upon specification to provide continuous
delivery of the COMPOUND for a 72 hour period, to MINIMED for
the purpose of performing the EVALUATION STUDY. Within 8 weeks
of the receipt of such units of CONTINUOUS SYSTEM, MINIMED
shall perform and complete the EVALUATION STUDY on the
CONTINUOUS SYSTEM for the purpose of establishing that the
continuous basal subcutaneous infusion of the COMPOUND using
the CONTINUOUS SYSTEM provides similar or better glucose
control for Type 2 insulin using patients than existing oral
products which are used for the treatment of diabetes mellitus
and marketed in the US as of the EFFECTIVE DATE.
2.2.2. In the event that MINIMED fails to perform or complete the
EVALUATION STUDY within 8 weeks of receipt of the CONTINUOUS
SYSTEM pursuant to Clause 2.2.1. or the EVALUATION STUDY
achieves the target results as agreed to by ELAN and MINIMED
and set out therein, ELAN and MINIMED shall proceed with the
development of the CONTINUOUS SYSTEM and the PRODUCT for the
FIELD in accordance with this Agreement. In such event,
MINIMED shall have, for a period from the EFFECTIVE DATE up
until 12 months from the first commercial launch of the
PRODUCT in a MAJOR MARKET, a fully paid-up exclusive option to
an exclusive license to the ELAN BACKGROUND TECHNOLOGY and
ELAN IMPROVEMENTS as they relate to the BASAL AND BOLUS SYSTEM
for use in the subcutaneous delivery of the COMPOUND for the
FIELD in the TERRITORY in accordance with the terms of this
Agreement. In the event of termination of this Agreement,
MINIMED's option as set out herein shall automatically
terminate.
2.2.3. In the event that the EVALUATION STUDY does not achieve the
target results which have been agreed by ELAN and MINIMED and
set out
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<PAGE> 13
therein, then, unless otherwise agreed in writing between the
parties, the BASAL AND BOLUS SYSTEM shall automatically
replace the CONTINUOUS SYSTEM as the SYSTEM for the purpose of
this Agreement and ELAN and MINIMED shall proceed with the
development of the BASAL AND BOLUS SYSTEM and the PRODUCT for
the FIELD in accordance with the terms of this Agreement.
Furthermore, all of the rights granted to MINIMED for the
CONTINUOUS SYSTEM pursuant to Clause 2.1 shall immediately
terminate and revert to ELAN, except for those rights
reasonably necessary for the BASAL AND BOLUS SYSTEM.
2.2.4. In the event the CONTINUOUS SYSTEM is replaced by the BASAL
AND BOLUS SYSTEM herein in accordance with Section 2.3.3, then
within 30 days of such event, ELAN shall provide MINIMED with
a development plan and budget for the development of the BASAL
and BOLUS SYSTEM. Notwithstanding any other provision to the
contrary herein, in the event that MINIMED elects not to fund
the development of the BASAL AND BOLUS SYSTEM, MINIMED shall
be entitled, for a period of 60 days from receipt of such
development plan and budget, in its discretion, to terminate
this Agreement by written notice thereof to ELAN. In such
event, MINIMED shall forfeit the Licence granted hereunder and
the amount paid to ELAN pursuant to Section 11.1.1 and this
Agreement shall terminate in accordance with the provisions of
Clause 13.
2.3 SUB-LICENSING BY MINIMED:
2.3.1 Subject to the provisions of Clause 2.3.8, MINIMED shall be
entitled, subject to the prior written consent of ELAN which
shall not be unreasonably withheld or delayed, to grant
sub-licences to package, import, use, offer for sale and sell
the PRODUCT for the FIELD in one or more countries of the
TERRITORY, provided that MINIMED may grant one sub-licence
only per country and MINIMED shall not grant a sub-licence to
a TECHNOLOGICAL COMPETITOR of ELAN. Notwithstanding the
foregoing, MINIMED shall be entitled to appoint one or more
distributors in (i) the markets designated in Clause 2.3.8,
consistent with MINIMED's other diabetes business activities
in such markets and (ii) in such other countries of the
TERRITORY in accordance with the terms of this Agreement.
2.3.2 Any sub-licence granted hereunder shall be on the same terms
mutatis mutandis as the terms of this Agreement insofar as
they are applicable, but excluding the right to grant a
sub-licence or a production licence.
2.3.3 For the avoidance of doubt, MINIMED shall use its reasonable
endeavours to ensure that ELAN shall have the same rights of
audit and inspection vis-a-vis a sub-licensee, as ELAN has
pursuant to this Agreement concerning MINIMED.
2.3.4 MINIMED shall be liable to ELAN for all acts and omissions of
any sub-licensee
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<PAGE> 14
as though such acts and omissions were by MINIMED and MINIMED
shall provide the indemnity to ELAN outlined in Clause 15.8.
2.3.5 Where a sub-licence has been granted under Clause 2.3.1, such
sub-licence shall automatically terminate if this Agreement
terminates for the country or countries covered by the
sub-licence.
2.3.6 MINIMED shall undertake to protect the confidentiality of
ELAN's formulation, engineering and manufacturing processes
for the SYSTEM and/or PRODUCT in its dealings with permitted
sub-licensees
2.3.7 For the avoidance of doubt:-
(1) the parties agree that any sub-licence granted
pursuant to this Clause 2.3 shall not be capable of
surviving the termination of this Agreement; and
(2) IN MARKET sales of the PRODUCT by the sub-licensee
(but not a distributor) shall be included in
calculating NSP for the purposes of this Agreement.
2.3.8. MINIMED undertakes that MINIMED shall sell the PRODUCT itself
through MINIMED's direct sales force in the USA, France,
Germany, Sweden and Benelux countries. In no event shall
MINIMED be entitled to grant sub-licences to package, import,
use, offer for sale and sell the PRODUCT for the FIELD in such
countries of the TERRITORY. MINIMED may appoint one or more
distributors in such countries of the TERRITORY in a manner
consistent with MINIMED's other diabetes business practices
from time to time in effect.
CLAUSE 3 - INTELLECTUAL PROPERTY
3.1. OWNERSHIP OF ELAN PATENT RIGHTS/KNOW-HOW:
3.1.1. ELAN shall remain the sole owner of the ELAN BACKGROUND
TECHNOLOGY.
3.1.2 ELAN shall remain the sole owner of the ELAN IMPROVEMENTS. Any
ELAN IMPROVEMENTS which are made jointly by at least one
employee of ELAN and at least one employee of MINIMED shall be
assigned to ELAN by MINIMED at ELAN's request.
3.1.3. ELAN hereby grants to MINIMED an irrevocable non-exclusive
perpetual royalty-free license to such ELAN IMPROVEMENTS as
are made jointly by at least one employee of ELAN and at least
one employee of MINIMED for use outside of the FIELD; provided
however, that any such use shall
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<PAGE> 15
be subject to the provisions of Clause 4.1 for the TERM.
3.1.4 ELAN shall be entitled to use the ELAN BACKGROUND TECHNOLOGY
and ELAN IMPROVEMENTS, and all technical and clinical data,
generated by ELAN pursuant to this Agreement in connection
with ELAN's commercial arrangements otherwise than in relation
to the PRODUCT for the FIELD, and in connection with the
PRODUCT for the FIELD in any countries which cease to be part
of the TERRITORY; and in the TERRITORY following termination
of this Agreement.
3.2 OWNERSHIP OF MINIMED PATENT RIGHTS/KNOW-HOW:
3.2.1. MINIMED shall remain the sole owner of all MINIMED BACKGROUND
COMPOUND TECHNOLOGY, MINIMED BACKGROUND INFUSION SYSTEM
TECHNOLOGY, MINIMED SYSTEM IMPROVEMENTS and MINIMED COMPOUND
IMPROVEMENTS.
3.2.2. MINIMED hereby grants to ELAN an irrevocable non-exclusive
perpetual royalty-free license to all MINIMED SYSTEM
IMPROVEMENTS for use in the TERRITORY; provided however, that
any such use shall be subject to the provisions of Clause 4.1
for the TERM.
3.2.3. In the event that MINIMED wishes to incorporate any MINIMED
BACKGROUND MEDICAL DEVICE TECHNOLOGY in the SYSTEM, MINIMED
shall provide full details of any such MINIMED BACKGROUND
MEDICAL DEVICE TECHNOLOGY to ELAN in writing for review. ELAN
shall have the option, at its sole discretion, to determine
whether to include such MINIMED BACKGROUND MEDICAL DEVICE
TECHNOLOGY in the SYSTEM, which decision shall be considered
with the PROJECT TEAM. In the event that ELAN is agreeable to
including such MINIMED BACKGROUND MEDICAL DEVICE TECHNOLOGY in
the SYSTEM, ELAN and MINIMED shall enter into discussions in
good faith as to the terms upon which such MINIMED BACKGROUND
MEDICAL DEVICE TECHNOLOGY shall be licensed to ELAN.
3.3 FILING AND MAINTENANCE OF PATENTS:
3.3.1 ELAN will be entitled, at its own expense, to file and
prosecute ELAN PATENTS and patentable ELAN IMPROVEMENTS made
solely by ELAN; to determine the patent filing strategy in
relation to same at its sole discretion; to assert and defend
the foregoing patent applications against third party
oppositions; and upon grant of any letters patent, to maintain
such letters patent in force subject to the following
conditions:
(1) ELAN shall promptly notify MINIMED in writing in
relation to the existence of ELAN improvements, or
any other intellectual property rights which may be
relevant to this Agreement and upon request by
MINIMED,
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<PAGE> 16
ELAN shall provide MINIMED with copies of any
documents relating to the ELAN improvements or other
intellectual property rights in question.
(2) ELAN shall promptly notify MINIMED in writing of any
patent applications filed by ELAN under this Clause
3.3.1 and upon request by MINIMED shall provide
copies to MINIMED to such patent applications and any
patents issuing thereon, to the extent reasonably
required in order for MINIMED to fulfil its
obligations under this Agreement;
3.3.2. Elan shall inform MiniMed in a timely fashion of its intent to
seek patent protection on an Elan Improvement developed
jointly between Elan and MiniMed. At MiniMed's request, Elan
shall cooperate with MiniMed's patent counsel to seek
concurrent patent protection for such an Elan Improvement as
it relates to the Product and System. The parties will
cooperate to seek such concurrent protection so that neither
party shall be the owner of any patent, application or
publication that may be used as prior art against the other,
or otherwise be a bar to the other in obtaining patent
protection for such improvement as it relates to the Elan
Improvements.
3.3.3. If ELAN does not intend to make an application for patents or
continue prosecution of a pending application in respect of,
or continue to maintain the ELAN PATENTS or ELAN IMPROVEMENTS
in any or some countries of the TERRITORY in relation to the
FIELD, MINIMED will be entitled to file, prosecute and
maintain patent applications and patents in respect thereof,
at its own expense, in accordance with the following terms:-
(1) MINIMED shall consult with ELAN on a regular basis in
relation to the status of its activities under this
Clause 3.3.3;
(2) ELAN shall execute all documents, forms and
declarations, provide all necessary information and
data, and do all such things as shall be necessary to
enable MINIMED to exercise the foregoing right;
(3) MINIMED shall promptly notify ELAN in writing of any
patent applications filed by MINIMED hereunder and
shall provide all reasonable access to ELAN to such
patent applications and any patents issuing thereon.
3.3.4 MINIMED will be entitled, at its own expense, to file and
prosecute the MINIMED COMPOUND PATENTS and patentable MINIMED
COMPOUND IMPROVEMENTS; to determine the patent filing strategy
in relation to same at its sole discretion; to assert and
defend the foregoing patent applications against third party
oppositions; and upon grant of any letters patent, to maintain
such letters patent in force subject to the following
conditions:-
Page 16 of 44
<PAGE> 17
(1) MINIMED shall promptly notify ELAN in writing in
relation to the existence of MINIMED COMPOUND
improvements, or any other intellectual property
rights which may be relevant to this Agreement and
upon request by ELAN, MINIMED shall provide ELAN with
copies of any documents relating to the MINIMED
COMPOUND improvements or other intellectual property
rights in question.
(2) MINIMED shall promptly notify ELAN in writing of any
patent applications filed by MINIMED under this
Clause 3.3.4 and upon request by ELAN shall provide
copies to ELAN to such patent applications and any
patents issuing thereon, to the extent reasonably
required in order for ELAN to fulfil its obligations
under this Agreement.
3.3.5 MINIMED shall inform ELAN in a timely fashion of its intent to
seek patent protection on a MINIMED SYSTEM Improvement
developed solely by MiniMed. At ELAN's request, MINIMED shall
cooperate with ELAN's patent counsel to seek concurrent patent
protection for a MINIMED SYSTEM IMPROVEMENT as it relates to
the Product and System and such an improvement as it relates
to ELAN's developments outside the scope of this Agreement.
The parties will cooperate to seek such concurrent protection
so that neither party shall be the owner of any patent,
application or publication that may be used as prior art
against the other, or otherwise be a bar to the other in
obtaining patent protection for such improvement as it relates
to the MINIMED SYSTEM Improvements.
3.3.6 If MINIMED does not intend to make an application for patents
or continue prosecution of a pending application in respect
of, or continue to maintain the MINIMED COMPOUND PATENTS or
MINIMED SYSTEM IMPROVEMENTS in any or some countries of the
TERRITORY, ELAN will be entitled to file, prosecute and
maintain patent applications and patents in respect thereof,
at its own expense, in accordance with the following terms:-
(1) ELAN shall consult with MINIMED on a regular basis in
relation to the status of its activities under this
Clause 3.3.6;
(2) MINIMED shall execute all documents, forms and
declarations, provide all necessary information and
data, and do all such things as shall be necessary to
enable ELAN to exercise the foregoing right;
(3) ELAN shall promptly notify MINIMED in writing of any
patent applications filed by ELAN hereunder and shall
provide all reasonable access to MINIMED to such
patent applications and any patents issuing thereon.
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<PAGE> 18
3.4 ENFORCEMENT
3.4.1 MINIMED and ELAN shall promptly inform the other in writing of
any alleged infringement of which it shall become aware by a
third party of any patents within the ELAN PATENTS or ELAN
IMPROVEMENTS and provide such other with any available
evidence of infringement.
3.4.2 ELAN, at its option, shall be entitled to institute any
administrative, judicial or other proceeding to prevent or
stop any infringement or unauthorised use ("ENFORCEMENT
PROCEEDINGS") of the ELAN BACKGROUND TECHNOLOGY or ELAN
IMPROVEMENTS.
3.4.3. MINIMED agrees to provide all reasonable co-operation and
assistance to ELAN in relation to any such ENFORCEMENT
PROCEEDINGS and agrees to be named as a party in any
ENFORCEMENT PROCEEDINGS, as necessary, instituted by ELAN
hereunder. ELAN shall reimburse MINIMED its reasonable costs
and expense for co-operating with ELAN hereunder.
3.4.4 MINIMED, at its option, shall be entitled to institute
ENFORCEMENT PROCEEDINGS in respect of any infringement or
unauthorised use of the MINIMED BACKGROUND COMPOUND
TECHNOLOGY, MINIMED COMPOUND IMPROVEMENTS, MINIMED SYSTEM
IMPROVEMENTS, or MINIMED INFUSION SYSTEM BACKGROUND TECHNOLOGY
at its own expense and for its own benefit. ELAN agrees to
provide all reasonable co-operation and assistance to MINIMED
in relation to any such ENFORCEMENT PROCEEDINGS and agrees to
be named as a party in any ENFORCEMENT PROCEEDINGS, as
necessary, instituted by MINIMED hereunder.
3.4.5 In the event that the intellectual property owner does not
want to institute ENFORCEMENT PROCEEDINGS, then the other
Party may enforce such rights at its own expense. The
intellectual property owner shall cooperate with the enforcing
Party and provide all reasonable assistance in relation to any
such ENFORCEMENT PROCEEDINGS. The enforcing Party must seek
written approval from the intellectual property owner, which
may not be unreasonably withheld, prior to taking action and
must keep the intellectual property owner informed of the
action and may not enter into any settlement agreement without
the intellectual property owner's consent, which may not be
unreasonably withheld. Any reasonable fees and costs borne by
the intellectual property owner shall be reimbursed by the
enforcing Party. In the event that MINIMED decides to enforce
the ELAN BACKGROUND TECHNOLOGY or ELAN IMPROVEMENTS in
accordance with this paragraph, any recovery remaining after
the deduction of reasonable expenses (including attorney's
fees and
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<PAGE> 19
expenses) incurred in relation to such ENFORCEMENT PROCEEDINGS
shall constitute NSP for the purpose of this Agreement.
3.5 DEFENCE
3.5.1 In the event that a claim or proceeding is brought against
MINIMED by a third party alleging that the method of
manufacture, manufacture, sale, use or offer for sale of the
SYSTEM and/or the PRODUCTas claimed in the ELAN PATENTS,
infringes the patent rights of such a third party in the
TERRITORY, MINIMED shall promptly advise ELAN of such threat
or suit.
3.5.2. Confidential portion omitted and filed separately with the
Commission.
3.5.3. Confidential portion omitted and filed separately with the
Commission.
Page 19 of 44
<PAGE> 20
3.5.4 Confidential portion omitted and filed separately with the
Commission.
3.5.5 Neither Party shall have any liability to the other party
whatsoever or howsoever arising for any losses incurred as a
result of MINIMED having to cease selling the PRODUCT or
having to defer the launch of selling the PRODUCT.
3.5.6. In the event that a claim or proceeding is brought against
ELAN by a third party alleging that the manufacture, offer for
sale, sale, distribution or use of the PRODUCT and/or the
COMPOUND in the TERRITORY infringes any adversely held patent
or involves the unauthorised use of any other intellectual
property, ELAN shall promptly advise MINIMED of such threat or
suit. Subject to ELAN's obligations pursuant to the provisions
of Clause 3.5.2, Clause 3.5.3, Clause 3.5.4. and Clause 15.4,
MINIMED shall indemnify ELAN against such a claim; provided
that ELAN shall not acknowledge to the third party or to any
other person the validity of the patent rights of such a third
party and shall not compromise or settle any claim or
proceedings relating thereto without the written consent of
MINIMED, which shall not be unreasonably withheld or delayed.
At its option, MINIMED may elect to take over the conduct of
such proceedings from ELAN with counsel of MINIMED's choice.
In such event MINIMED shall keep ELAN advised of all material
developments in the said proceedings and shall not settle or
compromise such proceedings without the consent of ELAN which
shall not be unreasonably withheld or delayed.
3.5.7. In the event that a claim or proceeding is brought against
ELAN by a third party alleging that the manufacture, offer for
sale, sale, distribution or use of the SYSTEM infringes any
adversely held patent or involves the unauthorised use of any
other intellectual property, the provisions of either Clause
3.5 of this Agreement or Clause 3.5 of the MANUFACTURING
AGREEMENT shall apply; provided however, that in no event
shall MINIMED be entitled to rely upon the provisions of both
agreements.
3.6 TRADEMARKS
ELAN AND MINIMED hereby acknowledge and agree that one or more
trademarks
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<PAGE> 21
owned or licensed by or on behalf of either party, whether on the date
hereof or hereafter, may be used in connection with the sale or
promotion of the PRODUCT. This Agreement notwithstanding, any such mark
shall continue to be owned or licensed by ELAN or MINIMED, as
appropriate. In the event that an ELAN trademark is to be used in
connection with for the PRODUCT, then, at such time, the parties shall
enter into an appropriate royalty-free trademark licence agreement as
is necessary.
CLAUSE 4 - COMPETING PRODUCTS
4.1 Subject to the provisions of Clause 4.2 and except as otherwise
provided in this Agreement and the MANUFACTURING AGREEMENT, ELAN and
MINIMED shall not promote, license, manufacture, market, or sell an
external disposable subcutaneous infusion device, which is * other than
the PRODUCT ("COMPETING PRODUCT") in the TERRITORY during the INITIAL
PERIOD.
4.2 Confidential portion omitted and filed separately with the Commission.
4.3 Confidential portion omitted and filed separately with the Commission.
CLAUSE 5 - DEVELOPMENT OF THE SYSTEM AND PRODUCT
5.1 ELAN has developed the SYSTEM in accordance with the CURRENT SYSTEM
SPECIFICATIONS as a method of drug delivery. ELAN acknowledges that it
is of the opinion, that to the best of its knowledge and belief as of
the date of this Agreement, the SYSTEM is capable of performing in
material conformance with the CURRENT SYSTEM SPECIFICATIONS.
Notwithstanding the foregoing, ELAN and MINIMED acknowledge and agree
that the SYSTEM is still in
- --------------
* Confidential portion omitted and filed separately with the Commission
Page 21 of 44
<PAGE> 22
development and that such development involves inherent risks in terms
of outcome and timing. Any obligation on ELAN arising hereunder shall
be expressly limited to a covenant to exercise all commercially
reasonable efforts to develop the SYSTEM in accordance with the terms
of this Agreement.
5.2. The Parties wish ELAN to further develop the SYSTEM to deliver the
COMPOUND, and ELAN shall diligently pursue the same in a commercially
reasonable manner. ELAN shall further develop the SYSTEM in accordance
with the PROJECT pursuant to the terms of this Agreement. However, it
is acknowledged that device development incorporates inherent risk in
terms of outcomes and ELAN does not guarantee the further development
of the SYSTEM or the ability of the SYSTEM to achieve the PROJECT
SYSTEM SPECIFICATIONS beyond the CURRENT SYSTEM SPECIFICATIONS and/or
to obtain the DMF or DEVICE REGULATORY APPROVAL in one or more of the
countries of the TERRITORY.
5.3 Except as otherwise provided for herein or in the MANUFACTURING
AGREEMENT, MINIMED shall be responsible for all activities and costs
associated with the further development of the PRODUCT in accordance
with the PROJECT pursuant to the terms of this Agreement and in
particular but not limited to :
5.3.1. sourcing, supplying and, if necessary, formulating, all
COMPOUND which is required to develop the SYSTEM and the
PRODUCT; and
5.3.2. designing and manufacturing the drug cartridge which will
contain the COMPOUND and will be used in connection with the
SYSTEM.
5.4 ELAN and MINIMED shall undertake their respective obligations under the
PROJECT on a collaborative basis. Accordingly, the parties shall
co-operate in good faith particularly with respect to unknown problems
or contingencies and shall perform their respective obligations in good
faith and in a commercially reasonable, diligent and workmanlike
manner.
5.5 As soon as possible following the execution of this Agreement, MINIMED
shall provide to ELAN, unless it has already done so prior to the
execution of this Agreement, the specifications for the COMPOUND to be
delivered with the SYSTEM, the desired PRODUCT characteristics, interim
PRODUCT SPECIFICATIONS and information as to the MINIMED objectives for
the PRODUCT.
5.6 In particular, MINIMED shall be responsible for determining the scope
and nature, and for carrying out at its own cost all clinical studies
program in human patients, including for the avoidance of doubt any
pharmacokinetic/pharmacodynamic studies. Such studies shall be
performed by MINIMED for the MAJOR MARKETS, and for other the countries
of the TERRITORY outside of the MAJOR MARKETS, in accordance with
Clause 7;
5.6.1 the primary objectives of the program so conducted shall be to
complete the
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<PAGE> 23
DEVICE REGULATORY APPLICATION and DEVICE REGULATORY APPROVAL
in the MAJOR MARKETS and it is the parties' expectation that
the body of data so generated in the PROJECT will also support
such applications for DEVICE REGULATORY APPROVAL which MINIMED
or its AFFILIATES or permitted sub-licensees shall make in the
other countries of the TERRITORY in accordance with the terms
of this Agreement.
5.6.2 Subject to the provisions of Clause 7, MINIMED agrees to carry
out and complete the clinical program in the USA and in such
other countries of the TERRITORY as necessary to obtain DEVICE
REGULATORY APPROVAL in such countries to a standard and
timeframe which it would otherwise find appropriate for one of
its major branded products;
5.6.3 MINIMED shall keep ELAN informed as to the progress and
completion of the studies and, shall provide to ELAN summary
study reports thereon;
5.6.4 MINIMED undertakes that it shall carry out all such clinical
studies to prevailing cGCP and cGLP and most specifically in
accordance with the applicable RHA standards and guidelines;
5.6.5 MINIMED shall be responsible at its cost for the preparation
and filing of appropriate INDs (and/or IDE's or 510k's, to the
extent deemed appropriate by the PROJECT TEAM and subject to
the provisions of Clause 7.4) to the extent required to allow
it to undertake such clinical studies. ELAN shall co-operate
with MINIMED as reasonably necessary in the preparation and
filing of such INDs. The parties agree that ELAN's charges to
MINIMED for any such work shall be as set out in Clause 11.2
of the Agreement.
5.7 For the avoidance of doubt, it is acknowledged that ELAN's primary
objective under the PROJECT is to develop the SYSTEM in accordance with
the PROJECT.
5.8 MINIMED shall conduct any pharmacokinetic, clinical, pharmacoeconomic,
and any other market analysis, study or test on the PRODUCT which
MINIMED deems appropriate. In the event that MINIMED does conduct such
analysis, study or test, MINIMED shall own the said data and
information which shall thereafter form part of MINIMED KNOW-HOW.
MINIMED shall provide ELAN with a summary report of any such material
analysis, study or test performed by MINIMED as soon as is reasonably
possible following its completion. Subject to any contractual
restrictions on MINIMED and to the prior written consent of MINIMED
which shall not be unreasonably withheld or delayed, and subject
further, as appropriate, to secrecy obligations being imposed on any
recipient of such MINIMED KNOW-HOW, ELAN shall be entitled to use any
such MINIMED KNOW-HOW in connection with ELAN's commercial arrangements
for the SYSTEM otherwise than in relation to the PRODUCT for the FIELD,
and in
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<PAGE> 24
connection with the PRODUCT for the FIELD in any countries which cease
to be part of the TERRITORY; and in the TERRITORY following termination
of this Agreement. Subject to any contractual restrictions on ELAN,
ELAN shall disclose a summary report of any technical or clinical data
which may be generated by ELAN or ELAN's licensees on the SYSTEM to
MINIMED. Subject to the prior written consent of ELAN which shall not
be unreasonably withheld or delayed, MINIMED shall be entitled to use
any such data connection with the PRODUCT in the TERRITORY.
CLAUSE 6 - PROJECT TEAM AND PROJECT MANAGEMENT
6.1 It is recognised by the parties that a significant resource shall be
required from each party to accomplish successful DEVICE REGULATORY
APPROVAL in the MAJOR MARKETS and launch of the PRODUCT, particularly
in the co-ordination of logistics, finalisation of various
specifications, preparation and agreement of clinical study designs and
protocols, methodologies transfer, supply and packaging configurations,
shipping and handling procedures and for this purpose, the parties will
establish a PROJECT TEAM.
6.2 The PROJECT TEAM shall consist of a chief representative from each
party together with such additional business and development personnel
from each party who are appropriately skilled and knowledgeable in
relation to the PROJECT and who are deemed necessary to accomplish the
work of the PROJECT.
6.3 Unless otherwise agreed by the parties, the PROJECT TEAM shall meet at
least once each calendar quarter, such meetings to continue until the
time of launch or such later time as may be agreed. The PROJECT TEAM
may be meet in person or by means of such telephone, video or other
communication facilities as permit all members of the PROJECT TEAM to
communicate with each other simultaneously and instantaneously. If the
PROJECT TEAM decides to meet in person, such meetings shall be held
alternatively at the offices of ELAN and MINIMED or as otherwise agreed
by the parties. Meetings shall be co-chaired by the chief
representatives of the parties. At and between meetings of the PROJECT
TEAM, each party shall keep the other fully and regularly informed as
to its progress with its respective obligations.
6.4 In the event of a dispute amongst the PROJECT TEAM which cannot be
resolved by consensus, such dispute shall be referred to the President
and Chief Operating Officer, of MINIMED and the President of Elan
Pharmaceutical Technologies who shall discuss the matter and attempt to
reach an amicable solution. In the event that the foregoing officers
cannot resolve the dispute amicably, the said officers shall refer the
dispute to the Chairmen of MINIMED and ELAN who shall discuss the
matter and attempt to reach an amicable solution. The provisions of
this Clause 6.4. shall be without prejudice to the parties' other
rights and remedies.
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<PAGE> 25
6.5. The PROJECT TEAM shall not have the authority to amend or vary any of
the terms of this Agreement.
CLAUSE 7 - REGISTRATION OF THE PRODUCT
7.1 The PROJECT TEAM shall establish the regulatory procedure to be
followed by ELAN and MINIMED in order to secure all necessary
regulatory approvals to market the PRODUCT in the MAJOR MARKETS as
swiftly as practicable. ELAN shall be responsible for filing and
maintaining a DMF for the SYSTEM with the RHA in the MAJOR MARKETS.
ELAN shall use reasonable endeavours in filing and maintaining each DMF
with the RHA in the MAJOR MARKETS as swiftly as practicable.
7.2 At its expense, MINIMED shall be responsible for the filing and
maintaining all required NDAs and DEVICE REGULATORY APPLICATIONS in
respect of the COMPOUND and PRODUCT respectively, with the RHAs in the
TERRITORY. MINIMED shall use reasonable endeavours in prosecuting each
required NDA and DEVICE REGULATORY APPLICATION to approval by the RHA
as swiftly as practicable.
7.3 MINIMED shall notify ELAN of the date of submission of any NDA or
DEVICE REGULATORY APPLICATION in any country of the TERRITORY and shall
also notify ELAN of any NDA APPROVAL or DEVICE REGULATORY APPROVAL as
soon as is reasonably possible following said approval.
7.4 MINIMED will be the holder of the NDA APPROVAL and DEVICE REGULATORY
APPROVAL for the COMPOUND and PRODUCT respectively, in the TERRITORY,
provided however, that in the event that a DEVICE REGULATORY APPROVAL
is granted for the SYSTEM alone, such DEVICE REGULATORY APPROVAL shall
be the property of ELAN. In such event, ELAN shall provide MINIMED with
reference rights to such DEVICE REGULATORY APPROVAL mutatis mutandis
with the provisions of Clause 7.5 below.
7.5 MINIMED will permit ELAN, or ELAN's licensees, without charge, to have
access to, to photocopy and to cross reference all DEVICE REGULATORY
APPROVALS or DEVICE REGULATORY APPLICATIONS for the PRODUCT for the
purpose of obtaining DEVICE REGULATORY APPROVALS for the SYSTEM in
connection with ELAN's commercial arrangements otherwise than in
relation to the PRODUCT for the FIELD, and in connection with the
PRODUCT for the FIELD in any countries which cease to be part of the
TERRITORY; and in the TERRITORY following termination of this
Agreement.
7.6 MINIMED shall submit to ELAN a quarterly report, for every calendar
quarter prior to the marketing of the PRODUCT within 14 days of the end
of the relevant quarter fully outlining the regulatory status of the
PRODUCT in the TERRITORY, including an overview of any material
communications with the RHAs in the TERRITORY.
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<PAGE> 26
7.7 MINIMED shall be responsible for obtaining and maintaining all
regulatory approvals necessary for MINIMED to package the PRODUCT into
final marketing packaging and for obtaining all applicable state and
local regulatory approvals for the distribution of the PRODUCT in the
TERRITORY. ELAN shall co-operate with MINIMED in obtaining such
approvals.
7.8 MINIMED shall provide ELAN with access to all DEVICE REGULATORY
APPROVALS to enable ELAN to exercise its rights and fulfil its
obligations hereunder.
7.9 MINIMED shall indemnify and hold harmless ELAN from and against all
claims, damages, losses, liabilities and expenses to which ELAN may
become liable relating to or arising out of MINIMED's bad faith,
negligence or intentional misconduct in connection with the filing or
maintenance of the DEVICE REGULATORY APPLICATIONS and REGULATORY
APPROVALS in the TERRITORY. ELAN shall indemnify and hold harmless
MINIMED from and against all claims, damages, losses, liabilities and
expenses to which MINIMED may become liable relating to or arising out
of ELAN's bad faith, negligence or intentional misconduct in connection
with the filing or maintenance of the DMF in the TERRITORY.
7.10 Subject to the express representations and warranties set out in this
Agreement, it is hereby acknowledged that there are inherent
uncertainties involved in the registration of pharmaceutical products
and medical devices with the RHA in relation to achieving the PROJECT
SYSTEM SPECIFICATIONS and/or PRODUCT SPECIFICATIONS, filing and
maintaining the DMF, and obtaining the NDA APPROVAL and/or DEVICE
REGULATORY APPROVAL and such uncertainties form part of the business
risk involved in undertaking the form of commercial collaboration
outlined in this Agreement. Accordingly, ELAN and MINIMED shall have no
liability to the other as a result of any failure of the PRODUCT to
successfully achieve the PROJECT SYSTEM SPECIFICATIONS or PRODUCT
SPECIFICATIONS, or the DMF, NDA APPROVAL or DEVICE REGULATORY APPROVAL
of the RHA.
CLAUSE 8 - MARKETING AND PROMOTION OF THE PRODUCT
8.1. Upon a date to be agreed by the PROJECT TEAM, ELAN and MINIMED shall
establish a MARKETING COMMITTEE consisting of at least one
representative from each party who shall act as liaison between the
parties to ensure that ELAN is up to date on the prevailing market
conditions and MINIMED's efforts at marketing and selling the PRODUCT.
Within 90 days of the submission of the first DEVICE REGULATORY
APPLICATION for the PRODUCT in the MAJOR MARKETS, MINIMED will outline
to ELAN the structure of the promotional activities to be carried out
by MINIMED for the period up to the first commercial sale of the
PRODUCT and for a period of 1 year thereafter. MINIMED shall both prior
to and subsequent to the launch of a PRODUCT communicate with ELAN
regarding its objectives for and performance of such
Page 26 of 44
<PAGE> 27
PRODUCT in the MAJOR MARKETS and in all of the other countries of the
TERRITORY. At such meetings, MINIMED shall report on the ongoing sales
performance of the PRODUCT in the TERRITORY, including marketing
approaches, educational campaigns, promotional and advertising
materials and campaigns, sales plans, pricing and results, performance
against competitors, its objectives for the PRODUCT and its plans for
the next year of the Agreement. In addition the MARKETING COMMITTEE
shall review the quarterly royalty statements and in particular the
calculation of GROSS PROFIT and the deductible items listed in the
definition of NSP.
8.2. Unless otherwise agreed by the Parties, the MARKETING COMMITTEE shall
meet at least once each calendar quarter, such meetings to continue
until such time as may be agreed by the PROJECT TEAM. Thereafter, the
Parties shall meet on an annual basis. The MARKETING COMMITTEE shall
meet alternately at the offices of ELAN and MINIMED or as otherwise
agreed by the parties, or shall conduct such meetings by telephonic or
video conference. Each party shall bear the cost of its own travel
expenses.
8.3 MINIMED shall control and be responsible for the content and format of
the promotional campaign to be submitted to the RHA, but shall inform
ELAN thereof and provide to ELAN a copy of such submissions, which
shall be subject to the confidentiality obligations herein. To the
extent required by the laws, rules and regulations of the RHA in the
applicable country of the TERRITORY, MINIMED shall use reasonable
efforts to obtain approval by the RHA of the promotional campaign for
the PRODUCT.
8.4. Within 6 months of the EFFECTIVE DATE, the MARKETING COMMITTEE shall
agree in good faith upon a schedule for the commercialisation of the
PRODUCT in such countries of the TERRITORY outside of the MAJOR MARKETS
as the MARKETING COMMITTEE shall determine. Such schedule shall include
but not be limited to the target dates for filing the DEVICE REGULATORY
APPLICATION and for securing DEVICE REGULATORY APPROVAL for the PRODUCT
in such countries of the TERRITORY, as well as the general structure of
the promotional activities to be carried out by MINIMED.
8.5 MINIMED shall diligently pursue the commercialisation of the PRODUCT
and shall use commercially reasonable efforts, including reasonable IN
MARKET prices, to market and promote the PRODUCT in the MAJOR MARKETS,
and throughout the rest of the TERRITORY in accordance with the
schedule agreed upon by the MARKETING COMMITTEE pursuant to Article
8.4, and in doing so, shall use the same level of effort as with other
similar products of similar sales potential which it markets. MINIMED
covenants that it shall not use the PRODUCT as a "loss leader" in its
marketing programs and shall at all times use its reasonable efforts in
marketing the PRODUCT.
8.6 MINIMED shall submit to ELAN for ELAN's information, copies of all
trade packaging, cartons and labels and other printed materials which
MINIMED proposes at any time to
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<PAGE> 28
use in relation to the sale of the PRODUCT provided always that the
provisions of this Clause 8.6 shall be without prejudice to the
obligations and responsibilities of MINIMED under Clauses 8.1 and 15.7
and MINIMED shall indemnify and hold harmless ELAN from and against all
claims, damages, losses, liabilities and expenses to which ELAN may
become liable relating to the activities described in this Clause 8.6.
Unless ELAN reasonably objects to the use of any such materials within
14 days of receipt for information purposes, MINIMED shall be entitled
to proceed to use such trade packaging, cartons and labels and other
printed materials in connection with the sale of the PRODUCT provided
however, that in no event shall such materials contain any statement
which may have a damaging or harmful effect on the commercialisation of
the SYSTEM and/or the goodwill of ELAN in the TERRITORY.
8.7 To the extent permitted by law, the materials referred to in Clause 8.6
shall include due acknowledgement that the PRODUCT is licensed from
ELAN.
8.8 To the extent permitted by law, MINIMED shall mark or have marked all
patent number(s) in respect of the ELAN PATENTS on all PRODUCT or
PRODUCT packaging, or otherwise reasonably communicate to the trade the
existence of any ELAN PATENTS for the countries within the TERRITORY in
such a manner as to ensure compliance with, and enforceability under,
applicable laws.
8.9 MINIMED shall effect the first full scale commercial launch of the
PRODUCT in the USA as soon as reasonably practicable but in any event
within * days of the DEVICE REGULATORY APPROVAL in the USA. Except for
any failure to manufacture and/or supply the SYSTEM arising from any
breach of the MANUFACTURING AGREEMENT by MINIMED, the obligation in the
preceding sentence to effect a full scale commercial launch of the
PRODUCT shall coincide with the availability of adequate quantities in
accordance with the production requirements as set out in the
MANUFACTURING AGREEMENT. With respect to each of the other countries of
the TERRITORY, MINIMED will effect a national commercial launch of the
PRODUCT as soon as reasonably practicable but in any event within *
days after the relevant DEVICE REGULATORY APPROVAL.
CLAUSE 9 - SUPPLY OF THE SYSTEM
9.1 ELAN has appointed MINIMED as the manufacturer of the SYSTEM for and on
behalf of ELAN pursuant to the MANUFACTURING AGREEMENT and MINIMED
shall manufacture and supply the SYSTEM for distribution pursuant to
the terms set out therein. MINIMED shall be the sole and exclusive
supplier of the SYSTEM to MINIMED in the TERRITORY for the purpose of
this Agreement.
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* Confidential portion omitted and filed separately with the Commission
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<PAGE> 29
CLAUSE 10 - MANUFACTURE OF THE PRODUCT
10.1 MINIMED shall be responsible at its sole expense, for furnishing all
operations, labour, supervision, equipment, tools, machinery, COMPOUND
and facilities necessary to manufacture the PRODUCT in accordance with
the SYSTEM SPECIFICATIONS, PRODUCT SPECIFICATIONS and REGULATORY
APPROVALS including but not limited to:
10.1.1. sourcing and supplying all COMPOUND which is required for the
PRODUCT;
10.1.2. manufacturing the drug cartridge for the SYSTEM and filling
such drug cartridge with the COMPOUND;
10.1.3. qualifying, ordering, receiving, approving and storing, in
suitable facilities free from contamination, all packaging
materials which are necessary to package the PRODUCT;
10.1.4. packaging the SYSTEM with the drug cartridge containing the
COMPOUND;
10.1.5. analysing the PRODUCT for quality control and releasing the
PRODUCT for commercial sale.
10.2 MINIMED shall be responsible for, and shall ensure that, all of the
suppliers of equipment, tools, machinery and materials shall hold all
necessary licenses and registrations appropriate and necessary for the
inclusion of such materials in the PRODUCT. MINIMED shall indemnify
ELAN against any claim arising from any defective materials or COMPOUND
which may be included in the PRODUCT.
CLAUSE 11 - FINANCIAL PROVISIONS
11.1 LICENCE ROYALTIES:
11.1.1 In consideration of the licence of the ELAN PATENTS granted to
MINIMED under this Agreement, MINIMED shall pay to ELAN the
non-refundable amounts set forth in Schedule 7 hereto.
11.1.2 In the event that MINIMED exercises the option for the BASAL
AND BOLUS SYSTEM pursuant to Clause 2.2.2, then in addition to
the amounts payable to ELAN pursuant to Clause 11.1.1, MINIMED
shall pay to ELAN a further $ * upon the exercise of such
option in consideration of
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* Confidential portion omitted and filed separately with the Commission
Page 29 of 44
<PAGE> 30
the licence of the ELAN PATENTS granted to MINIMED under this
Agreement for the BASAL AND BOLUS SYSTEM.
11.2 DEVELOPMENT ROYALTIES:
11.2.1. Except as otherwise provided in this Agreement or in the
MANUFACTURING AGREEMENT, all development or other technical
assistance which ELAN shall perform pursuant to the PROJECT or
the terms of this Agreement, or which is requested by MINIMED
and agreed to by ELAN, shall be charged to MINIMED at FULLY
ALLOCATED COST plus * %. Any such work shall be mutually
agreed upon by ELAN and MINIMED in writing and in advance of
the commencement of such work, which agreement shall include
an agreed upon budget.
11.2.2 Development royalties for all work agreed upon by ELAN and
MINIMED pursuant to Clause 11.2.1. and carried out by ELAN
hereunder shall be invoiced by ELAN to MINIMED at the end of
each calendar quarter. Payment shall be effected in US Dollars
within 30 days of the date of receipt of the relevant invoice.
11.3 ROYALTY ON SALES:
11.3.1 In consideration of the licence of the ELAN PATENTS to MINIMED
hereunder, the royalty payable by MINIMED to ELAN on GROSS
PROFIT of the PRODUCT following the first launch of the
PRODUCT in accordance with the table set forth in Schedule 7
to this Agreement.
11.3.2 Within forty-five (45) days of the end of each calendar
quarter of this Agreement, MINIMED shall notify ELAN of the
NSP of PRODUCT for that previous calendar quarter. Payments
shown by each calendar quarter report to have accrued but
which have not yet been paid shall be included in calculating
the NSP for that quarter.
11.3.3 Payment of royalties shall be made once in each calendar
quarter within 45 days after the expiry of the relevant
calendar quarter.
11.3.4 All payments due hereunder shall be made in U.S. Dollars.
11.3.5 In the event that MINIMED or any AFFILIATE of MINIMED shall
sell the PRODUCT together with other products of MINIMED to
third parties (by the method commonly known in the
pharmaceutical industry as "bundling") and the price
attributable to the PRODUCT is less than the average price of
"arms length" sales to similar customers for the reporting
period in which sales occur (such sales to be excluded from
the calculation of the average price of "arms length" sales),
NSP for any such sales shall be the average price of "arms
length" sales by
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<PAGE> 31
MINIMED or an AFFILIATE of MINIMED or a permitted sub-licensee
to similar customers in the country where such bundling occurs
during the reporting period in which such sales occur.
11.4 METHOD OF CALCULATION OF ROYALTIES AND OTHER PAYMENTS:
The parties acknowledge and agree that the methods for calculating the
royalties and other payments fees hereunder are for the purposes of the
convenience of the parties, are freely chosen and not coerced.
CLAUSE 12 - PAYMENTS, REPORTS AND AUDITS
12.1 MINIMED shall keep true and accurate records of gross sales of the
PRODUCT, the number of units of PRODUCT sold, the items deducted from
the gross amount in calculating the NSP, the NSP, the GROSS PROFIT and
the royalties payable to ELAN under Clause 11. MINIMED shall deliver to
ELAN a written statement ("the STATEMENT") thereof within 45 days
following the end of each calendar quarter, (or any part thereof in the
first or last calendar quarter of this Agreement) for such calendar
quarter. The STATEMENT shall outline on a country-by-country basis, the
calculation of the NSP from gross revenues during that calendar
quarter, the applicable percentage rate, and a computation of the sums
due to ELAN. The parties' financial officers shall agree upon the
precise format of the STATEMENT.
12.2 Unless otherwise notified in writing by ELAN, payments due on GROSS
PROFIT of the PRODUCT based on sales amounts in a currency other than
US Dollars shall first be calculated in the foreign currency and then
converted to US Dollars on the basis of the exchange rate in effect for
the purchase of US Dollars with such foreign currency quoted in the
Wall Street Journal (or comparable publication if not quoted in the
Wall Street Journal) with respect to the sale of currency of the
country of origin of such payment for the day prior to the date on
which the payment by MINIMED is being made.
12.3 Any income or other taxes which MINIMED is required by law to pay or
withhold on behalf of ELAN with respect to royalties and any other
monies payable to ELAN under this Agreement shall be deducted from the
amount of such GROSS PROFIT payments, royalties and other monies due.
MINIMED shall furnish ELAN with proof of such payments. Any such tax
required to be paid or withheld shall be an expense of and borne solely
by ELAN. MINIMED shall promptly provide ELAN with a certificate or
other documentary evidence to enable ELAN to support a claim for a
refund or a foreign tax credit with respect to any such tax so withheld
or deducted by MINIMED. The parties will reasonably cooperate in
completing and filing documents required under the provisions of any
applicable tax treaty or under any other applicable law, in order to
enable MINIMED to make such payments to ELAN without any deduction or
withholding.
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<PAGE> 32
12.4 All payments due hereunder shall be made to the designated bank account
of ELAN in accordance with such timely written instructions as ELAN
shall from time to time provide.
12.5 MINIMED shall pay interest to ELAN at the Prime Rate publicly announced
by Morgan Guaranty Trust Company of New York at its principal office on
the date (or next to occur business day, if such date is not a business
day) on which payment should have been made pursuant to the applicable
provisions of this Agreement plus 5% on all late payments under this
Agreement applicable from the date on which payment should have been
made pursuant to the applicable provisions of this Agreement until the
date of payment.
12.6 For the 180 day period following the close of each calendar year of the
Agreement, ELAN and MINIMED will, in the event that the other party
reasonably requests such access, provide each other's independent
certified accountants (reasonably acceptable to the other party) with
access, during regular business hours and subject to the
confidentiality provisions as contained in this Agreement, to such
party's books and records relating to the PRODUCT, solely for the
purpose of verifying the accuracy and reasonable composition of the
calculations hereunder for the calendar year then ended.
12.7 In the event of a discovery of a discrepancy which exceeds 5% of the
amount due or charged by a party for any period, the cost of such
accountants shall be borne by the audited party; otherwise, such cost
shall be borne by the auditing party.
CLAUSE 13 - DURATION AND TERMINATION
13.1 This Agreement shall be deemed to have come into force on the EFFECTIVE
DATE and, subject to the rights of termination outlined in this Clause
13 will expire on a country by country basis on the 12th anniversary of
the date of the launch of the PRODUCT in the country concerned ("the
INITIAL PERIOD").
13.2 At the end of the INITIAL PERIOD, the Agreement shall continue
automatically for rolling 2 year periods thereafter, unless the
Agreement has been terminated by either of the parties by serving 2
years' written notice on the other immediately prior to the end of the
INITIAL PERIOD or any additional 2 year period provided for herein.
13.3 In addition to the rights of termination provided for elsewhere in this
Agreement, either party will be entitled forthwith to terminate this
Agreement by written notice to the other party if:
13.3.1 that other party commits any breach of any of the provisions
of this Agreement, and in the case of a breach capable of
remedy, fails to remedy the same within 90 days after receipt
of a written notice giving full particulars of the breach and
requiring it to be remedied;
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<PAGE> 33
13.3.2 that other party goes into liquidation (except for the
purposes of amalgamation or reconstruction and in such manner
that the company resulting therefrom effectively agrees to be
bound by or assume the obligations imposed on that other party
under this Agreement);
13.3.3 an encumbrancer takes possession or a receiver is appointed
over any of the property or assets of that other party;
13.3.4 any proceedings are filed or commenced by that other party
under bankruptcy, insolvency or debtor relief laws or anything
analogous to any of the foregoing under the laws of any
jurisdiction occurs in relation to that other party.
13.3.5 a TECHNOLOGICAL COMPETITOR of the other party hereto, or a
company with a directly competing product, acquires * % or
more of the other party's voting stock or where * % or more of
the voting stock of a TECHNOLOGICAL COMPETITOR to a party
hereto is acquired by the other party hereto.
13.4 For the purposes of Clause 13.3.1, a breach will be considered capable
of remedy if the party in breach can comply with the provision in
question in all respects other than as to the time of performance
(provided that time of performance is not of the essence).
13.5 In further addition to the rights and termination provided for
elsewhere in this Agreement, ELAN shall be entitled to forthwith
terminate the licence granted to MINIMED under this Agreement for any
country or countries of the TERRITORY, in accordance with the terms set
out below, in the event that MINIMED:-
13.5.1 fails to file a DEVICE REGULATORY APPLICATION for the PRODUCT
in any country of the MAJOR MARKETS within 18 months from the
completion of the PROJECT; or
13.5.2 fails to file a DEVICE REGULATORY APPLICATION for the PRODUCT
in any country of TERRITORY outside of the MAJOR MARKETS
within 18 months of the target date set for such country by
the MARKETING COMMITTEE pursuant to Clause 8.4; or
13.5.3 fails to effect any one of the commercial launches required by
Clause 8 in accordance with the provisions thereof; or
13.5.4 notifies ELAN that it does not wish to commercialise the
PRODUCT in any country of the TERRITORY.
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* Confidential portion omitted and filed separately with the Commission
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<PAGE> 34
CLAUSE 14 - CONSEQUENCES OF TERMINATION
14.1 Upon exercise of those rights of termination specified in Clauses 13 or
elsewhere in this Agreement, this Agreement shall, subject to the
provisions of the Agreement which survive the termination of the
Agreement and Clause 14.2, automatically terminate forthwith and be of
no further legal force or effect.
14.2 Upon termination of the Agreement by either party, or upon termination
by ELAN of a licence for a particular country under Clause 13.5, the
following shall be the consequences relating to the TERRITORY or the
particular country, as applicable:-
14.2.1 any sums that were due from MINIMED to ELAN under the
provisions of Clause 11 or otherwise howsoever prior to the
exercise of the right to terminate this Agreement as set forth
herein shall be paid in full within 30 days of termination of
this Agreement and receipt of the invoice in respect thereto,
and ELAN shall not be liable to repay to MINIMED any amount of
money paid or payable by MINIMED to ELAN up to the date of the
termination of this Agreement;
14.2.2 all confidentiality provisions set out herein shall remain in
full force and effect for a period of 7 years from the date of
termination of this Agreement;
14.2.3 all responsibilities and warranties shall insofar as they are
appropriate remain in full force and effect;
14.2.4 the rights of inspection and audit shall continue in force for
the period referred to in the relevant provisions of this
Agreement;
14.2.5 ELAN shall be entitled to research, develop, manufacture and
commercialise the SYSTEM in the FIELD for its own benefit in
the TERRITORY or in the relevant country or countries of the
TERRITORY and either party shall be entitled to manufacture,
market, sell, or assist in the distribution or sale of a
COMPETING PRODUCT;
14.2.6 ELAN shall be entitled to file for DEVICE REGULATORY APPROVAL
for the SYSTEM with any insulin and/or insulin analogue
otherwise available to ELAN, in any country which ceases to be
a part of the TERRITORY, or in any country of the TERRITORY in
the event of termination of this Agreement, or in the
TERRITORY or the relevant country or countries of the
TERRITORY;
14.2.7 subject to the provisions of Clause 3.1.3, the licence granted
by ELAN to
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<PAGE> 35
MINIMED of the ELAN BACKGROUND TECHNOLOGY and ELAN
IMPROVEMENTS shall automatically terminate;
14.2.8 MINIMED shall transfer to ELAN or ELAN's designee without
charge (but at ELAN's expense, if any), and/or permit ELAN or
ELAN's designee without charge to conduct sufficient
cross-referencing to, and have sufficient access to any and
all pending DEVICE REGULATORY APPLICATIONS or granted DEVICE
REGULATORY APPROVALS for the PRODUCT for the relevant country
or countries of the TERRITORY.
CLAUSE 15 - WARRANTY AND INDEMNITY
15.1 ELAN represents and warrants that it has the sole, exclusive and
unencumbered right to grant the licences and rights herein granted to
MINIMED, and that it has not granted any option, licence, right or
interest in or to the ELAN PATENTS or ELAN KNOW-HOW to any third party
which would conflict with the rights granted by this Agreement. ELAN
agrees to hold MINIMED harmless from any and all costs, expenses and
damages (including reasonable attorneys' fees) incurred or sustained by
MINIMED as the result of any third party's challenges to ELAN's right
to grant the rights and licences herein granted to MINIMED.
15.2 ELAN represents and warrants that the execution of this Agreement and
the full performance and enjoyment of the rights of MINIMED under this
Agreement will not breach or in any way be inconsistent with the terms
and conditions of any licence, contract, understanding or agreement,
whether express, implied, written or oral between ELAN and any third
party.
15.3 Except as expressly stated in this Clause 15, all other warranties,
conditions and representations, express or implied, statutory or
otherwise, including a warranty as to the quality or fitness for any
particular purpose of the SYSTEM are hereby excluded and except as
expressly stated in this Agreement, ELAN shall not be liable in
contract, tort or otherwise for any loss, damage, expense or injury,
arising out of or in connection with the PRODUCT or any defect in the
SYSTEM or from any other cause.
15.4 ELAN represents and warrants to MINIMED as of the date of the EFFECTIVE
DATE:-
15.4.1 there are no patent or other proceedings served on ELAN in
connection with the SYSTEM; and
15.4.2 to the best of ELAN's knowledge, there are no threatened
patent or other proceedings against ELAN in connection with
the SYSTEM;
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<PAGE> 36
15.4.3 to the best of ELAN's knowledge, there are no substantive
grounds for patent proceedings against ELAN in connection with
the SYSTEM.
15.5 ELAN represents and warrants that, in performing the development
activities for the further development of the SYSTEM, ELAN will
exercise all due skill, care and diligence in conducting such
activities as are commercially reasonable.
15.6 MINIMED represents and warrants that, once successfully assembled, the
PRODUCT sold by MINIMED under this Agreement will conform and perform
in all material respects to:-
15.6.1 the PRODUCT SPECIFICATIONS, the NDA APPROVAL and DEVICE
REGULATORY APPROVAL; and
15.6.2 all applicable regulations and requirements of the relevant
RHA including the then cGMP regulations which apply to the
manufacture and supply of the COMPOUND and the PRODUCT.
15.7 MINIMED further represents and warrants to ELAN that in assembling,
packaging, transporting, storing, handling, distributing, marketing and
selling the PRODUCT hereunder:-
15.7.1 it will exercise all due skill, care and diligence in
conducting such activities as are commercially reasonable; and
15.7.2 it will comply with the provisions of this Agreement, all RHA
and other approvals, all applicable state and local regulatory
approvals and all applicable laws, ordinances and regulations.
15.8 Each of the parties shall indemnify, defend and hold harmless the other
party from all actions, losses, claims, demands, damages, costs and
liabilities (including reasonable attorneys' fees) to which the other
party is or may become liable insofar as they arise out of any breach
by the first party of any of its obligations or warranties under this
Agreement.
15.9 With reference to Clause 2.3.4, MINIMED shall indemnify and hold
harmless ELAN to the extent that any claims, damages, liabilities,
claims, costs or expenses arise out of any such acts or omissions of
any sub-licensee.
15.10 As a condition of obtaining an indemnity in the circumstances set out
in Clauses 15.4, 15.5, 15.6, 15.7, 15.8 and 15.9, the party seeking an
indemnity shall:
15.10.1 fully and promptly notify the other party of any claim or
proceedings, or threatened claim or proceedings;
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<PAGE> 37
15.10.2 permit the indemnifying party to take full control of such
claim or proceedings;
15.10.3 assist in the investigation and defence of such claim or
proceedings;
15.10.4 not compromise or otherwise settle any such claim or
proceedings without the prior written consent of the other
party, which consent shall not be unreasonably withheld; and
15.10.5 take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceedings.
15.11 Notwithstanding anything to the contrary in this Agreement, ELAN and
MINIMED shall not be liable to the other by reason of any
representation or warranty, condition or other term or any duty of
common law, or under the express terms of this Agreement, for any
consequential or incidental loss or damage (whether for loss of profits
or otherwise) and whether occasioned by the negligence of the
respective parties, their employees or agents or otherwise.
15.12 ELAN and MINIMED shall maintain comprehensive general liability
insurance, including product liability insurance on the SYSTEM and
PRODUCT respectively, in such prudent amount as shall be determined by
the PROJECT TEAM. Each Party shall provide the other Party with a
certificate from the insurance company verifying the above and
undertakes to notify such Party directly at least 30 days prior to the
expiration or termination of such coverage.
CLAUSE 16 - CUSTOMER COMPLAINTS AND PRODUCT RECALL
16.1 MINIMED shall notify ELAN promptly:-
16.1.1 of any complaints from third parties reported to MINIMED
involving any serious and unexpected adverse reactions
resulting from the use of the PRODUCT; and
16.1.2 of any potential recall of the PRODUCT by any governmental
authority.
16.2. ELAN shall notify MINIMED promptly:-.
16.2.1 of any complaints from third parties reported to ELAN
involving any serious and unexpected adverse device events or
incident reports resulting from the use of the SYSTEM; and
16.1.2 of any potential recall of the SYSTEM by any governmental
authority.
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<PAGE> 38
16.3 MINIMED and ELAN shall establish a procedure for formal adverse event
handling, customer complaints and reporting. It is envisaged that
MINIMED shall be responsible for furnishing post-marketing reports to
the applicable RHA's and other relevant regulatory agencies. MINIMED
and ELAN shall keep each other informed and shall copy the other party
with all communications with the RHA's and other relevant regulatory
agencies with respect to the PRODUCT and such events.
16.4 In the event of any recall of the PRODUCT, as suggested or requested by
any governmental authority:
16.4.1 MINIMED shall perform the recall of the PRODUCT in the
TERRITORY and save as provided in Clause 16.4.2, in all events
the recall costs shall be borne by MINIMED.
16.4.2 If the recall arises from ELAN's acts or omissions in
manufacturing the SYSTEM or any failure to conform to the
PROJECT SYSTEM SPECIFICATIONS, the recall costs shall be borne
by ELAN provided that MINIMED should not have discovered the
said act or omission prior to the sale of the PRODUCT by
exercising the quality procedures to be agreed upon by the
parties for the release of the PRODUCT.
In the event that ELAN should bear the costs of any recall
hereunder, ELAN shall be entitled but not obliged to take over
and perform the recall of the PRODUCT described in Clause
16.4.1 and MINIMED shall provide ELAN with all such reasonable
assistance as may be required by ELAN, with ELAN reimbursing
MINIMED for reasonable costs incurred.
16.4.3 Neither party shall be liable to the other party or to any
third party for consequential or incidental damages which may
arise as a result of the recall of the PRODUCT.
16.4.4. For the avoidance of doubt, in no event shall MINIMED be
responsible under this Agreement for performing any recall of
the PRODUCT in any country of the TERRITORY for which
MINIMED's license to the ELAN BACKGROUND TECHNOLOGY and ELAN
IMPROVEMENTS has been terminated in accordance with the terms
of this Agreement.
CLAUSE 17 - MISCELLANEOUS PROVISIONS
17.1 SECRECY:
17.1.1 Any information, whether written or oral (oral information
shall be reduced to writing within one month by the party
giving the oral information and the written form shall be
furnished to the other party)
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<PAGE> 39
pertaining to the PRODUCT that has been or will be
communicated or delivered by ELAN to MINIMED, or by MINIMED to
ELAN, including, without limitation, trade secrets, business
methods, and cost, supplier, manufacturing and customer
information, shall be treated by MINIMED and ELAN,
respectively, as confidential information, and shall not be
disclosed or revealed to any third party whatsoever or used in
any manner except as expressly provided for herein; provided,
however, that such confidential information shall not be
subject to the restrictions and prohibitions set forth herein
to the extent that such confidential information:-
(1) is available to the public in public literature or
otherwise, or after disclosure by one party to the
other becomes public knowledge through no default of
the party receiving such confidential information; or
(2) was known to the party receiving such confidential
information prior to the receipt of such confidential
information by such party, whether received before or
after the date of this Agreement; or
(3) is obtained by the party receiving such confidential
information from a third party not subject to a
requirement of confidentiality with respect to such
confidential information; or
(4) is required to be disclosed pursuant to: (A) any
order of a court having competent jurisdiction and
power to order such information to be released or
made public; or (B) any lawful action of a
governmental or regulatory agency or stock exchange
provided that each party shall notify the other in
writing of any disclosure of information required
hereunder prior to such disclosure.
17.1.2 Each party shall take in relation to the confidential
information of the other party all such precautions as it
normally takes with its own confidential information to
prevent any improper disclosure of such confidential
information to any third party; provided, however, that such
confidential information may be disclosed within the limits
required to obtain any authorisation from the applicable RHA
or any governmental or regulatory agency or, with the prior
written consent of the other party, which shall not be
unreasonably withheld, or as may otherwise be required in
connection with the purposes of this Agreement.
17.1.3 Each of the parties agrees that it will not use, directly or
indirectly, any know-how of the other party (ELAN KNOW-HOW or
MINIMED KNOW-
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<PAGE> 40
HOW, as the case may be), or other confidential information
disclosed to it by the other party or obtained by it from the
other party pursuant to this Agreement, other than as
expressly provided herein.
17.1.4 Neither party will publicise the existence of this Agreement
in any way without the prior written consent of the other
party subject to the disclosure requirements of applicable
laws and regulations. In the event that either party wishes to
make an announcement concerning the Agreement, that party will
seek the consent of the other party. The terms of any such
announcement shall be agreed in good faith. ELAN and MINIMED
shall also co-operate in good faith with respect to any stock
exchange filings, public announcements, or filings with the
United States Securities and Exchange Commission which may be
necessary following execution of this Agreement.
17.2 ASSIGNMENTS/ SUB-CONTRACTING:
This Agreement may not be assigned by MINIMED or ELAN without the prior
written consent of the other party, save that either party may assign
this Agreement in whole or in part and delegate its duties hereunder to
its AFFILIATE or AFFILIATES without such consent provided that such
assignment or delegation has no material adverse tax implications for
the other party hereto. Each party shall be responsible for the acts
and/or omissions of its respective AFFILIATES.
17.3 PARTIES BOUND:
This Agreement shall be binding upon and enure for the benefit of
parties hereto, their successors and permitted assigns.
17.4 SEVERABILITY:
If any provision in this Agreement is agreed by the parties to be, or
is deemed to be, or becomes invalid, illegal, void or unenforceable
under any law that is applicable hereto:-
17.4.1 such provision will be deemed amended to conform to applicable
laws so as to be valid and enforceable or, if it cannot be so
amended without materially altering the intention of the
parties, it will be deleted, with effect from the date of such
agreement or such earlier date as the parties may agree; and
17.4.2 the validity, legality and enforceability of the remaining
provisions of this Agreement shall not be impaired or affected
in any way.
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<PAGE> 41
17.5 FORCE MAJEURE:
Neither party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay results
from causes beyond its reasonable control, including, without
limitation, acts of God, fires, earthquakes, strikes, acts of war, or
intervention of a government authority, non-availability of raw
materials, but any such delay or failure shall be remedied by such
party as soon as practicable.
17.6 RELATIONSHIP OF THE PARTIES:
Nothing contained in this Agreement is intended or is to be construed
to constitute ELAN and MINIMED as partners or members of a joint
venture or either party as an employee of the other. Neither party
hereto shall have any express or implied right or authority to assume
or create any obligations on behalf of or in the name of the other
party or to bind the other party to any contract, agreement or
undertaking with any third party.
17.7 AMENDMENTS:
No amendment, modification or addition hereto shall be effective or
binding on either party unless set forth in writing and executed by a
duly authorised representative of both parties.
17.8 WAIVER:
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any future breach or failure to perform or of
any other right arising under this Agreement.
17.9 NO EFFECT ON OTHER AGREEMENTS:
No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement
between the parties unless specifically referred to, and solely to the
extent provided, in any such other agreement.
17.10 GOVERNING LAW AND JURISDICTION:
This Agreement shall be governed by the laws of the State of New York,
without regard to principles of conflicts of law. Each of the Parties
hereby irrevocably submits to the jurisdiction of any New York State or
United States Federal court
Page 41 of 44
<PAGE> 42
sitting in the County, City and State of New York over any action or
proceeding arising out of or relating to this Agreement, and each
hereby waives the defence of any inconvenient forum for the maintenance
of such action.
17.11 NOTICE:
17.11.1 Any notice to be given under this Agreement shall be sent in
writing in English by registered airmail or telecopied to:
Elan Pharmaceutical Technologies at
Elan Pharmaceutical Technologies
A division of Elan Corporation, plc.
Lincoln House
Lincoln Place
Dublin 2
Ireland.
Attention: Vice-President & General Counsel,
Elan Pharmaceutical Technologies
Telephone: 353 1 7094000
Telefax : 353 1 7094124
Elan Pharma International Limited at
Elan Pharma International Limited
WIL House
Shannon Business Park
Shannon
Co. Clare
Ireland.
Attention: Company Secretary
Telephone: 353 61 363533
Telefax: 353 61 362010
MINIMED at
MiniMed Inc.
12744 San Fernando Road
Sylmar
California 91342
United States of America
Attention: Senior Vice President & General Counsel
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<PAGE> 43
Telephone: 818 362 5958
Telefax: 818 367 1460
or to such other address(es) and telecopier numbers as may
from time to time be notified by either party to the other
hereunder.
17.11.2 Any notice sent by mail shall be deemed to have been delivered
within 10 working days after despatch and any notice sent by
telex or telecopy shall be deemed to have been delivered
within 24 hours of the time of the despatch. Notice of change
of address shall be effective upon receipt.
IN WITNESS of which the parties have executed this Agreement.
Page 43 of 44
<PAGE> 44
Executed by MINIMED INC. on 11th June, 1999
By : /s/ TERRANCE H. GREGG
--------------------------
Name: Terrance H. Gregg
Title: President and Chief Operating Officer
Executed by ELAN PHARMACEUTICAL TECHNOLOGIES on 10th June, 1999
By: /s/ LARRY A. STERNSON
--------------------------
Name: Larry A. Sternson
--------------------------
Title: President
--------------------------
Executed by ELAN PHARMA INTERNATIONAL LIMITED on 10th June, 1999
By: /s/ DAVID HURLEY
--------------------------
Name: David Hurley
--------------------------
Title: Director
--------------------------
Page 44 of 44
<PAGE> 1
EXECUTION COPY EXHIBIT 10.10
CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH
RESPECT TO THE PORTIONS
OF THIS EXHIBIT AS
INDICATED HEREIN.
Dated 11th June, 1999
ELAN PHARMACEUTICAL TECHNOLOGIES
A DIVISION OF ELAN CORPORATION, PLC
AND
ELAN PHARMA INTERNATIONAL LIMITED
AND
MINIMED INC.
LICENCE AND MANUFACTURING AGREEMENT
Page 1 of 47
<PAGE> 2
CONTENTS
<TABLE>
<S> <C>
CLAUSE 1 PRELIMINARY
CLAUSE 2 APPOINTMENT & LICENCE
CLAUSE 3 INTELLECTUAL PROPERTY
CLAUSE 4 PROJECT TEAM AND PROJECT MANAGEMENT
CLAUSE 5 TECHNOLOGY TRANSFER
CLAUSE 6 FACILITY, EQUIPMENT & COMPONENTS
CLAUSE 7 REGISTRATION OF THE CONTINUOUS SYSTEM
CLAUSE 8 MANUFACTURE & SUPPLY OF THE CONTINUOUS SYSTEM
CLAUSE 9 CHANGE IN SPECIFICATIONS / MANUFACTURING PROCESS
CLAUSE 10 FINANCIAL PROVISIONS
CLAUSE 11 PAYMENTS, REPORTS AND AUDITS
CLAUSE 12 DURATION AND TERMINATION
CLAUSE 13 CONSEQUENCES OF TERMINATION
CLAUSE 14 WARRANTY AND INDEMNITY
CLAUSE 15 CUSTOMER COMPLAINTS AND CONTINUOUS SYSTEM RECALL
CLAUSE 16 MISCELLANEOUS PROVISIONS
SCHEDULE 1 ELAN PATENTS
SCHEDULE 2 SYSTEM SPECIFICATIONS
SCHEDULE 3 PACKAGING SPECIFICATIONS
SCHEDULE 4 PROJECT
</TABLE>
Page 2 of 47
<PAGE> 3
<TABLE>
<S> <C>
SCHEDULE 5 ROYALTIES
</TABLE>
Page 3 of 47
<PAGE> 4
THIS AGREEMENT is made on 11th June, 1999.
BETWEEN:
(1) ELAN PHARMACEUTICAL TECHNOLOGIES, a division of Elan Corporation, plc, a
company incorporated in Ireland having its registered office at Lincoln
House, Lincoln Place, Dublin 2, Ireland;
(2) ELAN PHARMA INTERNATIONAL LIMITED, a company incorporated in Ireland
having its registered office at WIL House, Shannon Business Park,
Shannon, Co. Clare, Ireland; and
(3) MINIMED INC., a company incorporated under the laws of the State of
Delaware having its principal place of business at 12744 San Fernando
Road, Sylmar, California CA 91342, United States of America.
RECITALS:
A. ELAN is beneficially entitled to the use of various patents, including
the ELAN PATENTS, which have been granted or are pending under the
International Convention in relation to the development and production
of subcutaneous micro-infusion pump devices, methods of drug delivery
using such devices and drug specific dosage forms for pharmaceutical
products, devices and processes.
B. ELAN has developed the CONTINUOUS SYSTEM and has entered into, or
intends to enter into, agreements to supply the CONTINUOUS SYSTEM to
LICENSEES;
C. MINIMED is knowledgeable in the manufacture of pump devices for
pharmaceutical use and maintains the FACILITY for the manufacture of
such devices; and
D. ELAN wishes to appoint MINIMED as the exclusive manufacturer and
packager of the CONTINUOUS SYSTEM for ELAN and to grant MINIMED a
licence of the ELAN INTELLECTUAL PROPERTY for such purpose and MINIMED
is willing to accept such appointment in accordance with the terms
hereof.
NOW IT IS HEREBY AGREED AS FOLLOWS:
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<PAGE> 5
CLAUSE 1 - PRELIMINARY
1.1 DEFINITIONS: In this Agreement unless the context otherwise requires:
AFFILIATE shall mean any corporation or entity controlling or controlled
or under common control with MINIMED or ELAN, as the case may be. For
the purposes of this Agreement, "control" shall mean the direct or
indirect ownership of more than 50% of the issued voting shares or other
voting rights of the subject entity to elect directors, or if not
meeting the preceding criteria, any entity owned or controlled by or
owning or controlling at the maximum control or ownership right
permitted in the country where such entity exists.
BASAL AND BOLUS SYSTEM shall mean ELAN's ambulatory subcutaneous
infusion drug delivery system for direct attachment to the body of a
patient, which is capable of delivering factory pre-programmed
continuous amounts combined with incremental amounts of drug upon
activation either manually or automatically as disclosed and described
in the ELAN PATENTS set forth in Schedule 1.
CFR shall mean the US Code of Federal Regulations 21, as amended from
time to time.
cGCP, cGMP and cGLP shall mean current Good Clinical Practice, current
Good Manufacturing Practice and current Good Laboratory Practices,
respectively, as defined in the FFDCA.
CONTINUOUS SYSTEM shall mean ELAN's ambulatory subcutaneous infusion
drug delivery system for direct attachment to the body of a patient,
having a flexible diaphragm drug reservoir which is capable of
delivering factory pre-programmed continuous amounts of drug upon
activation as disclosed and described in the ELAN PATENTS set forth in
Schedule 1 attached hereto.
CONTINUOUS SYSTEM SPECIFICATIONS shall mean the specifications for the
CONTINUOUS SYSTEM set as of the EFFECTIVE DATE by ELAN and attached as
Schedule 3, as well as such other specifications as may be fixed in
accordance with Clause 9.
CUMULATIVE SALES shall mean (i) the total sum of all sales of the
CONTINUOUS SYSTEM by MINIMED to ELAN pursuant to this Agreement from the
EFFECTIVE DATE plus (ii) the total sum of all units of CONTINUOUS SYSTEM
which are manufactured by MINIMED for MINIMED, its AFFILIATES or
permitted sub-licensees for sale pursuant to the LICENCE AGREEMENT or
such other license agreements as MINIMED and ELAN may subsequently enter
into.
DEVICE REGULATORY APPLICATION shall mean applications for marketing
approval for the SYSTEM with a pharmaceutical compound, but not for the
SYSTEM
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<PAGE> 6
alone, which ELAN or its LICENSEES will file with the RHA in any country
of the TERRITORY, including any supplements or amendments thereto.
DEVICE REGULATORY APPROVAL shall mean the final approval by the RHA to
market a the SYSTEM with a pharmaceutical compound, but not the SYSTEM
alone, in any country of the TERRITORY, including pricing and
reimbursement approval and any other approval which is required to
launch the SYSTEM with the pharmaceutical compound in the normal course
of business.
EFFECTIVE DATE shall mean 11th June, 1999.
ELAN shall mean Elan Pharmaceutical Technologies, a division of Elan
Corporation, plc, Elan Pharmaceutical International Limited and any of
their AFFILIATES.
ELAN BACKGROUND TECHNOLOGY shall mean ELAN PATENTS, and/or ELAN KNOW
HOW. Notwithstanding anything contained in this Agreement to the
contrary, ELAN BACKGROUND TECHNOLOGY shall consist of ELAN KNOW-HOW, and
ELAN PATENTS controlled by Elan Corporation plc doing business as Elan
Pharmaceutical Technologies, and shall exclude (a) inventions, patents
and know-how owned, licensed or controlled by AFFILIATES of Elan
Corporation, plc (other than Elan Pharmaceutical Technologies),
including, without limitation, Elan Pharmaceuticals Inc., Athena
Neurosciences, Inc., Carnrick Laboratories, Targon Corporation and
Neurex Corporation, and (b) the Nanosystems Technology (as defined in
Clause 4.2 of the MANUFACTURING AGREEMENT).
ELAN IMPROVEMENTS shall mean any and all improvements or enhancements,
patentable or otherwise, that have been conceived, created, developed
and/or otherwise invented solely by ELAN or jointly by at least one
employee of ELAN and at least one employee of MINIMED, and which can be
usefully applied to the SYSTEM, including the manufacture thereof,
except for (i) improvements relating exclusively to the COMPOUND (as
defined in the LICENCE AGREEMENT), (ii) any improvements that are
subject to contractual obligations of ELAN to third parties or (iii)
improvements or enhancements based on MINIMED BACKGROUND INFUSION SYSTEM
TECHNOLOGY made solely by MINIMED. If the inclusion of an ELAN
IMPROVEMENT is restricted or limited by a third party agreement, ELAN
shall use reasonable commercial efforts to exclude or where applicable
minimize any such restriction or limitation;
ELAN KNOW-HOW shall mean all knowledge, information, trade secrets, data
and expertise which is not generally known to the public, owned by ELAN,
or to which ELAN has rights under the terms of a licence or licences in
force on the EFFECTIVE DATE, or developed or to be developed before or
during the TERM, which permit(s) disclosure of same to MINIMED, relating
to the SYSTEM, whether or not covered by any patent, copyright, design
patent, trademark, trade secret or other industrial or any intellectual
Page 6 of 47
<PAGE> 7
property rights.
ELAN PATENTS shall mean the patents and patent applications as set forth
in Schedule 1, that are owned or licensed by or on behalf of ELAN. ELAN
PATENTS shall also include all extensions, continuations,
continuations-in-part, divisionals, patents-of-additions,
re-examinations, re-issues, supplementary protection certificates and
foreign counterparts of such patents and patent applications and any
patents issuing thereon and extensions of any patents licensed
hereunder.
ENFORCEMENT PROCEEDINGS shall mean the proceedings referred to in Clause
3.4.2.
EX WORKS shall have the meaning as such term is defined in the ICC
Incoterms, 1990, International Rules for the Interpretation of Trade
Terms, ICC Publication No. 460.
FACILITY shall mean the plant and facilities of MINIMED located at
Sylmar or MINIMED's future corporate headquarters at the North Campus
section of California State University, Northridge or such other site as
MINIMED may reasonably determine in the discharge of its obligations and
the exercise of its rights hereunder, provided however, that MINIMED
shall discuss the use of any such other site with ELAN in advance and
require the prior written consent of ELAN (to the extent such move would
result in an increase in the MANUFACTURING COST), which consent shall
not be unreasonably withheld or delayed.
FFDCA shall mean the US Federal Food, Drug and Cosmetic Act of 1934, and
the regulations promulgated thereunder, as may be amended from time to
time.
INITIAL PERIOD shall mean the initial period of this Agreement, as more
fully described in Clause 12.
LICENCE AGREEMENT shall mean the Development and License Agreement of
even date entered into between ELAN and MINIMED.
LICENSEE(S) shall mean any unaffiliated independent third party who has
concluded, or who subsequently concludes, a binding agreement with ELAN
or its AFFILIATES for the commercialisation of the CONTINUOUS SYSTEM,
including MINIMED pursuant to the LICENCE AGREEMENT.
MANAGEMENT TEAM shall mean the group to be established pursuant to
Clause 4.
MANUFACTURING COST shall mean MINIMED's direct cost of manufacturing and
packaging the CONTINUOUS SYSTEM which shall be determined on the basis
of direct materials and supplies, labour, quality control/quality
assurance and overhead and attributable general administrative costs
which are calculated in accordance with generally
Page 7 of 47
<PAGE> 8
accepted accounting principles.
MATERIALS shall mean any components, parts or materials which are
required to manufacture the CONTINUOUS SYSTEM.
MINIMED shall mean MiniMed Inc. and any of its AFFILIATES.
MINIMED BACKGROUND INFUSION SYSTEM KNOW-HOW shall mean all knowledge,
information, trade secrets, data and expertise which is not generally
known to the public, owned or licensed by MINIMED prior to the EFFECTIVE
DATE or independently developed by MINIMED, relating to infusion
systems, whether or not covered by any patent, copyright, design,
trademark or other industrial or intellectual property rights.
MINIMED BACKGROUND INFUSION SYSTEM PATENTS shall mean all patents and
patent applications that are owned by, or licensed to MINIMED prior to
the EFFECTIVE DATE or independently developed by MINIMED, relating to
infusion systems but excluding any MINIMED SYSTEM IMPROVEMENTS. MINIMED
PATENTS shall also include all extensions, continuations,
continuations-in-part, divisionals, patents-of-additions,
re-examinations, re-issues, supplementary protection certificates and
foreign counterparts of such patents and patent applications and any
patents issuing thereon and extensions of any patents licensed
hereunder.
MINIMED BACKGROUND INFUSION SYSTEM TECHNOLOGY shall mean MINIMED
BACKGROUND INFUSION SYSTEM PATENTS and MINIMED BACKGROUND INFUSION
SYSTEM KNOW HOW conceived prior to the EFFECTIVE DATE or independently
developed by MINIMED. For purposes of clarity, the parties acknowledge
that MINIMED SYSTEM IMPROVEMENTS shall not constitute MINIMED BACKGROUND
INFUSION SYSTEM TECHNOLOGY hereunder.
MINIMED SYSTEM IMPROVEMENTS shall mean any and all improvements or
enhancements, patentable or otherwise, that have been conceived,
created, developed and/or otherwise invented solely by MINIMED, which
can be usefully applied to the SYSTEM and which is based upon ELAN
BACKGROUND TECHNOLOGY and/or ELAN IMPROVEMENTS. For purposes of clarity,
the parties acknowledge that (i) MINIMED COMPOUND IMPROVEMENTS (as
defined in the LICENCE AGREEMENT), and (ii) any such improvements or
enhancements that are based on MINIMED BACKGROUND INFUSION SYSTEM
TECHNOLOGY made solely by MINIMED do not constitute MINIMED SYSTEM
IMPROVEMENTS hereunder.
PACKAGING SPECIFICATIONS shall mean the packaging specifications for the
CONTINUOUS SYSTEM mutually agreeable to ELAN and MINIMED and which shall
be attached from time to time as Schedule 3.
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<PAGE> 9
Party shall mean MINIMED or ELAN as the case may be. Parties shall mean
MINIMED and ELAN.
PRODUCTION COMMENCEMENT DATE shall mean the effective date of completion
of Confidential portion omitted and filed separately with the
Commission.
PROJECT shall mean all activity in order to transfer the ELAN
INTELLECTUAL PROPERTY to MINIMED and successfully manufacture the
CONTINUOUS SYSTEM for the purpose of this Agreement, in accordance with
the plan to be drawn up by the PROJECT TEAM and which shall be attached
as Schedule 4, and may be amended from time to time by the agreement of
the parties.
PROJECT TEAM shall mean the group to be established pursuant to Clause
4.
RHA shall mean any relevant government health authority (or successor
agency thereof) in any country of the TERRITORY whose approval is
necessary to manufacture the CONTINUOUS SYSTEM in the relevant country
of the TERRITORY.
TECHNOLOGICAL COMPETITOR shall mean, with respect to ELAN, a
pharmaceutical company or corporation having a substantial or primary
part of its business in research, development and manufacturing of oral,
transdermal or device drug delivery systems and which licenses such drug
delivery systems to third parties for the development of pharmaceutical
products. TECHNOLOGICAL COMPETITOR shall mean, with respect to MINIMED,
a company or corporation having a substantial or primary part of its
business in research, development and manufacturing, or distributing,
devices or products (a) for the infusion or injection of insulin or
insulin analogues or (b) for the measurement of glucose in the treatment
of diabetes.
TECHNOLOGY SUPPORT COST shall mean (a) in the case of ELAN, the
technology support cost which is the sum total of all support and
assistance provided to MINIMED in connection with the transfer of the
ELAN INTELLECTUAL PROPERTY to MINIMED for manufacture of the CONTINUOUS
SYSTEM including direct labour, direct materials and supplies, variable
labour, overhead and attributable administration, quality control,
quality assurance and other costs such as insurance and freight costs,
whether incurred by ELAN, its agents or any
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<PAGE> 10
sub-contractor of ELAN, and shall be incurred in accordance with a
budget established by the PROJECT TEAM; such costs to be calculated in
accordance with generally accepted accounting principles, or (b) in the
case of MINIMED, the sum total of costs incurred by MINIMED for
development performed by MINIMED, as mutually agreed by the Parties,
including direct labour, direct materials and supplies, variable labour,
overhead and attributable administration, quality control, quality
assurance and other costs such as insurance and freight costs, whether
incurred by MINIMED, its agents or any sub-contractor of MINIMED, and
shall be incurred in accordance with a budget established by the PROJECT
TEAM; such costs to be calculated in accordance with generally accepted
accounting principles.
TERM shall mean the term of this Agreement, as set out in Clause 12.
TERRITORY shall mean all of the countries of the world.
WASTE shall mean all rejects or waste materials relating to the
manufacture or packaging of the CONTINUOUS SYSTEM, including but not
limited to, chemical wastes, rejected excess or unusable MATERIALS,
CONTINUOUS SYSTEMS, containers, packaging materials or labels, and
previously used or discarded protective clothing.
$ shall mean United States Dollars.
"US" or "USA" shall mean the United States of America.
1.2 INTERPRETATION: In this Agreement:
1.2.1 the singular includes the plural and vice versa, the masculine
includes the feminine and vice versa and references to natural
persons include corporate bodies, partnerships and vice versa.
1.2.2 any reference to a Clause or Schedule, unless otherwise
specifically provided, shall be respectively to a Clause or
Schedule of this Agreement.
1.2.3 the headings of this Agreement are for ease of reference only
and shall not affect its construction or interpretation.
CLAUSE 2 - APPOINTMENT & LICENCE
2.1 APPOINTMENT OF MINIMED
2.1.1. Subject to the terms of this Agreement and in particular, Clause
2.1.2, ELAN hereby appoints MINIMED as the exclusive
manufacturer and packager of the CONTINUOUS SYSTEM for ELAN and
for ELAN's LICENSEES for direct sale in the TERRITORY for the
TERM.
2.1.2. MINIMED's appointment as exclusive manufacturer of the
CONTINUOUS SYSTEM pursuant to Clause 2.1.1 shall be subject to
the following limitations:
(1) ELAN shall retain the right to manufacture supplies of
the
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<PAGE> 11
CONTINUOUS SYSTEM for development, clinical, commercial
or other purposes for ELAN or ELAN's LICENSEES from the
EFFECTIVE DATE until the Production Commencement Date
(or such later date, up to the time MINIMED has
established a fully automated production line in
accordance with Clause 6.3, as is reasonably necessary
for ELAN to meet the requirements of its LICENSEES), and
solely for development purposes thereafter;
(2) Prior to the execution of this Agreement, ELAN has
entered into an agreement which grants a third party an
exclusive option to acquire an exclusive license for
world-wide rights to manufacture, use and sell the
CONTINUOUS SYSTEM for pain management ("Option
Agreement"). MINIMED's appointment as exclusive
manufacturer of the CONTINUOUS SYSTEM shall be subject
to this Option Agreement. In the event that said third
party does not exercise the Option Agreement or notifies
ELAN that it does not wish to manufacture the CONTINUOUS
SYSTEM for pain management, MINIMED shall automatically
be appointed, and MINIMED shall automatically be deemed
to accept such appointment, as the manufacturer of the
CONTINUOUS SYSTEM for pain management pursuant to the
terms of this Agreement;
(3) (i) Subject to the terms of this Clause 2.1.2. (3), ELAN
hereby grants to MINIMED an option to also become the
exclusive manufacturer of the BASAL AND BOLUS SYSTEM in
addition to the CONTINUOUS SYSTEM (the "BB Option"), on
the same terms and conditions mutatis mutandis as the
terms of this Agreement insofar as they are applicable.
(ii) Subject to paragraphs (iii) and (iv) herein,
MINIMED may exercise the BB Option by written notice
thereof to ELAN at any time within 60 days of MINIMED
acquiring the license rights to the BASAL AND BOLUS
SYSTEM pursuant to the terms of the LICENSE AGREEMENT.
(iii) The BB Option may be exercised by MINIMED only in
conjunction with its acquisition of a licence to the
BASAL AND BOLUS SYSTEM pursuant to the LICENSE
AGREEMENT. In the event that MINIMED's option to acquire
such licence to the BASAL AND BOLUS SYSTEM pursuant to
Clause 2.2. of the LICENCE AGREEMENT expires, the BB
Option shall automatically terminate forthwith and
paragraph (iv) as set out below shall have no force or
effect.
(iv) Confidential portion omitted and filed separately
with the Commission.
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<PAGE> 12
(v) For the avoidance of doubt, in no event shall
MINIMED's exercise of, or failure to exercise, the BB
Option set out herein in any way affect MINIMED's
appointment as the manufacturer of the CONTINUOUS SYSTEM
pursuant to this Agreement.
(4) Except as expressly set forth herein and in the LICENSE
AGREEMENT relative to the CONTINUOUS SYSTEM and the
BASAL AND BOLUS SYSTEM, MINIMED shall have no rights,
manufacturing or otherwise, to any other devices which
are owned, licensed or otherwise controlled by ELAN.
2.2 LICENSE OF ELAN INTELLECTUAL PROPERTY
Subject to the terms of this Agreement, ELAN hereby grants to MINIMED
and MINIMED hereby accepts for the TERM a non-exclusive licence to the
ELAN BACKGROUND TECHNOLOGY and ELAN IMPROVEMENTS to exclusively
manufacture and package the CONTINUOUS SYSTEM for ELAN and ELAN's
LICENSEES as provided herein.
CLAUSE 3 - INTELLECTUAL PROPERTY
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<PAGE> 13
3.1. OWNERSHIP OF ELAN PATENT RIGHTS/KNOW-HOW:
3.1.1. ELAN shall remain the sole owner of the ELAN BACKGROUND
TECHNOLOGY.
3.1.2 ELAN shall remain the sole owner of the ELAN IMPROVEMENTS. Any
ELAN IMPROVEMENTS which are made jointly by at least one
employee of ELAN and at least one employee of MINIMED shall be
assigned to ELAN by MINIMED at ELAN's request.
3.1.3. ELAN hereby grants to MINIMED an irrevocable non-exclusive
perpetual royalty-free license to such ELAN IMPROVEMENTS as are
made jointly by at least one employee of ELAN and at least one
employee of MINIMED; provided however, that any such use shall
be subject to the restrictions set forth in Clause 3.1.3. of the
LICENSE AGREEMENT.
3.1.4 ELAN shall be entitled to use the ELAN BACKGROUND TECHNOLOGY and
ELAN IMPROVEMENTS, and all technical and clinical data,
generated by ELAN pursuant to this Agreement in connection with
ELAN's commercial arrangements.
3.2 OWNERSHIP OF MINIMED PATENT RIGHTS/KNOW-HOW:
3.2.1. MINIMED shall remain the sole owner of all MINIMED BACKGROUND
INFUSION SYSTEM TECHNOLOGY and MINIMED SYSTEM IMPROVEMENTS.
3.2.2. MINIMED hereby grants to ELAN an irrevocable non-exclusive
perpetual royalty-free license to all MINIMED SYSTEM
IMPROVEMENTS for use in the TERRITORY.
3.2.3. In the event that MINIMED wishes to incorporate any MINIMED
BACKGROUND INFUSION SYSTEM TECHNOLOGY in the SYSTEM, MINIMED
shall provide full details of any such MINIMED BACKGROUND
INFUSION SYSTEM TECHNOLOGY to ELAN in writing for review. ELAN
shall have the option, at its sole discretion, to determine
whether to include such MINIMED BACKGROUND INFUSION SYSTEM
TECHNOLOGY in the SYSTEM, which decision shall be considered
with the PROJECT TEAM. In the event that ELAN is agreeable to
including such MINIMED BACKGROUND INFUSION SYSTEM TECHNOLOGY in
the SYSTEM, ELAN and MINIMED shall enter into discussions in
good faith as to the terms upon which such MINIMED BACKGROUND
INFUSION SYSTEM TECHNOLOGY shall be licensed to ELAN.
3.3 FILING AND MAINTENANCE OF PATENTS:
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<PAGE> 14
3.3.1. ELAN will be entitled, at its own expense, to file and prosecute
ELAN PATENTS and patentable ELAN IMPROVEMENTS made solely by
ELAN; to determine the patent filing strategy in relation to
same at its sole discretion; to assert and defend the foregoing
patent applications against third party oppositions; and upon
grant of any letters patent, to maintain such letters patent in
force subject to the following conditions:
(1) ELAN shall promptly notify MINIMED in writing in
relation to the existence of ELAN improvements, or any
other intellectual property rights which may be relevant
to this Agreement and upon request by MINIMED, ELAN
shall provide MINIMED with copies of any documents
relating to the ELAN improvements or other intellectual
property rights in question.
(2) ELAN shall promptly notify MINIMED in writing of any
patent applications filed by ELAN under this Clause
3.3.1 and upon request by MINIMED shall provide copies
to MINIMED to such patent applications and any patents
issuing thereon, to the extent reasonably required in
order for MINIMED to fulfil its obligations under this
Agreement;
3.3.2. Elan shall inform MiniMed in a timely fashion of its intent to
seek patent protection on an Elan Improvement developed jointly
between Elan and MiniMed. At MiniMed's request, Elan shall
cooperate with MiniMed's patent counsel to seek concurrent
patent protection for such an Elan Improvement as it relates to
the System. The parties will cooperate to seek such concurrent
protection so that neither party shall be the owner of any
patent, application or publication that may be used as prior art
against the other, or otherwise be a bar to the other in
obtaining patent protection for such improvement as it relates
to such Elan Improvements.
3.3.3. If ELAN does not intend to make an application for patents or
continue prosecution of a pending application in respect of, or
continue to maintain the ELAN PATENTS or ELAN IMPROVEMENTS in
any or some countries of the TERRITORY, MINIMED will be entitled
to file, prosecute and maintain patent applications and patents
in respect thereof, at its own expense, in accordance with the
following terms:-
(1) MINIMED shall consult with ELAN on a regular basis in
relation to the status of its activities under this
Clause 3.3.3;
(2) ELAN shall execute all documents, forms and
declarations, provide all necessary information and
data, and do all such things as shall be necessary to
enable MINIMED to exercise the foregoing right;
(3) MINIMED shall promptly notify ELAN in writing of any
patent applications filed by MINIMED hereunder and shall
provide all
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<PAGE> 15
reasonable access to ELAN to such patent applications
and any patents issuing thereon.
3.3.4 MINIMED shall inform ELAN in a timely fashion of its intent to
seek patent protection on a MINIMED SYSTEM Improvement developed
solely by MiniMed. At ELAN's request, MINIMED shall cooperate
with ELAN's patent counsel to seek concurrent patent protection
for a MINIMED SYSTEM IMPROVEMENT as it relates to the System and
such an improvement as it relates to ELAN's developments. The
parties will cooperate to seek such concurrent protection so
that neither party shall be the owner of any patent, application
or publication that may be used as prior art against the other,
or otherwise be a bar to the other in obtaining patent
protection for such improvement as it relates to the MINIMED
SYSTEM Improvements.
3.3.5 If MINIMED does not intend to make an application for patents or
continue prosecution of a pending application in respect of, or
continue to maintain the MINIMED SYSTEM IMPROVEMENTS in any or
some countries of the TERRITORY, ELAN will be entitled to file,
prosecute and maintain patent applications and patents in
respect thereof, at its own expense, in accordance with the
following terms:-
(1) ELAN shall consult with MINIMED on a regular basis in
relation to the status of its activities under this
Clause 3.3.5;
(2) MINIMED shall execute all documents, forms and
declarations, provide all necessary information and
data, and do all such things as shall be necessary to
enable ELAN to exercise the foregoing right;
(3) ELAN shall promptly notify MINIMED in writing of any
patent applications filed by ELAN hereunder and shall
provide all reasonable access to MINIMED to such patent
applications and any patents issuing thereon.
3.4 ENFORCEMENT
3.4.1 MINIMED and ELAN shall promptly inform the other in writing of
any alleged infringement of which it shall become aware by a
third party of any patents within the ELAN PATENTS or ELAN
IMPROVEMENTS and provide such other with any available evidence
of infringement.
3.4.2 ELAN, at its option, shall be entitled to institute any
administrative, judicial or other proceeding to prevent or stop
any infringement or unauthorised use ("ENFORCEMENT PROCEEDINGS")
of the ELAN BACKGROUND TECHNOLOGY or ELAN IMPROVEMENTS.
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<PAGE> 16
3.4.3. MINIMED agrees to provide all reasonable co-operation and
assistance to ELAN in relation to any such ENFORCEMENT
PROCEEDINGS and agrees to be named as a party in any ENFORCEMENT
PROCEEDINGS, as necessary, instituted by ELAN hereunder. ELAN
shall reimburse MINIMED its reasonable costs and expense for
co-operating with ELAN hereunder.
3.4.4 MINIMED, at its option, shall be entitled to institute
ENFORCEMENT PROCEEDINGS in respect of any infringement or
unauthorised use of the MINIMED SYSTEM IMPROVEMENTS or MINIMED
INFUSION SYSTEM BACKGROUND TECHNOLOGY at its own expense and for
its own benefit. ELAN agrees to provide all reasonable
co-operation and assistance to MINIMED in relation to any such
ENFORCEMENT PROCEEDINGS and agrees to be named as a party in any
ENFORCEMENT PROCEEDINGS, as necessary, instituted by MINIMED
hereunder.
3.4.5 In the event that the intellectual property owner does not want
to institute ENFORCEMENT PROCEEDINGS, then the other Party may
enforce such rights at its own expense. The intellectual
property owner shall cooperate with the enforcing Party and
provide all reasonable assistance in relation to any such
ENFORCEMENT PROCEEDINGS. The enforcing Party must seek written
approval from the intellectual property owner, which may not be
unreasonably withheld, prior to taking action and must keep the
intellectual property owner informed of the action and may not
enter into any settlement agreement without the intellectual
property owner's consent, which may not be unreasonably
withheld. Any reasonable fees and costs borne by the
intellectual property owner shall be reimbursed by the enforcing
Party. In the event that MINIMED decides to enforce the ELAN
BACKGROUND TECHNOLOGY or ELAN IMPROVEMENTS in accordance with
this paragraph, any recovery remaining after the deduction of
reasonable expenses (including attorney's fees and expenses)
incurred in relation to such ENFORCEMENT PROCEEDINGS shall
constitute NSP for the purpose of the LICENCE AGREEMENT and
MINIMED shall make the appropriate payment to ELAN pursuant to
Clause 11.3 of such agreement. In the event that the LICENCE
AGREEMENT is terminated, MINIMED shall make such payment to ELAN
mutatis mutandis with the provisions of such agreement.
3.5 DEFENCE
3.5.1 In the event that a claim or proceeding is brought against
MINIMED by a third party alleging that the method of
manufacture, manufacture, sale, use or offer for sale of the
CONTINUOUS SYSTEM as claimed in the ELAN PATENTS, infringes the
patent rights of such a third party in the
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<PAGE> 17
TERRITORY, MINIMED shall promptly advise ELAN of such threat or
suit.
3.5.2. Confidential portion omitted and filed separately with the
Commission.
3.5.3. Confidential portion omitted and filed separately with the
Commission.
3.5.4 Confidential portion omitted and filed separately with the
Commission.
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<PAGE> 18
3.5.5. Neither Party shall have any liability to the other party
whatsoever or howsoever arising for any losses incurred as a
result of MINIMED having to cease selling the CONTINUOUS SYSTEM
or having to defer the launch of selling any product containing
the CONTINUOUS SYSTEM.
3.5.6. In the event that a claim or proceeding is brought against ELAN
by a third party alleging that the manufacture, offer for sale,
sale, distribution or use of the SYSTEM infringes any adversely
held patent or involves the unauthorised use of any other
intellectual property, ELAN shall promptly advise MINIMED of
such threat or suit. Subject to ELAN's obligations pursuant to
the provisions of Clause 3.5.2, Clause 3.5.3 and Clause 3.5.4,
MINIMED shall indemnify ELAN against such a claim; provided that
ELAN shall not acknowledge to the third party or to any other
person the validity of the patent rights of such a third party
and shall not compromise or settle any claim or proceedings
relating thereto without the written consent of MINIMED, which
shall not be unreasonably withheld or delayed. At its option,
MINIMED may elect to take over the conduct of such proceedings
from ELAN with counsel of MINIMED's choice. In such event
MINIMED shall keep ELAN advised of all material developments in
the said proceedings and shall not settle or compromise such
proceedings without the consent of ELAN which shall not be
unreasonably withheld or delayed.
3.5.7. In the event that a claim or proceeding is brought against ELAN
by a third party alleging that the manufacture, offer for sale,
sale, distribution or use of the SYSTEM infringes any adversely
held patent or involves the unauthorised use of any other
intellectual property, the provisions of either Clause 3.5 of
this Agreement or Clause 3.5 of the LICENCE AGREEMENT shall
apply; provided however, that in no event shall MINIMED be
entitled to rely upon the provisions of both agreements.
CLAUSE 4 - PROJECT TEAM AND MANAGEMENT TEAM
4.1 It is recognised by the Parties that a significant resource shall be
required from each Party to successfully accomplish the transfer of the
ELAN KNOW-HOW and the manufacture of the CONTINUOUS SYSTEM, particularly
in the co-ordination of logistics, finalisation of various
specifications, supply and packaging configurations, shipping and
handling procedures etc. and for this purpose, the Parties will
establish a PROJECT TEAM within 30 days of the EFFECTIVE DATE.
4.2 The PROJECT TEAM shall consist of a chief representative from each Party
together with such additional business and development personnel from
each Party who are
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appropriately skilled and knowledgeable in relation to the appropriate
stage of the PROJECT and who are deemed necessary to accomplish the work
of the PROJECT. The PROJECT TEAM shall have an appropriate number of
members from each of the Parties and the total size of the PROJECT TEAM
shall be agreed from time to time between the Parties.
4.3. Unless otherwise agreed by the Parties, the PROJECT TEAM shall meet
monthly or at such other intervals as the PROJECT TEAM determines, such
meetings to continue until such time as may be agreed. The PROJECT TEAM
may meet in person or by means of such telephone, video or other
communication facilities as permit all members of the PROJECT TEAM to
communicate with each other simultaneously and instantaneously. If the
PROJECT TEAM decides to meet in person, such meetings shall be held
alternatively at the offices of MINIMED and ELAN or as otherwise agreed
by the Parties. Meetings shall be co-chaired by the chief
representatives of the Parties. At and between meetings of the PROJECT
TEAM, each Party shall keep the other fully and regularly informed as to
its progress with its respective obligations.
4.4 The Parties shall also establish a MANAGEMENT TEAM which shall consist
of a senior executive of Elan Pharmaceutical Technologies and a senior
executive of MINIMED. The MANAGEMENT TEAM shall have responsibility for
supervising the PROJECT TEAM and shall act as the liaison between the
Parties during the manufacture of the CONTINUOUS SYSTEM by MINIMED on
behalf of ELAN. Unless otherwise agreed by the Parties, the MANAGEMENT
TEAM shall meet at least bimonthly. Such meeting may be held in person
or by means of such telephone, video or other communication facilities
as permit all members of the MANAGEMENT TEAM to communicate with each
other simultaneously and instantaneously.
4.5. In the event of a dispute between the project managers of each Party on
the PROJECT TEAM, the project managers shall refer the dispute to the
MANAGEMENT TEAM , who shall discuss the matter and attempt to reach an
amicable solution. In the event that the MANAGEMENT TEAM cannot resolve
the dispute amicably, the said officers shall refer the dispute to the
Chairmen of ELAN and MINIMED who shall discuss the matter and attempt to
reach an amicable solution. The provisions of this Clause 4.5. shall be
without prejudice to the Parties' other rights and remedies.
4.6. The Chief Executive Officers of ELAN and MINIMED shall, if they are
unable to resolve a dispute or difference when it is referred to them
under Clause 4.5, refer the matter to an independent expert who is
knowledgeable of the medical device/drug delivery industry (the
"Expert"). The Expert shall be selected by the Chairmen. The Expert
shall be selected having regard to his suitability to determine the
particular dispute or difference on which he is being requested to
determine. Unless otherwise agreed between the Chief Executive Officers,
the following rules shall apply to the appointment of the Expert. The
fees of the Expert shall be shared equally between the Parties in
dispute. The Expert shall be entitled to inspect and examine all
documentation and any other material which he may
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consider to be relevant to the dispute. He shall afford each Party a
reasonable opportunity (in writing or orally) of stating reasons in
support of such contentions as each Party may wish to make relative to
the matters under consideration. The Expert shall give notice in writing
of his determination to the Parties within such time as may be
stipulated in his terms of appointment or in the absence of such
stipulation as soon as practicable. The Parties shall request that the
Expert in any event complete and deliver his findings within four (4)
weeks from the reference of the dispute or difference to him. Any
determination by the Expert of a dispute or difference shall not be
final and binding on the Parties.
4.7. The PROJECT TEAM and MANAGEMENT TEAM shall not have the authority to
amend or vary any of the terms of this Agreement unless in accordance
with the provisions of Clause 16.8.
CLAUSE 5 - TECHNOLOGY TRANSFER
5.1. The PROJECT TEAM shall submit a formal technology transfer procedure for
approval by the MANAGEMENT COMMITTEE before 1st August 1999 which shall
provide for completion of Section I of the technology transfer by * .
This procedure will formally state the responsibilities and duties of
each Party during the transfer process and shall be divided into two
sections:
5.1.1 Section I of the Technology Transfer
This section of the technology transfer shall contain a plan to
provide that the FACILITY has the capacity, on or before * , to
manufacture in routine production a minimum capacity of * units
of the CONTINUOUS SYSTEM per calendar month ;
5.1.2 Section II of the Technology Transfer
This section of the technology transfer shall contain (i) plans
for the establishment of a semi automated / improved manual
production line; and (ii) plans for the establishment of a fully
automated production line at the FACILITY.
This procedure should include the principles of cGMP and current
industry practise as it relates to "process transfer" and validation.
This procedure will be supplemented by technical agreements and all
appropriate documents and practises to ensure an effective and orderly
transfer of the ELAN KNOW-HOW to MINIMED.
5.2 As soon as possible following the execution of this Agreement, ELAN
shall provide to MINIMED, unless it has already done so prior to the
execution of this Agreement, a
- --------
* Confidential portion omitted and filed separately with the Commission
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package of information regarding the CONTINUOUS SYSTEM. The foregoing
data shall include, but shall not be limited to:- engineering and
processing plans and drawings for the CONTINUOUS SYSTEM, the CONTINUOUS
SYSTEM SPECIFICATIONS, design data for tooling, vendor information
design data for test fixtures and a copy of the test software.
5.3 As soon as possible following the execution of this Agreement and at a
mutually convenient date, unless it has already done so prior to the
execution of this Agreement, ELAN shall receive MINIMED's technical
staff in its premises to observe ELAN in the working up and use of the
ELAN KNOW-HOW to manufacture the CONTINUOUS SYSTEM.
5.4. For the period commencing on the EFFECTIVE DATE and expiring on * , ELAN
shall provide, without charge, reasonable technical support and
assistance to MINIMED in connection with implementing the transfer of
the ELAN KNOW-HOW to MINIMED, provided however, that such support and
assistance shall be limited to making employees of ELAN, in such number
as is mutually agreed upon by ELAN and MINIMED, available to MINIMED at
mutually agreeable times and places during normal business hours. Except
for the costs associated with making available such employees to
MINIMED, ELAN shall not be required to incur any additional expenditure
in connection with the transfer of the ELAN KNOW-HOW to MINIMED. During
such period up to 31st March 2000, ELAN shall continue to work on
improving the ability to manufacture the CONTINUOUS SYSTEM on a fully
automated production line, provided however, that the amount of
expenditure, whether internal or external, to be incurred by ELAN in
performing such work shall be within the sole discretion of ELAN. The
PROJECT TEAM shall establish the extent, if any, to which ELAN shall
provide further technical support and assistance to MINIMED as and from
* . In the event that ELAN provides such additional services, ELAN's
charges for this work shall be on the basis set out in Clause 10.2.
5.5. MINIMED shall be responsible, at its expense, for all activities
associated with preparing
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* Confidential portion omitted and filed separately with the Commission
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the FACILITY for the manufacture of the CONTINUOUS SYSTEM, ordering,
installing and validating the EQUIPMENT, and locating and approving
suppliers for the MATERIALS. Consistent with Clause 5.4, ELAN shall
reasonably cooperate with MINIMED in connection with such activities.
5.6. MINIMED and ELAN hereby confirm that each shall undertake its respective
part of the PROJECT as a collaborative effort and that the provisions of
this Agreement requires that each Party diligently carries out those
tasks assigned to it under the PROJECT and as otherwise agreed during
the course of the PROJECT. Each Party shall co-operate with the other in
good faith particularly with respect to unknown problems or
contingencies and shall perform its obligations in good faith and in a
commercially reasonable, diligent and workmanlike manner.
CLAUSE 6 - FACILITY, EQUIPMENT & MATERIALS
6.1 MINIMED shall be responsible at its sole expense, for furnishing all
operations, labour, supervision, equipment, tools, machinery, MATERIALS
and facilities necessary to manufacture and package the CONTINUOUS
SYSTEM at the FACILITY in accordance with the CONTINUOUS SYSTEM
SPECIFICATIONS, PACKAGING SPECIFICATIONS and REGULATORY APPROVALS
including but not limited to:
6.1.1. designing, ordering, installing and validating all equipment,
machinery and tooling necessary to establish the manual and
fully automated production lines for the manufacture of the
CONTINUOUS SYSTEM, subject to and in accordance with Clauses 6.2
and 6.3;
6.1.2. qualifying, ordering, receiving, approving and storing, in
suitable facilities free from contamination, all of the
MATERIALS which are necessary to manufacture the CONTINUOUS
SYSTEM;
6.1.3. qualifying, ordering, receiving, approving and storing, in
suitable facilities free from contamination, all of the
packaging materials required for the packaging of the CONTINUOUS
SYSTEM;
6.1.4. maintaining all manufacturing and quality systems, procedures
and records in accordance with cGMP and cGLP and the REGULATORY
APPROVALS;
6.1.5. analysing for quality control, storing and packaging the
CONTINUOUS SYSTEM in accordance with the PACKAGING
SPECIFICATIONS; and
6.1.6. handling, storing and treating and/or disposing of any WASTE
generated in connection with the services provided by MINIMED to
ELAN pursuant
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<PAGE> 23
to this Agreement.
For the avoidance of doubt, all equipment, machinery and tooling which
is furnished by MINIMED at its sole expense pursuant to this Clause 6
shall be the property of MINIMED.
6.2 MINIMED undertakes that it shall exercise all commercially reasonable
efforts to establish and validate, on or before the PRODUCTION
COMMENCEMENT DATE, a manual production line at the FACILITY which has
the capacity to manufacture in routine production a minimum of * units
of the CONTINUOUS SYSTEM per calendar month which are in accordance with
the CONTINUOUS SYSTEM SPECIFICATIONS. Thereafter, MINIMED undertakes
that it shall exercise commercially reasonable efforts to enable
production capacities at the levels and in accordance with the schedule
set forth below:
Months From
PRODUCTION COMMENCEMENT DATE Units per Month
* *
* *
Confidential portion omitted and filed separately with the Commission.
6.3 MINIMED undertakes that it shall * to establish and validate a fully
automated production line at the FACILITY to enable production
capacities of the CONTINUOUS SYSTEM in accordance with the CONTINUOUS
SYSTEM SPECIFICATIONS at the levels and in accordance with the schedule
set forth below:
<TABLE>
<CAPTION>
Months From Completion of
Section II of Technology Transfer Units per Month
--------------------------------- ---------------
<S> <C>
* *
* *
* *
</TABLE>
The PROJECT TEAM shall agree upon a date for completion of Section II of
the technology transfer. Such validation of the fully automated
production line shall be performed in accordance with the instructions
of the PROJECT TEAM. MINIMED shall construct the fully automated
production line for the
- --------
* Confidential portion omitted and filed separately with the Commission
Page 23 of 47
<PAGE> 24
CONTINUOUS SYSTEM in a cost efficient manner which will allow such
production line to be expanded to satisfy, in a commercially reasonable
fashion, any increased capacity requirements for the CONTINUOUS SYSTEM.
Notwithstanding anything to the contrary contained herein, it is
acknowledged and agreed that production of a new medical device
technology and the technology transfer contemplated by Clause 5 of this
Agreement each involve inherent risks in terms of outcomes and timing,
and the obligation of MINIMED hereunder shall be expressly limited to a
covenant to exercise commercially reasonable efforts in connection
therewith. Pursuant to Clause 2.1.2.(1), until such time MIMIMED has
established the fully automated production line in accordance with this
paragraph, ELAN shall be free to manufacture such amounts of the
CONTINUOUS SYSTEM as may be required by ELAN or its LICENSEES in excess
of the amount which MINIMED has the capacity to manufacture and supply
to ELAN.
6.4 MINIMED shall regularly consult with ELAN at meetings of the PROJECT
TEAM and MANAGEMENT TEAM and otherwise, regarding all activities being
undertaken by MINIMED in preparation for the manufacture and packaging
of the CONTINUOUS SYSTEM pursuant to this Agreement including
establishing the manual and fully automated production lines and
identifying vendors for the MATERIALS. When reasonably requested,
MINIMED shall furnish ELAN with a report outlining the status of such
activities including but not limited to the projected completion dates
for the manual and fully automated production lines. MINIMED shall also
permit ELAN, or the ELAN members of the PROJECT TEAM, at mutually
agreeable times and intervals and at ELAN's sole cost and expense, to
attend at the FACILITY to observe the establishment of the manual and
fully automated production lines.
6.5 MINIMED shall be responsible for, and shall ensure that, all of the
suppliers of equipment, tools, machinery and MATERIALS shall hold all
necessary licenses and registrations appropriate and necessary for the
inclusion of such MATERIALS in the CONTINUOUS SYSTEM. MINIMED shall keep
ELAN fully informed of the identity of such suppliers, which information
shall be deemed to be confidential information hereunder for the TERM of
this Agreement and shall not be disclosed by ELAN to its LICENSEES or
other third parties except as is required in order to obtain any DEVICE
REGULATORY APPROVALS or by any laws, rules or regulations. MINIMED shall
be liable to ELAN for any defective MATERIALS which may be included in
the CONTINUOUS SYSTEM.
6.6 MINIMED warrants that it shall only use equipment, tools, machinery and
MATERIALS in the manufacture of the CONTINUOUS SYSTEM which are in
accordance with the CONTINUOUS SYSTEM SPECIFICATIONS and PACKAGING
SPECIFICATIONS for the CONTINUOUS SYSTEM and all applicable laws, rules
and regulations.
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<PAGE> 25
6.7. In the event that any MATERIALS are required by ELAN in connection with
the development and commercialisation of the CONTINUOUS SYSTEM and/or
the BASAL AND BOLUS SYSTEM, MINIMED acknowledges that it shall sell such
MATERIALS directly to ELAN, to the extent MINIMED has such MATERIALS in
inventory. Such MATERIALS shall be charged by MINIMED to ELAN at cost,
plus any direct or indirect costs reasonably incurred in MINIMED's
procurement of such MATERIALS.
CLAUSE 7 - REGISTRATION OF THE FACILITY AND CONTINUOUS SYSTEM
7.1 ELAN and its LICENSEES shall be responsible, at their expense, for
filing and maintaining all DEVICE REGULATORY APPLICATIONS and DEVICE
REGULATORY APPROVALS for the CONTINUOUS SYSTEM. MINIMED shall provide
all reasonable assistance to, and shall co-operate with, ELAN and its
LICENSEES in filing and maintaining all DEVICE REGULATORY APPLICATIONS
and DEVICE REGULATORY APPROVALS for the CONTINUOUS SYSTEM including
providing any data or other information concerning the manufacture and
packaging of the CONTINUOUS SYSTEM which is available to MINIMED.
7.2 MINIMED shall be responsible, at its expense, for filing and maintaining
all licenses and registrations necessary for the manufacture and
packaging of the CONTINUOUS SYSTEM at the FACILITY. MINIMED shall
procure that ELAN and its LICENSEES shall have the right to refer free
of charge to any licenses and registrations of MINIMED (other than the
associated direct costs of ELAN and its LICENSEES) as may be necessary
for the purpose of obtaining REGULATORY APPROVALS from time to time.
7.3 MINIMED shall permit RHAs to inspect the FACILITY where the CONTINUOUS
SYSTEM are manufactured, packaged or stored to the extent required by
any laws, rules or regulations in order to secure any DEVICE REGULATORY
APPROVALS for the CONTINUOUS SYSTEM. If any RHA conducts or gives notice
to MINIMED of its intent to conduct an inspection at the FACILITY or
take any regulatory action with respect to the CONTINUOUS SYSTEM,
MINIMED will promptly give notice thereof to ELAN. ELAN acknowledges
that ELAN may not direct the manner in which MINIMED fulfils its
obligations to permit inspection by RHAs. MINIMED shall provide ELAN
with copies of any documentation resulting from such audit with no
deletions within 5 days after receipt to the extent such documentation
relates to the CONTINUOUS SYSTEM.
7.4 MINIMED shall only conduct such technical analysis, studies or tests on
the CONTINUOUS SYSTEM as is reasonably necessary for the purpose of
MINIMED fulfilling its obligations under this Agreement.
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<PAGE> 26
CLAUSE 8 - MANUFACTURE AND SUPPLY OF THE CONTINUOUS SYSTEM
8.1 Save as otherwise provided in this Agreement and in particular Clause
2.1.2, MINIMED shall be the sole and exclusive manufacturer and supplier
of the CONTINUOUS SYSTEM to ELAN in the TERRITORY and ELAN will purchase
the CONTINUOUS SYSTEM exclusively from MINIMED in the TERRITORY.
8.2 The CONTINUOUS SYSTEM shall be supplied to ELAN by MINIMED in sterile
form encased in an outer carton in final packaged form or in other such
form as may be agreed by the Parties during the PROJECT. MINIMED shall
deliver the CONTINUOUS SYSTEM to ELAN and/or any party designated by
ELAN in proper packaging in accordance with the PACKAGING SPECIFICATIONS
so as to permit safe storage and transport and to maintain the
sterilisation of the CONTINUOUS SYSTEM.
8.3 Subject to the production capacity limitations set forth in Clause 6.2
of this Agreement, MINIMED shall deliver the CONTINUOUS SYSTEM to ELAN
within 90 days of the receipt of a firm purchase order therefor (120
days in the case of LAUNCH STOCKS). MINIMED represents and warrants that
each shipment of CONTINUOUS SYSTEM shall conform to the CONTINUOUS
SYSTEM SPECIFICATIONS. ELAN and its LICENSEES shall be entitled to rely
upon such representation and warranty without the necessity of
additional testing. Notwithstanding the foregoing, routine testing
protocols will be established and implemented as contemplated by Clause
8.7 hereof.
8.4 Prior to the commencement of commercial manufacture of the CONTINUOUS
SYSTEM, ELAN shall provide a rolling 18 months forecast for the period
beginning on the first day of the relevant calendar month. The format of
such 18 months forecasts shall be comprised of a 12 monthly forecast
together with 2 quarterly forecasts. The first calendar quarter of such
18 months forecast shall be a binding purchase commitment of ELAN. In
addition to the obligation of ELAN regarding rolling 18 month forecasts
outlined herein, ELAN shall provide MINIMED with rolling 3 years'
forecasts on 1 August of each year of this Agreement.
The PROJECT TEAM shall agree upon a minimum batch for each form of the
CONTINUOUS SYSTEM which shall be manufactured by MINIMED for ELAN
pursuant to the terms of this Agreement.
8.5. Subject to the production capacity limitations set forth in Clause 6.2
of this Agreement. MINIMED warrants that during the term of this
Agreement, MINIMED shall provide and/or maintain sufficient capacity at
the FACILITY to be able supply ELAN with such amounts of the CONTINUOUS
SYSTEM as may be forecasted by ELAN for the first calendar quarter of
each rolling 18 month forecast which is provided by ELAN pursuant to the
terms of Clause 8.4. MINIMED will use commercially reasonable efforts to
fulfil ELAN's requirements in excess of such forecasted amounts, but
shall not be obliged to meet such requirements if it is not
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<PAGE> 27
reasonably practicable to do so provided that MINIMED shall supply the
CONTINUOUS SYSTEM so ordered but not immediately available as soon
thereafter as reasonably practicable.
Subject to the agreement of the PROJECT TEAM, the calendar quarterly
forecasts (other than for LAUNCH STOCKS) shall not increase or decrease
from one quarter to the next by more than 25% in terms of volume of the
CONTINUOUS SYSTEM ordered. Notwithstanding the foregoing, MINIMED will
use its reasonable efforts to fulfil ELAN's requirements in excess of
forecasted amounts, but shall not be obliged to meet such requirements
if it is not reasonably practicable to do so provided that MINIMED shall
supply the units of CONTINUOUS SYSTEM so ordered but not immediately
available as soon thereafter as reasonably practicable.
8.6 Save as otherwise agreed between the Parties, delivery of consignments
of CONTINUOUS SYSTEM shall be effected to ELAN or ELAN's designee by
MINIMED EX-WORKS the FACILITY. Risk of loss of or damage to any
consignment of the CONTINUOUS SYSTEM shall pass to ELAN or it's designee
when each such consignment of the CONTINUOUS SYSTEM is loaded onto the
vehicle of ELAN or ELAN's designee's agent on which it is to be
despatched from the FACILITY. ELAN or it's designee shall fully insure
or procure the insurance of all consignments of the CONTINUOUS SYSTEM
from the time when risk passes as aforesaid and shall produce the
supporting insurance when requested by MINIMED.
8.7 All claims for failure of any delivery of the CONTINUOUS SYSTEM to
conform in all material respects to CONTINUOUS SYSTEM SPECIFICATIONS
under Clause 8 shall be made by ELAN to MINIMED in writing as soon as
possible but in any event within 45 days following delivery except in
the case of latent defects. Claims for latent defects, which could not
have been reasonably discovered during the routine testing protocol (to
be agreed by ELAN and MINIMED), shall be made by ELAN to MINIMED in
writing as soon as possible but in any event within 60 days of
discovery. Failure to make timely claims in the manner prescribed shall
constitute acceptance of the delivery. Where possible, ELAN shall return
the defective CONTINUOUS SYSTEM to MINIMED, in such amount as is agreed
by the parties, in support of any claim pursuant to this Clause 8.7.
8.8. MINIMED represents and warrants that each shipment of CONTINUOUS SYSTEM
shall comply with the CONTINUOUS SYSTEM SPECIFICATIONS. In the event of
a failure to comply with the CONTINUOUS SYSTEM SPECIFICATIONS, MINIMED
shall bear sole responsibility for all direct costs reasonably incurred
by ELAN or ELAN's LICENSEES in relation to any testing, handling,
processing, packaging, destruction or return of the defective CONTINUOUS
SYSTEM including any WASTE.
8.9 Any CONTINUOUS SYSTEM which has been delivered and which has been shown
within the period designated in Clause 8.7 not to conform to the
CONTINUOUS
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<PAGE> 28
SYSTEM SPECIFICATIONS, shall be replaced at MINIMED's cost within 90
days of the receipt of notice thereof by MINIMED of the failed
CONTINUOUS SYSTEM, provided that such failure is the responsibility of
MINIMED pursuant to Clause 8.8.
8.10 In the event of an unresolved dispute as to conformity of the CONTINUOUS
SYSTEM with CONTINUOUS SYSTEM SPECIFICATIONS, the Parties shall within
30 days appoint an independent first class laboratory to undertake the
relevant testing and its findings shall be conclusive and binding upon
the Parties. All costs relating to this process shall be borne solely by
the unsuccessful Party.
8.11 The Parties shall negotiate in good faith to conclude a detailed
technical agreement(s) regulating the Parties' respective obligations
from a technical and quality perspective for the supply of the
CONTINUOUS SYSTEM by MINIMED to ELAN or ELAN's LICENSEES.
8.12. Subject to Section 16.6 hereof, in the event that (i) MINIMED fails to
supply a shipment of the CONTINUOUS SYSTEM which has been ordered by
ELAN for a period exceeding * days from the receipt of a firm purchase
order or (ii) there are delays in filling each of * successive orders
which delays cumulatively exceed * days when each delay is measured
beginning on the * day from receipt of the corresponding firm purchase
order or (iii) there is a shortfall * successive orders delivered by
MINIMED which on a cumulative basis, exceeds * % of the total amount of
said * orders, then MINIMED shall promptly notify ELAN in writing of the
cause of the failure, delay or shortfall in supply of the CONTINUOUS
SYSTEM. If MINIMED has not remedied the failure, delay or shortfall
within a period of * days of such notice, ELAN shall for so long as such
conditions exist, be entitled to at ELAN's option to either suspend
MINIMED's appointment as an exclusive manufacturer pursuant to Clause
2.1. and ELAN may manufacture itself or appoint an alternative
manufacturer of the CONTINUOUS SYSTEM. In such event MINIMED shall
without charge:
8.12.1. provide ELAN (or ELAN's designee) with any technical data
necessary for the carrying of this into effect, which
information or data shall be deemed to be confidential
information hereunder. To this end, MINIMED shall impart to ELAN
the documentation constituting the required material support,
more particularly practical performance advice, shop practice,
specifications as to materials to be used and control methods;
and
8.12.2. assist ELAN for the working up and use of the ELAN BACKGROUND
TECHNOLOGY and ELAN IMPROVEMENTS, the machinery tools and
equipment necessary to manufacture the
- --------
* Confidential portion omitted and filed separately with the Commission
Page 28 of 47
<PAGE> 29
CONTINUOUS SYSTEM as well as for the training of ELAN's
personnel. For this purpose, MINIMED shall receive ELAN's
scientific staff in its premises for periods the term of which
shall be decided by common consent.
In the event of such a transfer of manufacture the parties shall agree
on a reasonable period of time within which said transfer is to be made
and MINIMED shall continue to supply ELAN with the CONTINUOUS SYSTEM
until such transfer is fully effected so that ELAN's supply of the
CONTINUOUS SYSTEM shall be continuous and uninterrupted until ELAN or
ELAN's designee receives all necessary regulatory approvals.
When MINIMED has remedied the situation that prevented MINIMED from
satisfying ELAN's requirements and is once again able to fulfil its
obligations to supply the CONTINUOUS SYSTEM as provided for in this
Agreement, ELAN shall cease manufacturing the CONTINUOUS SYSTEM or
purchasing the CONTINUOUS SYSTEM from an alternative manufacturer and
shall resume purchasing the CONTINUOUS SYSTEM from MINIMED pursuant to
the terms of this Agreement; provided that
(i) in the event that ELAN is manufacturing the CONTINUOUS SYSTEM
itself, ELAN shall be entitled to continue manufacturing the
CONTINUOUS SYSTEM for the period necessary so as to enable ELAN
to recoup those costs expended by ELAN in establishing its
manufacturing capability for the CONTINUOUS SYSTEM plus * %.
(ii) in the event that ELAN has appointed an alternative manufacturer
of the CONTINUOUS SYSTEM, ELAN shall be entitled to purchase the
CONTINUOUS SYSTEM from such alternative manufacturer for so long
as ELAN has contracted to purchase the CONTINUOUS SYSTEM from
such party. ELAN shall use reasonable endeavours to limit the
term of such appointment of a third party as an alternative
manufacturer of the CONTINUOUS SYSTEM.
In the event that at any stage of this Agreement, MINIMED is unable to
manufacture the CONTINUOUS SYSTEM for a continuous period in excess of 6
months, ELAN shall be entitled to terminate this Agreement in accordance
with the provisions of Clause 13.
8.13 In the event of any failure, inability or delay by MINIMED in supplying
the CONTINUOUS SYSTEM pursuant to this Agreement (and notwithstanding
that ELAN may have suspended or terminated MINIMED's appointment as the
exclusive manufacturer of the CONTINUOUS SYSTEM in accordance with
Clause 8.12) MINIMED shall be liable to ELAN and ELAN's LICENSEES in
damages for the direct
- --------
* Confidential portion omitted and filed separately with the Commission
Page 29 of 47
<PAGE> 30
losses sustained as a result of any such failure, inability or delay in
supplying CONTINUOUS SYSTEM; provided, however, that MINIMED shall not
be liable to ELAN and ELAN's LICENSEES for any such losses if the
failure, inability or delay in supplying CONTINUOUS SYSTEM is the result
of an event of force majeure pursuant to Clause 16.6 of this Agreement.
8.14. In the event of any shortfall or delay in the manufacture or supply of
the CONTINUOUS SYSTEM by MINIMED, MINIMED shall treat all outstanding
orders for the CONTINUOUS SYSTEM in a pro rata and equitable manner. In
no event shall MINIMIED favour itself or any of its AFFILIATES or
permitted sub-licensees in fulfilling any orders which may be
outstanding for the CONTINUOUS SYSTEM.
8.15 Notwithstanding the foregoing provisions, the Parties recognise that the
CONTINUOUS SYSTEM shall be supplied by ELAN to ELAN's LICENSEES for
commercial sale in the TERRITORY. Accordingly, in the event that the
above provisions are not agreeable to such LICENSEES, ELAN and MINIMED
undertake to enter into negotiations in good faith to discuss
appropriate amendments to the provisions of Clause 9.
CLAUSE 9 - CHANGE IN SPECIFICATIONS / MANUFACTURING PROCESS
9.1. MINIMED shall not amend or change:
(i) the CONTINUOUS SYSTEM SPECIFICATIONS, PACKAGING SPECIFICATIONS,
or
(ii) the manufacturing and/or packaging procedures for the CONTINUOUS
SYSTEM in any way which would affect the design, form, fit,
function or safety of the CONTINUOUS SYSTEM,
unless such amendment or change has been approved in advance in writing
by ELAN, which approval shall not unreasonably be withheld. Any other
changes shall be communicated by MINIMED to ELAN in writing on a
quarterly basis.
9.2. ELAN shall be entitled at any time during the term of this Agreement to
amend or change the CONTINUOUS SYSTEM SPECIFICATIONS and/or the
PACKAGING SPECIFICATIONS to accommodate the requests of ELAN's LICENSEES
for the CONTINUOUS SYSTEM and MINIMED shall be obliged to comply with
any such amendments or changes. ELAN shall consult with MINIMED in
advance of any such amendments or changes. In such event, MINIMED shall
be entitled to a change in the price of such model for CONTINUOUS
SYSTEM, and ELAN shall reimburse MINIMED for any resultant WASTE in
inventory resulting therefrom to the extent that such inventory was
specifically required and ordered by MINIMED in accordance with
forecasts furnished by ELAN pursuant to Clause 8. Subject to ELAN's
commitment to commercialise the CONTINUOUS SYSTEM,
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<PAGE> 31
ELAN shall use all reasonable efforts in its dealing with LICENSEES to
minimise any material changes to the CONTINUOUS SYSTEM SPECIFICATIONS
and PACKAGING SPECIFICATIONS. MINIMED shall not be required to make any
such amendment or changes to the extent they require a material capital
expenditure by MINIMED as determined by the PROJECT TEAM. In the event
such a modification is agreed upon by MINIMED and effected hereunder,
MINIMED may increase the price of the CONTINUOUS SYSTEM by an
incremental amount that will amortize said capital cost over the
remaining orders for the CONTINUOUS SYSTEM, as modified. In the event
that such a modification is not agreed upon by MINIMED, ELAN shall have
the option, at its sole discretion, to
(i) appoint an alternative manufacturer of the CONTINUOUS SYSTEM
which contains such amendments or changes solely for such
LICENSEES which request such modifications, and Clause 2.1 of
the Agreement shall be amended accordingly; or
(ii) to discharge itself or through its LICENSEES, such material
capital charge, on terms to be agreed in good faith, and in such
event, MINIMED shall be obliged to comply with any such
amendment or change to the CONTINUOUS SYSTEM SPECIFICATIONS
and/or the PACKAGING SPECIFICATIONS.
9.3. Any change or amendment pursuant to this Clause 9 in the CONTINUOUS
SYSTEM SPECIFICATIONS and/or the PACKAGING SPECIFICATIONS of the
CONTINUOUS SYSTEM which is to be commercialised by MINIMED pursuant to
the LICENSE AGREEMENT shall require MINIMED's prior consent, which shall
not be unreasonably withheld or delayed.
CLAUSE 10 - FINANCIAL PROVISIONS
10.1 LICENCE ROYALTIES:
10.1.1 In consideration of the licence of the ELAN PATENTS granted to
MINIMED under this Agreement, MINIMED shall pay to ELAN the
non-refundable amounts as set forth in Schedule 5.
Each of the milestone payments which are payable by MINIMED to
ELAN pursuant to this Section shall be paid by MINIMED to ELAN
within 30 days of the achievement of the relevant milestone.
10.2 DEVELOPMENT ROYALTIES:
10.2.1. In the event that work or technical assistance beyond that
provided for in Clause 5.4 ("Additional Work") is requested by
MINIMED, MINIMED shall
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<PAGE> 32
reimburse ELAN in respect of the cost of such Additional Work
requested by MINIMED or required pursuant to the terms of this
Agreement provided that:-
(i) ELAN's charges for such work shall be ELAN's TECHNOLOGY
SUPPORT COST plus * %; and
(ii) payment for all Additional Work carried out by ELAN
hereunder shall be invoiced by ELAN to MINIMED at the
end of each calendar quarter. Payment shall be effected
in US Dollars within 30 days of the date of receipt of
the relevant invoice.
10.2.2 In the event that ELAN requests MINIMED in writing to perform
work or provide technical assistance on modifying the CONTINUOUS
SYSTEM for manufacture on an automated production line, and
MINIMED is agreeable to performing such work or providing such
assistance, the Parties shall agree upon a detailed plan and
budget in advance of MINIMED commencing such work or assistance.
ELAN shall reimburse MINIMED in respect of the cost of such work
or assistance requested by ELAN at MINIMED's TECHNOLOGY SUPPORT
COST plus * %. Such amounts shall be invoiced by MINIMED to ELAN
at the end of each calendar quarter. Payment shall be effected
in US Dollars within 30 days of the date of receipt of the
relevant invoice.
10.3 PRICE OF CONTINUOUS SYSTEM:
10.3.1. The price of the CONTINUOUS SYSTEM to be charged by MINIMED to
ELAN shall be as set forth in Schedule 5.
10.3.2 At the end of each quarter, MINIMED shall retrospectively
determine the exact amount of MANUFACTURING COST for the
preceding calendar quarter month period and provide supporting
details and evidence to ELAN and if necessary, there shall be a
payment either by MINIMED to ELAN or by ELAN to MINIMED to
adjust to such exact MANUFACTURING COST.
10.3.3. Payment for all CONTINUOUS SYSTEM delivered from the FACILITY to
ELAN shall be effected in U.S. Dollars ($) within 30 days of the
date of the delivery of the CONTINUOUS SYSTEM EX WORKS the
FACILITY.
CLAUSE 11 - PAYMENTS, REPORTS AND AUDITS
11.1 MINIMED shall keep true and accurate records of the MANUFACTURING COST
including but not limited all costs included in calculating the
MANUFACTURING COST
- --------
* Confidential portion omitted and filed separately with the Commission
Page 32 of 47
<PAGE> 33
and the methods used in calculating such costs. MINIMED shall deliver to
ELAN a written statement ("the STATEMENT") thereof within 30 days
following the end of each calendar quarter, (or any part thereof in the
first or last calendar quarter of this Agreement) for such calendar
quarter. The STATEMENT shall outline in detail the MANUFACTURING COST
during that calendar quarter. The Parties' financial officers shall
agree upon the precise format of the STATEMENT.
11.2 Any income or other taxes which either Party is required by law to pay
or withhold on behalf of the other Party with respect any monies payable
to such Party under this Agreement shall be deducted from the amount of
such monies due. The paying Party shall furnish the receiving Party with
proof of such payments. Any such tax required to be paid or withheld
shall be an expense of and borne solely by the receiving Party. The
paying Party shall promptly provide the receiving Party with a
certificate or other documentary evidence, if available, to enable the
receiving Party to support a claim for a refund or a foreign tax credit
with respect to any such tax so withheld or deducted by the paying
Party. The Parties will reasonably cooperate in completing and filing
documents required under the provisions of any applicable tax treaty or
under any other applicable law, in order to enable the paying Party to
make such payments to the receiving Party without any deduction or
withholding.
11.3 All payments due hereunder shall be made to the designated bank account
of the receiving Party in accordance with such timely written
instructions as the receiving Party shall from time to time provide.
11.4 The paying Party shall pay interest to the receiving Party at the Prime
Rate publicly announced by Morgan Guaranty Trust Company of New York at
its principal office on the date (or next to occur business day, if such
date is not a business day) on which payment should have been made
pursuant to the applicable provisions of this Agreement plus 5%, or to
the extent permissible by law, on all late payments under this Agreement
applicable from the date on which payment should have been made pursuant
to the applicable provisions of this Agreement until the date of
payment.
11.5 For the 180 day period following the close of each calendar year of the
Agreement, MINIMED and ELAN will, in the event that the other Party
reasonably requests such access, provide each other's independent
certified accountants (reasonably acceptable to the other Party) with
access, during regular business hours and subject to the confidentiality
provisions as contained in this Agreement, to such Party's books and
records relating to the CONTINUOUS SYSTEM, solely for the purpose of
verifying the accuracy and reasonable composition of the calculations
hereunder for the calendar year then ended.
11.6 In the event of a discovery of a discrepancy which exceeds 5% of the
amount due or charged by a Party for any period, the cost of such
accountants shall be borne by the audited Party; otherwise, such cost
shall be borne by the auditing
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<PAGE> 34
Party.
11.7 MINIMED shall make (and where relevant shall procure that MINIMED's
subcontractor shall make) that portion of the FACILITY where the
CONTINUOUS SYSTEM is manufactured, tested or stored, including all
record and reference samples relating to the CONTINUOUS SYSTEM available
for inspection by ELAN, ELAN's LICENSEES or by the relevant governmental
or regulatory authority. The investigation shall be limited to
determining whether there is compliance with cGMP and other requirements
of applicable law.
CLAUSE 12 - DURATION AND TERMINATION
12.1 This Agreement shall be deemed to have come into force on the EFFECTIVE
DATE and, subject to the rights of termination outlined in this Clause
12 will expire on the 12th anniversary of the date of the first launch
of the CONTINUOUS SYSTEM in the TERRITORY ("the INITIAL PERIOD").
12.2 At the end of the TERM, the Agreement shall continue automatically for
rolling 2 year periods thereafter, unless the Agreement has been
terminated by either of the Parties by serving 2 years' written notice
on the other 2 years immediately prior to the end of the INITIAL PERIOD
or any additional 2 year period provided for herein.
12.3 In addition to the rights of termination provided for elsewhere in this
Agreement, either Party will be entitled forthwith to terminate this
Agreement by written notice to the other Party if:
12.3.1 that other Party commits any material breach of any of the
provisions of this Agreement, and in the case of a breach
capable of remedy, fails to remedy the same within 90 days after
receipt of a written notice giving full particulars of the
material breach and requiring it to be remedied;
12.3.2 that other Party goes into liquidation (except for the purposes
of amalgamation or reconstruction and in such manner that the
company resulting therefrom effectively agrees to be bound by or
assume the obligations imposed on that other Party under this
Agreement);
12.3.3 an encumbrancer takes possession or a receiver is appointed over
any of the property or assets of that other Party;
12.3.4 any proceedings are filed or commenced by that other Party under
bankruptcy, insolvency or debtor relief laws or anything
analogous to any of the foregoing under the laws of any
jurisdiction occurs in relation to that other Party;
12.4 For the purposes of Clause 12.3.1, a breach will be considered capable
of
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<PAGE> 35
remedy if the Party in breach can comply with the provision in question
in all respects other than as to the time of performance (provided that
time of performance is not of the essence).
12.5 In further addition to the rights and termination provided for elsewhere
in this Agreement, ELAN shall be entitled to terminate this Agreement at
any stage without notice in the event that:-
12.5.1 any applicable RHA, state or local regulatory approvals, laws,
ordinances or regulations, present or future, for the FACILITY
are amended, suspended or revoked, and as a result, the FACILITY
ceases to be suitable for the manufacture and packaging of the
CONTINUOUS SYSTEM and same is not cured within 90 days of such
event. In the event of any dispute between the Parties as to the
suitability of the FACILITY as a result of any such amendment,
suspension or revocation, the Parties shall refer the matter an
Expert in accordance with Clause 4.6;
12.5.2. MINIMED fails to establish and validate in so far as is
reasonably possible to "approvable" regulatory status in the US,
the manual and fully automated production lines for the
manufacture of the CONTINUOUS SYSTEM within * months of the
dates designated in Clauses 6.2. and 6.3 respectively;
12.5.3 the LICENCE AGREEMENT is terminated by ELAN in accordance with
the terms set out therein; or
12.5.4 a TECHNOLOGICAL COMPETITOR of a Party or a company with a
directly competing product acquires * % or more of the other
Party's voting stock or where * % or more of such company's
voting stock is acquired by a Party hereto.
CLAUSE 13 - CONSEQUENCES OF TERMINATION
13.1 Upon exercise of those rights of termination specified in Clauses 12 or
elsewhere in this Agreement, this Agreement shall, subject to the
provisions of the Agreement which survive the termination of the
Agreement, automatically terminate forthwith and be of no further legal
force or effect.
13.2 Upon termination of the Agreement by either Party, the following shall
be the consequences:-
13.2.1 any sums that were due from one Party to the other Party under
the
- --------
* Confidential portion omitted and filed separately with the Commission
Page 35 of 47
<PAGE> 36
provisions of this Agreement prior to the exercise of the right
to terminate this Agreement as set forth herein shall be paid in
full within 30 days of termination of this Agreement and such
receiving Party shall not be liable to repay to the paying Party
any amount of money paid or payable by such paying Party to the
receiving Party up to the date of the termination of this
Agreement;
13.2.2 all confidentiality provisions set out herein shall remain in
full force and effect for a period of * years from the date of
termination of this Agreement;
13.2.3. all documents or data containing ELAN KNOW-HOW or confidential
information of ELAN including any electronic file, note,
extract, analysis or any other way of representing or recording
and recalling information which contains, reflects or is derived
from ELAN KNOW-HOW or confidential information, shall be
promptly returned by MINIMED to ELAN;
13.2.4 all responsibilities and warranties shall insofar as they are
appropriate remain in full force and effect;
13.2.5 the rights of inspection and audit shall continue in force for
the period referred to in the relevant provisions of this
Agreement;
13.2.6 MINIMED shall provide at MINIMED's fully allocated cost plus *
%, for a reasonable period which shall be decided by common
consent, all reasonable assistance to ELAN (or ELAN's designee)
in the working up and use of the ELAN INTELLECTUAL PROPERTY and
the specifications and plans for the tools, machinery and
equipment necessary to manufacture the CONTINUOUS SYSTEM as well
as for the training of ELAN's personnel, provided however, that
where termination is due to the default of MINIMED, such
assistance shall be provided without charge. For this purpose,
MINIMED shall receive ELAN's staff in its premises for periods
the term of which shall be decided by common consent. For the
avoidance of doubt, in no event shall Clause 13.2.2 or Clause
16.1 restrict ELAN's use of the specifications and plans for the
tools, machinery and equipment furnished pursuant to this
paragraph or any information which may have been disclosed to
ELAN pursuant to Clause 6.
CLAUSE 14 - WARRANTY AND INDEMNITY
14.1 ELAN represents and warrant to MINIMED as follows:
- --------
* Confidential portion omitted and filed separately with the Commission
Page 36 of 47
<PAGE> 37
14.1.1 ELAN is duly and validly existing in the jurisdiction of its
incorporation and each other jurisdiction in which the conduct
of its business requires such qualification (except where such
failure to so qualify shall not have a material adverse affect
on the business and assets of ELAN), and is in material
compliance with all applicable laws, rules, regulations or
orders relating to its business and assets;
14.1.2 ELAN has full corporate authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby; this Agreement has been duly executed and delivered by
ELAN and constitutes the legal and valid obligations of ELAN and
is enforceable against ELAN in accordance with its terms and the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby and will not violate or result
in a default under or creation of lien or encumbrance under
ELAN's memorandum and articles of association or any material
agreement or instrument binding upon or affecting ELAN or its
properties or assets or any applicable laws, rules, regulations
or orders affecting ELAN or its properties or assets;
14.1.3 ELAN is not in material default of its memorandum and articles
of association, any applicable material laws or regulations or
any material contract or agreement binding upon or affecting it
or its properties or assets and the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby will not result in any such violation;
14.1.4 ELAN represents and warrants that the execution of this
Agreement will not breach or in any way be inconsistent with the
terms and conditions of any licence, contract, understanding or
agreement, whether express, implied, written or oral between
ELAN and any third party.
14.2 MINIMED represents and warrants to ELAN as follows:
14.2.1 MINIMED is duly and validly existing in the jurisdiction of its
incorporation and each other jurisdiction in which the conduct
of its business requires such qualification (except where such
failure to so qualify shall not have a material adverse affect
on the business and assets of MINIMED), and is in material
compliance with all applicable laws, rules, regulations or
orders relating to its business and assets;
14.2.2 MINIMED has full corporate authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby; this Agreement has been duly executed and delivered by
MINIMED and constitutes the legal and valid obligations of
MINIMED and is enforceable
Page 37 of 47
<PAGE> 38
against MINIMED in accordance with its terms and the execution,
delivery and performance of this Agreement and the transactions
contemplated hereby and will not violate or result in a default
under or creation of lien or encumbrance under MINIMED's bylaws
and certificate of association or any material agreement or
instrument binding upon or affecting MINIMED or its properties
or assets or any applicable laws, rules, regulations or orders
affecting MINIMED or its properties or assets;
14.2.3 MINIMED is not in material default of its bylaws and certificate
of association, any applicable material laws or regulations or
any material contract or agreement binding upon or affecting it
or its properties or assets and the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby will not result in any such violation;
14.2.4 MINIMED represents and warrants that the execution of this
Agreement will not breach or in any way be inconsistent with the
terms and conditions of any licence, contract, understanding or
agreement, whether express, implied, written or oral between
MINIMED and any third party;
14.2.5 MINIMED represents and warrants that MINIMED is in material
compliance with all Environmental Law and is not subject to any
material liability under any Environmental Law with respect to
the FACILITY. For the purpose of this Agreement, "Environmental
Law" shall mean the common law and any applicable Federal, State
and local laws or regulations, codes, ordinances or rules
relating to pollution or protection of public health or the
environment, including without limitation ambient air, indoor
air, surface water, ground water, landsurface or subsurface.
14.2.6 MINIMED will maintain in effect all governmental permits,
licenses, orders, applications and approvals required of it and
make all filings and notifications required of it regarding the
manufacture of the CONTINUOUS SYSTEM and the generation,
storage, treatment, transport, distribution, possession,
handling and disposal of any WASTE;
14.2.7 MINIMED represents and warrants that MINIMED and its employees
have never been (i) debarred or (ii) convicted of a crime for
which a person can be debarred under the provisions of Section
306(a) or 306(b) of the Generic Drug Enforcement Act of 1992.
MINIMED agrees that it shall immediately notify ELAN in the
event that it becomes debarred or receives notice of action or
threat of action with respect to debarment during the terms of
this Agreement.
14.3. MINIMED further represents and warrants that, MINIMED shall manufacture
and package the CONTINUOUS SYSTEM in accordance with the
Page 38 of 47
<PAGE> 39
instructions furnished by ELAN to MINIMED, which are reasonably
acceptable to MINIMED, the REGULATORY APPLICATION and any granted
REGULATORY APPROVALS. and all applicable regulations and requirements of
the RHAs in the TERRITORY including the then cGMP regulations which
apply to the manufacture and supply of the CONTINUOUS SYSTEM.
14.4 MINIMED shall indemnify, defend and hold harmless ELAN against any and
all claims, damages, losses, liabilities, costs or expenses (including
reasonable attorney's fees) to which ELAN is or may become subject
insofar as they arise or are alleged or claimed to arise from (i) the
manufacture or packaging of the CONTINUOUS SYSTEM, but only to the
extent that such claim results from the negligent act or omission of
MINIMED or its agents or employees in the manufacture and packaging of
the CONTINUOUS SYSTEM or (ii) any breach by the MINIMED of any of its
obligations or warranties under this Agreement.
14.5 ELAN shall indemnify, defend and hold harmless MINIMED from all actions,
losses, claims, demands, damages, costs and liabilities (including
reasonable attorneys' fees) to which MINIMED is or may become liable
insofar as they arise (i) out of any breach by ELAN of any of its
obligations or warranties under this Agreement, or (ii) solely from any
claim relating to any compound (except for the COMPOUND in the LICENCE
AGREEMENT) which is delivered by the CONTINUOUS SYSTEM.
14.6 As a condition of obtaining an indemnity in the circumstances set out in
Clauses 14.4 and 14.5, the Party seeking an indemnity shall:
14.6.1 fully and promptly notify the other Party of any claim or
proceedings, or threatened claim or proceedings;
14.6.2 permit the indemnifying Party to take full control of such claim
or proceedings;
14.6.3 assist in the investigation and defence of such claim or
proceedings;
14.6.4 not compromise or otherwise settle any such claim or proceedings
without the prior written consent of the other Party, which
consent shall not be unreasonably withheld; and
14.6.5 take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceedings.
14.7 Notwithstanding anything to the contrary in this Agreement, MINIMED and
ELAN shall not be liable to the other by reason of any representation or
warranty, condition or other term or any duty of common law, or under
the express terms of this Agreement (including but in no event limited
to Clause 14.7), for any consequential or incidental or punitive loss or
damage (whether for loss of profits or otherwise) and whether occasioned
by the negligence of the respective Parties, their employees or agents
or otherwise including any
Page 39 of 47
<PAGE> 40
product recall.
14.8 Each Party shall maintain comprehensive general liability insurance,
including product liability insurance on the CONTINUOUS SYSTEM in such
prudent amount as shall be determined by the PROJECT TEAM. Each Party
shall provide the other Party with a certificate from the insurance
company verifying the above and undertakes to notify such Party directly
at least 30 days prior to the expiration or termination of such
coverage. ELAN shall ensure that its LICENSEES also maintain adequate
comprehensive general liability insurance, including product liability
insurance on any products containing the CONTINUOUS SYSTEM which such
LICENSEES market in the TERRITORY.
CLAUSE 15 - CUSTOMER COMPLAINTS AND CONTINUOUS SYSTEM RECALL
15.1 ELAN shall notify MINIMED promptly:-
15.1.1 of any complaints from third parties reported to ELAN involving
any serious and unexpected adverse device events or incident
reports resulting from the use of the CONTINUOUS SYSTEM; and
15.1.2 of any potential recall of the CONTINUOUS SYSTEM by any
governmental authority.
The PROJECT TEAM shall establish a procedure for formal customer
complaints and adverse event handling and reporting.
15.2 ELAN or its LICENSEES shall be responsible, at ELAN or its LICENSEES'
cost, for maintaining and filing any reports regarding the CONTINUOUS
SYSTEM with the RHA in any country of the TERRITORY including but not
limited to all formal adverse event handling reports, and post marketing
reports.
15.3 In the event of any recall of any of the CONTINUOUS SYSTEM, as suggested
or requested by any governmental authority:
15.3.1 ELAN or its LICENSEE shall perform the recall of such CONTINUOUS
SYSTEM in the TERRITORY and save as provided in Clause 15.3.2,
in all events the recall costs shall be borne by ELAN or its
LICENSEE.
15.3.2 If the recall arises from MINIMED's negligent acts or omissions
in manufacturing such CONTINUOUS SYSTEM, the recall costs shall
be borne by MINIMED provided that ELAN or its LICENSEES could
not have reasonably discovered the said act(s) or omission(s)
prior to the sale of such CONTINUOUS SYSTEM by following the
testing protocol to be agreed by ELAN or its LICENSEE, and
MINIMED.
Page 40 of 47
<PAGE> 41
In the event that MINIMED should bear the costs of any recall
hereunder, MINIMED shall be entitled but not obliged to take
over and perform the recall of the CONTINUOUS SYSTEM described
in Clause 15.3.1 and ELAN shall provide MINIMED at no cost with
all such reasonable assistance as may be required by MINIMED.
CLAUSE 16 - MISCELLANEOUS PROVISIONS
16.1 SECRECY:
16.1.1 Any information, whether written or oral (oral information shall
be reduced to writing within one month by the Party giving the
oral information and the written form shall be furnished to the
other Party) pertaining to the CONTINUOUS SYSTEM that has been
or will be communicated or delivered by MINIMED to ELAN, or by
ELAN to MINIMED, including, without limitation, trade secrets,
business methods, and cost, supplier, manufacturing and customer
information, shall be treated by ELAN and MINIMED, respectively,
as confidential information, disclosed to employees who are
bound by obligations of confidentiality only on a need-to-know
basis, and shall not be disclosed or revealed to any third party
whatsoever or used in any manner except as expressly provided
for herein; provided, however, that such confidential
information shall not be subject to the restrictions and
prohibitions set forth herein to the extent that such
confidential information:-
(1) is available to the public in public literature or
otherwise, or after disclosure by one Party to the other
becomes public knowledge through no default of the Party
receiving such confidential information; or
(2) was known to the Party receiving such confidential
information prior to the receipt of such confidential
information by such Party, whether received before or
after the date of this Agreement; or
(3) is obtained by the Party receiving such confidential
information from a third Party not subject to a
requirement of confidentiality with respect to such
confidential information;
or
(4) is required to be disclosed pursuant to: (A) any order
of a court having competent jurisdiction and power to
order such information to be released or made public; or
(B) any lawful action of a
Page 41 of 47
<PAGE> 42
governmental or regulatory agency provided that each
Party shall notify the other in writing of any
disclosure of information required hereunder prior to
such disclosure; or
(5) is proven by documentary evidence to have been
independently discovered, after the date of this
Agreement, by the Party receiving such confidential
information without the aid, application or use of
confidential information.
16.1.2 Each Party shall take in relation to the confidential
information of the other Party all such precautions as it
normally takes with its own confidential information to prevent
any improper disclosure of such confidential information to any
third party; provided, however, that such confidential
information may be disclosed within the limits required to
obtain any authorisation from the applicable RHA or any
governmental or regulatory agency or, with the prior written
consent of the other Party, which shall not be unreasonably
withheld, or as may otherwise be required in connection with the
purposes of this Agreement.
16.1.3.The Party receiving confidential information undertakes that any
further confidential information which may come to the knowledge
of the receiving Party as a result of any visits, inclusive of
the form, materials and design of the various elements of any
relevant plant and equipment which may be seen at such
establishments as well as the plant as a whole, the methods of
operation thereof and the various applications thereof, shall be
kept strictly confidential, and shall be deemed to be
confidential information which is protected by the terms of this
Agreement.
16.1.4 Each of the Parties agrees that it will not use, directly or
indirectly, any know-how of the other Party (MINIMED KNOW-HOW or
ELAN KNOW-HOW, as the case may be), or other confidential
information disclosed to it by the other Party or obtained by it
from the other Party pursuant to this Agreement, other than as
expressly provided herein.
16.1.5 Neither Party will publicise the existence of this Agreement in
any way without the prior written consent of the other Party
subject to the disclosure requirements of applicable laws and
regulations. In the event that either Party wishes to make an
announcement concerning the Agreement, that Party will seek the
consent of the other Party. The terms of any such announcement
shall be agreed in good faith. ELAN and MINIMED shall also
co-operate in good faith with respect to any stock exchange
filings, public announcements or filings with the United States
Securities and Exchange Commission which may be necessary upon
or following execution of this Agreement.
Page 42 of 47
<PAGE> 43
16.2 ASSIGNMENTS/ SUB-CONTRACTING:
16.2.1. This Agreement may not be assigned by either Party without the
prior written consent of the other Party, save that either Party
may assign this Agreement in whole or in part and delegate its
duties hereunder to its AFFILIATE or AFFILIATES without such
consent provided that such assignment or delegation has no
material adverse tax implications for the other Party. Each
party shall be responsible for the acts and/or omissions of its
respective AFFILIATES.
16.2.2. MINIMED shall have the right to subcontract any portion of the
manufacturing of the CONTINUOUS SYSTEM to a third party with the
prior written consent of ELAN, which consent shall not be
unreasonably withheld or delayed, save that in no event shall
MINIMED be entitled to assign or subcontract any activities to a
TECHNOLOGICAL COMPETITOR of ELAN. MINIMED shall be liable to
ELAN for all acts and omissions of any permitted sub-contractor
as though such acts and omissions were by MINIMED.
16.3 NON-SOLICITATION
Each Party agrees that, for the TERM of this Agreement and for a period
of two year after the date of termination of this Agreement, it will
not, directly or indirectly, solicit for employment any employees of the
other Party or any of its AFFILIATES who became known to it as a result
of this Agreement; provided, however, that any such solicitation shall
not be deemed a breach of this Agreement if (i) the personnel who
perform such solicitation have no knowledge of this Agreement and (ii)
none of the soliciting Party's personnel who are aware of this Agreement
have actual advance knowledge of such solicitation. The term "solicit
for employment" shall not be deemed to include general solicitations of
employment not specifically directed towards employees of a Party or any
of its AFFILIATES.
16.4 PARTIES BOUND:
This Agreement shall be binding upon and enure for the benefit of
Parties hereto, their successors and permitted assigns.
16.5 SEVERABILITY:
If any provision in this Agreement is agreed by the Parties to be, or is
deemed to be, or becomes invalid, illegal, void or unenforceable under
any law that is applicable hereto:-
16.5.1 such provision will be deemed amended to conform to applicable
laws so
Page 43 of 47
<PAGE> 44
as to be valid and enforceable or, if it cannot be so amended
without materially altering the intention of the Parties, it
will be deleted, with effect from the date of such agreement or
such earlier date as the Parties may agree; and
16.5.2 the validity, legality and enforceability of the remaining
provisions of this Agreement shall not be impaired or affected
in any way.
16.6 FORCE MAJEURE:
16.6.1. Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay
results from causes beyond its reasonable control, including,
without limitation, acts of God, fires, strikes, earthquakes,
acts of war, or intervention of a government authority,
non-availability of raw materials, but any such delay or failure
shall be remedied by such Party as soon as practicable.
16.6.2 If either Party is prevented or delayed in the performance of
any of its obligations under this Agreement by force majeure,
that Party shall forthwith serve notice in writing on the other
party specifying the nature and extent of the circumstances
giving rise to force majeure, and shall subject to service of
such notice and to Clause 16.6.4 have no liability in respect of
the performance of such of its obligations as are prevented by
the force majeure events during the continuation of such events,
and for such time after they cease as is necessary for that
Party, using all reasonable endeavours, to recommence its
affected operations in order for it to perform its obligations.
16.6.3 If either Party is prevented from performance of its obligations
for a continuous period in excess of 180 days , the other Party
may terminate this Agreement forthwith on service of written
notice upon the Party so prevented, in which case neither party
shall have any liability to the other except that rights and
liabilities which accrued prior to such termination shall
continue to subsist.
16.6.4 The Party claiming to be prevented or delayed in the performance
of any of its obligations under this Agreement by reason of
force majeure shall use reasonable endeavours to bring the force
majeure event to a close or to find a solution by which the
Agreement may be performed despite the continuance of the force
majeure event.
16.7 RELATIONSHIP OF THE PARTIES:
Nothing contained in this Agreement is intended or is to be construed to
constitute MINIMED and ELAN as partners or members of a joint venture or
Page 44 of 47
<PAGE> 45
either Party as an employee of the other. Neither Party hereto shall
have any express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other Party or to bind
the other Party to any contract, agreement or undertaking with any third
party.
16.8 AMENDMENTS:
No amendment, modification or addition hereto shall be effective or
binding on either Party unless set forth in writing and executed by a
duly authorised representative of both Parties.
16.9 WAIVER:
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any future breach or failure to perform or of
any other right arising under this Agreement.
16.10 NO EFFECT ON OTHER AGREEMENTS:
No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement
between the Parties unless specifically referred to, and solely to the
extent provided, in any such other agreement.
16.11 GOVERNING LAW AND JURISDICTION:
This Agreement shall be governed by the laws of the State of New York,
without regard to principles of conflicts of law. Each of the parties
hereby irrevocably submits to the jurisdiction of any New York State or
United States Federal court sitting in the County, City and State of New
York over any action or proceeding arising out of or relating to this
Agreement, and each hereby waives the defence of an inconvenient forum
for the maintenance of such an action.
16.12 NOTICE:
16.12.1 Any notice to be given under this Agreement shall be sent in
writing in English by registered airmail or telecopied to:
Elan Pharmaceutical Technologies at
Elan Corporation, plc.
Lincoln House
Lincoln Place
Dublin 2
Page 45 of 47
<PAGE> 46
Ireland.
Attention: Vice-President & General Counsel,
Elan Pharmaceutical Technologies
Telephone: 353 1 7094000
Telefax : 353 1 7094124
Elan Pharma International Limited at
Elan Pharma International Limited
WIL House
Shannon Business Park
Shannon
Co. Clare
Ireland.
Attention: Company Secretary
Telephone: 353 61 363533
Telefax: 353 61 362010
MINIMED at
MiniMed Inc.
12744 San Fernando Road
Sylmar
California 91342
United States of America
Attention: Senior Vice President and General Counsel
Telephone: 818 362 5958
Telefax: 818 367 1460
or to such other address(es) and telecopier numbers as may from
time to time be notified by either Party to the other hereunder.
16.12.2 Any notice sent by mail shall be deemed to have been delivered
within 7 working days after despatch and any notice sent by
telex or telecopy shall be deemed to have been delivered within
24 hours of the time of the despatch. Notice of change of
address shall be effective upon receipt.
16.13 FURTHER ASSURANCE CLAUSE
Page 46 of 47
<PAGE> 47
Upon request, ELAN and MINIMED shall (and shall procure that any other
necessary parties shall) execute and do all such documents, acts and
things as may reasonably be required subsequent to the signing of this
Agreement for assuring to or vesting in the other party the full benefit
of the terms hereof.
IN WITNESS of which the Parties have executed this Agreement.
Executed by ELAN PHARMACEUTICAL TECHNOLOGIES on 11th June, 1999
By : /s/ LARRY A. STERNSON
------------------------------
Name: Larry A. Sternson
------------------------------
Title: President
------------------------------
Executed by ELAN PHARMA INTERNATIONAL LIMITED on 11th June, 1999
By : /s/ DAVID HURLEY
------------------------------
Name: David Hurley
------------------------------
Title: Director
------------------------------
Executed by MINIMED INC. on 11th June, 1999
By: /s/ TERRANCE H. GREGG
-------------------------------
Name: Terrance H. Gregg
Title: President and Chief Operating Officer
Page 47 of 47
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0
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