Exhibit 10.6

EXECUTION VERSION

LEASE AND SECURITY AGREEMENT (LEASE B)

dated as of August 6, 2004
among Wells Fargo Bank Northwest, National Association,
not in its individual capacity,
except as expressly stated herein, but solely as Agent,
as AGENT,

LSI LOGIC CORPORATION,
as LESSEE

and

BANK OF THE WEST,
as LESSOR

MONTGOMERY STREET FINANCIAL SERVICES, LLC,
as Arranger

THIS LEASE AND SECURITY AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO
THE EXTENT, IF ANY, THAT THIS LEASE AND SECURITY AGREEMENT CONSTITUTES CHATTEL
PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AND SECURITY
AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART
HEREOF OTHER THAN THE “ORIGINAL EXECUTED COUNTERPART NO. 1.” SEE SECTION 2.4 FOR
THE NATURE OF THIS TRANSACTION AND INTENTION OF THE PARTIES. THIS COUNTERPART IS
[NOT] THE ORIGINAL EXECUTED COUNTERPART NO. 1.

 

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TABLE OF CONTENTS

              SECTION   HEADING   PAGE
ARTICLE I
  DEFINITIONS     1  
ARTICLE II
  ACQUISITION AND LEASE; GENERAL PROVISIONS     28  
Section 2.1.
  Funding; Payment of Purchase Price     28  
Section 2.2.
  Application of Funds; Purchase and Lease of Equipment     28  
Section 2.3.
  Delivery Date Notice and Delivery Date     28  
Section 2.4.
  Nature of Transaction     29  
Section 2.5.
  [Reserved]     29  
Section 2.6.
  Cash Collateral     29  
Section 2.7.
  [Reserved]     30  
Section 2.8.
  Legal and Tax Representation     30  
Section 2.9.
  Computations     30  
Section 2.10.
  Fees     30  
ARTICLE III
  CONDITIONS PRECEDENT     31  
Section 3.1.
  Conditions to Closing Date     31  
ARTICLE IV
  ACCEPTANCE AND LEASING OF EQUIPMENT     33  
Section 4.1.
  Acceptance and Lease     33  
Section 4.2.
  No Warranty     34  
ARTICLE V
  LEASE TERM     34  
Section 5.1.
  Lease Term     35  
ARTICLE VI
  RENT     35  
Section 6.1.
  Rent Payments     35  
Section 6.2.
  Supplemental Rent     35  
Section 6.3.
  Method and Amount of Payment     35  
Section 6.4.
  Late Payment     36  
Section 6.5.
  Set-Off     36  
ARTICLE VII
  NET LEASE     36  
ARTICLE VIII
  POSSESSION, ASSIGNMENT, USE AND MAINTENANCE OF EQUIPMENT     38  
Section 8.1.
  Possession and Use of Equipment; Compliance with Laws     38  
Section 8.2.
  Subleases and Assignments     39  
Section 8.3.
  Maintenance     40  

 

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              SECTION   HEADING   PAGE
Section 8.4.
  Alterations and Modifications     42  
Section 8.5.
  Identifying Numbers and Registration; Legend; Changes; Inspection     43  
Section 8.6.
  Liens     44  
Section 8.7.
  Replacements and Substitutions     44  
ARTICLE IX
  RISK OF LOSS; INSURANCE     45  
Section 9.1.
  Casualty     45  
Section 9.2.
  Insurance Coverages     48  
Section 9.3.
  Insurance Certificates     49  
ARTICLE X
  CERTAIN DUTIES AND RESPONSIBILITIES     50  
ARTICLE XI
  INDEMNITIES     50  
Section 11.1.
  General Indemnification     50  
Section 11.2.
  General Tax Indemnity     53  
Section 11.3.
  Withholding Taxes     57  
Section 11.4.
  Increased Costs     59  
Section 11.5.
  Funding Losses     61  
Section 11.6.
  Gross Up     61  
Section 11.7.
  Nonconformance Indemnity     61  
Section 11.8.
  Payment of Indemnities     62  
ARTICLE XII
  LEASE EVENTS OF DEFAULT; REMEDIES     62  
Section 12.1.
  Lease Events of Default     62  
Section 12.2.
  Remedies     65  
Section 12.3.
  Sale of Equipment     66  
Section 12.4.
  Application of Proceeds     66  
Section 12.5.
  Power of Attorney     67  
Section 12.6.
  Remedies Cumulative; Consents     67  
ARTICLE XIII
  RIGHT TO CURE     67  
ARTICLE XIV
  EARLY TERMINATION OPTION AND OBLIGATION TO PURCHASE     68  
Section 14.1.
  Early Termination Option     68  
Section 14.2.
  Required Purchase     69  
ARTICLE XV
  LEASE TERMINATION     69  
Section 15.1.
  Lessee's Options     69  
Section 15.2.
  Election of Options     70  
Section 15.3.
  [Reserved]     70  
Section 15.4.
  Sale Option Procedures     70  
Section 15.5.
  Certain Obligations Continue     73  

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              SECTION   HEADING   PAGE
Section 15.6.
  Failure to Sell Items of Equipment     73  
ARTICLE XVI
  OWNERSHIP AND GRANT OF LIEN AND SECURITY INTEREST     75  
Section 16.1.
  Grant of Lien and Security Interest     75  
Section 16.2.
  Retention of Sale Proceeds     76  
Section 16.3.
  State of Incorporation     76  
ARTICLE XVII
  REPRESENTATIONS AND WARRANTIES     76  
Section 17.1.
  Representations and Warranties of Lessee     76  
Section 17.2.
  Representations and Warranties of Lessor     82  
Section 17.3.
  Representations and Warranties of Agent     82  
ARTICLE XVIII
  COVENANTS OF LESSEE     84  
Section 18.1.
  Affirmative Covenants     84  
Section 18.2.
  Negative Covenants     89  
Section 18.3.
  Financial and Other Covenants     93  
Section 18.4.
  General Covenants     94  
Section 18.5.
  Covenants of Agent     95  
Section 18.6.
  Covenants of Lessor     95  
ARTICLE XIX
  ASSIGNMENTS     96  
Section 19.1.
  Lessor Assignments     96  
Section 19.2.
  Lessor Participations     98  
ARTICLE XX
  AGENT     99  
Section 20.1.
  Appointment of Agent; Powers and Authorization to Take Certain Actions     99
 
Section 20.2.
  Reliance     100  
Section 20.3.
  Action upon Instructions Generally     100  
Section 20.4.
  Indemnification     101  
Section 20.5.
  Independent Credit Investigation     101  
Section 20.6.
  Refusal to Act     101  
Section 20.7.
  Resignation or Removal of Agent; Appointment of Successor     101  
Section 20.8.
  Separate Agent     102  
Section 20.9.
  Termination of Agency     103  
Section 20.10.
  Compensation of Agency     103  
Section 20.11.
  Limitations     103  
Section 20.12.
  Assignments     103  
ARTICLE XXI
  DISTRIBUTIONS TO LESSOR     104  
Section 21.1.
  Distribution     104  
Section 21.2.
  Timing of Distribution     104  

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              SECTION   HEADING   PAGE
ARTICLE XXII
  MISCELLANEOUS     104  
Section 22.1.
  Effect of Waiver     104  
Section 22.2.
  Survival of Covenants     105  
Section 22.3.
  Governing Law     105  
Section 22.4.
  Notices     105  
Section 22.5.
  Amendment; Complete Agreements     105  
Section 22.6.
  Counterparts     105  
Section 22.7.
  Severability     105  
Section 22.8.
  Successors and Assigns     105  
Section 22.9.
  Captions; Table of Contents     106  
Section 22.10.
  Schedules and Exhibits     106  
Section 22.11.
  No Accord and Satisfaction     106  
Section 22.12.
  Enforcement of Certain Warranties     106  
Section 22.13.
  Security Interest in Funds     106  

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SCHEDULE I
  Description of Equipment
SCHEDULE II
  Addresses For Notice; Wire Instructions
SCHEDULE III
  Amortization Schedule
SCHEDULE IV
  Encumbrances
SCHEDULE 3.1(j)
  UCC Financing Statements
SCHEDULE 17.1(d)
  Governmental Consents
SCHEDULE 17.1(l)
  Significant Subsidiaries
EXHIBIT A
  Form of Delivery Date Notice
EXHIBIT B
  Form of Opinion of Special Counsel to Agent
EXHIBIT C
  Form of Opinion of Senior Corporate Counsel of Lessee
EXHIBIT D
  Form of Opinion of Special Counsel to Lessee
EXHIBIT D-1
  [Reserved]
EXHIBIT E
  Form of Secretary’s or Assistant Secretary’s Certificate of Lessee
EXHIBIT F
  Form of Officer’s Certificate of Lessee
EXHIBIT G
  Form of Assignment and Assumption Agreement
EXHIBIT H
  Form of Offeree Letter

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LEASE AND SECURITY AGREEMENT (LEASE B)

     THIS LEASE AND SECURITY AGREEMENT (LEASE B), dated as of August 6, 2004 (as
amended, supplemented, restated or otherwise modified from time to time, this
“Lease”), is among LSI LOGIC CORPORATION, a Delaware corporation, as Lessee
(“Lessee”) with its principal office at 1621 Barber Lane, Milpitas, California,
BANK OF THE WEST, as Lessor (“Lessor”) and WELLS FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity, except as expressly stated herein,
but solely as Agent (“Agent”).

W I T N E S S E T H:

     WHEREAS, on the Delivery Date, Lessor will purchase certain Items of
Equipment more particularly described on Schedule I hereto; and

     WHEREAS, upon the purchase of the Items of Equipment on the Delivery Date,
Lessor will lease such Items of Equipment to Lessee and Lessee will lease such
Items of Equipment from Lessor pursuant to the terms of this Lease upon the
terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:

ARTICLE I

DEFINITIONS

     In this Lease and each other Operative Document, unless the context
otherwise requires:

     (a) Interpretation. (i) any term defined below by reference to another
instrument or document shall continue to have the meaning ascribed thereto
whether or not such other instrument or document remains in effect;

     (ii) words importing the singular include the plural and vice versa;

     (iii) a reference to a part, clause, section, article, exhibit or schedule
is a reference to a part, clause, section and article of, and exhibit and
schedule to, such Operative Document;

     (iv) a reference to any statute, regulation, proclamation, ordinance or law
includes all statutes, regulations, proclamations, ordinances or laws amending,
supplementing, supplanting, varying, consolidating or replacing them, and a
reference to a statute includes all regulations, proclamations and ordinances
issued or otherwise applicable under that statute;

 

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     (v) a reference to a document includes any amendment or supplement to, or
replacement or novation of, that document;

     (vi) a reference to a party to a document includes that party’s successors
and permitted assigns; and

     (vii) references to “including” means including without limiting the
generality of any description preceding such term and for purposes hereof the
rule of ejusdem generis shall not be applicable to limit a general statement
followed by or referable to an enumeration of specific matters to matters
similar to those specifically mentioned.

     (b) Accounting Terms. In each Operative Document, unless expressly provided
otherwise, accounting terms shall be construed and interpreted, and accounting
determinations and computations shall be made, in accordance with GAAP.

     Further, each of the parties to the Operative Documents and their counsel
have reviewed and revised the Operative Documents, or requested revisions
thereto, and the usual rule of construction that any ambiguities are to be
resolved against the drafting party shall be inapplicable in construing and
interpreting the Operative Documents.

     “ABN Cash Collateral Account” shall have the meaning provided in the Cash
Collateral Agreement.

     “ABN Control Agreement” shall mean that certain Control Agreement, dated as
of August 6, 2004, among the ABN Securities Intermediary, the Lessee and Lessor.

     “ABN Securities Intermediary” shall have the meaning provided in the Cash
Collateral Agreement.

     “Accrual Rent” shall mean, individually or collectively, Series A Accrual
Rent, Series B Accrual Rent, Series C Accrual Rent and Lessor’s Interest Related
Accrual Rent.

     “Acquisition” shall mean any transaction or series of related transactions
for the purpose of or resulting in (a) the acquisition, directly or indirectly,
of all or substantially all of the assets of a Person or of any business or
division of a Person, (b) the acquisition, directly or indirectly, of all or
substantially all of the capital stock, obligations or other securities of or
interest in a Person, or (c) a merger or consolidation or any other combination
by Lessee or any Subsidiary with another Person.

     “Affiliate” shall mean any Person which, directly or indirectly, controls,
is controlled by or is under common control with another Person. For purposes of
the foregoing, “control” with respect to any Person shall mean the possession,
directly or indirectly, of the power (a) to vote twenty-five percent (25%) or
more of the securities having ordinary voting power for the election of
directors of such Person, or (b) to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.

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     “Agent” shall mean Wells Fargo Bank Northwest, National Association, in its
capacity as agent under the Operative Documents.

     “Agent Fee Letter” shall mean that certain letter agreement, dated as of
June 23, 2004, between Agent and Lessee.

     “Applicable Laws and Regulations,” “Applicable Laws” and “Laws” shall mean
as of any date all applicable laws, rules, regulations (including Environmental
Laws), statutes, treaties, codes, ordinances, permits, certificates, orders and
licenses of and interpretations by, any Governmental Agency, and applicable
judgments, decrees, injunctions, writs, orders or like action of any court,
arbitrator or other administrative, judicial or quasi-judicial tribunal or
agency of competent jurisdiction (including those pertaining to health, safety
or the environment), to which Lessee or any Item of Equipment is subject.

     “Appraisal” shall mean the appraisal described in Section 3.1(g).

     “Appraised Value” shall mean the Fair Market Value of the Equipment as of
the Delivery Date as determined pursuant to the Appraisal delivered pursuant to
Section 3.1(g).

     “Appraiser” or “Appraisers” shall mean American Appraisal Associates, Inc.

     “Arranger” shall mean Montgomery Street Financial Services, LLC.

     “Assignee” shall have the meaning provided in Section 19.1(a)(ii).

     “Assignee’s Share” shall have the meaning provided in the Lessor Assignment
Agreement.

     “Bank of the West Cash Collateral Account” shall have the meaning provided
in the Cash Collateral Agreement.

     “Bank of the West Control Agreement” shall mean that certain Control
Agreement, dated as of August 6, 2004, among Lessee and Lessor, in its capacity
as Lessor and as Securities Intermediary.

     “Bank of the West Securities Intermediary” shall have the meaning provided
in the Cash Collateral Agreement.

     “Basic Rent” shall have the meaning provided in Section 6.1.

     “Bill of Sale” shall mean any bill of sale delivered in connection with the
requirements of Section 8.4 or 9.1.

     “Break Funding Amount” shall have the meaning provided in Section 11.5.

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     “Business Day” shall mean any Monday, Tuesday, Wednesday, Thursday or
Friday, other than a day on which commercial banks are authorized or required to
be closed in New York, New York, Milpitas, California, Salt Lake City, Utah and
solely with respect to determination of the LIBO Rate, London, England.

     “Capital Lease” shall mean, for any Person, any lease of property (whether
real, personal or mixed) which, in accordance with GAAP, would, at the time a
determination is made, be required to be recorded as a capital lease in respect
of which such Person is liable as lessee.

     “Capital Rent” shall mean, individually, or collectively, Series A Capital
Rent and Series B Capital Rent.

     “Cash Collateral” shall mean, as the Lessor or applicable Series A
Assignee, in each case benefiting from such Cash Collateral may elect, in its
sole and absolute discretion, (i)(a) obligations of the United States government
and any agency thereof and (b) time deposits and/or certificates of deposit, in
each case having the highest rates of return for similar time deposits and/or
certificates of deposit with similar terms and similar amounts as the time
deposit and/or certificate of deposit offered by the commercial bank holding or
issuing such time deposit and/or certificate of deposit and issued by such
commercial bank, which commercial bank shall have (x) a combined capital and
surplus of not less than $500,000,000 and (y) a senior unsecured debt credit
rating of at least “A3” by Moody’s and “A-” by S&P and which commercial bank
shall be incorporated under (A) the laws of the United Kingdom or (B) the laws
of the United States of America or any state thereof or the District of Columbia
and, in the case of this clause (B), shall be a member of the Federal Reserve
System; provided that the aggregate amount of the certificates of deposit issued
by a financial institution having an unsecured debt credit rating of “A3” by
Moody’s and/or “A-” by S&P shall not exceed $40,000,000 in face amount, (ii) all
cash maintained in or credited to the Cash Collateral Account in which such Cash
Collateral is held, and (iii) all proceeds of the foregoing, including whatever
is receivable or received when Cash Collateral or proceeds are sold, collected,
exchanged, returned, substituted or otherwise disposed of, whether such
disposition is voluntary or involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with respect to any Cash
Collateral, and all rights to payment with respect to any cause of action
affecting or relating to the Cash Collateral. All Cash Collateral shall have a
final maturity from the date of issuance of not more than 100 days and maturing
on or before the next succeeding Payment Date during the Lease Term.

     “Cash Collateral Accounts” shall mean, collectively, the Cash Collateral
Accounts listed in Section 1.1 of the Cash Collateral Agreement.

     “Cash Collateral Agreement” shall mean the Assignment of Cash Collateral
Accounts dated as of August 6, 2004 executed by Lessee in favor of Lessor.

     “Casualty” or “Casualties” shall mean any of the following events in
respect of any Item of Equipment: (a) the total loss of such Item of Equipment,
the total loss of use thereof due to theft, disappearance, destruction, damage
beyond repair or the rendering of such Item of Equipment permanently unfit for
normal use for any reason whatsoever (other than

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obsolescence); (b) any damage to such Item of Equipment which results in an
insurance settlement with respect to such Item of Equipment on the basis of a
total loss or a constructive total loss; (c) the permanent condemnation,
confiscation or seizure of, or the requisition of title to or use of, such Item
of Equipment; (d) as a result of any change in Applicable Laws and Regulations
or other similar action by any Governmental Agency, the use of such Item of
Equipment in the normal course of Lessee’s business shall have been prohibited,
directly or indirectly, for a period equal to the lesser of 90 consecutive days
and the remaining Lease Term.

     “Casualty Amount” shall mean, with respect to any Item of Equipment leased
hereunder as of any date specified for payment thereof, the sum of (A) a portion
of the Lease Balance equal to the product obtained by multiplying the
outstanding Lease Balance as of the Casualty Settlement Date by the Item Value
Fraction of such Item of Equipment and (B) all other Rent due and owing under
the Operative Documents.

     “Casualty Notice” shall have the meaning provided in Section 9.1.

     “Casualty Recoveries” shall have the meaning provided in Section 9.1.

     “Casualty Settlement Date” shall have the meaning provided in Section
9.1(a).

     “Change in Law” shall have the meaning provided in Section 11.4.

     “Claims” shall mean liabilities, obligations, damages, actual losses,
demands, penalties, fines, claims, actions, suits, judgments, settlements,
charges, costs, fees, expenses and disbursements (including, without limitation,
out-of-pocket legal fees and expenses and costs of investigation which, in the
case of counsel or investigators retained by an Indemnitee, shall be reasonable)
of any kind and nature whatsoever, but shall exclude anticipated losses or lost
profits of Lessor, any Assignee or Agent.

     “Code” shall mean the Internal Revenue Code of 1986 and the rules and
regulations thereunder, each as amended, supplemented or otherwise modified from
time to time.

     “Compliance Certificate” shall have the meaning provided for in Section
18.1(a)(iii).

     “Consolidated Intangible Assets” shall mean, as of any date of
determination, the total goodwill and other intangible assets of Lessee and its
Subsidiaries on a consolidated basis, as determined in accordance with GAAP.

     “Consolidated Total Assets” shall mean, as of any date of determination,
the total assets of Lessee and its Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.

     “Consolidated Total Liabilities” shall mean, as of any date of
determination, the total liabilities of Lessee and its Subsidiaries on a
consolidated basis, as determined in accordance with GAAP.

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     “Contractual Obligation” of any Person shall mean, any indenture, note,
lease, loan agreement, security, deed of trust, mortgage, security agreement,
guaranty, instrument, contract, agreement or other form of contractual
obligation or undertaking to which such Person is a party or by which such
Person or any of its property is bound.

     “Control Agreements” shall mean, collectively, (a) the Wells Fargo Control
Agreement, (b) the ABN Control Agreement and (c) the Bank of the West Control
Agreement.

     “Delivery Date” shall mean August 6, 2004.

     “Early Termination Option” shall have the meaning provided in Section
14.1(a).

     “Early Termination Payment Date” shall have the meaning provided in
Section 14.1(a).

     “Early Termination Purchase Amount” shall mean, with respect to any Item of
Equipment, as of the Early Termination Payment Date, the sum of (a) a portion of
the Lease Balance equal to the product obtained by multiplying the outstanding
Lease Balance as of the Early Termination Payment Date by the Item Value
Fraction of such Item of Equipment and (b) all other Rent then due and owing
under the Operative Documents.

     “Eligible Assignee” shall mean (a) any other Lessor or Assignee, (b) any
affiliate of a Lessor or Assignee, (c) any commercial bank, leasing company,
finance company or other financial institution which has or is an affiliate of
an entity (and such entity provides a guaranty of such affiliate’s obligations
under the Operative Documents) which has a combined capital and surplus of at
least $100,000,000 or (d) any institution which is a “qualified institutional
buyer” as defined in rule 144A of the Securities Act.

     “Eligible Lessor Assignee” shall mean any commercial bank, leasing company,
finance company or other financial institution which has or is an affiliate of
an entity (and such entity provides a guaranty of such affiliate’s obligations
under the Operative Documents) which has a combined capital and surplus of at
least $75,000,000.

     “Encumbrance” shall mean any mortgage, deed of trust, pledge, security
interest, assignment, deposit arrangement, charge or encumbrance, lien
(statutory or other), or other preferential arrangement (including any
conditional sale or other title retention agreement, or any financing lease
having substantially the same economic effect as any of the foregoing or any
agreement to give any security interest, but excluding any operating lease,
regardless of whether precautionary filings are made in respect thereto under
Section 9408 of the California Uniform Commercial Code).

     “End of Term Value Ratio” shall mean, with respect to any Item or Items of
Equipment as of any date of determination, the ratio of (a) the expected Fair
Market Value of such Item or Items of Equipment as of the end of the Lease Term
(as set forth in the Appraisal) to (b) the Fair Market Value of such Item or
Items of Equipment as of the Delivery Date (as set forth in the Appraisal).

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     “Environmental Laws” shall mean all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directives, requests, licenses, authorizations and
permits of, and agreements with (including consent decrees), any Governmental
Authorities, in each case relating to or imposing liability or standards of
conduct concerning public health, safety and environmental protection matters,
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Clean Air Act, the Federal Water Pollution Control Act of 1972,
the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery
Act, the Toxic Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the California Hazardous Waste Control Law, the California
Solid Waste Management, Resource Recovery and Recycling Act, the California
Water Code and the California Health and Safety Code.

     “Equipment” shall mean, individually, each Item of equipment described on
Schedule I hereto and, collectively, each of the foregoing Items of Equipment.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, and
any regulations issued pursuant thereto, as amended or replaced and as in effect
from time to time.

     “ERISA Affiliate” shall mean any trade or business (whether or not
incorporated) which is under common control with Lessee within the meaning of
Section 4001(a)(14) of ERISA and Sections 414(b), (c) and (m) of the Code.

     “ERISA Event” shall mean (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by Lessee or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) the filing of a notice of intent to terminate, the treatment of a
plan amendment as a termination under Section 4041 or 4041A of ERISA or the
commencement of proceedings by the PBGC to terminate a Pension Plan subject to
Title IV of ERISA; (d) a failure by Lessee or any ERISA Affiliate to make
required contributions to a Pension Plan or other Plan subject to Section 412 of
the Code; (e) an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (f) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon Lessee or any ERISA Affiliate; or
(g) an application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code with respect to any Pension Plan.

     “Extended Remarketing Period” shall have the meaning provided in Section
15.6(a).

     “Fair Market Value” shall mean, with respect to any Item of Equipment as of
any date, the price which a purchaser would pay to purchase such Item of
Equipment in an arm’s-length transaction between an informed and willing buyer
and an informed and willing seller, neither of them being under any compulsion
to buy or sell. Except for any determination of the Fair Market Value in
connection with an appraisal delivered pursuant to Section 9.1 or 14.1, in
making any determination of Fair Market Value, any appraiser, if applicable, may
assume such

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Item of Equipment is installed in-place and as-built and (a) has been maintained
in accordance with the requirements of this Lease, (b) is in the condition in
which it is required to be under this Lease as of the date for which such
determination is made and (c) is not subject to a Sublease, and any appraiser,
if applicable, shall use such reasonable methods of appraisal as are chosen by
Agent and which are acceptable to Lessee.

     “FASB 94” shall have the meaning provided in Section 2.4.

     “FIN 46R” shall have the meaning provided in Section 2.4.

     “Financial Statements” shall mean, with respect to any accounting period
for any Person, statements of income, shareholders’ equity and cash flows of
such Person for such period, and a balance sheet of such Person as of the end of
such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.

     “Foreign Plan” shall mean any employee benefit plan maintained by Lessee or
any of its Subsidiaries which is mandated or governed by any Governmental Rule
of any Governmental Authority other than the United States.

     “F.R.S. Board” shall mean the Board of Governors of the Federal Reserve
System or any successor thereto, and any Governmental Authority succeeding to
any of its principal functions.

     “Funding” shall mean an advance of funds by the Lessor to the Agent
pursuant to Article II hereof.

     “Generally Accepted Accounting Principles” or “GAAP” shall mean, as of any
date of determination, accounting principles (a) set forth as generally accepted
in then currently effective Opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (b) set forth as generally
accepted in then currently effective Statements of the Financial Accounting
Standards Board or (c) that are then approved by such other entity as may be
approved by a significant segment of the accounting profession in the United
States of America. The term “consistently applied,” as used in connection
therewith, means that the accounting principles applied are consistent in all
material respects to those applied at prior dates or for prior periods.

     “Governmental Action” shall mean all applicable permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, decrees, licenses, exemptions, publications, filings, notices to and
declarations of or with, or required by, any Governmental Agency, or required by
any Applicable Laws and Regulations.

     “Governmental Agency” or “Authority” shall mean any domestic or foreign
national, state or local government, any political subdivision thereof, any
department, agency, authority or bureau of any of the foregoing, or any other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without

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limitation, the Federal Deposit Insurance Corporation, the F.R.S. Board, the
Comptroller of the Currency, any central bank or any comparable authority.

     “Governmental Charges” shall mean, with respect to any Person, all levies,
assessments, fees, claims or other charges imposed by any Governmental Authority
upon such Person or any of its property or otherwise payable by such Person.

     “Governmental Rule” shall mean any law, rule, regulation, ordinance, order,
code, interpretation, judgment, decree, directive, guidelines, policy or similar
form of decision of any Governmental Authority.

     “Grossed-Up Basis” shall have the meaning provided in Section 11.6.

     “Guaranty Obligation” shall mean, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person:

     (a) With respect to any Indebtedness, lease (other than an operating
lease), dividend, or other obligation (the “primary obligations”) of another
Person (the “primary obligor”), including any obligation of that Person (i) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (ii) to advance
or provide funds (A) for the payment or discharge of any such primary
obligation, or (B) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, or (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof;

     (b) (i) With respect to letters of credit, acceptances, bank guaranties,
surety bonds or similar instruments issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or
(ii) as a partner or joint venturer in any partnership or joint venture;

     (c) With respect to leases that are treated by Lessee as operating leases
for accounting purposes and as a loan for all other purposes; or

     (d) Net obligations with respect to Rate Contracts, other than Rate
Contracts entered into in connection with a bona fide hedging operation that
provides offsetting benefits to such Person.

     “Hazardous Material” shall mean any toxic or hazardous substances,
materials, wastes, contaminants or pollutants, including asbestos, PCBs,
petroleum products and byproducts, and any substances defined or listed as
“hazardous substances,” “hazardous materials,” “hazardous wastes” or “toxic
substances” (or similarly identified), regulated under or forming the basis for
liability under any applicable Environmental Law.

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     “Imposition” or “Impositions” shall mean any and all liabilities, losses,
expenses and costs of any kind whatsoever for fees, taxes, levies, imposts,
duties, charges, assessments or withholdings of any nature whatsoever (“Taxes")
(including (i) personal property taxes; (ii) sales taxes, use taxes and other
similar taxes (including rent taxes and intangible taxes); (iii) any excise
taxes; (iv) transfer taxes, conveyance taxes, mortgage taxes, intangible taxes,
stamp taxes and documentary recording taxes and fees; (v) taxes that are or are
in the nature of franchise, income, value added, gross receipts, privilege and
doing business taxes, license and registration fees; and (vi) assessments on any
Item of Equipment or any part thereof or any other Lessee Collateral), and in
each case all interest, additions to tax and penalties thereon, which at any
time may be levied, assessed or imposed by any Federal, state or local authority
upon or with respect to (a) any Indemnitee, any Item of Equipment or any part
thereof or interest therein or any other Lessee Collateral, or Lessee or any
sublessee of Lessee or user of any Item of Equipment; (b) the financing,
refinancing, demolition, construction, substitution, subleasing, assignment,
control, condition, servicing, maintenance, repair, ownership, possession,
purchase, rental, lease, activity conducted on, delivery, insuring, use,
operation, improvement, transfer, return or other disposition of any Item of
Equipment or any part thereof or interest therein; (c) indebtedness with respect
to any Item of Equipment or any part thereof or interest therein or transfer
thereof; (d) the rentals, receipts or earnings arising from any Item of
Equipment, any other Lessee Collateral or any part thereof or interest therein;
(e) the Operative Documents or any payment made or accrued pursuant thereto;
(f) the income or other proceeds received with respect to any Item of Equipment,
any other Lessee Collateral or any part thereof or interest therein upon the
sale or disposition thereof; (g) any contract relating to the manufacture,
acquisition or delivery of any Item of Equipment or any part thereof or interest
therein; or (h) otherwise in connection with the Overall Transaction.

     Notwithstanding anything in the first paragraph of this definition (except
as provided in the final paragraph of this definition) the term “Imposition”
shall not mean or include:

     (i) any Taxes and impositions (other than Taxes that are, or are in the
nature of, sales, use, value added, rental, transfer, property or ad valorem
taxes) that are imposed by any Governmental Agency and that are based upon or
measured by the gross or net income or gross or net receipts (including any
minimum taxes or taxes on, measured by or in the nature of capital, net worth,
excess profits, items of tax preference, capital stock, franchise, business
privilege or doing business taxes); provided that this clause (i) shall not be
interpreted to prevent a payment from being made on an Grossed-Up Basis if such
payment is otherwise required to be so made; provided further this clause
(i) shall not apply to Taxes and Impositions imposed on an Indemnitee solely as
a result of Lessee’s activities or the location of the Equipment in the
jurisdiction imposing such Taxes or Impositions;

     (ii) any Tax or imposition to the extent, but only to such extent, it
relates to any act, event or omission that first occurs, or relates to a period,
after the termination of the Lease, return of the Items of Equipment as required
under the Lease and payment in full of all amounts due under the Lease (but not
any Tax or imposition that relates to any period prior to such termination,
return and payment in full with respect to the Item of Equipment or Items of
Equipment to which such Tax or imposition relates);

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     (iii) any Tax or imposition imposed on an Indemnitee as a result of the
failure of such Indemnitee to file any return or report provided to it pursuant
to Section 11.2(d) on a timely basis and to pay any Tax or imposition indicated
as being due and payable on such return or report other than any withholding or
other Tax which may be paid by Lessee directly;

     (iv) any Tax or imposition for so long as, but only for so long as, it is
being contested in accordance with the provisions of Section 11.2(b); provided
that the foregoing shall not limit Lessee’s obligations under Section 11.2(b) to
advance to such Indemnitee amounts with respect to Taxes or impositions that are
being contested in accordance with Section 11.2(b) or any expenses incurred by
such Indemnitee in connection with such contest;

     (v) any Taxes or imposition imposed upon an Indemnitee with respect to any
voluntary transfer, sale, financing or other voluntary disposition of any
interest in any Item of Equipment or any part thereof, or any interest therein
or any interest or obligation under the Operative Documents, or from any sale,
assignment, transfer or other disposition of any interest in a Indemnitee or any
Affiliate thereof, (other than any transfer in connection with (1) the exercise
by Lessee of its Early Termination Option or any termination option or other
purchase of any Item or Items of Equipment by Lessee or the exercise by Lessee
of the Purchase Option or the Sale Option, (2) the occurrence of an Lease Event
of Default, (3) a Casualty affecting any Item or Items of Equipment, or (4) any
assignment, sublease, modification or addition of or to any Item or Items of
Equipment by Lessee) or any involuntary transfer of any of the foregoing
interests resulting or arising from or in connection with the bankruptcy or
insolvency of an Indemnitee;

     (vi) any Taxes or impositions imposed on a direct or indirect transferee,
successor or assign of an Indemnitee to the extent of the excess of such Taxes
or impositions over the amount of such Taxes and impositions that would have
been imposed had there not been a transfer by the original Indemnitee of an
interest arising under the Operative Documents, provided, however, that there
shall not be excluded under this clause (vi) any such Tax or imposition if such
direct or indirect transferee, successor, or assignee of the Lessor acquired its
interest as a result of a transfer in connection with a Lease Event of Default;
provided, further, that there shall not be excluded under this clause (vi) any
amount necessary to make any payment on a Grossed-Up Basis;

     (vii) any Tax or imposition to the extent that such Tax or imposition is
actually reimbursed to the Indemnitee by a Person other than an Affiliate of
such Indemnitee;

     (viii) any Taxes or impositions imposed on an Indemnitee, to the extent
such Indemnitee actually receives a credit (or otherwise has a reduction in a
liability for Taxes) in respect thereof against Taxes that are not indemnified
hereunder (but only to the extent such credit was not taken into account in
calculating the related indemnity payment on an Grossed-Up Basis);

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     (ix) any gift, inheritance or estate Tax or similar imposition;

     (x) any Tax or imposition imposed on or with respect to an Indemnitee as a
result of transactions or activities of such Indemnitee unrelated to the
transactions or activities referred to in or contemplated by the Operative
Documents;

     (xi) any Taxes imposed against or payable by an Indemnitee resulting from,
or that would not have been imposed but for, the gross negligence or willful
misconduct of such Indemnitee;

     (xii) Taxes imposed on or payable by an Indemnitee to the extent such Taxes
would not have been imposed but for a breach by such Indemnitee or any Affiliate
thereof of any representations, warranties or covenants set forth in the
Operative Documents (unless such breach is caused by Lessee’s breach of its
representations, warranties or covenants set forth in the Operative Documents);

     (xiii) Taxes of an Indemnitee to the extent resulting from such
Indemnitee’s failure to comply with the provisions of Section 11.2(b), which
failure precludes the ability to conduct a contest pursuant to Section 11.2(b)
(unless such failure is caused by Lessee’s breach of its obligations);

     (xiv) any Taxes imposed on the Lessor that are a result of the Lessor not
being considered a “United States person” as defined in Section 7701(a)(30) of
the Code; or

     (xv) any Taxes imposed against or payable by an Indemnitee as a result of
the transfer of the Items of Equipment in connection with the exercise by Lessee
of the Sale Option pursuant to Section 15.4 which Lessee is not obligated to pay
pursuant to Section 15.4.

     Notwithstanding the foregoing, the exclusions from the definition of
Impositions set forth in clauses (i), (ii), (iv), (v), (vi), (viii), (ix) and
(x) above shall not apply (but the other exclusions shall apply) to any Taxes or
any increase in Taxes imposed on an Indemnitee (net of any decrease in Taxes
realized by such Indemnitee), to the extent that such Tax increase or decrease
would not have occurred if on the Delivery Date the Lessor had advanced funds to
Lessee in the form of a loan by Lessor to Lessee secured by the Equipment in an
amount equal to the amounts funded on the Delivery Date, with debt service for
each such loan equal to the Basic Rent payable on each Payment Date and a
principal balance at the maturity of such loan in an amount equal to the then
outstanding amount of the Lease Balance.

     “Indebtedness” shall mean, for any Person, without duplication:

     (a) All indebtedness or other obligations of such Person for borrowed
money;

     (b) All obligations of such Person for the deferred purchase price of
property or services (including obligations under credit facilities which secure
or finance such purchase price and obligations under leases that are treated by
Lessee as operating leases

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for accounting purposes and as a loan for all other purposes), other than trade
payables incurred by such Person in the ordinary course of its business on
ordinary terms;

     (c) All obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses;

     (d) All indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property);

     (e) All obligations under Capital Leases;

     (f) All Guaranty Obligations other than Guaranty Obligations described in
clauses (a)(iii) and (a)(iv) of the definition of “Guaranty Obligation” where
the primary obligor is a Subsidiary; and

     (g) All indebtedness of another Person secured by any Encumbrance upon or
in property owned by the Person for whom Indebtedness is being determined,
whether or not such Person has assumed or become liable for the payment of such
indebtedness of such other Person; provided, that if such indebtedness is not
assumed and recourse is limited solely to such property, the Indebtedness
incurred hereunder shall be valued at the lesser of the principal amount of the
obligation so secured or the fair market value of the property subject to such
Encumbrance.

     “Indemnitee” shall mean Agent (in its individual capacity), Lessor,
Assignees, any additional, separate or co-agent, and the respective Affiliates,
successors, permitted assigns, lenders, secured parties, permitted transferees,
contractors, servants, employees, officers, directors, shareholders, partners,
participants, representatives and agents of each of the foregoing Persons;
provided, however, that in no event shall Lessee or any of its Affiliates be an
Indemnitee.

     “Insurance Requirements” shall mean all terms and conditions of any
insurance policy required by the terms hereof to be maintained by Lessee and all
requirements of the issuer of any such policy.

     “IRS” shall mean the Internal Revenue Service, or any successor thereto.

     “Item” or “Item of Equipment” shall mean a particular item of Equipment
(including a Replacement Item but excluding a Replaced Item) and “Items” or
“Items of Equipment” shall mean, collectively, each item of Equipment (including
Replacement Items but excluding Replaced Items), unless the context requires
otherwise.

     “Item Value Fraction” shall mean, with respect to any Item of Equipment
leased hereunder, a fraction, the numerator of which is the Purchase Price for
such Item of Equipment

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and the denominator of which is the aggregate Purchase Price of all Items of
Equipment then subject to this Lease, including such Item of Equipment.

     “Lease” shall have the meaning provided in the preamble.

     “Lease A” shall mean that certain Lease and Security Agreement (Lease A),
dated as of August 6, 2004, among LSI Logic Corporation, a Delaware corporation,
as lessee, BTM Capital Corporation, as lessor and Wells Fargo Bank Northwest,
National Association, not in its individual capacity except as expressly stated
therein, but solely as agent.

     “Lease Balance” shall mean collectively, the Series A Lease Balance, the
Series B Lease Balance, the Series C Lease Balance and the Lessor’s Interest
Related Lease Balance.

     “Lease Default” shall mean any event, condition or failure which, with
notice or lapse of time or both, would become a Lease Event of Default.

     “Lease Event of Default” shall mean any event condition or failure
designated as a “Lease Event of Default” in Section 12.1.

     “Lease Expiration Date” shall mean the last day of the Lease Term, subject
to any other date on which the Lease is terminated.

     “Lease Term” shall have the meaning provided in Section 5.1.

     “Lessee” shall mean LSI Logic Corporation, a Delaware corporation.

     “Lessee Collateral” shall mean all of Lessee’s right, title and interest in
and to each of the following, however arising and whether now existing or
hereafter acquired or arising:

     (a) the Items of Equipment (including all Parts thereof, accessions thereto
and replacements and substitutions therefor);

     (b) the Subleases;

     (c) all contracts necessary to operate and maintain the Items of Equipment;

     (d) any rights to a rebate, offset or other assignment, warranty or service
under a purchase order, invoice or purchase agreement with any manufacturer of
any Item of Equipment;

     (e) all books, manuals, logs, records, writings, software, information and
other property solely relating to any of the foregoing;

     (f) the Cash Collateral and all cash, monies, certificates of deposit and
investments held in the Cash Collateral Accounts; and

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     (g) all products, accessions, rents, issues, profits, returns, income and
proceeds of and from any and all of the foregoing collateral (including proceeds
which constitute property of the types described in clauses (a), (b), (c), (d),
(e) and (f) above and, to the extent not otherwise included, all payments under
insurance (whether or not Lessor is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing collateral).

     “Lessee Obligations” shall mean all obligations of Lessee at any time and
from time to time owed to any one or more or all of the Lessor, Agent (both
individually and in its capacity as Agent), each other Indemnitee and their
respective successors and permitted assigns, under one or more of the Operative
Documents, whether due or to become due, matured or unmatured, liquidated or
unliquidated, or contingent or noncontingent, including obligations of
performance as well as obligations of payment (including all Rent, Lease
Balance, Casualty Amount, Purchase Amount and Sale Recourse Amount), and
including interest that accrues after the commencement of any bankruptcy or
insolvency proceeding by or against Lessee or any other Person.

     “Lessee Permitted Investments” shall mean any investments selected by
Lessee in accordance with its Cash Investment Policy and Procedures as adopted
by Lessee on March 1, 2004 (as the same may be amended from time to time with
the approval of Agent); provided that any investments not meeting the standards
set forth in such Cash Investment Policy and Procedures shall nevertheless be
deemed to be “Lessee Permitted Investments” if they do not exceed at any time,
in the aggregate, ten percent (10%) of all Lessee Permitted Investments at such
time.

     “Lessor” shall have the meaning provided in the preamble.

     “Lessor Assignment Agreement” shall mean the Lessor Assignment Agreement
dated as of August 6, 2004 among Agent, Lessor, the Assignees and each
Securities Intermediary.

     “Lessor’s Interest” shall mean $10,720,000.

     “Lessor’s Interest Related Accrual Rent” shall mean, with respect to each
Rent Period, an amount equal to yield accrued on the Lessor’s Interest Related
Lease Balance outstanding during such Rent Period at the Lessor’s Interest
Related Yield Rate.

     “Lessor’s Interest Related Cash Collateral” shall mean the Required
Lessor’s Interest Related Cash Collateral Amount.

     “Lessor’s Interest Related Cash Collateral Account” shall have the meaning
provided in Section 1.1 of the Cash Collateral Agreement.

     "Lessor’s Interest Related Lease Balance” shall mean, as of any date of
determination, the Lessor’s Interest, less the sum of all amounts paid and
attributable to the Lessor’s Interest Related Lease Balance pursuant to Section
6.1, 9.1 or 12.2, Article XIV or Article XV.

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     “Lessor’s Interest Related Share” shall have the meaning provided in the
Lessor Assignment Agreement.

     “Lessor’s Interest Related Rent” shall mean for each Payment Date during
the Lease Term, a payment of rent consisting of Lessor’s Interest Related
Accrual Rent for the Rent Period ending on such Payment Date.

     “Lessor’s Interest Related Yield Rate” shall mean the LIBO Rate plus 3.00%.

     “Lessor Liens” shall mean Liens on or against any Item of Equipment, the
Lease, the Cash Collateral, the Cash Collateral Accounts or any payment of Rent
(a) which result from any act of, or any Claim against Lessor or Agent unrelated
to the transactions contemplated by the Operative Documents, (b) which result
from any Tax owed by Lessor, except any Tax for which Lessee is obligated to
indemnify Lessor or (c) which result from any act or omission of Lessor that is
in breach of Lessor’s covenants or agreements under the Operative Documents.

     “LIBO Rate” shall mean with respect to any Rent Period at any time, the
applicable London interbank offered rate for deposits in U.S. dollars appearing
on Bloomberg LIBO page, British Bankers Association as of 11:00 a.m.(London
time) two (2) Business Days prior to the first day of such Rent Period, and
having a maturity approximately equal to such Rent Period; or if no London
interbank offered rate of such maturity then appears on Bloomberg LIBO page,
then the rate equal to the London interbank offered rate for deposits in U.S.
dollars maturing immediately before or immediately after such maturity,
whichever is higher, as determined by the Agent from Bloomberg LIBO page; or if
Bloomberg LIBO page is not available, the applicable LIBO Rate for the relevant
Rent Period shall be the rate determined by the Agent to be the arithmetic
average of the rates at which Agent offers to place deposits in U.S. dollars
with first-class banks in the London interbank market at approximately 11:00
a.m. (London time) two (2) Business Days prior to the first day of such Rent
Period, in the approximate amount of the Lease Balance on such date and having a
maturity approximately equal to such Rent Period.

     “LIBOR Reserve Percentage” shall mean, relative to any Rent Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal and
other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements) specified under regulations issued
from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including “Eurocurrency Liabilities,” as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Rent Period.

     “Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, lien or charge of any
kind, whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Item of Equipment or any other Lessee Collateral, including any
agreement to grant any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature of a security interest, and/or the
filing of or agreement to give any financing statement (other than a
precautionary financing statement with respect to a lease or other agreement
that is not in the nature of a security interest) under the

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Uniform Commercial Code or comparable law of any jurisdiction with respect to
any Item of Equipment or any other Lessee Collateral.

     “LSI” shall mean LSI Logic Corporation, a Delaware corporation.

     “Manufacturer” shall mean, individually, any manufacturer of an Item of
Equipment and “Manufacturers” shall mean, collectively, the Manufacturers of all
Items of Equipment.

     “Material Adverse Effect” shall mean (i) for purposes of Sections 12.1(o),
17.1(p), 18.1(a)(xvi) and 18.2(c)(iv), that the Tangible Net Worth of Lessee is
$600,000,000 or less as determined at the end of the most recently ended fiscal
quarter of the Lessee, and (ii) for all other purposes, a materially adverse
effect on (A) the assets, business, operations, properties, income or condition
(financial or otherwise) or prospects of the Lessee and its consolidated
Subsidiaries taken as a whole, (B) the ability or authority of the Lessee to
perform its obligations under any of the Operative Documents, (C) the validity
or enforceability of any of the Operative Documents or any rights or remedies
under any thereof, (D) the rights or interests of the Lessor or any Assignee in
the Equipment or the other Lessee Collateral or (E) the Fair Market Value, use,
utility, useful life or residual value of the Equipment.

     “Material Lease Default” shall mean a Lease Default of the type described
in Section 12.1(a), (f) or (g).

     “Moody’s” shall mean Moody’s Investor Service, Inc., or any successor
thereto.

     “Multiemployer Plan” shall mean a “multiemployer plan” as defined in
Sections 3(37) and 4001(a)(3) of ERISA.

     “Offeree Letter” shall have the meaning provided in Section 3.1(s).

     “Operative Documents” shall mean, as the context requires:

     (a) the Lease;

     (b) the Cash Collateral Agreement;

     (c) each Control Agreement; and

     (d) the Lessor Assignment Agreement.

     “Original Part” shall have the meaning provided in Section 8.4.

     “Overall Transaction” shall mean all the transactions and activities
referred to in or contemplated by the Operative Documents and the Bill of Sale.

     “Overdue Rate” shall mean the lesser of (a) the highest interest rate
permitted by Applicable Laws and Regulations and (b) an interest rate per annum
equal to, in the case of Series A Rent, the Series A Yield Rate plus 2%, in the
case of the Series B Rent, the Series B

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Yield Rate plus 2%, in the case of the Series C Rent, the Series C Yield Rate
plus 2% and, in the case of the Lessor’s Interest Related Rent, the Lessor’s
Interest Related Yield Rate plus 2%.

     “Part” shall have the meaning provided in Section 8.4.

     “Payment Date” shall mean (a) the 28th day of each March, June, September
and December and (b) the last day of the Lease Term or, in each case, the next
succeeding Business Day if such day is not a Business Day, unless the result
would be that the Payment Date would be in the next succeeding calendar month,
in which case such Payment Date shall be on the next preceding Business Day.

     “Payment Default” shall have the meaning provided in Section 20.3.

     “PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.

     “Pension Plan” shall mean any-employee pension benefit plan covered by
Title IV of ERISA (other than a Multiemployer Plan) that is maintained for
employees of Lessee or any ERISA Affiliate or with regard to which Lessee or an
ERISA Affiliate is a contributing sponsor within the meaning of Sections
4001(a)(13) or 4069 of ERISA.

     “Permitted Contest” shall mean actions taken by a Person to contest in good
faith, by appropriate proceedings (judicial or otherwise) initiated timely and
diligently prosecuted, including to contest the legality, validity or
applicability to any Item of Equipment or any other Lessee Collateral or any
interest therein of any Person of: (a) any Applicable Laws and Regulations;
(b) any term or condition of, or any revocation or amendment of, or other
proceeding relating to, any Governmental Action or any contract or arrangement
or obligation; or (c) any Lien or Tax; provided that the initiation and
prosecution of such contest would not: (i) result in, or materially increase the
risk of, the imposition of any criminal liability or material civil liability on
any Indemnitee; (ii) be reasonably likely to adversely affect the lien and
security interests created by the Operative Documents or the right, title or
interest of Lessor in or to any of the Items of Equipment or any other Lessee
Collateral or the right of Lessor to receive payment of Rent or the Lease
Balance or any other amount payable under the Operative Documents or any
interest therein; (iii) be reasonably likely to adversely affect in any material
respect the fair market value, utility or remaining useful life of any Item of
Equipment or any interest therein; (iv) involve any material risk of the sale,
forfeiture or loss of any Item of Equipment or any other Lessee Collateral,
title thereto or any material interest therein or materially interfere with the
use or disposition of any Item of Equipment or the payment of Rent or
(v) otherwise be reasonably expected to result in a Material Adverse Effect; and
provided further that in any event reserves to the extent required by GAAP are
maintained against any adverse determination of such contest.

     “Permitted Encumbrances” shall mean:

     (a) Encumbrances which may at any time be granted in favor of Lessor to
secure the Lessee Obligations;

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     (b) Encumbrances in existence as of the Delivery Date listed on
Schedule IV, and any substitutions or renewals thereof, provided that (i) any
substitute or renewal Encumbrance is limited to the property encumbered by the
existing Encumbrance, and (ii) the principal amount of the obligations secured
thereby is not increased;

     (c) Encumbrances for current taxes, assessments or other Governmental
Charges which are not delinquent or remain payable without any penalty or which
are being contested in good faith via appropriate proceedings, with appropriate
reserves established therefor in accordance with GAAP;

     (d) Encumbrances in connection with workers’ compensation, unemployment
insurance or other social security obligations;

     (e) Mechanics’, workers’, materialmen’s, landlords’, carriers’ or other
like Encumbrances arising in the ordinary and normal course of business with
respect to obligations which are not past due or which are being contested in
good faith via appropriate proceedings, with appropriate reserves established
therefor in accordance with GAAP;

     (f) Purchase money security interests (including by way of installment
sales and title retention agreements) in personal or real property hereafter
acquired when the security interest is granted contemporaneously with such
acquisition (or within nine months thereafter), Encumbrances created to secure
the cost of construction or improvement of property and Encumbrances created to
secure Indebtedness incurred to finance such purchase price or cost (including
Encumbrances of Lessee in favor of the United States or any state, or any
department, agency, instrumentality or political subdivision thereof, securing
any real property or other assets in connection with the financing of industrial
revenue bond facilities or of any equipment or other property designed primarily
for the purpose of air or water pollution control); provided that (i) any such
Encumbrance shall attach only to the property so purchased, constructed or
improved, together with attachments and accessions thereto, and rents, proceeds,
products, substitutions, replacements and profits thereof and attachments and
accessories thereto, and (ii) the amount of Indebtedness secured by any such
Encumbrance shall not exceed the purchase or construction price of such property
plus transaction costs and financing charges relating to the acquisition or
construction thereof;

     (g) Encumbrances arising from attachments or similar proceedings, pending
litigation, judgments or taxes or assessments in any such event whose validity
or amount is being contested in good faith by appropriate proceedings and for
which adequate reserves have been established and are maintained in accordance
with GAAP;

     (h) Encumbrances arising in the ordinary course of business or by operation
of law, not securing Indebtedness, but securing such obligations as
(i) judgments or awards, which (A) are covered by applicable insurance or
(B) have been outstanding less than thirty (30) consecutive days, (ii) interests
of landlords or lessors under leases of real or personal property entered into
in the ordinary course of business arising by contract or

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operation of law, (iii) Encumbrances in favor of customs and revenue authorities
which secure payment of customs in connection with the importation of goods,
(iv) Encumbrances which constitute rights of set-off of a customary nature or
bankers’ liens on amounts on deposit, whether arising by contract or by
operation of law, in connection with arrangements entered into with depository
institutions in the ordinary course of business, (v) such minor defects,
irregularities, encumbrances, easements, rights of way, and clouds on title as
normally exist with respect to similar properties which do not, individually or
in the aggregate, materially impair the property affected thereby or the use
thereof and (vi) subleases, licenses, and sublicenses granted to third parties,
the granting of which does not result in a Material Adverse Effect;

     (i) Encumbrances securing reimbursement obligations of Lessee under
documentary letters of credit; provided that such Encumbrances shall attach only
to documents relating to such letters of credit, goods covered thereby and
products and proceeds thereof;

     (j) Encumbrances on insurance policies or the proceeds of insurance
policies other than policies and the proceeds of policies required pursuant to
Section 9.2 hereof incurred solely to secure the financing of premiums owing
with respect thereto;

     (k) Encumbrances existing on property (including the proceeds and
accessions thereto) acquired by Lessee (including Encumbrances on assets of any
corporation at the time it becomes a Subsidiary), but excluding any Encumbrances
created in contemplation of any such acquisition; and

     (l) Encumbrances encumbering customary initial deposits and margin
deposits, and other Encumbrances that are within the general parameters
customary in the industry and incurred in the ordinary course of business in
connection with Rate Contracts or portfolio investments maintained with
financial intermediaries.

     “Permitted Investments” shall mean (a) full faith and credit obligations of
the United States of America, or fully guaranteed as to interest and principal
by the full faith and credit of the United States of America, maturing in not
more than one year from the date such investment is made, (b) certificates of
deposit having a final maturity of not more than one year after the date of
issuance thereof of an Assignee or of any other commercial bank incorporated
under the laws of the United States of America or any state thereof or the
District of Columbia, which bank is a member of the Federal Reserve System and
has a combined capital and surplus of not less than $500,000,000 and with a
senior unsecured debt credit rating of at least “A3” by Moody’s and “A-” by S &
P, (c) commercial paper of Lessor or any Assignee having a remaining term until
maturity of not more than 180 days from the date such investment is made,
(d) commercial paper of Lessee, banks, trust companies or national banking
associations (in each case excluding Lessee and its Affiliates) incorporated or
doing business under the laws of the United States or one of the States thereof,
in each case having a remaining term until maturity of not more than 180 days
from the date such investment is made and rated at least “P-1” by Moody’s or at
least “A-1” by S&P and (e) repurchase agreements maturing within one year with
any financial institution having combined capital and surplus of not less than
$500,000,000 with any of the

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obligations described in clauses (a) through (d) as collateral so long as title
to the underlying obligations pass to Agent and such underlying obligations
shall be segregated in a custodial or trust account for the benefit of Agent.

     “Permitted Liens” shall mean (a) the respective rights and interests of
Lessee, Agent and Lessor, as provided in the Operative Documents, (b) Lessor
Liens, (c) Liens for current Taxes either not yet delinquent or being contested
by a Permitted Contest, (d) the leasehold interest of any Person under any
Sublease permitted under Section 8.2 of the Lease, (e) materialmen’s,
mechanic’s, worker’s, artisan’s, repairmen’s, employee’s or other like Liens
securing payment of the price of goods or services rendered arising in the
ordinary course of business for amounts either not yet due or being contested by
a Permitted Contest, (f) statutory Liens, other than those described in clauses
(a) or (e) above, arising in the ordinary course of business with respect to
obligations which are not delinquent or are being contested by a Permitted
Contest; provided that, if delinquent, adequate reserves have been set aside
with respect thereto and, by reason of nonpayment, no Item of Equipment or any
other Lessee Collateral is subject to a material risk of loss or forfeiture, and
(g) Liens created by or resulting from any litigation or legal proceeding
involving Lessee or any of its Subsidiaries in the ordinary course of its
business which is currently being contested by a Permitted Contest.

     “Permitted Modification” shall have the meaning provided in Section 8.4.

     “Person” shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, an unincorporated
association, a limited liability company, a joint venture, a trust or other
entity or a Governmental Authority.

     “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of
ERISA) which Lessee or any ERISA Affiliate sponsors or maintains, or to which
Lessee or any ERISA Affiliate makes, is making, or is obligated to make
contributions, and includes any Pension Plan.

     “Prohibited Transaction” shall mean a transaction that is prohibited under
Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.

     “Purchase Amount” shall mean, as of any date of determination, the sum of
(a) the Lease Balance as of such date of determination, plus (b) all Rent and
other sums then due and payable pursuant to the terms of the Operative Documents
by Lessee, including, without limitation, all Supplemental Rent.

     “Purchase Option” shall have the meaning provided in Section 15.1(a).

     “Purchase Price” (i) for an Item of Equipment shall mean the Appraised
Value of such Item of Equipment, plus applicable sales, use or similar taxes
financed by the Lessor through the Funding and as more specifically described on
Schedule I hereto and (ii) the aggregate Purchase Price of all Items of
Equipment leased hereunder shall mean, collectively, the Series A Purchase
Price, the Series B Purchase Price, the Series C Purchase Price and the Lessor’s
Interest, plus applicable sales, use or similar taxes financed by the Lessor
through the Funding. The Purchase

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Price for a Replacement Item shall be deemed to be the Purchase Price of the
Item of Equipment replaced by such Replacement Item.

     “Rate Contracts” shall mean interest rate swaps, caps, floors and collars,
currency swaps, or other similar financial products designed to provide
protection against fluctuations in interest, currency or exchange rates.

     “Regulatory Requirement” shall have the meaning provided in Section
11.4(b).

     “Related Party” shall have the meaning provided in Section 18.2(g).

     “Release” shall mean the release, deposit, disposal or leak of any
Hazardous Material into or upon or under any land or water or air, or otherwise
into the environment, including, without limitation, by shall mean of burial,
disposal, discharge, emission, injection, spillage, leakage, seepage, leaching,
dumping, pumping, pouring, escaping, emptying, placement and the like.

     “Removable Part” shall have the meaning provided in Section 8.4.

     “Rent” shall mean Basic Rent and Supplemental Rent, collectively.

     “Rent Period” shall mean (a) for the initial Rent Period, a period
commencing on the Delivery Date to but excluding the first Payment Date and (b)
for each other Rent Period, each period commencing on a Payment Date to but
excluding the next Payment Date; provided that any Rent Period that would
otherwise extend beyond the Lease Expiration Date shall end on the Lease
Expiration Date.

     “Replaced Item” or “Replaced Items” shall have the meaning provided in
Section 8.7.

     “Replacement Items” or “Replacement Items” shall have the meaning provided
in Section 8.7.

     “Replacement Parts” shall have the meaning provided in Section 8.4.

     “Reportable Event” shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations promulgated thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.

     “Required ABN Cash Collateral Amount” shall mean, as of any date of
determination, an amount equal to 100% of the Series A Lease Balance held by ABN
AMRO Bank N.V., plus 100% of the Series A Accrual Rent relating to such portion
of the Series A Lease Balance due on the next succeeding Payment Date.

     “Required Alteration” shall have the meaning provided in Section 8.4.

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     “Required Cash Collateral Amount” shall mean, as the context may require,
any or all of the Required Wells Fargo Cash Collateral Amount, the Required ABN
Cash Collateral Amount, the Required Series C Cash Collateral Amount and the
Required Lessor’s Interest Related Cash Collateral Amount.

     “Required Series C Cash Collateral Amount” shall mean, as of any date of
determination, an amount equal to 100% of the Series C Lease Balance, plus 100%
of the Series C Accrual Rent due on the next succeeding Payment Date.

     “Required Lessor’s Interest Related Cash Collateral Amount” shall mean, as
of any date of determination, an amount equal to 100% of the Lessor’s Interest
Related Lease Balance, plus 100% of the Lessor’s Interest Related Accrual Rent
due on the next succeeding Payment Date.

     “Required Wells Fargo Cash Collateral Amount” shall mean, as of any date of
determination, an amount equal to 100% of the Series A Lease Balance held by
Wells Fargo Bank, N.A., plus 100% of the Series A Accrual Rent relating to such
portion of the Series A Lease Balance due on the next succeeding Payment Date.

     “Residual Value” shall mean the Fair Market Value of the Equipment as of
the end of the Lease Term as determined by the Appraisal.

     “Responsible Official” or “Responsible Officer” shall mean, when used with
reference to a Person other than an individual, any corporate officer of such
Person, general partner of such Person, corporate officer of a corporate general
partner of such Person, or corporate officer of a corporate general partner of a
partnership that is a general partner of such Person, or any other responsible
official thereof duly acting on behalf thereof. Any document or certificate
hereunder that is signed or executed by a Responsible Official of another Person
shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such other Person;
provided, however, that with respect to Lessee or its Affiliates, Responsible
Official or Responsible Officer shall mean, with respect to any Person, the
chief executive officer, the president, the chief financial officer or the
treasurer of such Person, or any other senior officer of such Person having
substantially the same authority and responsibility; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of any such Person, or any other senior officer of such Person
involved principally in the financial administration or controllership function
of such Person and having substantially the same authority and responsibility.

     “Sale Option” shall have the meaning provided in Section 15.1(b).

     “Sale Proceeds” shall have the meaning set forth in Section 15.1(b).

     “Sale Recourse Amount” shall mean the product obtained by multiplying the
aggregate Purchase Price for the Items of Equipment then subject to the Lease by
37.50723972388%.

     “SEC” shall mean the United States Securities and Exchange Commission and
any successor thereto.

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     “Securities Act” shall mean the Securities Act of 1933, as amended.

     “Securities Intermediaries” shall mean, collectively, each Securities
Intermediary under the Control Agreements and “Securities Intermediary” shall
mean any of them, as the context requires.

     “Seller’s Share” shall have the meaning set forth in the Lessor Assignment
Agreement.

     “Series” shall have the meaning set forth in Section 3.1(b)(2)(E) of the
Lessor Assignment Agreement.

     “Series A Accrual Rent” shall mean, with respect to each Rent Period, an
amount equal to yield accrued on the Series A Lease Balance outstanding during
such Rent Period at the Series A Yield Rate.

     “Series A Assignee” shall mean each Assignee that purchases and assumes an
Assignee’s Share with respect to the Series A Lease Balance pursuant to the
Lessor Assignment Agreement.

     “Securities Intermediary” shall have the meaning provided in the Cash
Collateral Agreement.

     “Series A Capital Rent” shall mean, for each Payment Date during the Lease
Term, that portion of the installment of Rent payable on such Payment Date
designated as Series A Capital Rent under the column heading “Series A Capital
Rent” on Schedule III.

     “Series A Cash Collateral” shall mean, collectively, the Required ABN Cash
Collateral Amount and the Required Wells Fargo Cash Collateral Amount.

     “Series A Lease Balance” shall mean, as of any date of determination, the
Series A Purchase Price, less (a) the sum of all Series A Capital Rent paid
prior to such date of determination, and (b) the sum of all amounts paid and
attributable to the Series A Lease Balance pursuant to Section 9.1 or 12.2,
Article XIV or Article XV.

     “Series A Share” shall have the meaning provided in the Lessor Assignment
Agreement.

     “Series A Purchase Price” shall mean $104,579,701.22.

     “Series A Rent” shall mean for each Payment Date during the Lease Term, a
payment of rent consisting of (a) Series A Capital Rent and (b) Series A Accrual
Rent for the Rent Period ending on such Payment Date.

     “Series A Yield Rate” shall mean the LIBO Rate plus 0.50%.

     “Series B Accrual Rent” shall mean, with respect to each Rent Period, an
amount equal to yield accrued on the Series B Lease Balance outstanding during
such Rent Period at the Series B Yield Rate.

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     “Series B Assignee” shall mean each Assignee that purchases and assumes an
Assignee’s Share with respect to the Series B Lease Balance pursuant to the
Lessor Assignment Agreement.

     “Series B Capital Rent” shall mean, for each Payment Date during the Lease
Term, that portion of the installment of Rent payable on such Payment Date
designated as Series B Capital Rent under the column heading “Series B Capital
Rent” on Schedule III.

     "Series B Lease Balance” shall mean, as of any date of determination, the
Series B Purchase Price, less (a) the sum of all Series B Capital Rent paid
prior to such date of determination, and (b) the sum of all amounts paid and
attributable to the Series B Lease Balance pursuant to Section 9.1 or 12.2,
Article XIV or Article XV.

     “Series B Share” shall have the meaning provided in the Lessor Assignment
Agreement.

     “Series B Purchase Price” shall mean $9,380,000.

     “Series B Rent” shall mean for each Payment Date during the Lease Term, a
payment of rent consisting of (a) Series B Capital Rent and (b) Series B Accrual
Rent for the Rent Period ending on such Payment Date.

     “Series B Yield Rate” shall mean the LIBO Rate plus 1.00%.

     “Series C Accrual Rent” shall mean, with respect to each Rent Period, an
amount equal to yield accrued on the Series C Lease Balance outstanding during
such Rent Period at the Series C Yield Rate.

     “Series C Cash Collateral” shall mean the Required Series C Cash Collateral
Amount.

     "Series C Lease Balance” shall mean, as of any date of determination, the
Series C Purchase Price, less the sum of all amounts paid and attributable to
the Series C Lease Balance pursuant to Section 6.1, 9.1 or 12.2, Article XIV or
Article XV.

     “Series C Purchase Price” shall mean $$9,320,298.78.

     “Series C Rent” shall mean for each Payment Date during the Lease Term, a
payment of rent consisting of Series C Accrual Rent for the Rent Period ending
on such Payment Date.

     “Series C Share” shall have the meaning provided in the Lessor Assignment
Agreement.

     “Series C Yield Rate” shall mean the LIBO Rate plus 1.50%.

     “Significant Subsidiary” shall mean, at any time, any Subsidiary of Lessee
having total assets (excluding intercompany assets and liabilities) as of the
last day of the preceding fiscal quarter representing 10% or more of the
Lessee’s consolidated total assets, excluding goodwill and long-term deferred
asset charges, based upon Lessee’s most recent quarterly Financial Statements
delivered to Agent under Section 18.1(a), determined in accordance with GAAP.

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     “Solvent” shall mean, with respect to any Person, that as of the date of
determination, (a) the then fair saleable value of the property of such Person
is (i) greater than the total amount of liabilities (including reasonably
anticipated liabilities with respect to contingent obligations) of such Person
and (ii) greater than the amount that will be required to pay the probable
liabilities on such Person’s then existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to such Person, and (b) such Person has not incurred and
does not intend to incur, nor does it believe that it will incur, debts beyond
its ability to pay such debts as they become due.

     “S&P” shall mean Standard & Poor’s Rating Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto.

     “Sublease” shall have the meaning provided in Section 8.2.

     “Sublessee” shall have the meaning provided in Section 8.2.

     “Subsidiary” shall mean any corporation, association, partnership, joint
venture or other business entity of which more than fifty percent (50%) of the
voting stock or other equity interest is owned directly or indirectly by any
Person or one or more of the other Subsidiaries of such Person or a combination
thereof.

     “Supplemental Rent” shall mean any and all amounts, liabilities and
obligations other than Basic Rent which Lessee assumes or agrees or is otherwise
obligated to pay under the Lease or any other Operative Document (whether or not
designated as Supplemental Rent) to Lessor or any other Person, including,
without limitation, Purchase Amount, Break Funding Amounts and indemnities and
damages for breach of any covenants, representations, warranties or agreements.

     “Surplus Collateral” is defined in Section 18.3(b)(ii).

     “Surviving Corporation” shall have the meaning provided in Section
18.2(c)(iv).

     “Swap Termination Value” shall mean, in respect of any one or more Rate
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Rate Contracts, (a) for any date on or after
the date such Rate Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Rate Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Rate Contracts (which may include any Assignee).

     “Tangible Net Worth” shall mean, as of any date of determination,
Consolidated Total Assets, minus Consolidated Total Liabilities, minus
Consolidated Intangible Assets, adjusted to add back all non-cash charges
recorded after the Delivery Date (other than customary depreciation and
amortization and non-cash charges related to Consolidated Intangible Assets).

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     “Taxes” and “Tax” shall have the meaning provided in the definition herein
of “Imposition.”

     “Transaction Costs” shall mean reasonable properly documented out-of-pocket
costs, expenses and fees incurred by Agent, Lessor, Lessee and Arranger, in
connection with the consummation of the transactions contemplated by the
Operative Documents, and the preparation, negotiation, execution and delivery,
modification and/or enforcement of the Operative Documents, including (a) the
reasonable fees and expenses of Chapman and Cutler LLP, document counsel;
(b) the reasonable fees and expenses of Latham & Watkins LLP, special counsel to
the Lessee; (c) the initial and ongoing fees and expenses of the Agent and its
special counsel payable in accordance with the Agent Fee Letter; (d) all
reasonable fees and expenses of the Appraiser with respect to the Appraisal;
(e) all taxes and search fees, recording fees and filing fees incurred in
connection with lien searches and the recording, registering or filing any
Operative Document, any security agreement, notice or financing statement with
any public office, registry or governmental agency; (f) all fees and expenses
incurred in connection with residual value insurance; (g) the initial and
ongoing reasonable fees and expenses of each Securities Intermediary; and
(h) all fees and expenses of Arranger in connection with the syndication of the
transaction.

     “UCC” shall mean the Uniform Commercial Code of any applicable
jurisdiction.

     “Unfunded Pension Liability” shall mean the excess of a Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA over the current value of that
Plan’s assets, determined in accordance with the assumptions used for funding
the Plan pursuant to Section 412 of the Code for the applicable year.

     “Unrestricted Cash Reserves” shall mean, in respect of the Lessee and its
wholly-owned Subsidiaries on a consolidated basis at any time, the sum of (a)
cash, plus (b) cash equivalents (as determined in accordance with GAAP), plus
(c) readily marketable debt securities that are current assets (in accordance
with GAAP) and which are rated A-/A3 or better by S&P and Moody’s, respectively,
minus (d) the amount of assets specified in clause (a), (b) and (c) of this
definition that are subject to the Cash Collateral Agreement, any Control
Agreement, the cash collateral agreement or control agreements entered into in
connection with the Lease A or any other Encumbrance, other than Encumbrances
permitted under clauses (c) and (h)(iv) of the definition of “Permitted
Encumbrances.”

     “Upfront Fee” shall have the meaning provided in Section 2.10.

     “USA Patriot Act” shall mean United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

     “Wells Fargo Cash Collateral Account” shall have the meaning provided in
the Cash Collateral Agreement.

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     “Wells Fargo Control Agreement” shall mean that certain Control Agreement,
dated as of August 6, 2004, among the Wells Fargo Securities Intermediary, the
Lessee and Lessor.

     “Wells Fargo Securities Intermediary” shall have the meaning provided in
the Cash Collateral Agreement.

ARTICLE II

ACQUISITION AND LEASE; GENERAL PROVISIONS

     Section 2.1. Funding; Payment of Purchase Price. (a) Subject to the terms
and conditions of this Lease and the other Operative Documents, and in reliance
on the representations and warranties contained herein or made pursuant hereto,
on the Delivery Date, Lessor shall transfer to Agent an amount equal to the
Purchase Price.

     (b) Remittances pursuant to this Section 2.1 shall be made in immediately
available funds by wire transfer to the account of Agent set forth below and
must be received by Agent by 10:00 a.m., California time, on the Delivery Date:

         

  Bank:   Wells Fargo Bank Northwest, National Association
 
  ABA Routing #:   121-000-248

  Account #:   A/C: 0510922115

  Payee:   Corporate Trust Department

  Notify:   DeAnn Madsen

  Reference:   LSI Logic 2004 Lease

     Section 2.2. Application of Funds; Purchase and Lease of Equipment. On the
Delivery Date, upon (a) receipt by Agent of all amounts to be paid by Lessor
pursuant to Section 2.1(a), and (b) satisfaction or waiver consented to by
Agent, Lessor and each Assignee of each of the conditions set forth in
Article III, (i) Agent, on behalf of Lessor, shall pay, from the funds made
available by Lessor pursuant to Section 2.1(a), an amount equal to the Purchase
Price of the Items of Equipment in immediately available funds remitted by wire
transfer to the account(s) specified by Lessee and (ii) Lessor shall lease to
Lessee the Items of Equipment and Lessee shall accept delivery of and lease from
Lessor the Items of Equipment pursuant to this Lease.

     Section 2.3. Delivery Date Notice and Delivery Date. At least two (2)
Business Days prior to the Delivery Date, Lessee shall deliver to Agent and
Lessor an irrevocable written notice (the “Delivery Date Notice”) substantially
in the form of Exhibit A, setting forth, inter alia,

     (a) a description of the Purchase Price and the amounts thereof; and

     (b) wire transfer instructions for the disbursement of funds.

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     All documents and instruments required to be delivered on the Delivery Date
pursuant to this Lease shall be delivered at the offices of Chapman and Cutler
LLP, 595 Market Street, Suite 2600, San Francisco, California 94104-2839. On the
Delivery Date, subject to the terms and conditions of this Lease, and upon
receipt of funds by Agent from Lessor sufficient therefor, Agent shall pay the
Purchase Price for the Items of Equipment on behalf of Lessor and Lessor shall
thereby purchase and lease the Items of Equipment to Lessee.

     Section 2.4. Nature of Transaction. It is the intent of the parties that
the transaction contemplated hereby constitutes an operating lease from Lessor
to Lessee under Financial Accounting Standard Board Statement No. 13 for
Lessee’s financial reporting and a non-consolidated transaction under Financial
Accounting Standard Board Interpretation No. 46R (“FIN 46R”) or Financial
Accounting Standard Board Statement No. 94 (“FASB 94") or related
interpretations, as applicable. The parties agree that for Federal and state and
local income tax, bankruptcy, insolvency, conservatorship, receivership,
commercial law and UCC purposes (including the substantive law upon which such
bankruptcy, insolvency, conservatorship and receivership proceedings are based)
(a) this Lease will be treated as a financing transaction, (b) the transaction
contemplated hereby preserves ownership in the Items of Equipment in Lessee,
(c) this Lease grants a Lien in the Items of Equipment and the other Lessee
Collateral to Lessor, (d) the obligations of Lessee to pay deemed principal
portion and deemed interest portion of Rent shall be treated as payments of
principal and interest, respectively, and (e) Lessee will be treated as the
owner of the Items of Equipment and Lessor shall be treated as having advanced
funds to Lessee in the form of a loan secured by a Lien on the Items of
Equipment and the other Lessee Collateral. Except as specifically provided for
herein, Lessor shall be deemed to have a first priority, perfected security
interest in and Lien on the Items of Equipment and the other Lessee Collateral,
free and clear of all Liens other than Permitted Liens, as security for the
obligations of Lessee under the Operative Documents. Except as otherwise
provided by law or in connection with a settlement, compromise or adjudication
made under the provisions of Section 11.2(c), each of the parties to this Lease
agrees that it will not, nor will it permit any Affiliate to at any time, take
any action or fail to take any action with respect to the filing of any income
tax return, including an amended income tax return, inconsistent with the
intention of the parties expressed in this Section 2.4.

     Section 2.5. [Reserved].

     Section 2.6. Cash Collateral. On the Delivery Date, Lessee shall cause (by
delivery to the Securities Intermediaries of, or by otherwise depositing into
the Cash Collateral Accounts, sufficient Cash Collateral):

     (a) Cash Collateral to be deposited into the ABN Cash Collateral Account in
an amount equal to $29,671,587.28; and

     (b) Cash Collateral to be deposited into the Wells Fargo Cash Collateral
Account in an amount equal to $75,232,979.17; and

     (c) Cash Collateral to be deposited into the Bank of the West Cash
Collateral Account in an amount equal to $20,155,728.84;

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in each case, to be held in such Cash Collateral Accounts, which Required Cash
Collateral Amounts shall be assigned and pledged by Lessee to the Lessor
pursuant to the Cash Collateral Agreement as security for the obligations of
Lessee under the Operative Documents with respect to the Series A Lease Balance,
the Series C Lease Balance and the Lessor’s Interest Related Lease Balance and
all other amounts due with respect to the Series A Lease Balance, Series C Lease
Balance and Lessor’s Interest Related Lease Balance; provided that pursuant to
the Lessor Assignment Agreement, a portion of the Lessor’s right, title and
interest in and to the Series A Cash Collateral shall be assigned and sold by
Lessor to each Series A Assignee in an amount equal to the Series A Lease
Balance held by such Series A Assignee plus 100% of the Series A Accrual Rent
relating to such portion of the Series A Lease Balance due on the next
succeeding Payment Date, in each case to secure such Series A Lease Balance and
all other amounts due with respect to such Series A Lease Balance; provided
further, that, if a Securities Intermediary has an unsecured debt credit rating
of “A3” by Moody’s and “A-” by S&P, then the aggregate amount of the
certificates of deposit constituting Cash Collateral which is issued by such
Securities Intermediary shall not exceed $40,000,000 in face amount.

     Section 2.7. [Reserved].

     Section 2.8. Legal, Accounting and Tax Representation. Lessee and Lessor
acknowledge and agree that none of Agent, Lessor, any Assignee or Arranger has
made or will make any representation or warranty concerning the tax, accounting
or legal characteristics of this Lease, any of the other Operative Documents or
the Overall Transaction, and that each of Lessee and Lessor has obtained and
relied on such tax, accounting and legal advice regarding this Lease, the other
Operative Documents and the Overall Transaction as it deems appropriate.

     Section 2.9. Computations.

     (a) Determination of Accrual Rent. All computations of Accrual Rent and
other accrued amounts (including, without limitation, the Overdue Rate), in each
case pursuant to the Operative Documents shall be made on the basis of a 360-day
year and the actual days elapsed for Accrual Rent calculated by reference to the
LIBO Rate.

     (b) Conclusive Determinations. Each determination of Accrual Rent pursuant
to any provision of this Lease or any of the other Operative Documents shall be
conclusive in the absence of manifest error.

     Section 2.10. Fees. Lessee agrees to pay the fees set forth in this
Section 2.10.

     (a) An upfront fee payable on the Delivery Date to Agent, on behalf of
Lessor, in an amount mutually agreed to by Lessee and Lessor (the “Upfront
Fee").

     (b) The fee payable on the Delivery Date to the Agent, as provided in the
Agent Fee Letter.

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ARTICLE III

CONDITIONS PRECEDENT

     Section 3.1. Conditions to Delivery Date. The effectiveness of this Lease,
and the obligation of Agent, Lessor and each Assignee to perform their
respective obligations on the Delivery Date, shall be subject to the fulfillment
to the satisfaction of (including, with respect to writings, such writings being
in form and substance reasonably satisfactory to the addressee or beneficiary
thereof), or the waiver by Agent, Lessor and each Assignee of, the conditions
precedent set forth in this Section 3.1 on or before the Delivery Date (except
that the obligation of any party hereto shall not be subject to the performance
or compliance of such party or of any of such party’s Affiliates). In the event
the Lessor and the Assignees fund on the Delivery Date, all of the conditions
precedent shall be deemed satisfied or waived.

     (a) Authorization, Execution and Delivery of Operative Documents; No Lease
Default. The Operative Documents and the Bill of Sale shall have been duly
authorized, executed and delivered by each of the parties thereto, shall be in
form and substance satisfactory to Agent, Lessor and each Assignee and an
executed counterpart of each thereof shall have been received by Agent, Lessor
and each Assignee. Each of the Operative Documents shall be in full force and
effect as to all parties and no Lease Default or Lease Event of Default shall
have occurred or be continuing or shall occur after giving effect to the
Operative Documents.

     (b) Legal Opinions. Agent, Lessor and each Assignee shall have received
favorable opinions, in each case, dated the Delivery Date of (i) Ray, Quinney &
Nebeker, special counsel to Agent, substantially in the form attached hereto as
Exhibit B, (ii) Senior Corporate Counsel of Lessee, substantially in the form
attached hereto as Exhibit C and (iii) Latham & Watkins LLP, special counsel to
Lessee, substantially in the form attached hereto as Exhibit D, in each case, in
form and substance satisfactory to Agent, Lessor and each Assignee.

     (c) Governmental and Third Party Approvals. All necessary or advisable
Governmental Actions, and all consents, approvals and authorizations of Persons
other than Governmental Agencies, in each case in form and substance
satisfactory to Agent, Lessor and each Assignee required as of the Delivery Date
in connection with the Overall Transaction, shall have been obtained or made and
be in full force and effect and not be subject to any pending procedures or
appeals, whether administrative, judicial or otherwise, except for any
Governmental Action, consent, approval or authorization the failure of which to
obtain, or the appeal of or further procedures with respect to which, could not
reasonably be expected to have a Material Adverse Effect.

     (d) Corporate Status and Proceedings. Agent, Lessor and each Assignee shall
have received:

     (i) a copy of the certificates of good standing with respect to Lessee from
the appropriate Governmental Agency of the jurisdiction of its formation, dated
no earlier than the 10th day prior to the Delivery Date; and

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     (ii) certificates of the Secretary or Assistant Secretary of Lessee,
substantially in the form of Exhibit E, and attaching and certifying as to
(A) the directors’ resolutions in respect of the execution, delivery and
performance by Lessee of each Operative Document to which it is or will be a
party, (B) its articles of incorporation and by-laws and (C) the incumbency and
signatures of persons authorized to execute and deliver the Operative Documents
on behalf of Lessee.

     (e) Agent Secretary’s Certificate. Lessor and each Assignee shall have
received (x) a certificate of the Secretary or Assistant Secretary of Agent
attaching and certifying as to: (i) the corporate authority for the execution,
delivery and performance by Agent of each Operative Document to which it is or
will be a party, (ii) its organizational documents, (iii) its by-laws and (iv)
the incumbency and signature of persons authorized to execute and deliver such
documents on behalf of Agent, and (y) a good standing certificate from the
appropriate Governmental Agency as to Agent’s good standing in its jurisdiction
of formation.

     (f) Representations and Warranties. Each representation and warranty of
Lessee contained herein or in any other Operative Document and to be made on the
Delivery Date shall be true and correct as of the Delivery Date.

     (g) Appraisal. Agent, Lessor and each Assignee shall have received a copy
of an appraisal (the “Appraisal”) on or before the Delivery Date of the Items of
Equipment from the Appraiser in form and substance satisfactory to Agent, Lessor
and each Assignee, which shall establish (by the use of appraisal methods
satisfactory to Agent) the remaining useful life of such Items of Equipment as
of the Delivery Date and the Fair Market Value of such Items of Equipment as of
the Delivery Date and the last day of the Lease Term on an in-exchange,
in-continued use basis.

     (h) [Reserved].

     (i) Fees and Transaction Costs. Lessee shall have paid all fees and
Transaction Costs due and payable on or prior to the Delivery Date.

     (j) Liens. Upon the payment by Lessor of the Purchase Price pursuant to
Section 2.2, the deposit of the Cash Collateral into the Cash Collateral
Accounts, the execution and delivery of each of the Lessor Assignment Agreement
and the Control Agreements by the parties thereto and the filing of the UCC
financing statements listed on Schedule 3.1(j), (A) the Lessor shall have a
first-priority, perfected security interest in the Lessee Collateral (other than
the Lessee Collateral described in clause (B) below), subject only to Permitted
Liens, (B) each Series A Assignee shall have a first-priority, perfected
security interest in the Series A Cash Collateral purchased and assumed by such
Series A Assignee pursuant to the Lessor Assignment Agreement and (C) the Items
of Equipment and the other Lessee Collateral shall be free and clear of all
Liens other than Permitted Liens.

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     (k) No Casualty. No Casualty or other event or circumstance that, with the
giving of notice or lapse of time or both, would constitute a Casualty with
respect to the Items of Equipment, shall have occurred and be continuing.

     (l) [Reserved.]

     (m) Insurance. Lessee shall have delivered to Agent, Lessor and each
Assignee the insurance Certificates required by Section 9.3.

     (n) Absence of Material Adverse Effect. Since December 31, 2003, no
Material Adverse Effect shall have occurred.

     (o) Filings and Recordings. Evidence that, upon filing of all UCC financing
statements with respect to the Items of Equipment (including applicable UCC-3
termination statements and fixture filings with respect to the Equipment), all
filings and recordings shall have been recorded or filed in such places or
offices as may be necessary or advisable in the reasonable opinion of Agent,
Lessor and each Assignee, to perfect the rights, title and interest of Lessor
intended to be created by the Operative Documents. The Agent, Lessor and each
Assignee shall have received the reports of lien searches conducted against
Lessee and the Items of Equipment in such states and with Governmental Agencies
as the Agent, Lessor and each Assignee, may reasonably request.

     (p) Cash Collateral. Lessee shall have deposited the Required Cash
Collateral Amount with the Securities Intermediaries to the satisfaction of
Agent, Lessor and each Assignee, in accordance with Section 2.6.

     (q) [Reserved.]

     (r) Delivery Date Notice. Lessee shall have delivered to Agent, Lessor and
each Assignee the Delivery Date Notice conforming with the requirements of
Section 2.3.

     (s) Offeree Letter. Agent, Lessor, each Assignee and Lessee shall have
received a letter, substantially in the form of Exhibit H, from the Arranger,
dated the Delivery Date, with respect to the number of offerees of the interests
in the Items of Equipment, the Lease and the other Operative Documents (the
“Offeree Letter”).

     (t) Further Documents. Agent, Lessor and each Assignee shall have received
all such further documents as the Agent, Lessor or any Assignee may reasonably
require.

ARTICLE IV

ACCEPTANCE AND LEASING OF EQUIPMENT

     Section 4.1. Acceptance and Lease. Lessor hereby agrees (subject to
satisfaction or waiver of the conditions set forth in Article III) to accept
delivery of each Item of Equipment from the sellers thereof and to lease such
Item of Equipment

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to Lessee hereunder, and Lessee hereby agrees, immediately following such
acceptance by Lessor, to lease from Lessor hereunder each such Item of
Equipment, such acceptance by Lessor and lease by Lessee to be evidenced by the
execution and delivery by Lessee and Lessor of this Lease, all in accordance
with Article III. Lessee hereby agrees that its execution and delivery of this
Lease shall, without further act, as between Lessor and Lessee irrevocably
constitute an agreement by Lessee to lease each Item of Equipment for all
purposes of this Lease.

     Section 4.2. No Warranty. THE ITEMS OF EQUIPMENT ARE LEASED BY LESSEE “AS
IS” IN THEIR PRESENT OR THEN CONDITION, AS THE CASE MAY BE, SUBJECT TO (i) ANY
RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (ii) THE STATE OF TITLE THERETO
EXISTING AT THE TIME LESSOR ACQUIRES ITS INTEREST IN THE ITEMS OF EQUIPMENT,
(iii) ANY STATE OF FACT WHICH AN ACCURATE PHYSICAL INSPECTION MIGHT SHOW, AND
LESSEE CONFIRMS THAT ITS EXECUTION AND DELIVERY OF THIS LEASE SHALL CONSTITUTE
ITS CERTIFICATION THAT IT HAS INSPECTED AND ACCEPTS, AS BETWEEN LESSOR AND
LESSEE, EACH ITEM OF EQUIPMENT WHICH IS THE SUBJECT MATTER HEREOF, (iv) ALL
APPLICABLE LAWS AND REGULATIONS, AND (v) ANY VIOLATIONS OF APPLICABLE LAWS AND
REGULATIONS WHICH MAY EXIST ON THE DELIVERY DATE (OTHER THAN BY LESSOR). LESSEE
ACKNOWLEDGES AND AGREES THAT (a) EACH ITEM OF EQUIPMENT IS OF A SIZE, DESIGN,
CAPACITY AND MANUFACTURE SELECTED BY LESSEE, (b) LESSEE IS SATISFIED THAT THE
SAME IS SUITABLE FOR ITS PURPOSES, (c) NEITHER LESSOR NOR AGENT IS A
MANUFACTURER THEREOF OR A DEALER IN PROPERTY OF SUCH KIND, (d) NEITHER LESSOR
NOR AGENT SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR PATENT DEFECT IN ANY ITEM OF
EQUIPMENT, OR THE FAILURE OF ANY ITEM OF EQUIPMENT TO COMPLY WITH APPLICABLE
LAWS AND REGULATIONS AND (e) NEITHER LESSOR NOR AGENT HAS MADE, OR DOES OR WILL
MAKE, (i) ANY REPRESENTATION OR WARRANTY OR COVENANT, WITH RESPECT TO THE TITLE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESIGN, OPERATION, CONDITION,
QUALITY, DESCRIPTION, DURABILITY OR SUITABILITY OF ANY SUCH ITEM OF EQUIPMENT IN
ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES AND USES OF LESSEE OR
(ii) ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY ITEM OF EQUIPMENT, IT BEING AGREED THAT ALL RISKS, AS BETWEEN
LESSOR OR AGENT, ON THE ONE HAND, AND LESSEE ON THE OTHER HAND, SHALL BE BORNE
BY LESSEE. Lessor assigns to Lessee, to the extent assignable, all of its
interest, if any, in any warranties, covenants and representations of any
Manufacturer or vendor of any Item of Equipment; provided, that if a Lease Event
of Default has occurred and is continuing, Lessor may revoke such assignment in
whole or in part by providing notice of such revocation to Lessee; and provided,
further, that any action taken by Lessee by reason thereof shall be at the
expense of Lessee and shall be consistent with Lessee’s obligations pursuant to
this Lease. Lessor and Agent acknowledge and agree that, at Lessee’s expense,
Lessor and Agent shall cooperate with Lessee with respect to any claim of Lessee
against any Manufacturer and Lessor and Agent further agree that, in the event
any such warranties, covenants and representations are not assignable by Lessor
to Lessee, Lessor and/or Agent shall, at the direction and expense of Lessee,
act on behalf of Lessee in pursuing any such claim.

ARTICLE V

LEASE TERM

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     Section 5.1. Lease Term. Unless earlier terminated pursuant to the terms of
the Operative Documents, the term of this Lease shall commence on the Delivery
Date and end on June 30, 2007 (the “Lease Term”).

ARTICLE VI

RENT

     Section 6.1. Rent Payments. On each Payment Date during the Lease Term,
Lessee shall pay to Agent for the benefit of Lessor, a payment of rent
consisting of (i) Capital Rent (other than with respect to the initial Payment
Date on which Lessee shall pay only Accrual Rent) and (ii) Accrual Rent
(collectively, “Basic Rent”).

     Section 6.2. Supplemental Rent. Lessee shall pay to Agent, for the benefit
of Lessor, or to whomever shall be entitled thereto as expressly provided herein
or in any other Operative Document (and Lessor hereby directs Lessee, on behalf
of Lessor, to so pay any such other Person), any and all Supplemental Rent as
the same shall become due and payable (with respect to payments to be made to
Agent or Lessor pursuant to the Operative Documents, otherwise, prior to the
time such Supplemental Rent is delinquent) and, if a Lease Event of Default is
continuing because of any failure on the part of Lessee to pay any Supplemental
Rent, Lessor shall have all rights, powers and remedies provided for herein or
by law or in equity or otherwise in the case of nonpayment of Basic Rent. The
expiration or other termination of Lessee’s obligations to pay Basic Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent.

     Section 6.3. Method and Amount of Payment. Rent and all other sums due to
Lessor hereunder shall be paid to Agent, on behalf of Lessor (or, in the case of
Supplemental Rent, to such Person as may be entitled thereto (if such Person is
other than Lessor or Agent, payment may be made by wire transfer or such other
form of payment as is acceptable to such Person)) in immediately available funds
at the office of Agent specified in Schedule II hereto or at such other office
of Agent as Agent may from time to time specify to Lessee in a notice pursuant
to this Lease. Each payment of Rent shall be accompanied by written designation
from Lessee as to the amount of such payment that is being made in respect of
Series A Capital Rent, Series A Accrual Rent, Series B Capital Rent, Series B
Accrual Rent, Series C Accrual Rent, Lessor’s Interest Related Accrual Rent or
Supplemental Rent; provided that notwithstanding such written designation by
Lessee, each payment of Rent or any other amounts received by Agent related to
this Lease shall be applied in accordance with Section 21.1 hereof and
Section 2.1 of the Lessor Assignment Agreement. Each payment of Rent shall be
made by Lessee prior to 10:00 A.M. California time (and payments made after such
time shall be deemed to have been made on the next day) at the place of payment
in funds consisting of lawful currency of the United States of America which (in
the case of any amount payable to Lessor or Agent or any other Indemnitee) shall
be immediately available on the scheduled date when such payment shall be due
unless the scheduled date shall not be a Business Day, in which case such
payment shall be due and made on the next succeeding Business Day. If the result
of the extension contemplated by the preceding sentence

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would be to carry payment of Rent into another calendar month, such payment of
Rent shall be made on the immediately preceding Business Day.

     Section 6.4. Late Payment. If any Basic Rent shall not be paid when due,
Lessee shall pay to Lessor, or if any Supplemental Rent payable to or on behalf
or for the account of Lessor or Agent or other Indemnitee is not paid when due,
Lessee shall pay to whomever shall be entitled thereto, in each case as
Supplemental Rent, interest at the Overdue Rate (to the maximum extent permitted
by law) on such overdue amount from and including the due date thereof (without
regard to any applicable grace period) to but excluding the Business Day of
payment thereof. If any payment of Rent shall be due on a day other than a
Business Day, such payment shall be due on the succeeding Business Day unless
the result of such extension would be to carry such payment into another
calendar month, in which case such payment shall be made on the immediately
preceding Business Day.

     Section 6.5. Set-Off. Notwithstanding any provision to the contrary
contained herein or in any other Operative Document, in the event the Series A
Lease Balance or any portion thereof is purchased by LSI as an Assignee in
accordance with Section 19.1(a)(ii), LSI, as Lessee, shall set-off against and
not pay to Agent Basic Rent or Supplemental Rent owed to LSI as an Assignee.

ARTICLE VII

NET LEASE

     (a) This Lease shall constitute a net lease and, notwithstanding any other
provision of this Lease, it is intended that Basic Rent, Supplemental Rent and
all other amounts due and payable under the Operative Documents, including, as
applicable, the Lease Balance, shall be paid, subject to Section 6.5, without
counterclaim, setoff, deduction or defense of any kind and without abatement,
suspension, deferment, diminution or reduction of any kind, and Lessee’s
obligation to pay all such amounts throughout the Lease Term is absolute and
unconditional. The obligations and liabilities of Lessee hereunder shall, to the
fullest extent permitted by Applicable Laws and Regulations, in no way be
released, discharged or otherwise affected for any reason (other than the
indefeasible payment or performance in full of such liability or obligation)
including: (a) any defect in the condition, merchantability, design,
construction, quality or fitness for use of any Item of Equipment or any failure
of any Item of Equipment to comply with all Applicable Laws and Regulations,
including any inability to operate or use any Item of Equipment by reason of
such non-compliance; (b) any damage to, abandonment, loss, contamination of or
release from or destruction of or any requisition or taking of any Item of
Equipment or any part thereof; (c) any restriction, prevention or curtailment of
or interference with any use of any Item of Equipment or any part thereof;
(d) any defect in title to or rights to any Item of Equipment or any Lien on
such title or rights on any Item of Equipment; (e) any change, waiver,
extension, indulgence or other action or omission or breach in respect of any
obligation or liability of or by Lessor or Agent; (f) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to Lessee or Lessor or any other Person, or any
action taken with respect to this Lease by any trustee or receiver of Lessee,
Lessor, Agent or any other Person, or by any court, in any such proceeding;

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(g) any claim that Lessee has or might have against any Person, including,
without limitation, Lessor or Agent (but will not constitute a waiver of such
claim); (h) any failure on the part of Lessor or Agent to perform or comply with
any of the terms of this Lease, any other Operative Document or of any other
agreement whether or not related to the Overall Transaction (but will not
constitute a waiver of such claim); (i) any invalidity or unenforceability or
disaffirmance against or by Lessee, Agent or Lessor of this Lease or any
provision hereof or any of the other Operative Documents or any provision of any
thereof; (j) the impossibility of performance by Lessee, Lessor, Agent or any of
them; (k) any action by any court, administrative agency or other Governmental
Authority or any restriction, prevention or curtailment of or any use of any
Item of Equipment or any part thereof; (l) the failure of Lessee to achieve any
accounting or tax benefits or the characterization of the transaction intended
by Section 2.4; or (m) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Lessee shall have notice or
knowledge of any of the foregoing. Except as specifically set forth in
Section 9.1 or Section 14.1 hereof, this Lease shall be noncancellable by Lessee
for any reason whatsoever, and Lessee, to the fullest extent permitted by
Applicable Laws and Regulations, waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate or surrender this Lease, or to any
diminution, abatement or reduction of Rent payable by Lessee hereunder. If for
any reason whatsoever this Lease shall be terminated or amended in whole or in
part by operation of law or otherwise, except as expressly provided in
Section 9.1 or Section 14.1 hereof or, with respect to amendments, as permitted
by the Operative Documents, Lessee shall, unless prohibited by Applicable Laws
and Regulations, pay to Agent (or, in the case of Supplemental Rent, to whomever
shall be entitled thereto) a compensation in an amount equal to each Rent
payment (including the Lease Balance or any other amount due and payable under
any Operative Documents) at the time and in the manner that such payment would
have become due and payable under the terms of this Lease if it had not been
terminated or amended in whole or in part. Each payment of Rent and any payment
of the Lease Balance made by Lessee hereunder shall be final and, absent error
in the computation of the amount thereof, Lessee shall not seek or have any
right to recover all or any part of such payment from Lessor, Agent or any party
to any agreements related thereto for any reason whatsoever. Lessee assumes the
sole responsibility for the condition, use, operation, maintenance, and
management of each Item of Equipment and Lessor and Agent shall have no
responsibility in respect thereof and shall have no liability for damage to any
Item of Equipment or any property relating thereto of Lessee or on any account
or for any reason whatsoever other than by reason of such Person’s willful
misconduct or gross negligence or negligence in the handling of funds or breach
of any of the Operative Documents; provided, however, any liability of Lessor or
Agent with respect to any such willful misconduct or gross negligence or
negligence in the handling of funds or breach of any of the Operative Documents
shall not limit or affect Lessee’s absolute obligations as set forth in this
Article VII. Without affecting Lessee’s obligation to pay Basic Rent,
Supplemental Rent, the Lease Balance and all other amounts due and payable under
the Operative Documents or to perform its obligations under the Operative
Documents, Lessee may, notwithstanding any other provision of the Operative
Documents, seek damages of any kind (which damages may be measured, if
appropriate, on the amount of Rent paid by Lessee) or any other remedy at law or
equity against Lessor or Agent for such willful misconduct or gross negligence
or negligence in the handling of funds or for a breach by such Person of its
obligations under this Lease or the other Operative Documents.

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     (b) Notwithstanding anything to the contrary contained in this Article VII,
the parties hereto agree that in the event that the Lessor becomes the subject
of any voluntary or involuntary case or proceeding under any bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, and as a
result thereof the Series C Cash Collateral and/or the Lessor’s Interest Related
Cash Collateral held by Lessor becomes a part of the Lessor’s bankruptcy estate,
then (i) the Lessor shall be deemed to have set off and applied such Series C
Cash Collateral and/or Lessor’s Interest Related Cash Collateral against any
amounts due with respect to the portion of the Series C Lease Balance and/or the
Lessor’s Interest Related Lease Balance secured by such Cash Collateral and
(ii) the Lessee shall be deemed to have paid in full any and all Rent due with
respect to the Series C Lease Balance and/or the Lessor’s Interest Related Lease
Balance secured by such Cash Collateral, in each case in an amount not to exceed
such Series C Cash Collateral and/or Lessor’s Interest Related Cash Collateral.

ARTICLE VIII

POSSESSION, ASSIGNMENT, USE AND MAINTENANCE OF EQUIPMENT

     Section 8.1. Possession and Use of Equipment; Compliance with Laws. Lessee
shall use each Item of Equipment only in the manner for which it was designed
and intended by the original manufacturer thereof (subject to any upgrade in any
software used in connection with such Item of Equipment) and shall not use any
Item of Equipment or any part thereof for any purpose or in any manner that
would adversely affect the Fair Market Value, the utility, remaining useful life
or, except to the extent in compliance with the Lease, Residual Value of such
Item of Equipment, other than as a result of ordinary wear and tear. Lessee
agrees that each Item of Equipment will be used and operated in compliance in
all material respects with any and all Applicable Laws and Regulations. Lessee
shall procure and maintain in effect all material licenses, registrations,
certificates, permits, approvals and consents required by Applicable Laws and
Regulations or by any Governmental Authority in connection with the ownership,
delivery, installation, use and operation of each Item of Equipment. Lessee
shall not (a) use, operate, maintain or store any Item of Equipment or any
portion thereof in material violation of Section 8.3 or any Insurance
Requirement; (b) sublease, assign or otherwise permit the use of any Item of
Equipment except as may be permitted by Sections 8.2, 8.3 or 8.4 hereof;
(c) except as set forth in Sections 8.2 or 8.4 hereof, sell, assign or transfer
any of its rights hereunder or in any Item of Equipment, or directly or
indirectly create, incur or suffer to exist any Lien on any of its rights
hereunder or in any Item of Equipment, except for Permitted Liens. Lessee shall
be entitled to use and operate the Items of Equipment only at the Lessee’s
semi-conductor manufacturing facility located in Gresham, Oregon or another
location or locations reasonably acceptable to the Agent in the continental
United States and at Lessee’s sole cost and expense, so long as the Lessee holds
title in fee simple to the real property on which such Equipment is to be
located and, (a) prior to moving any Item of Equipment to such other location, a
mortgagee’s waiver and consent is executed by the applicable mortgagee and
delivered to Agent and Lessor, in form and substance reasonably satisfactory to
the Agent and Lessor and (b) all UCC financing statements (including UCC fixture
filings) have been filed in all public offices wherein such filings are
necessary to perfect the Liens created by the Operative Documents. The Lessee
will defend the sale of each

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Item of Equipment by the seller thereof to Lessor against the claims or demands
of all Persons. Lessee shall keep in its possession at all times the items
described in clauses (c) and (e) of the definition of Lessee Collateral.

     Section 8.2. Subleases and Assignments. LESSEE SHALL NOT, WITHOUT THE PRIOR
WRITTEN CONSENT OF AGENT, SUBLEASE OR OTHERWISE RELINQUISH POSSESSION OF ANY
ITEM OF EQUIPMENT, OR ASSIGN, TRANSFER OR ENCUMBER (EXCEPT FOR PERMITTED LIENS)
ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER OR PERMIT ANY OF THE FOREGOING
AND ANY ATTEMPTED SUBLEASE OR OTHER RELINQUISHMENT OF POSSESSION, ASSIGNMENT,
TRANSFER OR ENCUMBERING BY LESSEE SHALL BE NULL AND VOID, except as provided in
this Section 8.2 or pursuant to a transaction permitted under Section 18.2(d) or
a Permitted Lien or in the case of relinquishment of possession pursuant to the
performance of Lessee’s covenants under Section 8.3 or 8.4 of this Lease. Each
sublease entered into in accordance with this Section 8.2 shall be referred to
as a “Sublease.” So long as no Lease Event of Default shall have occurred and be
continuing, Lessee may, without the prior written consent of Agent, enter into
subleases of one or more of the Items of Equipment to a direct or indirect
wholly-owned Subsidiary of Lessee organized under the laws of the United States
of America or any State thereof (a “Sublessee"); provided, that any Sublease
entered into pursuant to this Section 8.2 must satisfy each of the following
conditions:

     (a) such Sublease shall (i) automatically expire upon the termination of
this Lease, (ii) be expressly subordinate and subject to this Lease and the
Liens created hereunder and (iii) expressly require the Items of Equipment
subject thereto to be returned as directed by Agent upon notice to Sublessee
that a Lease Event of Default shall have occurred and be continuing;

     (b) such Sublease shall be in writing and shall expressly prohibit any
further assignment, sublease or transfer;

     (c) such Sublease shall not contain a purchase option in favor of the
Sublessee or any other provision pursuant to which the Sublessee may obtain
record or beneficial title to any Item of Equipment leased thereunder from
Lessee prior to Lessee acquiring title to such Item of Equipment from Lessor;

     (d) such Sublease shall prohibit the Sublessee from making any alterations
or modifications to any Item of Equipment that would result in a Lease Default;

     (e) all of Lessee’s rights, title and interest in, to and under such
Sublease shall be pledged by Lessee to Lessor, as collateral for Lessee’s
obligations under the Operative Documents, by delivery of an executed original
counterpart upon the execution and delivery thereof, marked as the sole original
execution counterpart for UCC purposes, to the Lessor, and Lessee shall, at its
own cost and expense, do any further act and execute, acknowledge, deliver,
file, register and record any further documents which the Agent or Lessor may
reasonably request in order to create, perfect, preserve and protect Lessor’s
Lien in such Sublease;

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     (f) Lessee shall not, without Agent’s prior written consent, permit or
consent to any renewal or extension of such Sublease at any time when a Material
Lease Default or Lease Event of Default has occurred and is continuing;

     (g) such Sublease shall require the Sublessee to maintain the Item or Items
of Equipment in accordance with Section 8.3;

     (h) such Sublease shall require the Sublessee to use and operate the Item
or Items of Equipment or any Part thereof in accordance with Section 8.1;

     (i) such Sublease shall require the Sublessee to insure the Item or Items
of Equipment in accordance with Section 9.2;

     (j) such Sublease shall provide that, upon reasonable notice to the
Sublessee, any designated representative of Agent or Lessor may inspect the Item
or Items of Equipment and the books and records relating thereto, upon
reasonable notice, in accordance with Agent’s and Lessor’s inspection rights set
forth in the Operative Documents (but not so as to materially interfere with the
business of such Sublessee); and

     (k) Lessee shall notify Agent and Lessor in writing not less than 10 days
prior to entering into any such Sublease (and promptly after execution of any
Sublease furnish Agent and Lessor with an executed copy thereof), which notice
shall include (i) a description of the Item or Items of Equipment to be
subleased thereunder and (ii) the general location parameters of such Item or
Items of Equipment during the term of such Sublease.

     The liability of Lessee with respect to this Lease and each of the other
Operative Documents shall not be altered or affected in any way by the existence
of any Sublease.

     Section 8.3. Maintenance. At all times during the term of this Lease,
Lessee shall, at its own cost and expense:

     (a) unless an Item of Equipment has suffered a Casualty and Lessee is
restoring such Item of Equipment, repairing such Item of Equipment (which
repairs may be done offsite), replacing such Item of Equipment or paying the
Casualty Amount for such Item of Equipment, keep, repair, maintain and preserve
each of the Items of Equipment in at least as good order and operating condition
and appearance as on the Delivery Date, ordinary wear and tear excepted, and in
conformance in all material respects with (A) customary industry standards,
(B) the terms of all contracts (including, without limitation, service
contracts) and obligations at the time applicable thereto, (C) all Applicable
Laws and Regulations and Insurance Requirements (in each case, subject to
Lessee’s right to contest by a Permitted Contest), and in the event that
Applicable Laws and Regulations require any alteration, replacement or addition
of or to any Part on any Item of Equipment, Lessee will conform therewith in all
material respects at its own expense, (D) standards no lower than the highest of
those applied by Lessee or any of its Affiliates in the ordinary course of
business for similar equipment

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owned or leased by it, (E) such mandated or suggested maintenance, repair and
deinstallation standards and procedures as are set forth in the manufacturer’s
manuals pertaining to each Item of Equipment and (F) such standards or
procedures as may be required to enforce warranty claims against each vendor and
manufacturer of each Item of Equipment;

     (b) (i) conduct or cause to be conducted all scheduled maintenance of each
Item of Equipment in conformity in all material respects with Lessee’s practices
and manufacturers and repair guidelines, for similar equipment (including,
without limitation, Lessee’s maintenance program for such equipment) and
(ii) maintain or cause to be maintained each Item of Equipment so as to preserve
its Fair Market Value, remaining economic useful life, utility and, except to
the extent in compliance with this Lease, Residual Value, other than as a result
of ordinary wear and tear;

     (c) in addition to the requirements in Section 8.3(a) and (b), (i) cause
maintenance on each Item of Equipment to be provided by the manufacturer thereof
or factory authorized technicians or by Lessee’s in-house technicians (trained
and certified by manufacturer or an entity approved by such manufacturer),
(ii) establish such maintenance, refurbishment, rebuilding and repair programs
so that the Items of Equipment can be kept in the condition required as set
forth herein and (iii) allow Lessor and Agent, at reasonable times, after
reasonable notice and in a reasonable manner, to review and approve changes to
the Lessee’s maintenance procedures (which approval shall not be unreasonably
withheld);

     (d) cause each Item of Equipment to continue to have at all times the
capacity and functional ability to perform, on a continuing basis (subject to
Casualties and customary interruption in the ordinary course of business for
maintenance, inspection, service, repair and testing), the functions for which
it was specifically designed; provided that Lessee shall have the ability to
remove any Item of Equipment from service in accordance with the standards set
forth in Section 8.3(a);

     (e) cause any hazardous or toxic substances used, or resulting or emitting
from, the operation or use of the Items of Equipment to be handled in accordance
with all applicable Environmental Laws in all material respects and otherwise
cause the Items of Equipment to be maintained and operated in accordance with
all Environmental Laws in all material respects; and

     (f) at any time while a Lease Default or Lease Event of Default has
occurred and is continuing or after the Lessee has exercised the Sale Option,
make the Items of Equipment available for inspection and testing by an
authorized inspector (which shall be at reasonable times and upon reasonable
notice in the event the Sale Option was exercised), including unlimited shipping
and testing of parts or equipment as required by any such inspector, and if any
discrepancies are found as pertaining to the general condition of the Items of
Equipment, Agent shall communicate such discrepancies to Lessee in writing and
Lessee shall rectify such discrepancies within 30 days of receiving such written
notice.

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     In no event shall Lessee adversely discriminate as to the use or
maintenance of any Item of Equipment (including the periodicity of maintenance
or recordkeeping in respect of such Item of Equipment) based upon such Item of
Equipment being leased and financed hereunder and under the other Operative
Documents as compared to equipment of a similar nature which Lessee owns or
leases. Lessee shall prepare and deliver to Agent or Lessor, as applicable,
within a reasonable time prior to the required date of filing (or, to the extent
permissible, file on behalf of Agent and Lessor) any and all reports required to
be filed by Agent or Lessor with any Governmental Authority of any country or
subdivision thereof in which any Item of Equipment is located by reason of the
ownership by Lessor of the Items of Equipment or the leasing thereof to Lessee
(subject, however, to Lessee’s right to Permitted Contests). Agent agrees to
inform Lessee of any request for such reports received by it or of which it has
knowledge. Lessee shall maintain or cause to be maintained, and shall permit
Agent and Lessor, their respective agents, representatives, or assignees to
inspect at reasonable times during regular business hours and as often as
requested (but not so as to materially interfere with the business of Lessee and
not more than annually if no Lease Default or Lease Event of Default has
occurred and is continuing) upon five (5) Business Days prior notice so long as
no Lease Default or Lease Event of Default shall have occurred and be continuing
and at any time following the occurrence and continuation of a Lease Default or
Lease Event of Default or following the election by the Lessee of the Sale
Option, all records, returns, renditions, logs and other materials required by
any Governmental Authority having jurisdiction over an Item of Equipment or
Lessee, to be maintained in respect of such Item of Equipment (subject, however,
to Lessee’s right to Permitted Contests). Lessee hereby waives any right now or
hereafter conferred by law to make repairs on any Item of Equipment at the
expense of Lessor or Agent.

     Section 8.4. Alterations and Modifications. In case any Item of Equipment,
part or appliance therein (each, a “Part”) is required to be altered, added to
or modified in order to comply in all material respects with any Applicable Laws
and Regulations (a “Required Alteration”) pursuant to Section 8.1 or 8.3 hereof,
Lessee agrees to make such Required Alteration at its own expense. Lessee shall
have the right to make or cause to be made any modification, alteration or
improvement to any Item of Equipment (herein referred to as a “Permitted
Modification”), or to remove or cause to be removed any Part which has become
worn out, broken or obsolete; provided in each case that Lessee continues to be
in compliance with Sections 8.1 and 8.3 hereof and that such action (a) will not
decrease the present or future economic value of the applicable Item of
Equipment or impair its originally intended use or function or decrease its
economic useful life and (b) will not cause such Item of Equipment to become
suitable for use only by Lessee. In the event any Permitted Modification (i) is
readily removable without impairing the value or use which the Item of Equipment
would have had at such time had such Part not been affixed or placed to or on
such Item of Equipment (a “Removable Part”), (ii) is not a Required Alteration
and (iii) is not a Part which replaces any Part originally incorporated or
installed in or attached to such Item of Equipment on the date on which such
Item of Equipment became subject to this Lease, or any Part in replacement of or
substitution for any such original Part (each an “Original Part”), any such
Permitted Modification, if no Lease Event of Default is continuing, shall be and
remain the property of Lessee. To the extent such Permitted Modification is not
a Removable Part, or is a Required Alteration or an Original Part, and (if the
Removable Part remains the property of Lessee) to the extent a Removable Part is
not the property of Lessee because of the continuance

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of a Lease Event of Default, the same shall immediately and automatically be and
become the property of Lessor and subject to the terms of this Lease. Any
Required Alterations, and any Parts installed or replacements made by Lessee
upon any Item of Equipment pursuant to its obligation to maintain and keep the
Items of Equipment in good order, operating condition and repair under
Section 8.3 (collectively, “Replacement Parts”) and all other Parts which become
the property of Lessor shall be considered, in each case, accessions to such
Item of Equipment and title thereto or security interest therein shall be
immediately and automatically vested in Lessor. All Replacement Parts shall be
free and clear of all Liens (other than Permitted Liens) and shall be in as good
an operating condition as, and shall have a value and utility at least equal to,
the Parts replaced, assuming such replaced Parts and the relevant Items of
Equipment were immediately prior to such replacement or the event or events
necessitating such replacement in the condition and repair required to be
maintained by the terms hereof. Any Part at any time removed from any Item of
Equipment shall remain subject to the interests of Lessor under the Operative
Documents, no matter where located, until such time as such Part shall be
replaced by a Part which has been incorporated or installed in or attached to
such Item of Equipment and which meets the requirements for a Replacement Part
specified above, whereupon Lessor hereby releases any and all interest in and to
such replaced Part. Upon the request of Lessor and no later than 45 days after
the end of each fiscal quarter of Lessee, Lessee shall deliver to Lessor, a Bill
of Sale evidencing the conveyance by Lessee to Lessor of all Replacement Parts
not previously evidenced by a Bill of Sale; provided that such Bill of Sale may
describe the Replacement Parts generally and need not specifically describe each
individual part, and such other documents in respect of such Part or Parts as
Lessor may reasonably request in order to confirm that title to such Part or
Parts has passed to Lessor, as hereinabove provided. Concurrently with the
delivery by Lessee of a Bill of Sale with respect to a Replacement Part, Lessor
shall deliver to Lessee a Bill of Sale (without representations or warranties
except as to the absence of Lessor Liens) for the Part replaced by such
Replacement Part and such other documents as may be required to release the
replaced Part from the terms of this Lease, in such form as may reasonably be
requested by Lessee. Any such Replacement Part, regardless of whether evidenced
by a Bill of Sale, shall be deemed part of such unit, for all purposes hereof to
the same extent as the Parts originally incorporated or installed in such unit,
and title to such Replacement Part shall thereupon vest in Lessor, subject to
the terms of this Lease. All replacements pursuant to this Section 8.4 shall be
purchased by Lessee with its own funds. There shall be no obligation on the part
of Lessor or Agent to pay for or otherwise finance any such replacement.

     Section 8.5. Identifying Numbers and Registration; Legend; Changes;
Inspection. (a) Lessee, at its own expense, will cause each Item of Equipment to
be kept numbered with the identification number as shall be set forth on
Schedule I hereto.

     (b) The Lessee will not change the identification number of any Item of
Equipment unless and until (i) a statement of new number or numbers to be
substituted therefor shall have been delivered to the Agent and filed, recorded
and deposited by the Lessee in all public offices where any financing statement
has been filed in respect thereof for purposes of perfecting any security
interest created hereby and (ii) Lessee shall have furnished the Agent an
opinion of counsel in form and substance reasonably satisfactory to the Agent to
the effect that once such statement has been so filed, recorded and/or
deposited, no other filing, recording, deposit or

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giving of notice with or to any other Federal, state or local government or
agency thereof is necessary to perfect the lien and security interest of Lessor
in such Items of Equipment. The Equipment may be lettered with the names or
initials or other insignia used by the Lessee or any Sublessee. Upon the request
of Agent or Lessor, Lessee shall make the Items of Equipment available to Agent
or Lessor, as applicable, their respective agents, representatives or assignees
for inspection at their then location and shall also make Lessee’s books,
manuals, logs, records and other information pertaining to the Items of
Equipment available for inspection and permit such parties to make copies
thereof, in each case at reasonable times during regular business hours and as
often as requested (but not so as to materially interfere with the business of
Lessee and not more than annually if no Lease Default or Lease Event of Default
has occurred and is continuing) upon five (5) Business Days prior notice so long
as no Lease Default or Lease Event of Default shall have occurred and is
continuing or at any time following the occurrence and continuation of a Lease
Default or Lease Event of Default or following the election by the Lessee of the
Sale Option; provided that all costs and expenses of Lessor or Agent in
connection with such inspection shall be borne by the inspecting party unless a
Lease Event of Default has occurred and is continuing at the time of such
inspection, in which case all such costs and expenses shall be borne by Lessee.
Agent and Lessor shall have the right to inspect and show the Items of Equipment
to prospective purchasers at any time following the occurrence of a Lease Event
of Default or following the election by the Lessee of the Sale Option.

     Section 8.6. Liens. Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien (other than Permitted Liens) on or with
respect to (i) any Item of Equipment or any Part thereof or any other Lessee
Collateral, or Lessor’s title thereto or interest therein or (ii) this Lease or
Lessor’s interests hereunder. Lessee, at its own expense, will promptly pay,
satisfy and otherwise take such actions as may be necessary to keep this Lease
and the Items of Equipment and the other Lessee Collateral, free and clear of,
and to duly discharge or eliminate, or bond in a satisfactory manner to Lessor
in its reasonable judgment, any such Lien not excepted above if the same shall
arise at any time. Lessee will notify Lessor in writing promptly upon becoming
aware of any Tax or other Lien (other than any Lien excepted above) that shall
attach to any Item of Equipment or any other Lessee Collateral, and of the full
particulars thereof. Without limiting the foregoing, Lessee shall not assign or
pledge any of its rights under any Sublease to any Person other than Lessor.

     Section 8.7. Replacements and Substitutions. (a) In addition to the rights
of Lessee under Section 8.4, Lessee shall have the option at any time to replace
any Item or Items of Equipment (a “Replaced Item” or “Replaced Items”) with a
substitute Item or Items of Equipment (a “Replacement Item” or “Replacement
Items”), subject to the following conditions:

     (i) No Lease Default or Lease Event of Default shall have occurred and be
continuing and Lessee shall represent in writing to Agent to such effect;

     (ii) The Replacement Item or Replacement Items shall be located in a
location permitted by Section 8.1 and Lessee shall represent in writing to Agent
to such effect;

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     (iii) The Replacement Item or Replacement Items shall have a function and
utility comparable to or better than the Replaced Item or Replaced Items and
Lessee shall represent in writing to Agent to such effect;

     (iv) The Replacement Item or Replacement Items shall have a value, useful
life, and operating condition equal to or greater than the Replaced Item or
Replaced Items and Lessee shall represent in writing to Agent to such effect,
which shall be confirmed by an appraisal reasonably satisfactory in scope and
form to Lessor and Agent and performed by an appraiser selected by the Lessor
and Agent and approved by Lessee (such approval not to be unreasonably withheld)
for each Replaced Item being substituted pursuant to this Section 8.7 in which
the Purchase Price, or for each series of substitutions pursuant to this
Section 8.7 in which the aggregate Purchase Price, is equal to or greater than
$5,000,000;

     (v) The aggregate Purchase Price of all Replaced Items leased hereunder and
substituted pursuant to this Section 8.7 from and after the Delivery Date to and
including the date of substitution and after giving effect thereto, shall not
exceed 25% of the aggregate Purchase Price of all Items of Equipment subject to
this Lease as of the Delivery Date; and

     (vi) Prior to the date of any such substitution, Lessee shall replace such
Replaced Item or Replaced Items by complying with the applicable terms of
Section 9.1 to the same extent as if a Casualty or a series of Casualties had
occurred with respect to such Replaced Item or Replaced Items, and the Lessor
shall transfer title to the Replaced Item or Replaced Items to Lessee in the
same manner as provided in the applicable provisions of Section 9.1.

     Items of Equipment replaced pursuant to Section 9.1(b) following a Casualty
shall not be included for purposes of the calculations set forth above.

     (b) All replacements pursuant to Section 8.7(a) shall be purchased by
Lessee with its own funds. There shall be no obligation on the part of Lessor or
Agent to pay for or otherwise finance any such replacement. No termination of
this Lease with respect to any Item of Equipment as contemplated by this
Section 8.7 shall result in any reduction of Rent or Lessee’s obligation to pay
Basic Rent hereunder.

ARTICLE IX

RISK OF LOSS; INSURANCE

     Section 9.1. Casualty. Upon the occurrence of a Casualty or a series of
Casualties with respect to an Item or Items of Equipment with a Purchase Price
aggregating in excess of $5,000,000 during the Lease Term, Lessee shall give
Lessor and Agent prompt notice thereof (a “Casualty Notice”). The Casualty
Notice shall specify whether Lessee will:

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     (a) pay to Lessor the Casualty Amount of the Item or Items of Equipment
suffering such Casualty or series of Casualties, together with all other Rent
then due and owing and if such amount is paid on a date which is not a Payment
Date any and all Break Funding Amounts and an amount equal to the sum of the
Basic Rent described in clause (A) of the definition Casualty Amount with
respect to such Casualty Amount due on the next succeeding Payment Date divided
by 90, multiplied by the number of days from the immediately preceding Payment
Date to but excluding the date of payment, which payment shall be made within
30 days after such Casualty or the latest in time of such series of Casualties
(the “Casualty Settlement Date”); or

     (b) replace the Item or Items of Equipment with respect to which the
Casualty or series of Casualties has occurred pursuant to the following
provisions of this Section 9.1; provided that (i) the aggregate Purchase Price
of all Items of Equipment replaced pursuant to this Section 9.1(b) with respect
to this Lease from and after the Delivery Date to and including the date of
replacement and after giving effect thereto, shall not exceed 25% of the
aggregate Purchase Price of all Items of Equipment subject to this Lease as of
the Delivery Date and (ii) upon the occurrence and during the continuance of a
Lease Event of Default or a Lease Default, Lessee shall be obligated, at the
option of the Agent, to make the payments referred to in clause (a) above and
shall not be entitled to exercise any right or election of replacement pursuant
to this clause (b).

Notwithstanding the foregoing, if Lessee has elected or is required to pay any
Casualty Amount pursuant to clause (a) above and either:

     (i) the payment of such Casualty Amount would cause the aggregate amount of
all Casualty Amounts paid with respect to the Items of Equipment leased
hereunder during the term of the Lease to exceed 25% of the aggregate Purchase
Price of all Items of Equipment subject to this Lease as of the Delivery Date;
or

     (ii) after giving effect to the payment of the Casualty Amount, the End of
Term Value Ratio of the Items of Equipment remaining subject to this Lease is
less than the End of Term Value Ratio of all Items of Equipment originally
subject to this Lease (as set forth in the Appraisal),

then Lessee shall not be entitled to pay such Casualty Amount pursuant to clause
(a) above, and instead Lessee shall be deemed to have elected the Early
Termination Option with respect to all, but not less than all, of the Items of
Equipment then subject to this Lease and Lessee shall be required to purchase
all but not less than all of the Items of Equipment in accordance with the terms
and provisions of Section 14.1 on the Casualty Settlement Date.

     If Lessee has elected, or is required, to pay the Casualty Amount with
respect to the Items of Equipment leased hereunder pursuant to clause (a) above,
Lessee shall continue to make all payments of Rent due under this Lease until
and including the Casualty Settlement Date. Upon payment of the Casualty Amount
in respect of such Item of Equipment on such Casualty Settlement Date together
with all Rent and Supplemental Rent then due and owing, the remaining scheduled
Rent payments hereunder shall be reduced by an amount equal to the

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product of the scheduled amount of each such payment (determined in each case
prior to the receipt of such Casualty Amount), multiplied by the Item Value
Fraction of such Item of Equipment suffering such Casualty or series of
Casualties.

     If Lessee has given notice that it intends to replace the Item or Items of
Equipment suffering such Casualty or series of Casualties, and such replacement
is permitted under the foregoing clause (b), Lessee may make subject to this
Lease, not later than 90 days after such Casualty or the latest in time of such
series of Casualties with respect to such Item or Items of Equipment, a
replacement for such Item or Items of Equipment meeting the suitability
standards hereinafter set forth. To be suitable as a Replacement Item of
Equipment (including for purposes of Section 8.7), an Item of Equipment (or
Items of Equipment) must (i) be of the same function and utility, (ii) have the
same or better Residual Value, remaining economic useful life and operating
condition (immediately preceding the Casualty or series of Casualties assuming
that such Item or Items of Equipment had been maintained in accordance with the
terms of Section 8.3) as the Item or Items of Equipment, taken as a whole,
suffering the Casualty or series of Casualties, (iii) have a Fair Market Value
of not less than the Fair Market Value (immediately preceding the Casualty or
series of Casualties assuming that such Item or Items of Equipment had been
maintained in accordance with the terms of Section 8.3) of the Item or Items of
Equipment, taken as a whole, suffering the Casualty or series of Casualties and
(iv) be free and clear of any Liens other than Permitted Liens. Lessee shall
represent in writing to Agent that such Replacement Item or Items of Equipment
meet the standards set forth in clauses (i), (ii) and (iii) of the immediately
preceding sentence and shall deliver an appraisal at Lessee’s sole expense in
form and substance reasonably satisfactory to the Agent from an appraiser
selected by the Agent and approved by Lessee (such approval not to be
unreasonably withheld) confirming that such Replacement Item or Items of
Equipment meet the standards set forth in clauses (ii) and (iii) of the
immediately preceding sentence. Lessee shall cause a Bill of Sale and a lease
supplement to be executed and delivered to Agent and Lessor in order to subject
such replacement Item of Equipment or Items of Equipment to this Lease, and upon
such execution and delivery and the receipt by Agent and the Lessor of (i)
evidence reasonably satisfactory to them of Lessee’s compliance with the
insurance provisions of Section 9.2 with respect to such replacement Item of
Equipment or Items of Equipment, and (ii) an opinion of counsel to Lessee (which
may be in-house counsel) opining as to the authorization, execution and delivery
of the Bill of Sale and the lease supplement, the enforceability of the lease
supplement and the filing and recording of the UCC financing statements with
respect thereto and, in each case, consistent with the opinions delivered on the
Delivery Date covering such matters, such replacement item or items shall be
deemed an “Item of Equipment” or “Items of Equipment” for all purposes hereof.

     If (i) Agent or Lessor has received the amount payable with respect to the
Casualty or series of Casualties and all other amounts due hereunder (if any),
or (ii) the Item or Items of Equipment have been substituted or repaired in
accordance herewith, and, in each case, no Material Lease Default or Lease Event
of Default exists, Lessee shall be entitled to receive from Agent or Lessor, as
applicable, the proceeds of any recovery in respect of the Item or Items of
Equipment from insurance or otherwise, to the extent recovered by Agent or
Lessor (“Casualty Recoveries”), and Agent or Lessor, as applicable, subject to
the rights of any insurer insuring the Items of Equipment as provided herein,
shall execute and deliver to Lessee, or to its assignee or

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nominee, a Bill of Sale (without representations or warranties except that each
such Item of Equipment is free and clear of Lessor Liens) for the Item or Items
of Equipment (other than repaired items), and such other documents as may be
required to release the Item or Items of Equipment from the terms of this Lease,
in such form as may reasonably be requested by Lessee. All fees, costs and
expenses relating to a substitution or repair as described herein shall be borne
by Lessee. Except as otherwise provided in this Section 9.1, Lessee shall not be
released from its obligations hereunder in the event of, and shall bear the risk
of, any Casualty to any Item of Equipment prior to or during the term of this
Lease and thereafter until all of Lessee’s obligations hereunder are fully
performed.

     Any payments (including, without limitation, insurance proceeds) received
at any time by Agent, Lessor or Lessee from any Governmental Authority or other
party with respect to any loss or damage to any Item or Items of Equipment not
constituting a Casualty (i) up to $5,000,000, shall be paid to Lessee, so long
as no Material Lease Default or Lease Event of Default shall have occurred and
be continuing, for application to repair or for replacement of property in
accordance with Sections 8.1 and 8.3 or (ii) in excess of $5,000,000, shall be
held by Agent and applied directly in payment of repairs or for replacement of
property in accordance with the provisions of Sections 8.1 and 8.3, if not
already paid by Lessee, or if already paid by Lessee and no Material Lease
Default or Lease Event of Default shall have occurred and be continuing, shall
be applied to reimburse Lessee for such payment, and any balance remaining after
compliance with said Sections with respect to such loss or damage shall be
retained by or disbursed to (as applicable) Lessee.

     LESSEE HEREBY ASSUMES ALL RISK OF LOSS, DAMAGE, THEFT, TAKING, DESTRUCTION,
CONFISCATION, REQUISITION, COMMANDEERING, TAKING BY EMINENT DOMAIN OR
CONDEMNATION, PARTIAL OR COMPLETE, OF OR TO EACH ITEM OF EQUIPMENT, HOWEVER
CAUSED OR OCCASIONED, SUCH RISK TO BE BORNE BY LESSEE WITH RESPECT TO EACH ITEM
OF EQUIPMENT FROM THE DELIVERY DATE AND CONTINUING UNTIL SUCH ITEM OF EQUIPMENT
HAS BEEN PURCHASED BY A THIRD PARTY OR RETURNED TO LESSOR IN ACCORDANCE WITH THE
TERMS HEREOF. LESSEE AGREES THAT NO OCCURRENCE SPECIFIED IN THE PRECEDING
SENTENCE SHALL IMPAIR, IN WHOLE OR IN PART, ANY OBLIGATION OF LESSEE UNDER THIS
LEASE, INCLUDING, WITHOUT LIMITATION, THE OBLIGATION TO PAY RENT.

     Section 9.2. Insurance Coverages. Lessee shall at all times, at its
expense, cause to be carried and maintained with financially sound and reputable
insurers, insurance against loss or damage to the Items of Equipment, of the
kinds and in the amounts customarily maintained by similar corporations engaged
in similar operations in similar jurisdictions and carry such other insurance as
is usually carried by such corporations; provided, that in any event Lessee will
maintain:

     (a) Casualty Insurance—insurance against risks of physical loss or damage
with respect to the Items of Equipment with deductibles and in such minimum
amounts as are consistent with industry standards; provided, however, that at no
time shall the amount of coverage, on a replacement cost basis, be less than the
outstanding Lease Balance as shall be applicable to the Items of Equipment;

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     (b) Comprehensive General Liability Insurance—combined single limit
comprehensive general liability insurance against claims for bodily injury,
death or property damage in amounts at least equal to $10,000,000 per
occurrence, with such deductibles as are carried by similarly situated companies
operating similar facilities and equipment; and

     (c) Other Insurance—such other insurance, including environmental/pollution
and worker’s compensation insurance, in each case, generally carried by owners
of equipment similar to the Items of Equipment and properties in each
jurisdiction where the Items of Equipment are located, in such amounts and
against such risks as are then customary for equipment and property similar in
use.

     Such insurance shall be written by reputable insurance companies that are
financially sound and solvent, rated in Best’s Insurance Guide or any successor
thereto (or if there be none, an organization having a similar national
reputation) with a general policyholder rating of “A” and a financial size
rating of at least “X” from A.M. Best and Company or any successor thereto (or
if there is none, an organization having a similar national reputation) or
otherwise acceptable to the Agent. All such insurance shall name Agent as
loss-payee and each of Agent, Lessor and the Assignees as additional insured, as
their respective interests may appear pursuant to the terms and conditions of
this Lease. Each policy referred to in this Section 9.2 shall provide that
(i) it will not be cancelled or its limits reduced, or allowed to lapse without
renewal, except after not less than 30 days written notice to Lessor and Agent,
(ii) the interests of Lessor shall not be invalidated by any act or negligence
of, or breach of representation or warranty by, Lessee or any Person having an
interest in any Item of Equipment (other than Lessee’s failure to pay premiums),
(iii) such insurance is primary with respect to any other insurance carried by
or available to Lessor; (iv) the insurer shall waive any right of subrogation,
setoff, counterclaim, or other deduction, whether by attachment or otherwise,
against Lessor; and (v) the insurer shall waive any right to claim any premiums
or commission against Lessor. Lessee will notify Agent and Lessor promptly of
any policy cancellation, reduction in policy limits, modification or amendment.

     Nothing in this Section 9.2 shall prohibit Lessor from obtaining insurance
for its own account and at its own expense and any proceeds payable thereunder
shall be payable as provided in the insurance policy relating thereto; provided,
that no such insurance may be obtained which would limit or otherwise adversely
affect the coverage or payment of any insurance required to be obtained or
maintained by Lessee pursuant to this Section 9.2.

     Section 9.3. Insurance Certificates. On the Delivery Date, and thereafter
within 15 days after the expiration dates of the expiring policies theretofore
delivered pursuant to Section 9.2, Lessee shall deliver to Lessor and Agent
certificates issued by the insurer(s) or insurance broker(s) for the insurance
maintained pursuant to Section 9.2; provided, however, that if the delivery of
any certificate is delayed, Lessee shall not be deemed to be in violation of the
obligation to deliver such certificate if, within such 15 day period, Lessee
delivers an executed binder with respect thereto and thereafter delivers the
certificate upon receipt thereof.

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ARTICLE X

CERTAIN DUTIES AND RESPONSIBILITIES

     Agent and Lessor undertake to perform such duties and only such duties as
are specifically set forth herein and in the other Operative Documents, and no
implied covenants or obligations shall be read into this Lease against Agent or
Lessor, and Agent and Lessor shall not, nor shall they have a duty to, manage,
control, use, sell, maintain, insure, register, lease, operate, modify, dispose
of or otherwise deal with the Items of Equipment in any manner whatsoever,
except as required by the terms of the Operative Documents and as otherwise
provided herein.

ARTICLE XI

INDEMNITIES

     Section 11.1. General Indemnification. (a) Subject to clause (b) below,
Lessee agrees to indemnify, defend and hold each Indemnitee harmless, on a
Grossed-Up Basis, from and against any and all Claims that directly or
indirectly relate to, result from or arise out of or are alleged to relate to,
result from or arise out of any of the following (whether or not any such
Indemnitee is indemnified as to such matter by any other Person and whether or
not such Claim arises or accrues prior to the Delivery Date or after the Lease
Expiration Date):

     (i) the Items of Equipment, the other Lessee Collateral or any part
thereof;

     (ii) any of the Operative Documents or any of the transactions contemplated
thereby, or any investigation, litigation, enforcement or proceeding in
connection therewith, and any amendment, modification or waiver in respect
thereof;

     (iii) the regulation of the ownership, construction, leasing, use or
operation of the Items of Equipment or any part thereof, but only to the extent
that the Indemnitee is subjected to such regulation as a result of its being a
party to or beneficiary of the Operative Documents or its involvement in the
transactions contemplated in the Operative Documents;

     (iv) the offer, financing, refinancing, inspection, mortgaging, granting of
a security interest in, design, manufacture, construction, purchase, ownership,
acquisition, acceptance, rejection, delivery, nondelivery, redelivery,
possession, transportation, lease, sublease, installation, condition, transfer
of title, rental, use, operation, storage, maintenance, modification,
alteration, repair, assembly, sale, return, abandonment or other application or
disposition of all or any part of the Items of Equipment or any interest therein
or improvements, additions or modifications thereto or the imposition of any
Lien thereon, or the failure to perform or accomplish any of the foregoing in
accordance with the requirements of the Operative Documents, other agreements
governing such matters or Applicable Laws and Regulations, including, without

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limitation: Claims or penalties arising from any violation of law or in tort
(strict liability or otherwise), latent or other defects, whether or not
discoverable, any Claim based upon a violation or alleged violation of the terms
of any restriction, easement, condition or covenant or other matter affecting
title to the Items of Equipment, the making of any alterations or modifications
in violation of any standards imposed by any insurance polices required to be
maintained by the Lessee pursuant to the Lease which policies are in effect at
any time with respect to the Items of Equipment or any part thereof, and any
Claim for patent, trademark or copyright infringement and any violations of any
environmental noise or pollution control laws;

     (v) a breach by Lessee of any of its covenants under any Operative
Document, or a misrepresentation by the Lessee (including any omission by Lessee
that makes any representation made by Lessee materially misleading) in any
Operative Document or in any certificate or other document delivered by the
Lessee to the Lessor or Agent pursuant to any Operative Document, or the
material inaccuracy of any information provided by Lessee to any third party in
connection with the preparation by such third party of a report or other
document required to be delivered pursuant to any Operative Document;

     (vi) the existence of any Lien on or with respect to the Items of
Equipment, title thereto, any interest therein or any Basic Rent or Supplemental
Rent, including any Liens which arise out of the possession, use, operation,
construction, repair or rebuilding of the Items of Equipment or by reason of
labor or materials furnished or claimed to have been furnished to Lessee, or any
of its contractors or agents or by reason of the financing of any personality or
equipment purchased or leased by the Lessee or alterations or modifications made
by the Lessee, except Liens in favor of the Lessor; and

     (vii) any Claims related to the Release from any Item of Equipment of any
substance into the environment, including (without limitation) Claims arising
out of the use of any Item of Equipment for the transportation or storage of any
Hazardous Material.

(b) Exclusions. The provisions of Section 11.1(a) shall not apply to any Claim:

     (i) with respect to any Indemnitee, to the extent attributable to the
willful misconduct or gross negligence of, or negligence in the handling of
funds by, such Indemnitee, its officers, agents, employees and Affiliates or the
breach in any material respect of any representation or covenant made by such
Indemnitee under the Operative Documents;

     (ii) to the extent attributable to acts or events that occur after the
payment in full of the entire Lease Balance and all other amounts due from
Lessee to the Agent and Lessor pursuant to the Operative Documents or
repossession of the Items of Equipment by Lessor or Agent following a Lease
Event of Default (except to the extent fairly attributable to circumstances
existing or acts, events, liabilities or damages occurring or accruing prior to
such payment in full or repossession, or to the extent relating to the acts

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or omissions of the Lessee in relation to, or liabilities arising out of, their
operation, repair, servicing, maintenance or replacement of the Items of
Equipment); or

     (iii) in respect of Taxes, which are governed by Section 11.2, other than a
payment necessary to make payments under this Section 11.1 on a Grossed-Up
Basis.

     (c) Contests. In respect of the indemnification provided under Section
11.1(a), promptly after receipt by an Indemnitee of notice of any pending or
threatened Claim, such Indemnitee shall, if a claim for indemnification in
respect thereof is to be made against Lessee give written notice thereof to
Lessee; provided that the failure to provide such prompt notice shall not limit
Lessee’s obligations or prejudice any rights of such Indemnitee under Section
11.1(a) with respect to such Claim, except to the extent that such failure to
provide prompt notice adversely affects Lessee’s indemnification obligations
hereunder. So long as no Lease Event of Default is continuing, Lessee at its own
expense, may elect to assume the defense of any such Claim through its own
counsel, which shall be subject to the reasonable approval of the Indemnitee, on
behalf of the Indemnitee (with full right of subrogation to the Indemnitee’s
rights and defenses). Lessee must indicate its election to assume such defense
by written notice to the Indemnitee within 30 days following receipt of
Indemnitee’s notice of the Claim, or in the case of a third party claim which
requires a shorter time for response then within such shorter period as
specified in the Indemnitee’s notice of Claim; provided that such Indemnitee has
given Lessee notice thereof. If Lessee denies liability or fails to respond to
the notice within the time period set forth above, the Indemnitee may defend or
compromise the Claim as it deems appropriate without prejudice to any of
Indemnitee’s rights hereunder and with no further obligation to inform Lessee of
the status of the Claim and no right of Lessee to approve or disapprove any
actions taken in connection therewith by the Indemnitee. If Lessee shall have
elected to assume the defense of any such Claim, then upon the request of
Lessee, the Indemnitee requesting payment of indemnity under Section 11.1(a)
shall promptly furnish Lessee with copies of any records or documents pertaining
to the matter to be indemnified and, to the extent known by such Indemnitee, a
reasonably detailed explanation of the circumstances giving rise to the claim of
indemnification and the determination of the amount of the requested indemnity
payment. Upon payment in full to Indemnitee of any indemnity pursuant to
Section 11.1(a), Lessee shall be subrogated to any right of Indemnitee in
respect of the matter against which such indemnity has been paid. If Lessee
shall have elected to assume the defense of any such Claim, upon the written
request at any time and from time to time of Lessee, Indemnitee shall, at the
expense of Lessee, take such reasonable actions and execute such documents as
are necessary or reasonably appropriate to assist Lessee in the preservation and
enforcement against third parties of Lessee’s right of subrogation hereunder.
The Indemnitee may employ separate counsel in any such Claim and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnitee unless the Indemnitee shall have been advised by its
counsel that a conflict of interest exists in Lessee’s counsel’s representations
of the Indemnitee and Lessee, in which case the fees and expenses of such
Indemnitee’s counsel shall be for the account of Lessee. All fees and expenses
shall be paid periodically as incurred. So long as no Lease Event of Default
shall have occurred and be continuing, Lessee shall not be liable for any
settlement of any such Claim effected without its consent unless Lessee shall
fail to, or elect in writing not to, assume the defense thereof in which case
the Indemnitee, without waiving any rights to indemnification hereunder, may
defend such Claim and enter into any good faith

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settlement thereof without the prior written consent of Lessee. Lessee shall
not, without the prior written consent (not to be unreasonably withheld) of the
Indemnitee, effect any settlement of any such Claim unless such settlement
includes an unconditional release of the Indemnitee from all liabilities that
are the subject of such Claim. The parties agree to cooperate in any defense or
settlement of any such Claim and to give each other reasonable access to all
information relevant thereto subject to appropriate confidentiality agreements.
The parties will similarly cooperate in the prosecution of any claim or lawsuit
against any third party.

     (d) Subrogation. Upon the payment in full of any claim pursuant to this
Section 11.1, Lessee, without any further action, shall be subrogated to any
claims the Indemnitee may have relating thereto. The Indemnitee agrees, at
Lessee’s expense, to give such further assurances or agreements and to cooperate
with Lessee to permit the Lessee to pursue such claims, if any, to the extent
reasonably requested by Lessee. If Lessee shall have paid an amount to or for an
Indemnitee pursuant to this Section 11.1, and such Indemnitee subsequently shall
be reimbursed in respect of such indemnified amount from any other Person, such
Indemnitee shall promptly pay Lessee, but not before Lessee shall have made all
payments then due to such Indemnitee pursuant to this Section 11.1 and any other
payments then due hereunder and under any other Operative Document, the amount
of such reimbursement, including interest actually received attributable
thereto, net of Taxes required to be paid by such Indemnitee as a result of any
refund received, after giving effect to such payment to Lessee.

     (e) Not Residual Guaranty. Nothing in this Section 11.1 shall be construed
as a guaranty of residual value of the Items of Equipment.

     Section 11.2. General Tax Indemnity.

     (a) Indemnification. Lessee shall pay and assume liability for, and does
hereby agree to indemnify, protect and defend the Equipment and the other Lessee
Collateral and all Indemnitees, and hold the Equipment and the other Lessee
Collateral and all Indemnitees harmless against, all Impositions on an
Grossed-Up Basis. Each Indemnitee further agrees to make good faith efforts to
implement the reasonable recommendations made by Lessee regarding techniques to
minimize Taxes indemnifiable hereunder, provided that Lessee agrees to indemnify
such Indemnitee on a Grossed-Up Basis and to hold each Indemnitee harmless
against any cost or expense arising from instituting Lessee’s recommendations.
Notwithstanding anything to the contrary herein, any indemnification obligation
of Lessee with respect to any withholding Taxes incurred by an Indemnitee shall
be governed exclusively by Section 11.3.

     (b) Contests. If any claim shall be made against any Indemnitee or if any
proceeding shall be commenced against any Indemnitee (including a written notice
of such proceeding) for any Imposition as to which Lessee reasonably may have an
indemnity obligation pursuant to this Section 11.2, or if any Indemnitee
reasonably shall determine that any Imposition for which Lessee may have an
indemnity obligation pursuant to this Section 11.2 may be payable, such
Indemnitee shall promptly (and in any event, within 30 days) notify Lessee in
writing (provided that failure to so notify Lessee within 30 days shall not
alter such Indemnitee’s rights under this Section 11.2, except to the extent
such failure precludes or materially adversely affects the ability

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to conduct a contest of any indemnified Imposition, in which case Lessee shall
have no indemnification obligation hereunder to the extent such failure
precludes or materially affects their ability to conduct a contest) and shall
not take any action with respect to such claim, proceeding or Imposition without
the written consent of Lessee (such consent not to be unreasonably withheld or
unreasonably delayed) for 30 days after the receipt of such notice by Lessee;
provided, however, that in the case of any such claim or proceeding, if such
Indemnitee shall be required by law or regulation to take action prior to the
end of such 30-day period, such Indemnitee shall in such notice to Lessee, so
inform Lessee, and such Indemnitee shall not take any action with respect to
such claim, proceeding or Imposition without the consent of Lessee (such consent
not to be unreasonably withheld or unreasonably delayed) for 10 days after the
receipt of such notice by Lessee, unless the Indemnitee shall be required by law
or regulation to take action prior to the end of such 10-day period.

     Lessee shall be entitled for a period of 30 days from receipt of such
notice from the Indemnitee (or such shorter period as the Indemnitee has
notified Lessee is required by law or regulation for the Indemnitee to commence
such contest), to request in writing that such Indemnitee contest in good faith
of such Imposition, at Lessee’s expense. If (x) such contest can be pursued in
the name of Lessee and independently from any other proceeding involving an
Imposition for which Lessee has not agreed to indemnify such Indemnitee, (y)
such contest must be pursued in the name of the Indemnitee, but can be pursued
independently from any other proceeding involving an Imposition for which Lessee
has not agreed to indemnify such Indemnitee or (z) the Indemnitee so requests,
then Lessee shall be permitted to control the contest of such claim, provided
that in the case of a contest described in any of clause (x), (y) or (z) if the
Indemnitee determines in good faith that such contest by Lessee reasonably could
have a material adverse impact on the business or operations of the Indemnitee
and provides a written explanation to Lessee of such determination, the
Indemnitee may elect to control or reassert control of the contest, and
provided, that by taking control of the contest, Lessee acknowledges that it is
responsible for the Imposition ultimately determined to be due by reason of such
claim, and; provided, further, that in determining the application of clauses
(x) and (y), each Indemnitee shall take any and all reasonable steps to
segregate claims for any Impositions for which Lessee indemnifies hereunder from
Impositions for which Lessee is not obligated to indemnify hereunder, so that
Lessee can control the contest of the former. In all other claims requested to
be contested by Lessee, the Indemnitee shall control the contest of such claim,
acting through counsel reasonably acceptable to Lessee. In any contest
controlled by an Indemnitee, the Indemnitee shall conduct such contest in good
faith. In no event shall Lessee be permitted to contest (or the Indemnitee
required to contest) any claim (A) if such Indemnitee provides Lessee with a
legal opinion of independent counsel that such action, suit or proceeding
involves a material risk of imposition of criminal liability or will involve a
material risk of the sale, forfeiture or loss of, or the creation of any Lien
(other than a Permitted Lien) on any Item or Items of Equipment or any part
thereof or any other Lessee Collateral unless Lessee shall have posted and
maintained a bond or other security reasonably satisfactory to the relevant
Indemnitee in respect to such risk, (B) if a Lease Event of Default has occurred
and is continuing, unless Lessee shall have posted and maintained a bond or
other security reasonably satisfactory to the relevant Indemnitee in respect of
the Impositions subject to such claim and any and all expenses for which Lessee
is responsible hereunder reasonably foreseeable in connection with the contest
of such claim, (C) unless Lessee shall have agreed to pay and shall pay to such
Indemnitee on

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demand all reasonable out-of-pocket costs, losses and expenses that such
Indemnitee may incur in connection with contesting such Imposition, including
all reasonable legal, accounting and investigatory fees and disbursements, or
(D) if such contest shall involve the payment of the Impositions prior to the
contest, unless Lessee shall provide to the Indemnitee an interest-free advance
in an amount equal to the Imposition that the Indemnitee is required to pay
(with no additional net after-tax costs (including Taxes) to such Indemnitee).
In addition, for Indemnitee-controlled contests and claims contested in the name
of the Indemnitee in a public forum, no contest shall be required: (A) unless
the amount of the potential indemnity (taking into account all similar or
logically related claims that have been or could be raised in any audit
involving such Indemnitee for which Lessee may be liable to pay an indemnity
under this Section 11.2) exceeds $75,000 and (B) unless, if requested by the
Indemnitee, the Lessee shall have provided to the Indemnitee an opinion of
counsel selected by Lessee that a reasonable basis exists to contest such claim.
In no event shall an Indemnitee be required to appeal an adverse judicial
determination to the United States Supreme Court.

     The party conducting the contest shall consult in good faith with the other
party and its counsel with respect to the contest of such claim for 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; provided, however, that
if the Indemnitee is the controlling party, no settlement offer with respect to
such claims shall be made or accepted by the Indemnitee without the prior
consent of the Lessee (which consent shall not unreasonably be withheld);
provided further, that if the Indemnitee is the controlling party and Lessee
recommends the acceptance of a settlement offer made by the relevant
Governmental Agency and such Indemnitee rejects such settlement offer then the
amount for which Lessee will be required to indemnify such Indemnitee with
respect to the Taxes subject to such offer shall not exceed the amount which it
would have owed if such settlement offer had been accepted. In addition, the
controlling party shall keep the noncontrolling party reasonably informed as to
the progress of the contest, and shall provide the noncontrolling party with a
copy of (or appropriate excerpts from) any reports or claims issued by the
relevant auditing agent or taxing authority to the controlling party thereof, in
connection with such claim or the contest thereof.

     Each Indemnitee shall supply Lessee with such information and documents
reasonably requested by Lessee as is necessary or advisable for Lessee to
participate in any action, suit or proceeding to the extent permitted by this
Section 11.2(b), and Lessee shall promptly reimburse such Indemnitee for the
reasonable out-of-pocket expenses of supplying such information and documents.
No Indemnitee shall enter into any settlement or other compromise or fail to
appeal an adverse ruling with respect to any claim which is entitled to be
indemnified under this Section 11.2 (and with respect to which contest is
required under this Section 11.2(b)) without the prior written consent of Lessee
(such consent not to be unreasonably withheld), unless such Indemnitee waives
its right to be indemnified under this Section 11.2 with respect to such claim.

     Notwithstanding anything contained herein to the contrary, an Indemnitee
will not be required to contest (and Lessee shall not be permitted to contest) a
claim with respect to any Imposition if (i) such Indemnitee shall waive its
right to indemnification under this Section 11.2 with respect to such claim (and
any claim with respect to such year or any other taxable year, the contest of
which is materially adversely affected as a result of such waiver) or (ii) such

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Imposition is the sole result of a claim of a continuing and consistent nature,
which claim has previously been resolved against the relevant Indemnitee (unless
a change in law or facts has occurred since such prior adverse resolution and
Lessee provides an opinion of independent tax counsel to the effect that it is
more likely than not that such change in law or facts will result in a favorable
resolution of the claim at issue).

     (c) Payments.

     (i) To or for the Account of an Indemnitee. (x) Any Imposition
indemnifiable under this Section 11.2 shall be paid directly when due to the
applicable taxing authority if direct payment is practicable and permitted. If
direct payment to the applicable taxing authority is not permitted or is
otherwise not made, any amount payable to an Indemnitee pursuant to this
Section 11.2 shall be paid within thirty (30) days after receipt of a written
demand therefor from such Indemnitee (accompanied by a written statement
describing in reasonable detail the amount so payable), but not before two
Business Days prior to the date that the relevant Taxes are due. Any payments
made to an Indemnitee pursuant to this Section 11.2 shall be made directly to
the Indemnitee entitled thereto in immediately available funds at such bank or
to such account as specified by the Indemnitee in written directions to Lessee,
or, if no such direction shall have been given, by check of Lessee payable to
the order of the Indemnitee by certified mail, postage prepaid at its address as
set forth in this Lease. Upon the request of any Indemnitee with respect to an
Imposition that Lessee is required to pay, Lessee shall furnish to such
Indemnitee the original or a copy of a receipt for Lessee’s payment of such
Imposition or such other evidence of payment as is reasonably acceptable to such
Indemnitee.

     (y) At the Lessee’s request, the amount of any indemnification payment by
Lessee pursuant to subsection (a) shall be verified and certified by an
independent public accounting firm mutually acceptable to the Lessee and the
Indemnitee. The fees and expenses of such independent public accounting firm
shall be paid by the Lessee unless such verification shall result in an
adjustment in the Lessee’s favor of 5% or more of the payment as computed by the
Indemnitee, in which case such fees and expenses shall be paid by the
Indemnitee.

     (ii) To Lessee. (x) If any Indemnitee actually shall realize a Tax benefit
(whether by way of deduction, credit, allocation or apportionment or otherwise)
with respect to an Imposition not indemnifiable hereunder which would not have
been realized but for any Imposition with respect to which Lessee has reimbursed
or indemnified such Indemnitee pursuant to the Operative Documents, which
benefit was not previously taken into account in determining the amount of
Lessee’s payment to such Indemnitee, such Indemnitee shall pay to Lessee an
amount equal to the amount of such Tax benefit on a Grossed-Up Basis; provided,
however, that no payment shall be made as long as Lease Event of Default is
continuing; provided further, however, that no Indemnitee shall be required to
pay to Lessee any Tax benefit to the extent such payment would be greater than
the amount of the Impositions in respect of which the reimbursement or
indemnification was paid by Lessee, reduced by all prior payments by such
Indemnitee under this Section 11.2(c)(ii)(x) in respect of such amount; any
payment to Lessee which is so limited shall, to the extent of such unpaid
excess, be carried over and shall be available to offset any future obligations
of Lessee under this Section 11.2. If such repaid Tax benefit is thereafter
lost, the additional Tax payable in respect of such lost Tax benefit shall be

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treated as an Imposition indemnifiable hereunder without regard to the
exclusions set forth in clauses (i), (ii), (iv), (v), (vi), (vii), (viii), (ix),
(x) of the definition of Impositions.

     (y) Upon receipt by an Indemnitee of a refund or credit of all or part of
any Impositions paid or indemnified against by Lessee, which refund or credit
was not previously taken into account in determining the amount of Lessee’s
payment to such Indemnitee, such Indemnitee shall pay to Lessee, on a Grossed-Up
Basis, an amount equal to the amount of such refund or credit, plus any interest
received by or credited to such Indemnitee with respect to such refund;
provided, however, that no such payment shall be made as long as a Lease Event
of Default is continuing; provided, further, however, that no Indemnitee shall
be required to pay to Lessee any refund or credit to the extent such refund or
credit is greater than the amount of Impositions in respect of which payment or
indemnification was made by Lessee, reduced by all prior payments by such
Indemnitee under this Section 11.2(c)(ii)(y) in respect of such amount. If such
repaid refund or credit is thereafter lost, the additional Tax payable shall be
treated as Imposition indemnifiable hereunder without regard to the exclusions
set forth in clauses (i), (ii), (iv), (v), (vi) (vii), (viii), (ix), (x) of the
definition of Impositions.

     (z) The Indemnitee will, at Lessee’s expense, pursue refunds and tax
benefits that would result in any such payments to Lessee, but only if the
Indemnitee has been notified in writing by Lessee that such refunds or tax
benefits are available.

     (d) Reports. In the case of any report, return or statement required to be
filed with respect to any Impositions that are subject to indemnification under
this Section 11.2 and of which Lessee or the Indemnitee has knowledge, the party
having such knowledge shall promptly notify the other of such requirement and,
at Lessee’s expense (i) if Lessee is permitted (unless otherwise requested by
the Indemnitee) by Applicable Laws and Regulations, timely file such report,
return or statement in its own name or (ii) if such report, return or statement
is required to be in the name of or filed by such Indemnitee or the Indemnitee
otherwise requests that such report, return or statement be filed in the name of
or by such Indemnitee, Lessee shall prepare such report, return or statement for
filing by such Indemnitee in such manner as shall be reasonably satisfactory to
such Indemnitee and send the same to the Indemnitee for filing no later than
15 days prior to the due date therefor. In any case in which the Indemnitee will
file any such report, return or statement, Lessee shall, upon written request of
such Indemnitee, provide such Indemnitee with such information as is reasonably
necessary to allow the Indemnitee to file such report, return or statement.
Notwithstanding the foregoing, Lessee shall not be required to prepare or file
any income tax return or franchise tax return of any Indemnitee.

     Section 11.3. Withholding Taxes. (a) (x) Agent shall withhold any Taxes
required by Applicable Laws and Regulations to be withheld on any payment to
Lessor or any Assignee, except to the extent that Lessor or such Assignee has
furnished to Agent the information set forth in Section 11.3(a)(y) entitling
such Person to an exemption from withholding Taxes. Except to the extent set
forth in Section 11.6, the amount payable to Lessor or any Assignee shall be
reduced by the amount of any withholding Taxes required to be withheld by Agent
pursuant to the preceding sentence and Lessee and Agent shall have no liability
or obligation to Lessor or such Assignee with respect to any such withholding
Taxes, except to the extent that the Agent is required to withhold such

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withholding Taxes as the result of a change in Applicable Laws and Regulations
(only if such change in Applicable Laws and Regulations occurs after Lessor or
the relevant Assignee has become a party to this Lease or the Lessor Assignment
Agreement, as applicable), in which case Lessee shall be responsible for, and
shall indemnify and hold harmless Agent (without duplication of any
indemnification required in Section 11.2(a)) on a Grossed-Up Basis against, any
claims regarding such withholding taxes made against the Agent, to the extent,
but only to the extent, Agent has actually paid funds to a taxing authority with
respect to such withholding Taxes or receives a demand for such payments from
any taxing authority. In accepting and carrying out its duties with respect to
withholding Taxes pursuant to this Section 11.3, Agent shall act as the duly
authorized agent of Lessee to act on behalf of Lessee under the withholding
provisions of Chapter 3 of the Code. Lessee shall file notice of such
appointment with the Director of Foreign Operations District of Internal Revenue
Service in accordance with Treas. Reg. §1.1441-7(b). Such agency shall terminate
in the event that Applicable Laws and Regulations are amended so as to release
Lessee of the obligation to withhold Taxes with respect to payments made by
Lessee to Agent under this Lease and in any event upon termination or expiration
of this Lease.

     (y) Lessor and each Assignee (whether now or hereafter a party to this
Lease or the Lessor Assignment Agreement, as applicable) that is not
incorporated under the laws of the United States of America or a state thereof
shall: (1) deliver to Lessee and Agent (A) two (2) duly completed copies of
United States Internal Revenue Service Form W-8BEN or W-8ECI or successor
applicable form, as the case may be, and (B) an Internal Revenue Service Form
W-8 or W-9 or successor applicable form; (2) deliver to Lessee and Agent after
written request therefor two (2) further copies of such forms or other
appropriate certification of such forms on or before the date that such form
expires or becomes obsolete and after the occurrence of any event requiring a
change in the most recent form delivered to Lessee and Agent; and (3) obtain
such extensions of time for filing and renew such forms and certifications
thereof as may reasonably be requested in writing by Lessee, unless any Change
in Law has occurred prior to the date on which any such delivery otherwise would
be required which renders any such form inapplicable or which would prevent
Lessor or such Assignee from duly completing and delivering any such forms and
Lessor or such Assignee so advises the Lessee and the Agent.

     (b) If and to the extent (A) Agent has in good faith attempted to comply
with its obligation to withhold Taxes in accordance with clause (a) and (B)
Lessor and each Assignee to which Section 11.3(a)(y) applies has complied
therewith, and a claim regarding withholding Taxes is made against Agent, as
between Lessee and Agent, Lessee shall be responsible for, and Lessee shall
indemnify and hold harmless Agent (without duplication of any indemnification
required by Section 11.2(a)) on a Grossed-Up Basis against, such claim to the
extent, but only to the extent, Agent has actually paid funds to a taxing
authority with respect to such withholding taxes or receives a demand for such
payment from any taxing authority.

     (c) Except with respect to withholding Taxes payable by Lessee pursuant to
Section 11.4, Lessor and each Assignee agrees to reimburse Agent for any
withholding Taxes for which Agent becomes liable and to reimburse Lessee for any
Taxes or other amounts paid by Lessee pursuant to clause (b) hereof.

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     (d) For purposes of determining whether withholding Taxes apply to payments
under this Lease, it shall be assumed that this Lease constitutes a loan for
United States Federal income tax purposes (as is the intention of the parties).

     Section 11.4. Increased Costs. (a) If on or after the Delivery Date, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof (each such event being a “Change in Law”) by any
Governmental Agency, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lessor or any
Assignee with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:

     (i) shall subject Lessor or such Assignee to any tax, duty or other charge
with respect to its investment made hereunder or under the Lessor Assignment
Agreement, as applicable, or shall change the basis of taxation of payments to
Lessor or such Assignee of Rent or any other amounts due under the Operative
Documents in respect of its investment hereunder (or under the Lessor Assignment
Agreement, as applicable (except for (A) franchise taxes, taxes or other charges
related to the general authority of Lessor or such Assignee to do business or
taxes on the overall income of Lessor or such Assignee imposed by the
jurisdiction where Lessor or such Assignee is incorporated (or any political
subdivision thereof) or where it is managed or controlled, or (B) withholding
taxes imposed under the laws of any jurisdiction); or

     (ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors of
the Federal Reserve System, but excluding, with respect to any funding by Lessor
or such Assignee made hereunder or under the Lessor Assignment Agreement, as
applicable, which is determined on a LIBO Rate basis, any such requirement with
respect to which Lessor or such Assignee is entitled to compensation pursuant to
clause (d) below), special deposit, insurance assessment or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
Lessor or such Assignee or shall impose on Lessor or on the London interbank
market any other condition affecting the investment of Lessor or such Assignee
made hereunder or under the Lessor Assignment Agreement, as applicable;

and the result of any of the foregoing is to increase the cost to Lessor or such
Assignee of making or maintaining its investment made hereunder or under the
Lessor Assignment Agreement, as applicable, or to reduce the amount of any sum
received or receivable by Lessor or such Assignee under this Lease or under the
Lessor Assignment Agreement, as applicable, by an amount deemed by Lessor or
such Assignee to be material, then, within 15 days after reasonably detailed
written demand by Lessor or such Assignee (with a copy to Agent), Lessee shall
pay to Lessor or such Assignee, as applicable, as Supplemental Rent, such
additional amount or amounts as will compensate Lessor or such Assignee for such
increased cost or reduction; provided, however, that Lessee shall have no
obligation to make any payment to any demanding party under this Section on
account of any such increased costs unless Lessee

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receives notice of such increased costs from the demanding party within twelve
(12) months after they are incurred or realized.

     (b) IF LESSOR OR ANY ASSIGNEE SHALL HAVE DETERMINED THAT ANY APPLICABLE
LAW, RULE, GUIDELINE OR REGULATION REGARDING CAPITAL ADEQUACY, OR ANY CHANGE
THEREIN, OR ANY CHANGE IN THE INTERPRETATION OR ADMINISTRATION THEREOF BY ANY
GOVERNMENTAL AGENCY, CENTRAL BANK OR COMPARABLE AGENCY CHARGED WITH THE
INTERPRETATION OR ADMINISTRATION THEREOF, OR ANY REQUEST OR DIRECTIVE REGARDING
CAPITAL ADEQUACY (WHETHER OR NOT HAVING THE FORCE OF LAW) OF ANY SUCH AUTHORITY,
CENTRAL BANK OR COMPARABLE AGENCY (A “REGULATORY REQUIREMENT”), HAS OR WOULD
HAVE THE EFFECT OF REDUCING THE RATE OF RETURN ON CAPITAL OF LESSOR (OR ITS
PARENT) OR SUCH ASSIGNEE AS A CONSEQUENCE OF LESSOR’S OR SUCH ASSIGNEE’S
OBLIGATIONS UNDER THE OPERATIVE DOCUMENTS TO A LEVEL BELOW THAT WHICH LESSOR (OR
ITS PARENT) OR SUCH ASSIGNEE COULD HAVE ACHIEVED BUT FOR SUCH REGULATORY
REQUIREMENT (TAKING INTO CONSIDERATION ITS POLICIES WITH RESPECT TO CAPITAL
ADEQUACY) BY AN AMOUNT DEEMED BY LESSOR OR SUCH ASSIGNEE TO BE MATERIAL, THEN
FROM TIME TO TIME, WITHIN 15 DAYS AFTER REASONABLY DETAILED WRITTEN DEMAND BY
LESSOR OR SUCH ASSIGNEE (WITH A COPY TO AGENT), LESSEE SHALL PAY TO LESSOR OR
SUCH ASSIGNEE, AS SUPPLEMENTAL RENT, SUCH ADDITIONAL AMOUNT OR AMOUNTS AS WILL
COMPENSATE LESSOR (OR ITS PARENT) OR SUCH ASSIGNEE FOR THE PORTION OF ANY SUCH
REDUCTION; PROVIDED, HOWEVER, THAT LESSEE SHALL HAVE NO OBLIGATION TO MAKE ANY
PAYMENT TO LESSOR OR ANY ASSIGNEE UNDER THIS SECTION ON ACCOUNT OF ANY SUCH
INCREASED COSTS UNLESS LESSEE RECEIVES NOTICE OF SUCH INCREASED COSTS FROM
LESSOR OR SUCH ASSIGNEE WITHIN TWELVE (12) MONTHS AFTER THEY ARE INCURRED OR
REALIZED.

     (c) Lessor and each Assignee will promptly notify Lessee and Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle Lessor or such Assignee to compensation pursuant to this Section 11.4
and will use reasonable commercial efforts to avoid the need for, or reduce the
amount of, such compensation if, in the reasonable judgment of Lessor or such
Assignee, such efforts would not result in any economic or regulatory
disadvantage to Lessor or such Assignee or be contrary to Lessor’s or such
Assignee’s normal banking procedures. A certificate of Lessor or any Assignee
claiming compensation under this Section 11.4 and setting forth the additional
amount or amounts to be paid to it hereunder, accompanied by a computation in
reasonable detail of such amount or amounts, shall be conclusive if prepared in
good faith and on a reasonable basis. In determining such amount, Lessor and
such Assignee may use any reasonable averaging and attribution methods.

     (d) For so long as Lessor or any Assignee shall be required pursuant to the
requirements of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
“Eurocurrency liabilities” (or any other category of liabilities which includes
deposits by reference to which the rate on the investment of Lessor or such
Assignee made hereunder or under the Lessor Assignment Agreement, as applicable,
on which is determined on a LIBO Rate basis, is determined or any category of
extensions of credit or other assets which includes loans by a non-United States
office of Lessor or such Assignee to United States residents), then Lessor or
such Assignee may require Lessee to pay, contemporaneously with each payment of
Basic Rent, additional yield on the investment of

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Lessor or such Assignee made hereunder or under the Lessor Assignment Agreement,
as applicable, at a rate per annum determined by Lessor or such Assignee up to
but not exceeding the excess of (a)(i) the applicable LIBO Rate divided by
(ii) one minus the LIBOR Reserve Percentage over (b) the applicable LIBO Rate.
If Lessor or any Assignee wishes to require payment of such additional yield,
Lessor or such Assignee (x) shall so notify Lessee and Agent in a reasonably
detailed, written notice, in which case such additional yield on the investment
of Lessor or such Assignee made hereunder or under the Lessor Assignment
Agreement, as applicable, shall be payable to Lessor or such Assignee at the
place indicated in such notice with respect to each Rent Period commencing at
least four Business Days after the giving of such notice and (y) shall notify
Lessee at least four Business Days prior to each date on which yield is payable
on such investment of the amount then due it under this clause.

     Section 11.5. Funding Losses. Lessee shall pay to Lessor and each Assignee,
as applicable, as Supplemental Rent, such amounts as may be necessary to
reimburse Lessor or such Assignee for any loss or expense incurred (including
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by Lessor or such Assignee to make, continue or
maintain any portion of its investment hereunder or under the Lessor Assignment
Agreement, as applicable, on a LIBO Rate basis) as a result of any (i) payment
of all or any portion of the Lease Balance for any reason on a date other than a
Payment Date, including, without limitation, by reason of acceleration, or
(ii) the failure of the transaction contemplated by Article II to occur on the
Delivery Date if Lessee has delivered the Delivery Date Notice and such failure
is the result of any action or inaction by Lessee (the amount of such loss or
expense, the “Break Funding Amount”). Lessor and each Assignee shall promptly
notify Lessee and Agent in writing of the amount of any claim under this
Section 11.5, the reason or reasons therefor and the additional amount required
fully to compensate Lessor or such Assignee for such loss or expense. Such
written notice (which shall include calculations in reasonable detail) shall, in
the absence of manifest error, be conclusive and binding on Lessee.

     Section 11.6. Gross Up. With respect to any payment to be received under
any other provision of this Article XI, the amount of such payment shall be
increased to an amount such that after deduction of the amount of all Taxes and
impositions required to be paid by the recipient of such payment (including any
Taxes otherwise excluded from the definition of Impositions hereunder) is equal
to the payment otherwise required to be made hereunder (net of any Tax savings
then actually realized by such Indemnitee with respect to any payment that is
the subject of indemnification) (“Grossed-Up Basis”).

     Section 11.7. Nonconformance Indemnity. Notwithstanding any provision to
the contrary in this Article XI, in the event that (a) Lessee elects the Sale
Option, and (b) after paying to Lessor, any amounts due under Article XV hereof,
the Lease Balance shall not have been reduced to zero, then the Lessee shall
deliver to Lessor a report from an appraiser selected by it (at the direction of
the Agent) and approved by the Lessee (such approval not to be unreasonably
withheld), in form and substance reasonably satisfactory to the Agent and using
methods reasonably satisfactory to the Agent. In the event that the
above-described appraisal establishes that (x) the actual Fair Market Value of
the

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Items of Equipment as of the Lease Expiration Date is less than the Fair Market
Value of the items of Equipment anticipated for such date in the Appraisal
delivered pursuant to Section 3.1(g), and (y) the reason for the actual Fair
Market Value of the Items of Equipment as of the Lease Expiration Date being
less than the Fair Market Value anticipated for such date in the Appraisal
delivered pursuant to Section 3.1(g) was due, in whole or in part, to any of the
following events, circumstances or conditions, whether or not permitted
hereunder: (i) the failure to maintain the Items of Equipment as required by the
Lease and the other Operative Documents (including the failure to comply with
all Environmental Laws), and in at least as good a condition as it was in on the
Delivery Date, ordinary wear and tear excepted; (ii) the carrying out of any
modifications, improvements or alterations or the failure to undertake, in
accordance with Section 15.4(b), any modifications, improvements or alterations;
(iii) excessive use of any Item of Equipment; or (iv) any defect, exception,
restriction or other encumbrance on or title to the Items of Equipment arising
after the Delivery Date, then Lessee shall promptly pay over to Lessor on the
Lease Expiration Date the lesser of (1) the outstanding Lease Balance and
(2) the amount of the shortfall between the Fair Market Value of the Items of
Equipment as of the Lease Expiration Date and the Fair Market Value anticipated
for such date in the Appraisal delivered pursuant to Section 3.1(g) demonstrated
in the report of the appraiser described above to be attributable to any of the
events or circumstances described in clauses (i) through (iv) of this
Section 11.7.

     Section 11.8. Payment of Indemnities. Unless the Operative Documents
provide otherwise, any payment of Supplemental Rent constituting indemnity
payments shall be due and payable within ten days of demand and compliance by
the Lessor and Agent with any notice or other requirements, if any, they are to
satisfy in accordance with the provision that gives rise to the indemnity
obligation.

ARTICLE XII

LEASE EVENTS OF DEFAULT; REMEDIES

     Section 12.1. Lease Events of Default. The following shall constitute
events of default (each a “Lease Event of Default”) hereunder; provided that for
purposes of Article IV and subsection (b), (c)(v), (c)(vi), (d), (h)(ii), (i),
(j) or (k) of this Section 12.1, to the extent Lessor shall exercise any
discretion in making a determination that a Lease Event of Default has occurred
thereunder, Lessor shall exercise such discretion in a commercially reasonable
manner:

     (a) Payments. Lessee shall fail to pay (i) when due any amount payable on
the Lease Expiration Date, or (ii) within five (5) Business Days after the same
becomes due, any installment of Basic Rent (other than Basic Rent payable on the
Lease Expiration Date) or any other amount payable by Lessee under any of the
Operative Documents.

     (b) Representations and Warranties. Any representation or warranty by
Lessee made herein or which is contained in any certificate, document or
financial or other statement by Lessee or any Responsible Officer of Lessee,
furnished at any time

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under or in connection with this Lease or any other Operative Document, is
false, incorrect or inaccurate in any material respect, on or as of the date
made; provided, however, that, other than willful misrepresentations or willful
breaches of warranties, such misrepresentation or breach of warranty shall not
constitute a Lease Event of Default if it is capable of being remedied and
Lessee remedies such misrepresentation or breach of warranty within thirty
(30) days after the earlier of (i) Lessee’s written acknowledgment of such
misrepresentation or breach of warranty or (ii) any written notice by Lessor or
Agent to Lessee of such misrepresentation or breach of warranty.

     (c) Failure by Lessee to Perform Certain Covenants. Lessee shall fail to
perform or observe any term, covenant or agreement contained in
(i) Section 8.1(c), (ii) Section 8.6, (iii) Section 9.2, (iv) Section 9.3,
(v) Article XV, (vi) Section 18.2(c) or 18.2(e), (vii) any other provision of
Section 18.2 or (viii) Section 18.3.

     (d) Failure by Lessee to Perform Other Covenants. Lessee shall fail to
perform or observe any other term, covenant or agreement contained in this Lease
or any other Operative Document on its part to be performed or observed and any
such failure shall remain unremedied for a period of thirty (30) days after the
earlier of (i) Lessee’s written acknowledgment of such failure or (ii) any
written notice by Lessor or Agent to Lessee of such failure; provided, however,
that, except with respect to any failure to perform or observe the covenants or
agreements contained in Sections 8.1, 8.2, 8.3, 8.4, 8.5, 8.7 or 9.1 hereof,
such failure shall not constitute a Lease Event of Default if it is capable of
being remedied and Lessee diligently proceeds to remedy such failure and
completes such remediation within 180 days after such written acknowledgment or
notice.

     (e) Insolvency; Voluntary Proceedings. Lessee or any of its Significant
Subsidiaries shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a substantial part of
its property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the benefit
of its or any of its creditors, (iv) be dissolved or liquidated in full or in
part, (v) become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing.

     (f) Involuntary Proceedings. Proceedings for the appointment of a receiver,
trustee, liquidator or custodian of Lessee or any of its Significant
Subsidiaries or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to Lessee or any of its Significant Subsidiaries or
the debts thereof under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered

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or such proceeding shall not be dismissed or discharged within sixty (60) days
of commencement.

     (g) Cross-Default. (i) Lessee or any of its Significant Subsidiaries shall
fail to make any payment on account of any Indebtedness of such Person (other
than the Lessee Obligations) when due (whether at scheduled maturity, by
required prepayment, upon acceleration or otherwise) and such failure shall
continue beyond any period of grace provided with respect thereto, if the
aggregate amount of such Indebtedness outstanding exceeds $10,000,000, (ii) a
“Lease Event of Default” shall exist under Lease A or (iii) Lessee or any of its
Significant Subsidiaries shall otherwise fail to observe or perform any
agreement, term or condition contained in any agreement or instrument of such
Person pursuant to which $10,000,000 or more of Indebtedness is outstanding
(other than the Lessee Obligations), or any other event shall occur or condition
shall exist, and such failure, event or condition shall continue beyond any
period of grace provided with respect thereto, if the effect of such failure,
event or condition is to cause Indebtedness of Lessee or any of its Significant
Subsidiaries (other than the Lessee Obligations) to become due; provided,
however, that no Lease Event of Default shall have occurred under this clause
(iii) if the Agent, Lessor, Assignees or their Affiliates have the ability to
control (by vote or otherwise), either collectively or individually, whether
such Indebtedness shall become due.

     (h) Judgments. (i) A final nonappealable judgment or order for the payment
of money against Lessee or any of its Significant Subsidiaries in an aggregate
amount of $25,000,000 or more in excess of amounts covered by third-party
insurance shall remain unpaid for ninety (90) days following the due date for
such payment; or (ii) any non-monetary judgment or order shall be rendered
against Lessee or any of its Significant Subsidiaries which has or would
reasonably be expected to have a Material Adverse Effect.

     (i) Process Issued. A warrant of attachment, execution, distraint, or
similar process against any substantial part of the assets of Lessee or any of
its Significant Subsidiaries is issued which remains undismissed or undischarged
for a period of thirty (30) days, if as a result thereof there is reasonably
expected to occur a Material Adverse Effect.

     (j) Seizure. All or a material part of the undertaking, assets, rights or
revenues of Lessee or any of its Significant Subsidiaries are seized,
nationalized, expropriated or compulsorily acquired by or under the authority of
any Governmental Authority.

     (k) ERISA (i) An ERISA Event shall occur with respect to a Pension Plan
which has resulted or could reasonably be expected to result in liability of
Lessee under Title IV of ERISA to the Pension Plan or PBGC in an aggregate
amount in excess of $10,000,000; or (ii) the commencement or increase of
contributions to, or the adoption of or the amendment of a Pension Plan by
Lessee which has resulted or could reasonably be

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expected to result in an increase in Unfunded Pension Liability among all
Pension Plans in an aggregate amount in excess of $10,000,000.

     (l) Operative Documents. Any Operative Document to which Lessee is a party
or any material term thereof shall cease to be, or be asserted by Lessee or any
of its Significant Subsidiaries not to be, a legal, valid and binding obligation
of Lessee or such Significant Subsidiary enforceable in accordance with its
terms.

     (m) Dissolution, Etc. Lessee or any of its Significant Subsidiaries shall
(i) liquidate, wind up or dissolve (or suffer any liquidation, wind-up or
dissolution), except to the extent expressly permitted by Section 18.2(c)(i)
hereof, (ii) suspend its operations other than in the ordinary course of
business, or (iii) take any corporate action to authorize any of the actions or
events set forth above in this subparagraph (m).

     (n) [Reserved].

     (o) Material Adverse Effect. A Material Adverse Effect shall occur or
exist.

     Section 12.2. Remedies. (a) Upon the occurrence of a Lease Event of
Default, Lessor shall have the right, at its sole option, to appoint Agent as
its attorney in fact to exercise Lessor’s remedies set forth herein and in the
other Operative Documents and as otherwise permitted by Applicable Laws and
Regulations. Lessor shall provide written notice of such appointment to Lessee.
If any Lease Event of Default exists, Agent or Lessor shall have the rights,
options and remedies set forth below and Agent or Lessor may exercise in any
order one or more or all of the following remedies, to the extent permitted
under Applicable Laws and Regulations (it being understood that no remedy herein
conferred is intended to be exclusive of any other remedy or remedies, but each
and every remedy shall be cumulative and shall be in addition to every other
remedy given herein or now or hereafter existing at law or in equity or by
statute): (i) declare the entire outstanding Lease Balance to be due and
payable, together with accrued and unpaid Rent and any other amounts payable
under the Operative Documents (without double counting); (ii) proceed by
appropriate court action or actions either at law or in equity, to enforce the
declaration of the amounts described in clause (i) above, the performance by
Lessee of the applicable covenants of this Lease and the other Operative
Documents (including but not limited to Section 14.2 hereof) or to recover
damages for the breach thereof; (iii) terminate this Lease by notice in writing
to Lessee, but Lessee shall remain liable as hereinafter provided; (iv) enforce
the Lien given hereunder pursuant to the UCC or any other law; (v) enter upon
the premises where any of the Lessee Collateral may be and take possession of
all or any of such Lessee Collateral and exercise any of its rights with respect
thereto; (vi) require Lessee to assemble and return each Item of Equipment as
provided below; and (vii) avail itself of the rights, options and remedies of a
secured party under the UCC (regardless of whether the UCC or a law similar
thereto has been enacted in a jurisdiction wherein the rights or remedies are
asserted) or any other law.

     (b) (i) If Agent or Lessor exercises the option set forth in clause (a)(vi)
above, Lessee shall, at its own expense, (i) forthwith deliver (to the extent
permitted under Applicable Laws and Regulations) exclusive possession of such
Items of Equipment to Agent or Lessor, as

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applicable, at a location or locations designated by Lessor in the 48 contiguous
United States, together with a copy of an inventory list of such Items of
Equipment then subject to this Lease, all then current plans, specifications and
operating, maintenance and repair manuals in the possession of Lessee and its
Affiliates and relating to such Items of Equipment that have been received or
prepared by Lessee, appropriately protected and in the condition required by
Article VIII hereof (and in any event in condition to be placed in immediate
revenue service) and free and clear of all Liens other than Lessor Liens and
(ii) otherwise comply with the provisions of clauses (i) through (iv) of
Section 15.4(b). In addition, Lessee shall, for 180 days after redelivery of
such Items of Equipment, at Lessee’s expense, (i) maintain (or cause to be
maintained) such Items of Equipment in the condition required by Article VIII
and free and clear of all Liens other than Lessor Liens, (ii) store such Items
of Equipment in accordance with all manufacturer’s recommendations, and
(iii) keep all of such Items of Equipment insured in accordance with
Section 9.2. This paragraph shall survive termination of this Lease.

     (ii) Upon acceleration of the Lease Balance, the Lessor and each Series A
Assignee, as applicable, shall have the rights and remedies with respect to the
Series A Cash Collateral, Series C Cash Collateral and Lessor’s Interest Related
Cash Collateral, as applicable, as set forth in the Lessor Assignment Agreement,
Cash Collateral Agreement and the Control Agreements.

     (c) Following the foreclosure of Lessee’s interest in the Equipment and the
other Lessee Collateral, Lessee shall take such action as Lessor or Agent shall
reasonably request in order to notify each sublessee of any Item of Equipment of
such foreclosure and the succession of Agent, Lessor or its designee to
ownership and operation thereof.

     (d) Notwithstanding the foregoing, if any Lease Event of Default described
in Section 12.1(e) or (f) shall have occurred and be continuing, then the entire
outstanding Lease Balance and all accrued and unpaid Rent and other amounts
payable under the Operative Documents (without double counting) shall
automatically and immediately become due and payable, without presentment,
demand, notice, declaration, protest or other requirements of any kind, all of
which are hereby expressly waived.

     Section 12.3. Sale of Equipment. In addition to the remedies set forth in
Section 12.2, if any Lease Event of Default shall occur Agent or Lessor may, but
are not required to, sell the Equipment or any portion thereof in one or more
sales. Lessor or Agent may purchase all or any part of the Equipment at such
sale. Lessee acknowledges that sales for cash or on credit to a wholesaler,
retailer or user of such Equipment, or at public or private auction, are all
commercially reasonable. Any notice required by law of intended disposition by
Lessor or Agent shall be deemed reasonably and properly given if given at least
10 days before such disposition.

     Section 12.4. Application of Proceeds. All payments received and amounts
held or realized by Agent at any time when a Lease Event of Default shall be
continuing as well as all payments or amounts then held or thereafter received
by Agent and the proceeds of sale pursuant to Section 12.3 shall be distributed
upon receipt by Lessor for distribution in accordance with Article XXI hereof.

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     Section 12.5. Power of Attorney. Lessee unconditionally and irrevocably
appoints Lessor and Agent as its true and lawful attorney-in-fact, with full
power of substitution, to the extent permitted by Applicable Laws and
Regulations, in its name and stead and on its behalf, solely for the purpose of
effectuating any sale, assignment, transfer or delivery under this Article XII,
if a Lease Event of Default occurs and is continuing, whether pursuant to
foreclosure or power of sale or otherwise, and in connection therewith and
during a Lease Event of Default, to execute and deliver all such deeds, bills of
sale, assignments, releases (including releases of this Lease on the records of
any Governmental Authority) and other proper instruments as Lessor may
reasonably consider necessary or appropriate. Lessee ratifies and confirms all
that such attorney or any substitute shall lawfully do by virtue hereof. If
requested by Lessor, Agent or any purchaser, Lessee shall ratify and confirm any
lawful sale, assignment, transfer or delivery by executing and delivering to
Lessor, Agent or such purchaser, all deeds, bills of sale, assignments, releases
and other proper instruments to effect such ratification and confirmation as may
be designated in any such request.

     Section 12.6. Remedies Cumulative; Consents. To the extent permitted by,
and subject to the mandatory requirements of, Applicable Laws and Regulations,
each and every right, power and remedy herein specifically given to Lessor and
Agent or otherwise in this Lease shall be cumulative and shall be in addition to
every other right, power and remedy herein specifically given or now or
hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by Lessor or Agent, and the exercise or the beginning of the exercise
of any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any right, power or remedy. Lessor’s or
Agent’s consent to any request made by Lessee shall not be deemed to constitute
or preclude the necessity for obtaining Lessor’s or Agent’s consent in the
future to all similar requests. To the extent permitted by Applicable Laws and
Regulations, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Lessor or Agent to sell, lease or
otherwise use the Equipment, any Item of Equipment or any Part thereof in
mitigation of Lessor’s or Agent’s damages upon the occurrence of a Lease Event
of Default or that may otherwise limit or modify any of Lessor’s or Agent’s
rights or remedies under this Article XII.

ARTICLE XIII

RIGHT TO CURE

     If any Lease Event of Default shall be continuing and in Agent’s reasonably
exercised judgment Lessee is not acting diligently and appropriately to cure
such Lease Event of Default, Lessor may, but shall not be obligated to, on five
(5) Business Days’ prior notice to Lessee (except in the event of an emergency,
in which case only one Business Day’s prior notice shall be required), pay or
perform the obligation giving rise to such Lease Event of Default, and neither
Agent nor Lessor shall thereby be deemed to have waived any default caused by
such failure to cure, and the amount of such payment and the amount of the
expenses of Lessor and Agent (including reasonable attorneys’ fees and expenses)
incurred in connection with such

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payment or performance (to the extent notice has been given with respect
thereto), together with interest thereon at the Overdue Rate, shall be deemed
Supplemental Rent, payable by Lessee to Agent within five (5) Business Days
after demand and delivery to Lessee of such notice.

ARTICLE XIV

EARLY TERMINATION OPTION AND OBLIGATION TO PURCHASE

     Section 14.1. Early Termination Option. (a) Subject to the first sentence
of Section 15.2 and the limitations contained in Section 14.1(b), on any day
(the “Early Termination Payment Date”) after the Delivery Date and so long as
Lessee has not delivered written notice that it intends to exercise the Sale
Option, Lessee may, at its option, upon at least 30 days advance written notice
to Agent and Lessor, purchase one or more Items of Equipment for a purchase
price equal to the Early Termination Purchase Amount plus any Break Funding
Amounts, if any (the “Early Termination Option”). Upon the payment of the Early
Termination Purchase Amount by Lessee in accordance with the provisions of the
preceding sentence, Lessor shall execute and deliver to Lessee such documents as
may be reasonably requested to release or evidence the release of the Item or
Items of Equipment subject to the Early Termination Option from the terms and
scope of this Lease and the other Operative Documents (without representations
or warranties, except that the Items of Equipment are free and clear of Lessor
Liens attributable to Lessor), in such form as may be reasonably requested by
Lessee, all at Lessee’s sole cost and expense.

     If Lessee has elected the Early Termination Option with respect to one or
more Items of Equipment, Lessee shall continue to make all payments of Rent due
under this Lease until and including the Early Termination Payment Date. Upon
payment of the Early Termination Purchase Amount in respect of such Items of
Equipment together with all Basic Rent and Supplemental Rent then due and owing,
the remaining scheduled Basic Rent payments under this Lease shall be reduced by
an amount equal to the product of the scheduled amount of each such remaining
Basic Rent payment (determined in each case prior to the receipt of such Early
Termination Purchase Amount), multiplied by the Item Value Fraction of the Item
or Items of Equipment subject to such early termination. In the event Lessee
shall elect the Early Termination Option with respect to all of the Items of
Equipment, the obligation of Lessee to pay Rent hereunder shall cease and the
term of this Lease shall end on the date of such payment.

     (b) Lessee shall not be entitled to elect the Early Termination Option with
respect to less than all of the Items of Equipment then subject to this Lease
unless:

     (i) after giving effect to such Early Termination Option and all Early
Termination Options previously exercised by Lessee, the aggregate Early
Termination Purchase Amount paid with respect to Items of Equipment during the
Lease term shall not exceed 25% of the aggregate Purchase Price of all Items of
Equipment as of the Delivery Date; and

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     (ii) the Lessee shall have delivered an appraisal at Lessee’s sole expense
to the Agent which is reasonably satisfactory in scope and form to the Agent
(which has been prepared by an appraiser selected by the Agent and approved by
Lessee (such approval not to be unreasonably withheld)) that confirms that,
after giving effect to such Early Termination Option, the End of Term Value
Ratio of the Items of Equipment remaining subject to this Lease is not less than
the End of Term Value Ratio of all Items of Equipment originally subject to this
Lease (as set forth in the Appraisal).

     Section 14.2. Required Purchase. So long as Agent or Lessor has not
exercised any other remedy inconsistent therewith, Lessee shall be obligated to
purchase all of the Items of Equipment for the Purchase Amount automatically and
without notice upon the occurrence of any Lease Event of Default described in
clause (e)(vi) or (f) of Section 12.1 and, within five (5) Business Days after
notice from Agent or Lessor, upon the occurrence of any other Lease Event of
Default, and upon receipt of the Purchase Amount, the Items of Equipment shall
be transferred to Lessee as set forth in the last sentence of the first
paragraph of Section 14.1(a).

ARTICLE XV

LEASE TERMINATION

     Section 15.1. Lessee’s Options. Not later than 360 days nor earlier than
390 days in the case of the Sale Option or not later than 120 days nor earlier
than 150 days in the case of the Purchase Option prior to the last day of the
Lease Term, Lessee shall, by delivery of written notice to Agent and the Lessor,
exercise one of the following options:

     (a) Subject to Section 15.2, including, without limitation, the first
sentence thereof, purchase for cash for the Purchase Amount all, but not less
than all, of the Items of Equipment then subject to this Lease on the last day
of the Lease Term (the “Purchase Option”); and if Lessee shall have elected to
purchase the Items of Equipment, Lessor shall, upon the payment to Agent of the
Purchase Amount then due and payable by Lessee under the Operative Documents,
transfer all of Lessor’s right, title and interest in and to the Items of
Equipment “as-is” without recourse or warranty (except as to the absence of
Lessor Liens); or

     (b) Subject to Section 15.2, including, without limitation, the first
sentence thereof, sell as non-exclusive agent, on behalf of Lessor, for cash to
a purchaser or purchasers all, but not less than all, of the Items of Equipment
then subject to this Lease on the last day of the Lease Term (the “Sale
Option”). Lessee’s right to sell the Items of Equipment pursuant to the Sale
Option shall be conditioned upon and subject to the fulfillment by Lessee of
each of the terms and conditions set forth in this Article XV. Simultaneously
with a sale on or prior to the last day of the Lease Term pursuant to the Sale
Option, Lessee shall pay or cause to be paid to Agent, (i) the Sale Recourse
Amount, (ii) the gross proceeds of the sale of the Equipment, without deductions
or expense reimbursements (the “Sale Proceeds”), and (iii) all accrued and
unpaid Rent and

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all other amounts due under the Operative Documents and, if such sale occurs
prior to the last day of the Lease Term, all Capital Rent not previously paid by
Lessee and which would have become due under the Operative Documents on or
before the last day of the Lease Term. If the amounts received by the Agent
pursuant to the immediately preceding sentence exceed the aggregate outstanding
Lease Balance and all other amounts due and owing by Lessee under the Operative
Documents, Agent will pay to Lessee such excess amount. The amount payable
pursuant to this Section 15.1(b) shall in no event be construed to limit any
other obligation of Lessee under the Operative Documents, including, without
limitation, pursuant to Article XI. All amounts paid to Agent pursuant to this
Section 15.1(b) shall be distributed in accordance with Article XXI hereof.

     Section 15.2. Election of Options. The Early Termination Option and end of
term option elected by Lessee under (i) Section 14.1(a), but solely with respect
to the purchase of all, but not less than all, of the Equipment and
(ii) Section 15.1 of this Lease, respectively, must be the same as the option
elected (or deemed to be elected) by Lessee under the corresponding section of
the Lease A. Lessee’s election (or deemed election) of the Purchase Option shall
be irrevocable at the time when made by Lessee. In the event Lessee fails to
make a timely election under Section 15.1 hereof, Lessee shall be deemed to have
elected the Purchase Option. Lessee may not elect the Sale Option if there
exists on the date the election is made a Lease Default or a Lease Event of
Default. In addition, the Sale Option shall automatically be revoked if there
exists a Lease Default or Lease Event of Default at any time after the Sale
Option is properly elected (whether or not such Lease Default or Lease Event of
Default is cured) or Lessee fails to comply with each of the other terms and
conditions set forth in this Article XV, in which case Lessee shall be required
to purchase on the last day of the Lease Term all of the Items of Equipment
pursuant to the Purchase Option and Lessor shall be entitled to exercise all
rights and remedies provided in Article XII.

     Section 15.3. [Reserved].

     Section 15.4. Sale Option Procedures. (a) If Lessee elects the Sale Option,
Lessee shall use its reasonable commercial efforts to obtain the highest all
cash purchase price for the Items of Equipment. All costs related to such sale
and delivery (including during the Extended Remarketing Period), including,
without limitation, the cost of sales agents, removal of the Items of Equipment,
delivery of documents and the Items of Equipment to any location designated by a
buyer or prospective buyer, legal costs, costs of notices, commissions, escrow
fees, filing fees, appraisal fees, license fees, transfer taxes, any
advertisement or other similar costs, or other information and of any parts,
configurations, repairs or modifications desired by a buyer or prospective
buyer, re-installation of the Items of Equipment in the manner and at the
location or locations required by a buyer, the cost of storage and insurance
during the Extended Remarketing Period as provided in Section 15.6(b) and the
costs associated with the satisfaction of the conditions set forth in
Section 15.4(b) below shall, except as provided in the following provisos, be
borne entirely by Lessee, without regard to whether such costs were incurred by
Lessor, Lessee or any potentially qualified buyer, and shall in no event be paid
from the Sale Proceeds for the benefit of Lessee; provided, that Lessee shall in
no event be liable for costs (other than de-installation costs, which shall in
all cases be borne by Lessee) described in this clause (a) which, in aggregate,
exceed

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$4,535,000; provided, further that in the event that Lessor pays any of the
costs described in this clause (a) (other than de-installation costs, which
shall in all cases be borne by Lessee) as a result of such costs (other than
de-installation costs, which shall in all cases be borne by Lessee) aggregating
in excess of $4,535,000, Lessor shall be entitled to reimbursement of such
payments from the Sale Proceeds prior to the Agent returning any excess Sale
Proceeds to the Lessee pursuant to Section 15.1(b), but in no event shall Lessor
be entitled to make any claim against Lessee under Article XI for reimbursement
or indemnification of such payments made by Lessor. Neither Agent nor Lessor
shall have any responsibility for procuring any purchaser. If, nevertheless,
Agent or Lessor undertakes any sales efforts, Lessee shall, subject to the
preceding sentence, promptly reimburse Agent and/or Lessor for any charges,
costs and expenses incurred in such effort, including any allocated time
charges, costs and expenses of internal counsel or other attorneys’ fees. Upon a
sale pursuant to the Sale Option, the Items of Equipment shall be in at least
the condition required by Section 12.2(b). Any purchaser or purchasers of the
Items of Equipment shall not be an Affiliate of Lessee or have any understanding
or arrangement with Lessee regarding the future use of the Items of Equipment.
On the last day of the Lease Term, so long as no Lease Event of Default or Lease
Default exists: (i) Lessee shall transfer all of Lessee’s right, title and
interest in the Items of Equipment, or cause the Items of Equipment to be so
transferred, to such purchaser or purchasers, if any, in accordance with all of
the terms of this Lease; (ii) subject to the simultaneous payment by Lessee of
all amounts due under clause (iii) of this sentence, Lessor shall, without
recourse or warranty, except as to the absence of Lessor Liens attributable to
it, transfer by quitclaim Lessor’s right, title and interest in and to the Items
of Equipment to such purchaser or purchasers; and (iii) Lessee shall
simultaneously pay to Lessor all of the amounts contemplated in Section 15.1(b).

     (b) The Lessee’s effective exercise and consummation of the Sale Option
with respect to the Items of Equipment shall be subject to the due and timely
fulfillment of each of the following provisions as to the Items of Equipment as
of the dates set forth below:

     (i) Lessee shall furnish to Lessor and Agent, on the last day of the Lease
Term, a certification from the manufacturer that the Items of Equipment have
been calibrated as necessary to be eligible for manufacturer’s maintenance
program and have been maintained at or modified to meet the latest available
version and/or revision levels (assuming the Equipment has been modified as each
such prior modification was introduced) of all hardware and software
requirements applicable to the specific model of Equipment as deemed necessary
by the manufacturer;

     (ii) Lessee shall have the Items of Equipment de-installed, packaged and
crated by the manufacturer’s technicians or service providers certified by the
manufacturer, and Lessee shall furnish to Lessor and Agent, a certification from
the manufacturer’s technicians or service providers certified by the
manufacturer that the Items of Equipment are in good condition prior to
shipment;

     (iii) Lessee shall furnish to Lessor and Agent all applicable and
corresponding instruction and service manuals, service and repair records, and
descriptive brochures;

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     (iv) Lessee shall cause the Items of Equipment to be delivered to any
location as selected by the purchaser, in a suitable manner which is
specifically designed for the transportation of electronic components and
equipment and in a manner consistent with the manufacturer’s recommendations for
transporting and packaging the Items of Equipment;

     (v) Lessee shall not enter into any additional Subleases or renew any
Subleases with respect to the Items of Equipment following Lessee’s election of
the Sale Option, and following Lessee’s election of the Sale Option, Lessee
shall not remove any Permitted Modifications or commence any voluntary Permitted
Modifications under Section 8.4 without the prior written consent of the Agent;

     (vi) The Lessee shall submit all bids to the Agent, and the Agent will have
the right to review the same and to submit any one or more bids. Agent shall
have no obligation to accept a bid that is not on an all-cash basis. Provided
that there are all-cash bids at such time, Lessee shall deliver to the Agent not
less than ninety (90) days prior to the Lease Expiration Date a binding written
unconditional (except as set forth below), irrevocable offer (the “High Bid”) by
such purchaser or purchasers offering the highest all-cash bid to purchase all,
but not less than all, of the Items of Equipment (unless otherwise agreed to by
the Agent). Subject to Agent’s rights in the immediately succeeding sentence,
Agent shall accept the High Bid in writing within 20 Business Days of receipt
thereof by Agent. If Agent in the exercise of its reasonable judgment believes
that the Sale Proceeds to be paid to the Agent from a High Bid which the Lessee
desires to accept is less than the lesser of (A) the Fair Market Value of the
Items of Equipment or (B) the Purchase Amount, then Agent may condition its
obligation to accept the High Bid upon Agent’s receipt of an appraisal
demonstrating that the High Bid is for an amount at least equal to the lesser of
(1) the Fair Market Value of the Items of Equipment or (2) the Purchase Amount,
as established by such appraisal. In such case then Agent shall promptly
following the receipt of such High Bid, engage an independent appraiser,
reasonably satisfactory to the Agent and Lessee, at Lessee’s expense, to
determine (by appraisal methods reasonably satisfactory to the Agent) the Fair
Market Value of the Items of Equipment as of the Lease Expiration Date. The
selection of the independent appraiser shall be completed within ten
(10) Business Days of the receipt by Agent of such High Bid. A copy of such
appraisal shall be delivered to Agent not later than 20 Business Days after the
selection of the independent appraiser. The appraiser will be instructed to
assume that the Items of Equipment are in the condition required by and have
been maintained in accordance with this Lease. Any such appraisal shall be at
the sole cost and expense of Lessee.

     (vii) In connection with any such sale of the Items of Equipment, the
Lessee will provide to the purchaser all customary “seller’s” indemnities,
representations and warranties regarding title, absence of Liens (except Lessor
Liens and Liens relating to the interest or rights of Lessee) and the condition
of such Items of Equipment. The Lessee shall have obtained, at its cost and
expense, all required governmental and regulatory consents and approvals and
shall have made all filings as required by Applicable Laws and Regulations in
order to carry out and complete the transfer of the Items of

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Equipment. Any agreement as to such sale shall be in form and substance
reasonably satisfactory to the Agent. If the Lessee properly exercises the Sale
Option, then the Lessee shall, upon a sale thereunder, and at its own cost,
transfer or cause to be transferred possession of the Items of Equipment to the
independent purchaser(s) thereof, in each case by surrendering the same into the
possession of such purchaser(s), free and clear of all Liens, other than Lessor
Liens, and in the condition required by this Lease, and the Lessee shall execute
and deliver to such purchaser(s) at the Lessee’s cost and expense a bill of sale
with respect to the Items of Equipment, warranting that such Items of Equipment
are free and clear of all Liens, other than Lessor Liens, together with an
assignment, without warranty of any kind, of Lessee’s rights, if any, under any
purchase contracts. The Lessee shall, on and within a reasonable time before and
up to two years after the Lease Expiration Date, cooperate reasonably with the
Agent, Lessor and the purchaser(s) of the Items of Equipment in order to
facilitate the purchase and use by such purchaser(s) of the Items of Equipment,
which cooperation shall include the following, all of which the Lessee shall do
on or before the Lease Expiration Date or as soon thereafter as is reasonably
practicable: providing reasonable access to all books and records regarding the
maintenance, use and ownership of the Items of Equipment and all know-how, data
and technical information regarding the use and maintenance of the Equipment
thereto, granting or assigning all licenses necessary for the operation and
maintenance of the Items of Equipment, and cooperating reasonably in seeking and
obtaining all necessary Governmental Action. The obligations of the Lessee under
this paragraph shall survive the expiration or termination of this Lease.

     (ix) The Lessee shall, to the extent permitted by Applicable Laws and
Regulations, assign, and shall cooperate with all reasonable requests of the
Lessor, Agent or the purchaser for obtaining any and all licenses, permits,
approvals and consents of any Governmental Authorities or other Persons that are
or will be required to be obtained by the Lessor, Agent or such purchaser in
connection with its use, operation, control or maintenance of the Items of
Equipment in compliance with Applicable Laws and Regulations.

     Except as expressly set forth herein, the Lessee shall have no right, power
or authority to bind the Lessor or Agent in connection with any proposed sale of
the Items of Equipment.

     Section 15.5. Certain Obligations Continue. During the period following
Lessee’s exercise of the Sale Option and until and including the Lease
Expiration Date, the obligation of the Lessee under the Lease, including,
without limitation, the obligation of Lessee to pay Rent with respect to the
Items of Equipment (including the installment of Rent due on the Lease
Expiration Date), shall continue undiminished. The Lessor shall have the right,
but shall be under no duty, to solicit bids, to inquire into the efforts of the
Lessee to obtain bids or otherwise to take action in connection with any such
sale, other than as expressly provided in this Article XV.

     Section 15.6. Failure to Sell Items of Equipment. If Lessee shall exercise
the Sale Option and shall fail to sell the Items of Equipment on the Lease
Expiration Date in accordance with Section 15.1(b) and subject

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to the provisions of Section 15.4 (other than as a result of Lessee’s failure to
comply with the provisions of Section 15.1(b) or 15.4, in which case, the last
sentence of Section 15.2 shall be operative), then Lessee and Lessor hereby
agree as follows:

     (a) Lessee shall continue to use reasonable commercial efforts as
non-exclusive agent for Lessor to sell the Items of Equipment on behalf of
Lessor in accordance with this Section 15.6 for the period (the “Extended
Remarketing Period”) commencing on the Lease Expiration Date and ending on the
earlier of (i) the sale of the Items of Equipment in accordance with the
provisions of this Section 15.6 or such earlier date as Lessor has received
payment in full of the Lease Balance and all accrued and unpaid Rent and
(ii) the delivery of a written notice from Lessor to Lessee at any time
terminating the Extended Remarketing Period, which notice shall indicate that
such termination is being made pursuant to this Section 15.6(a)(ii) and the date
such termination shall be effective, which date shall be the Lease Expiration
Date if such notice is given prior to the Lease Expiration Date. Without
limiting the foregoing, each of the conditions contained in this Article XV
shall be applicable to the Extended Remarketing Period and any sale during such
period. Lessor’s appointment of Lessee as Lessor’s nonexclusive agent to use its
reasonable commercial efforts to obtain the highest all-cash price for the
purchase of the Items of Equipment shall not restrict Lessor’s or Agent’s right
to market or lease the Items of Equipment, to retain one or more sales agents or
brokers at Lessee’s sole cost and expense.

     (b) On the Lease Expiration Date, Lessee shall (i) pay to Lessor the Sale
Recourse Amount and all other Rent due and owing hereunder and (ii) at Lessor’s
request either (A) return possession of the Items of Equipment to Lessor in
accordance with Section 15.4(b) and in the condition required by this Lease or
(B) de-install, package and crate the Equipment in accordance with Section
15.4(b) of the Lease and insure and store the Equipment in accordance with all
manufacturer’s recommendations and this Lease for the Extended Remarketing
Period; provided that such insurance and storage shall be at Lessee’s expense
for only the first 180 days of the Extended Remarketing Period. Thereafter, this
Lease shall terminate except as provided herein and Lessee shall have no further
obligation to pay Rent. Following the Lease Expiration Date, Lessor shall be
free to sell or lease the Items of Equipment to any party at such reasonable
times and for such amounts as Lessor deems commercially reasonable and
appropriate in order to maximize Lessor’s opportunity to recover the Lease
Balance. Following the Lease Expiration Date, Lessor shall have the right to
enter into leases for the Items of Equipment at fair market rentals and
otherwise on commercially reasonable terms, and the net operating cash flow
therefrom shall be payable to Agent in reduction of the Lease Balance and
Supplemental Rent due and owing under the Operative Documents.

     (c) Lessor reserves all rights under this Lease and the other Operative
Documents arising out of Lessee’s breach of any provisions of this Lease
(including this Article XV), occurring prior to or on the Lease Expiration Date,
including the right to sue Lessee for damages.

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     (d) To the greatest extent permitted by law and subject to Section 15.6(e)
below, Lessee hereby unconditionally and irrevocably waives, and releases Lessor
and Agent from, any right to require Lessor or Agent during or following the
Extended Remarketing Period to sell the Items of Equipment in a timely manner or
for any minimum purchase price or on any particular terms and conditions, Lessee
hereby agreeing that if Lessee shall elect the Sale Option, its ability to sell
the Items of Equipment on or prior to the Lease Expiration Date and to cause any
Person to submit a bid to Lessor pursuant to Section 15.4 shall constitute full
and complete protection of Lessee’s interest hereunder.

     (e) In addition, if Lessor has not sold the Items of Equipment within two
(2) years after its termination of the Extended Remarketing Period, Agent shall
appoint a qualified independent sales agent to sell the Items of Equipment
pursuant to the first bona fide offer received by a creditworthy offeror for an
all-cash purchase price at the then Fair Market Value of the Items of Equipment
to the extent the conditions therefor are satisfied. Any proceeds resulting from
the operation of this Section 15.6 shall be applied net of sale costs,
commissions and property maintenance costs. To determine whether an offer is for
the Fair Market Value of the Items of Equipment, Lessor may condition its
obligation to sell on its receipt of an appraisal in accordance with
Section 15.4(b)(vi). Any determination as to the bona fide nature of an offer or
creditworthiness of the offeror shall be made in the reasonable judgment of
Agent.

     (f) If a sale of Items of Equipment occurs during the Extended Remarketing
Period (i) the Lessor shall be entitled to the Sale Proceeds for such Items of
Equipment in an amount not to exceed the outstanding Lease Balance and all other
amounts due and owing under the Operative Documents and any such excess shall be
for the benefit of Lessee and (ii) Lessee shall comply with the provisions of
this Article XV including, but not limited to, Section 15.4.

ARTICLE XVI

OWNERSHIP AND GRANT OF LIEN AND SECURITY INTEREST

     Section 16.1. Grant of Lien and Security Interest. Title to the Items of
Equipment shall remain in Lessor as security for the obligations of Lessee
hereunder and under the other Operative Documents to which it is a party until
Lessee has fulfilled all of its obligations hereunder and thereunder. Lessee
hereby grants, assigns, hypothecates, transfers and pledges to Lessor, a lien
and security interest on all of Lessee’s right, title and interest in and to,
whether now or hereafter existing, each Item of Equipment and in each Sublease
covering any Item of Equipment that may be entered into from time to time in
accordance with the provisions of this Lease, and Lessee hereby grants to Lessor
a continuing lien on, and security interest in, and assigns to Lessor all of
Lessee’s rights, title and interest in all of the other Lessee Collateral, to
secure the payment of all sums due hereunder and under the other Operative
Documents to which it is a party and the performance of all other obligations
hereunder and under the other Operative Documents to which it is a party;
provided,

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however, that the lien on, and security interest in, the portion of the Lessee
Collateral which constitutes Cash Collateral will not secure any obligations of
the Lessee under the Operative Documents with respect to the Series B Lease
Balance or any amounts due and owing with respect to such Series B Lease Balance
or to the Series B Assignees, if any. Lessee also hereby authorizes Lessor and
Agent to file UCC financing statements on and after the Delivery Date to the
extent necessary to perfect such security interests granted pursuant to the
Operative Documents that may be perfected under the UCC through such filings.
Further, Lessee hereby assigns to Lessor all of its rights under any and all
purchase contracts relating to each Item of Equipment.

     Section 16.2. Retention of Sale Proceeds. If Lessee would be entitled to
any amount (including any Casualty Recoveries) held by Agent or title to any
Item of Equipment hereunder but for the existence of any Material Lease Default
or Lease Event of Default, Agent shall hold such amount or Item of Equipment as
part of the Lessee Collateral and during a Lease Event of Default shall be
entitled to apply such amounts against any amounts due hereunder; provided, that
Agent shall distribute such amount or transfer such Item of Equipment, to the
extent not theretofore applied, in accordance with the other terms of this Lease
if and when no Material Lease Default or Lease Event of Default exists.

     Section 16.3. State of Incorporation. Lessee shall not change its state of
incorporation unless Lessee has given Agent not less than thirty (30) days’
prior written notice and Lessee has executed and filed such UCC financing
statements as Agent may reasonably request during such thirty day period to
protect the security interests of Lessor granted by the Operative Documents.

ARTICLE XVII

REPRESENTATIONS AND WARRANTIES

     Section 17.1. Representations and Warranties of Lessee. As of the date
hereof, Lessee makes the representations and warranties set forth in this
Section 17.1 to Agent and Lessor.

     (a) Organization and Powers. Each of Lessee and its Significant
Subsidiaries is a corporation or partnership duly organized or formed, as the
case may be, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, is qualified to do business and
is in good standing in each jurisdiction in which the failure so to qualify or
be in good standing would result in a Material Adverse Effect and has all
requisite power and authority to own its assets and carry on its business and,
with respect to Lessee, to execute, deliver and perform its obligations under
the Operative Documents to which it is a party.

     (b) Authorization: No Conflict. The execution, delivery and performance by
Lessee of the Operative Documents to which it is a party have been duly
authorized by all necessary corporate action of Lessee and do not and will not
(i) contravene the terms of the certificate of incorporation and the bylaws of
Lessee or result in a breach of or constitute a material default

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under any material Contractual Obligation to which Lessee is a party or by which
it or its properties may be bound or affected; or (ii) violate in any material
respect any provision of any Governmental Rule binding on or affecting Lessee.

     (c) Binding Obligation. The Operative Documents to which Lessee is a party
constitute legal, valid and binding obligations of Lessee, enforceable against
Lessee in accordance with their respective terms, except to the extent the
enforceability thereof would be subject to bankruptcy, insolvency, receivership
or similar laws providing relief from creditors, or principles of equity
generally.

     (d) Governmental Consents. No authorization, consent, approval, license,
exemption of, or filing or registration with, any Governmental Authority, or
approval or consent of any other Person, is required for the due execution,
delivery or performance by Lessee of any of the Operative Documents, except
those set forth on Schedule 17.1(d) which have been obtained or made and are in
full force and effect.

     (e) No Defaults. Neither Lessee nor any of its Significant Subsidiaries is
in default under any Governmental Rule to which it is a party or by which it or
its properties may be bound which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse Effect.

     (f) Title to Properties. (i) Lessee has good record and marketable title in
fee simple to the real property on which the Equipment is to be located and, as
of the date hereof, there are no existing mortgages, deeds of trust or other
similar liens encumbering the real property and (ii) Lessee and each Significant
Subsidiary has good record and marketable title in fee simple to, or valid
leasehold interests in, all other real property necessary or used in the
ordinary conduct of their respective businesses, except, in each case, for such
defects in title as could not, individually or in the aggregate, have a Material
Adverse Effect. The property of Lessee and its Significant Subsidiaries is
subject to no Encumbrances, other than Encumbrances permitted under
Section 18.2(a).

     (g) Litigation. There are no actions, suits or proceedings pending or, to
the best of Lessee’s knowledge, threatened against or affecting Lessee or any of
its Significant Subsidiaries or the properties of Lessee or any of its
Significant Subsidiaries before any Governmental Authority or arbitrator which
is likely to be determined adversely to Lessee or any such Significant
Subsidiary and would be reasonably likely to result in a Material Adverse
Effect.

     (h) Compliance with Consents and Licenses. Every consent required by Lessee
or any Significant Subsidiary (including those required under or pursuant to any
Environmental Law) in connection with the conduct of its business and the
ownership, use, exploitation or occupation of its property and assets has been
obtained and is in full force and effect and there has not been any default in
the observance of the conditions and restrictions (if any) imposed in, or in
connection with, any of the same, except where the failure to obtain any of the
foregoing would not reasonably be expected to have a Material Adverse Effect.

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     (i) Compliance with Environmental Law. To the best of Lessee’s knowledge
after due investigation, (i) the properties of Lessee and its Subsidiaries do
not contain and have not previously contained (at, under, or about any such
property) any Hazardous Materials or other contamination (A) in amounts or
concentrations that constitute or constituted a violation of, or could give rise
to liability under, any Environmental Laws, in either case where such violation
or liability could reasonably be expected to result in a Material Adverse
Effect, (B) which could interfere with the continued operation of such property
or (C) which could materially impair the fair market value thereof; and
(ii) there has been no transportation or disposal of Hazardous Materials from,
nor any release or threatened release of Hazardous Materials at or from, any
property of Lessee or any of its Subsidiaries in violation of or in any manner
could give rise to liability under any Environmental Laws, where such violation
or liability, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.

     (j) Governmental Regulation. Neither Lessee nor any of its Subsidiaries is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce
Act, any state public utilities code or any other Governmental Rule limiting its
ability to incur Indebtedness.

     (k) ERISA. (i) Except as specifically disclosed to the Lessor and Agent in
writing prior to the date of this Lease: (A) each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Governmental Rules; (B) there are no pending, or to the best knowledge of
Lessee, threatened, claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect; (C) there has been no
prohibited transaction or other violation of the fiduciary responsibility rule
with respect to any Plan which could reasonably result in a Material Adverse
Effect; (D) no ERISA Event has occurred or is reasonably expected to occur with
respect to any Pension Plan; (E) no Pension Plan has any Unfunded Pension
Liability; (F) Lessee has not incurred, nor does it reasonably expect to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (G) no trade
or business (whether or not incorporated under common control with Lessee within
the meaning of Section 414(b), (c), (m) or (a) of the Code) maintains or
contributes to any Pension Plan or other Plan subject to Section 412 of the
Code; and (H) neither Lessee nor any entity under common control with Lessee in
the preceding sentence has ever contributed to any Multiemployer Plan.

     (ii) All employer and employee contributions required by any applicable
Governmental Rule in connection with all Foreign Plans have been made, or, if
applicable, accrued, in accordance with the country-specific accounting
practices. The fair market value of the assets of each funded Foreign Plan, the
liability of each insurer for any Foreign Plan funded through insurance or the
book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations, as of the date hereof, with respect to all current and former
participants in such Foreign Plan according to the actuarial assumptions and
valuations most recently used to determine employer contributions to such
Foreign Plan, which actuarial assumptions are commercially reasonable. Each
Foreign Plan required to be registered has been registered and has been
maintained in good standing with

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applicable Governmental Authorities. Each Foreign Plan reasonably complies in
all material respects with all applicable Governmental Rules.

     (l) Significant Subsidiaries. The name and ownership of each Significant
Subsidiary of Lessee on the date of this Agreement is as set forth in Schedule
17.1(l). All of the outstanding capital stock of, or any other interest in, each
such Significant Subsidiary has been validly issued, and is fully paid and
nonassessable.

     (m) Taxes. Lessee and its Significant Subsidiaries have filed all Federal
and other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other Governmental
Charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against Lessee or any
Significant Subsidiary except those for which adequate reserves have been
provided in accordance with GAAP.

     (n) Patents and Other Rights. Each of Lessee and its Significant
Subsidiaries possesses all permits, franchises, licenses, patents, trademarks,
trade names, service marks, copyrights and all rights with respect thereto, free
from maintenance and operation of its business, except where the failure to
obtain any of the foregoing would not reasonably be expected to have a Material
Adverse Effect.

     (o) Insurance. The properties of Lessee and its Significant Subsidiaries
are insured against losses and damages of the kinds and in amounts which are
deemed prudent by Lessee in its reasonable business judgment and within the
general parameters customary among similarly situated businesses in the
industry, and such insurance is maintained with financially sound and reputable
insurance companies or pursuant to a plan or plans or self-insurance to such
extent as is usual for companies of similar size engaged in the same or similar
businesses and owning similar properties.

     (p) Financial Statements. The audited Financial Statements of Lessee and
its Subsidiaries for the fiscal year ended in December 31, 2003, are complete
and correct and fairly present the financial condition of Lessee and its
Subsidiaries as at such date and the results of operations of Lessee and its
Subsidiaries for the period covered by such statements, in each case in
accordance with GAAP consistently applied. Since the last day of the fiscal year
ended December 31, 2003, there has been no Material Adverse Effect.

     (q) Liabilities. Neither Lessee nor any of its Significant Subsidiaries has
any liabilities in excess of $10,000,000, fixed or contingent, that are not
disclosed in either (i) the audited annual Financial Statements of the Lessee
and its Subsidiaries for the fiscal year ended December 31, 2003 or (ii) the
unaudited quarterly Financial Statements of the Lessee and its Subsidiaries for
the fiscal quarter ended March 31, 2004, in the notes thereto or otherwise
disclosed in writing to the Lessor and Agent, other than liabilities arising in
the ordinary course of business since March 31, 2004.

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     (r) Labor Disputes. Etc. There are no strikes, lockouts or other labor
disputes against Lessee or any of its Significant Subsidiaries, or, to the best
of Lessee’s knowledge, threatened against or affecting Lessee or any of its
Significant Subsidiaries, which may result in a Material Adverse Effect.

     (s) Solvency. Lessee and its Subsidiaries on a consolidated basis are
Solvent.

     (t) The Equipment. (i) On the Delivery Date, Lessor will acquire good and
valid title to the Equipment, free and clear of all Liens and all other
interests of other Persons (except for Permitted Liens).

     (ii) All of the Items of Equipment constitute personal property and not
fixtures for purposes of perfection under the Uniform Commercial Code.

     (iii) All of the Items of Equipment comply in all material respects with
all applicable Governmental Rules and Insurance Requirements.

     (u) State of Incorporation. The state of incorporation of the Lessee is
Delaware.

     (v) Disclosure. None of the representations or warranties made by Lessee in
the Operative Documents as of the date of such representations and warranties,
and none of the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of Lessee or any of its Significant
Subsidiaries to Agent or Lessor in connection with the Operative Documents,
contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading in any
material respect as of the time when made or delivered.

     (w) No Default; Casualty. No event has occurred and is continuing that is a
Lease Default and no Lease Event of Default exists and, to the knowledge of
Lessee, no Casualty has occurred.

     (x) Security Interest. (i) Upon filing of the UCC financing statements
listed on Schedule V hereto and payment of the Purchase Price, Lessor has a
valid and enforceable first priority, perfected Lien in the Items of Equipment
and the other Lessee Collateral (other than the Cash Collateral, a security
interest in which shall be perfected as set forth in clause (ii) below) as
against all Persons, including Lessee and its creditors, free and clear of all
Liens other than Permitted Liens.

     (ii) Upon the deposit of Cash Collateral by Lessee pursuant to Section 2.6
and the execution and delivery of the Cash Collateral Agreement, the Control
Agreements and the Lessor Assignment Agreement, (A) the Lessor will have a
first-priority, perfected Lien in the Cash Collateral (other than the Cash
Collateral described in clause (B) hereof) so deposited and (B) each Series A
Assignee will have a first-priority, perfected lien in the Series A Cash
Collateral purchased and assumed by such Series A Assignee pursuant to the
Lessor Assignment Agreement and, in each case, no filing, recording,
restoration, notice with or payment of any fees

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to, any Governmental Authority is necessary to establish or perfect the Lien in
such Cash Collateral in favor of the Lessor or such Series A Assignee, as
applicable.

     (y) No Transfer Taxes. No sales, use, excise, transfer or other Tax, fee or
imposition shall result from the sale, transfer or purchase of the Items of
Equipment, except such Taxes, fees or impositions that have been paid in full or
for which adequate arrangements for payment shall have been made by Lessee.

     (z) Appraisal Data. The written information provided by Lessee and its
Affiliates to the Appraiser and forming the basis for the conclusions set forth
in the Appraisal, taken as a whole, was true and correct in all material
respects at such times and did not omit any information known and available to
Lessee necessary to make the information provided not misleading at such times.

     (aa) No Prohibited Transaction. The execution and delivery of this Lease
and the other Operative Documents, including the consummation of the
transactions contemplated hereby and thereby, will not involve any Prohibited
Transactions. The representation by Lessee in the preceding sentence is made in
reliance upon and subject to the correctness of the representation by the Lessor
in Section 17.2(a)(i).

     (bb) Subject to Government Regulation. Neither Agent nor Lessor will
become, solely by reason of entering into the Operative Documents or
consummation of the transaction contemplated thereby (other than the exercise of
remedies under this Lease), subject to ongoing regulation of its operations by a
Governmental Agency (except with respect to bank regulations) will be required
to qualify to do business in any jurisdiction.

     (cc) Private Offering. Excluding the effect of any failure of the
representations and warranties set forth in Section 17.2(b) to be true and
correct, the issuance, sale and delivery of the interests in the Items of
Equipment, Lease and the other Operative Documents under the circumstances
contemplated hereby do not require the registration or qualification of such
interests under the Securities Act, any state securities laws. Excluding the
effect of any failure of the representations and warranties set forth in
Section 17.2(b) to be true and correct, neither Lessee nor anyone authorized to
act on its behalf has, directly or indirectly, solicited any offers to acquire,
offered or sold: (i) any interest in the Items of Equipment, the Lease or the
Operative Documents in violation of Section 5 of the Securities Act or any state
securities laws, or (ii) any interest in any security or lease the offering of
which, for purposes of the Securities Act or any state securities laws, would be
deemed to be part of the same offering as the offering of the aforementioned
interests. Neither Lessee nor anyone authorized to act on its behalf was
involved in (y) offering or soliciting offers for interests in the Items of
Equipment, Lease or the other Operative Documents (or any similar securities) or
(z) selling interests in the Items of Equipment, the Lease or the other
Operative Documents (or any similar securities) to any Person other than the
Lessor and Assignees not more than 18 other institutional investors.

     (dd) Margin Regulations. Lessee is not engaged in the business of extending
credit for the purpose of purchasing or carrying “margin stock” (within the
meaning of Regulation U of the F.R.S. Board). No part of the proceeds of the
Funding will be used to purchase or carry any

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margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.

     (ee) Tangible Net Worth. As of December 31, 2003, the Tangible Net Worth of
Lessee was at least $900,000,000.

     (ff) The Lessee and its Significant Subsidiaries are in compliance, in all
material respects, with the USA Patriot Act.

     Section 17.2. Representations and Warranties of Lessor. Lessor represents
and warrants to each of the other parties hereto as follows:

     (a) ERISA. Lessor is not and will not be purchasing any of its interest in
the Items of Equipment with the assets of an “employee benefit plan” (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA, or a “plan” (as
defined in Section 4975(e)(1) of the Code.

     (b) Investment in the Items of Equipment. It is acquiring its interest in
the Items of Equipment for its own account for investment in such a manner as
will not require the registration of such interest under the Securities Act or
any state securities laws, and if in the future it should decide to dispose of
its interest in the Items of Equipment, it understands that it may do so only in
compliance with the Securities Act and the rules and regulations of the SEC
thereunder and any applicable state securities laws. Neither it nor anyone
authorized to act on its behalf has taken or will take any action which would
subject any interest in the Items of Equipment or this Lease to the registration
requirements of Section 5 of the Securities Act. No representation or warranty
contained in this Section 17.2(b) shall include or cover any action or inaction
of Lessee or any Affiliate thereof whether or not purportedly on behalf of
Lessor or any of its Affiliates. Subject to the foregoing, and subject to the
provisions of Article XIX hereof, it is understood among the parties that the
disposition of Lessor’s property shall be at all times within its control.

     (c) Enforceability, Etc. Each Operative Document to which Lessor is a party
constitutes the legal, valid and binding obligation of Lessor enforceable
against it in accordance with the terms thereof, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles.

     Section 17.3. Representations and Warranties of Agent. Wells Fargo Bank
Northwest, National Association, in its individual capacity, hereby represents
and warrants to the other parties as set forth in this Section 17.3.

     (a) Due Organization, Etc. Agent is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States; Agent has full power

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and authority to enter into and perform its obligations under the Operative
Documents to which it is or is to be a party and each other agreement,
instrument and document to be executed and delivered by it on or before the
Delivery Date in connection with or as contemplated by each such Operative
Document to which it is or is to be a party; and the Operative Documents to
which Agent is a party, and to which Lessee is to be a party, have been or will
be duly executed and delivered by Agent.

     (b) Authorization; No Conflict. The execution and delivery by Agent of the
Operative Documents to which it is or is to be a party, and the performance by
Agent of its obligations under such Operative Documents, have been duly
authorized by all necessary action on its part, and do not and will not: (i)
contravene any applicable laws, rules, regulations, orders, injunctions or
decrees of any federal banking Authority or Authority in or with jurisdiction
over banks in the State of Utah where such contravention would be reasonably
likely to materially and adversely affect the ability of Agent, either in its
individual capacity, as Agent, or both, to perform its obligations under any
Operative Documents to which it is or will be a party; (ii) violate any
provision of its charter or by-laws; (iii) result in a breach of or constitute a
default under any indenture, loan or credit agreement, or any other agreement or
instrument to which Agent, either in its individual capacity, as Agent, or both,
is a party or by which it or its properties may be bound or affected, which
breaches or default would be reasonably likely to materially and adversely
affect the ability of Agent, either in its individual capacity, as Agent, or
both, to perform its obligations under any Operative Documents to which it is or
will be a party; or (iv) require any authorizations, consents, approvals,
licenses or formal exemptions from, nor any filings, declarations or
registrations with, any federal banking or Utah Authority or any consent or
approval of any non-governmental Person.

     (c) Enforceability, Etc. Each Operative Document to which Agent, either in
its individual capacity, as Agent, or both, is a party constitutes the legal,
valid and binding obligation of Agent, either in its individual capacity, as
Agent, or both, enforceable against it in accordance with the terms thereof,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors’ rights generally and by general equitable principles.

     (d) Litigation. There is no action, proceeding or investigation pending or
threatened which questions the validity of the Operative Documents to which
Agent, in its individual capacity, as Agent, or both, is a party or any action
taken or to be taken pursuant to the Operative Documents to which Agent, in its
individual capacity, as Agent, or both, is a party.

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ARTICLE XVIII

COVENANTS OF LESSEE

     Section 18.1. Affirmative Covenants. During the Lease Term, Lessee shall
comply, and shall cause compliance with, the following affirmative covenants:

     (a) Financial Statements and Other Reports. Lessee shall deliver to the
Agent (with sufficient copies for the Agent to distribute such copies to the
Assignees) and Lessor, at Lessee’s sole expense:

     (i) As soon as available and in any event within forty-five (45) days after
the end of each of the first three fiscal quarters of each fiscal year (and,
with respect to each fiscal quarter occurring after January 1, 2005, within
40 days after the end of such fiscal quarter), the consolidated Financial
Statements of Lessee and its Subsidiaries for such fiscal quarter, prepared in
accordance with GAAP consistently applied, all in reasonable detail;

     (ii) As soon as available and in any event within seventy (70) days after
the end of each fiscal year, the consolidated Financial Statements of Lessee and
its Subsidiaries for such fiscal year, prepared in accordance with GAAP
consistently applied, all in reasonable detail, and accompanied by a report
thereon of PricewaterhouseCoopers LLP or another firm of independent certified
public accountants of recognized national standing, which report shall be
unqualified as to scope of audit;

     (iii) Together with the Financial Statements required pursuant to clauses
(i) and (ii) of this Section 18.1(a), a compliance certificate of a Responsible
Officer of Lessee (a “Compliance Certificate”) which (A) states that such
Financial Statements fairly present the financial condition of Lessee and its
Subsidiaries as at the last day of the fiscal quarter or fiscal year covered by
such Financial Statements and the results of operations of Lessee and its
Subsidiaries for such quarter or year and have been prepared in accordance with
GAAP consistently applied, subject to normal, year-end audit adjustments in the
case of the Financial Statements for any fiscal quarter; and (B) states that no
Lease Default or Lease Event of Default has occurred and is continuing, or, if
any such Lease Default or Lease Event of Default has occurred and is continuing,
a statement as to the nature thereof and what action Lessee proposes to take
with respect thereto;

     (iv) (A) Promptly after the giving, sending or filing thereof, copies of
all reports, if any, which Lessee or any of its Subsidiaries sends generally to
any class of holders of its respective capital stock or other securities and
(B) promptly, but in no event later than five (5) Business Days, after the
sending or filing

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thereof, copies of all reports or filings, if any, by Lessee or any of its
Subsidiaries with the SEC or any national securities exchange;

     (v) Promptly after Lessee has knowledge or becomes aware thereof, notice of
the occurrence or existence of any Lease Default or Lease Event of Default;

     (vi) Prompt written notice of any action, event or occurrence that could
reasonably be expected to result in a Material Adverse Effect due to
environmental liability under Environmental Laws;

     (vii) Prompt written notice of all actions, suits and proceedings before
any Governmental Authority or arbitrator pending, or to the best of Lessee’s
knowledge, threatened against or affecting Lessee or any of its Subsidiaries
which (A) if adversely determined would involve an aggregate liability of
$25,000,000 or more in excess of amounts covered by third-party insurance or
(B) otherwise may have a Material Adverse Effect;

     (viii) Promptly after Lessee has knowledge or becomes aware thereof,
(A) notice of the occurrence of any ERISA Event, together with a copy of any
notice of such ERISA Event to the PBGC and (B) the details concerning any action
taken or proposed to be taken by the IRS, PBGC, Department of Labor or other
Person with respect thereto;

     (ix) Promptly upon the commencement or increase of contributions to, the
adoption of, or an amendment to, a Plan by Lessee or an ERISA Affiliate, if such
commencement or increase of contributions, adoption, or amendment could
reasonably be expected to result in a net increase in unfunded liability to
Lessee or an ERISA Affiliate in excess of $10,000,000, a calculation of the net
increase in unfunded liability;

     (x) Promptly after filing or receipt thereof by Lessee or any ERISA
Affiliate, copies of the following:

     (A) Any notice received from the PBGC of intent to terminate or have a
trustee appointed to administer any Pension Plan;

     (B) Any notice received from the sponsor of a Multiemployer Plan concerning
the imposition, delinquent payment, or amount of withdrawal liability;

     (C) Any demand by the PBGC under Subtitle D of Title IV of ERISA; and

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     (D) Any notice received from the IRS regarding the disqualification of a
Plan intended to qualify under Section 401(a) of the Code;

     (xi) Within forty-five (45) days of the date thereof, or, if earlier, on
the date of delivery of any Financial Statements pursuant to clause (i) or
(ii) of this Section 18.1(a), notice of any change in accounting policies or
financial reporting practices by Lessee or any of the Significant Subsidiaries
that is expected to affect (or has affected) materially under GAAP the
consolidated financial condition of Lessee and its Subsidiaries;

     (xii) Promptly after the occurrence thereof, notice of any labor
controversy resulting in or threatening to result in any strike, work stoppage,
boycott, shutdown or other material labor disruption against or involving Lessee
or any of its Subsidiaries which could result in an Material Adverse Effect;

     (xiii) Upon request from time to time of Agent or Lessor, the Swap
Termination Values, together with a description of the method by which such
values were determined, relating to any then-outstanding Rate Contracts to which
Lessee or any of its Subsidiaries is a party;

     (xiv) Prompt written notice of any change in Lessee’s fiscal year;

     (xv) Prompt written notice of any Person or Subsidiary not identified on
Schedule 17.1(l) that becomes a Significant Subsidiary after the Delivery Date;

     (xvi) Prompt written notice of a Material Adverse Effect; and

     (xvii) Such other information respecting the operations, properties,
business or condition (financial or otherwise) of Lessee or the Significant
Subsidiaries as Agent or Lessor may from time to time reasonably request.

     Each notice pursuant to clauses (vi)-(xvii) of this Section 18.1(a) shall
be accompanied by a written statement by a Responsible Officer of Lessee setting
forth details of the occurrence referred to therein, and stating what action
Lessee proposes to take with respect thereto.

     (b) Preservation of Corporate Existence, Etc. Lessee shall and shall cause
each of its Significant Subsidiaries to:

     (i) Preserve and maintain in full force and effect its corporate existence
and good standing under the laws of its state or jurisdiction of incorporation
or formation, except (A) in connection with transactions permitted by
Section 18.2 and (B) in the case of any Significant Subsidiary, to the extent
that failure to obtain or maintain the foregoing would not reasonably be
expected to have a Material Adverse Effect;

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     (ii) Preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business, except to the extent that
the failure to obtain or maintain the foregoing would not reasonably be expected
to have a Material Adverse Effect;

     (iii) Use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill, except in the case of any
Significant Subsidiary to the extent that the failure to obtain or maintain the
foregoing would not reasonably be expected to have a Material Adverse Effect;
and

     (iv) Preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.

     (c) Payment of Taxes, Etc. Lessee will, and will cause each of its
Significant Subsidiaries to, pay and discharge all material taxes, fees,
assessments, levies and other Governmental Charges imposed upon it or upon its
properties or assets prior to the date on which penalties attach thereto, and
all lawful and material claims for labor, materials and supplies which, if
unpaid, might become an Encumbrance (other than a Permitted Encumbrance) upon
any properties or assets of Lessee or any of its Significant Subsidiaries,
except to the extent such taxes, fees, assessments, levies or other Governmental
Charges, or such claims, are being contested in good faith by appropriate
proceedings and are adequately reserved against in accordance with GAAP.

     (d) Licenses. Lessee will, and will cause each of its Significant
Subsidiaries to, obtain and maintain all licenses, authorizations, consents,
filings, exemptions, registrations and other governmental approvals necessary in
connection with the execution, delivery and performance of the Operative
Documents, the consummation of the transactions therein contemplated or the
operation and conduct of its business and ownership of its properties, except to
the extent that the failure to obtain or maintain the foregoing would not
reasonably be expected to have a Material Adverse Effect.

     (e) Maintenance of Property. Except as otherwise permitted under
Section 18.2(c) or 18.2(d), Lessee shall, and shall cause each of its
Subsidiaries to, maintain and preserve all its property which is used in its
business in good working order and condition in all material respects, ordinary
wear and tear excepted.

     (f) Insurance. In addition to the insurance requirements set forth in this
Lease with respect to the Equipment, Lessee shall maintain, and shall cause each
of its Significant Subsidiaries to maintain, with financially sound and
reputable independent insurers, insurance with respect to its properties and
business against losses and damages of the kinds and in amounts which are deemed
prudent by Lessee in its reasonable business judgment and within the general
parameters customary among similarly situated businesses in the industry.

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     (g) Compliance with Laws. Lessee shall comply, and shall cause each of its
Significant Subsidiaries to comply, in all material respects with the
requirements of all Environmental Laws and all other Governmental Rules
applicable to it or its business.

     (h) Compliance with ERISA. (i) Lessee shall, and shall cause each of its
ERISA Affiliates to: (A) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (B) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (C) make all required contributions to
any Plan subject to Section 412 of the Code.

     (ii) Neither Lessee nor any of its Significant Subsidiaries shall
(A) engage in any transaction prohibited by any Governmental Rule applicable to
any Foreign Plan, (B) fail to make full payment when due of all amounts due as
contributions to any Foreign Plan or (C) otherwise fail to comply with the
requirements of any Governmental Rule applicable to any Foreign Plan, where
singly or cumulatively, the above would be reasonably likely to have a Material
Adverse Effect.

     (i) Inspection of Property and Books and Records. Lessee shall maintain and
shall cause each of its Significant Subsidiaries to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of Lessee or such Significant
Subsidiary. Lessee shall permit, and shall cause each of its Significant
Subsidiaries to permit, representatives and independent contractors of Agent or
Lessor to visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants all at the expense of Lessee and at such reasonable times during
normal business hours and as often as may be reasonably desired, upon reasonable
advance notice to Lessee; provided, however, that (i) unless a Lease Event of
Default shall have occurred and be continuing or following exercise of the Sale
Option, (A) Lessee shall be responsible under this Section 18.1(i) for the costs
and expenses of Agent and Lessor only, and (B) all inspections, visits,
examinations and other actions permitted or authorized hereunder shall be
coordinated only through Lessee, and (ii) when a Lease Event of Default exists
or following exercise of the Sale Option, Agent and Lessor may make any visit,
inspection or examination or take any other action authorized hereunder at the
expense of Lessee at any time during normal business hours, without advance
notice and without being subject to any of the other restrictions described in
clause (i) above.

     (j) Cash Collateral. Lessee shall maintain at all times Cash Collateral in
each of the Cash Collateral Accounts with a value equal to or greater than the
Required Cash Collateral Amount for each such Cash Collateral Account.

     (k) Further Assurances and Additional Acts. Lessee will execute,
acknowledge, deliver, file, notarize and register at its own expense all such
further

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agreements, instruments, certificates, documents and assurances and perform such
acts as Agent or Lessor reasonably shall deem necessary or appropriate (i) in
order to establish, preserve, protect and perfect the Lien of Lessor and each
Series A Assignee, as applicable, in the Items of Equipment, the Cash Collateral
and the other Lessee Collateral (including, without limitation, the preparation
and filing of any and all Uniform Commercial Code financing statements
(including precautionary financing statements) and all other filings or
registrations which the Agent or Lessor may from time to time reasonably request
to be filed or effected) and (ii) effectuate the purposes of the Operative
Documents, and promptly provide Agent or Lessor with evidence of the foregoing
satisfactory in form and substance to Agent or Lessor, as applicable.

     Section 18.2. Negative Covenants. During the Lease Term, Lessee shall
comply, and shall cause compliance, with the following negative covenants:

     (a) Encumbrances. Lessee will not, and will not permit any of its
Significant Subsidiaries to, create, incur, assume or suffer to exist any
Encumbrances upon or with respect to any of their properties, revenues or assets
(other than the Equipment which the Lessee is obligated to keep free of Liens in
accordance with Section 8.6 of this Lease), whether now owned or hereafter
acquired, other than (i) Permitted Encumbrances and (ii) other Encumbrances
that, in the aggregate at any time, secure obligations in an amount not in
excess of ten percent (10%) of Consolidated Total Assets determined as of the
last day of the immediately preceding fiscal quarter (or fiscal year, as the
case may be).

     (b) Change in Nature of Business. Lessee will not, and will not permit any
of its Significant Subsidiaries to, engage in any material line of business
other than the electronics business and other businesses incidental or
reasonably related thereto.

     (c) Restrictions on Fundamental Changes. Lessee will not, and will not
permit any of its Significant Subsidiaries to, merge with or consolidate into,
or acquire all or substantially all of the assets of, any Person, or sell,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets, except that:

     (i) Any of Lessee’s Significant Subsidiaries may merge with, consolidate
into or transfer all or substantially all of its assets to another of Lessee’s
Significant Subsidiaries or to Lessee and in connection therewith such
Significant Subsidiary (other than Lessee) may be liquidated or dissolved;
provided that (A) if the transaction involves Lessee, Lessee shall be the
surviving Person, and (B) if any transaction shall be between a non-wholly owned
Significant Subsidiary and a wholly owned Significant Subsidiary, the wholly
owned Significant Subsidiary shall be the continuing or surviving Person; and,
provided further, that no Material Adverse Effect or Lease Default or Lease
Event of Default exists or shall result therefrom;

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     (ii) Lessee or any of its Significant Subsidiaries may sell or dispose of
assets in accordance with the provisions of Section 18.2(d);

     (iii) Lessee or any of its Significant Subsidiaries may make any
Acquisition so long as (A) no Lease Default or Lease Event of Default has
occurred and is continuing and (B) no Lease Default, Lease Event of Default or
Material Adverse Effect would occur as a result thereof;

     (iv) Lessee may merge with or consolidate into any other Person, provided
that (A) Lessee is the surviving Person, and (B) no such merger or consolidation
shall be made while there exists a Lease Default or Lease Event of Default or if
a Lease Default or Lease Event of Default or Material Adverse Effect would occur
as a result thereof.

     (v) Lessee may merge with or consolidate into any other Person in
connection with a hostile takeover of Lessee by such Person that occurs without
the consent of Lessee.

     (d) Sales of Assets. Lessee will not, and will not permit any of its
Significant Subsidiaries to, convey, sell, lease, transfer, or otherwise dispose
of, or part with control of (whether in one transaction or a series of
transactions) any assets (including any shares of stock in any Subsidiary or
other Person), except:

     (i) Sales or other dispositions of inventory in the ordinary course of
business;

     (ii) Sales or other dispositions of assets in the ordinary course of
business which have become worn out or obsolete or which are promptly being
replaced;

     (iii) Sales of accounts receivable to financial institutions not affiliated
with Lessee; provided that (A) the discount rate shall not at any time exceed
ten percent (10%), (B) the amount of all accounts receivable permitted to be
sold in any fiscal quarter shall not exceed twenty percent (20%) of the
consolidated accounts receivable of Lessee and its Subsidiaries, determined as
of the last day of the immediately preceding fiscal quarter (or fiscal year, as
the case may be) and (C) the sole consideration received for such sales shall be
cash;

     (iv) Except as provided in clause (vi) below, sales or other dispositions
of assets outside the ordinary course of business which do not constitute
Substantial Assets (as defined below);

     (v) Sales or other dispositions of Lessee Permitted Investments; and

     (vi) Sale of all or less than all of the stock or assets of Engenio
Information Technologies, Inc.

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provided, however, that the foregoing exceptions shall not be construed to
permit any sales, leases, transfers or other disposals of any of the Equipment,
except as expressly permitted by this Lease. For purposes of clause (iv) above,
a sale, lease, transfer or other disposition of assets shall be deemed to be of
“Substantial Assets” if such assets, when added to all other assets conveyed,
sold, leased, transferred or otherwise disposed of by Lessee and its
Subsidiaries in any period of four consecutive fiscal quarters (other than
assets sold in the ordinary course of business or pursuant to clause
(iii) above), shall exceed ten percent (10%) of Consolidated Total Assets as
determined as of the last day of the fiscal quarter of Lessee immediately
preceding the date of determination.

     (e) Loans and Investments. Lessee will not, and will not permit any of its
Significant Subsidiaries to, extend any credit to, guarantee the obligations of
or make any additional investments in or acquire any interest in, any Person,
other than in connection with:

     (i) Extensions of credit in the nature of accounts receivable or notes
receivable arising from the sales of goods or services in the ordinary course of
business;

     (ii) Lessee Permitted Investments;

     (iii) Additional purchases of or investments in the stock of, or guarantees
of the obligations of, Subsidiaries;

     (iv) Employee loans and guarantees in accordance with Lessee’s usual and
customary practices with respect thereto;

     (v) Any Acquisition; or

     (vi) Additional investments not exceeding, in the aggregate with all such
investments, $300,000,000 during the period from the Delivery Date through the
Lease Expiration Date;

provided that in the case of an Acquisition referred to in clause (v) above or
an investment referred to in clause (vi) above, no such Acquisition or
investment shall be made while there exists a Lease Default or Lease Event of
Default or if a Lease Default, Lease Event of Default or Material Adverse Effect
would occur as a result thereof.

     (f) Distributions. Lessee will not declare or pay any dividends in respect
of its capital stock, or purchase, redeem, retire or otherwise acquire for value
any of its capital stock now or hereafter outstanding, return any capital to its
shareholders as such, or make any distribution of assets to its shareholders as
such, or permit any of its Subsidiaries to purchase, redeem, retire, or
otherwise acquire for value any stock of Lessee, except that Lessee may:

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     (i) Declare and deliver dividends and distributions payable only in common
stock of either (A) Lessee or (B) Engenio Information Technologies, Inc. so long
as (x) no Lease Default or Lease Event of Default has occurred and is continuing
and (y) no Lease Default, Lease Event of Default or Material Adverse Effect
would occur as a result thereof;

     (ii) Purchase shares of its capital stock from time to time in connection
with the issuance of shares under Lessee’s employee stock option plans;

     (iii) Purchase, redeem, retire, or otherwise acquire shares of its capital
stock with the proceeds received from a substantially concurrent issue of new
shares of its capital stock; and

     (iv) In addition to the dividends, purchases, redemptions, retirements and
other acquisitions permitted by the foregoing clauses (i) through (iii) above,
declare and deliver dividends and distributions, and purchase, redeem, retire,
or otherwise acquire shares of its capital stock, in an aggregate amount not
exceeding $100,000,000 in any period of four consecutive fiscal quarters.

     (g) Transactions with Related Parties. Lessee will not, and will not permit
any of its Significant Subsidiaries to, enter into any transaction, including
the purchase, sale or exchange of property or the rendering of any services,
with any Affiliate, any officer or director thereof or any Person which
beneficially owns or holds twenty percent (20%) or more of the equity
securities, or twenty percent (20%) or more of the equity interest, thereof (a
“Related Party”), or enter into, assume or suffer to exist, or permit any
Significant Subsidiary to enter into, assume or suffer to exist, any employment
or consulting contract with any Related Party, except (i) a transaction or
contract which is in the ordinary course of Lessee’s or such Significant
Subsidiary’s business, including a transaction in the ordinary course of
business between or among Lessee and one or more of its Subsidiaries and
(ii) any other transaction which is upon fair and reasonable terms not less
favorable to Lessee or such Significant Subsidiary than it would obtain in a
comparable arm’s length transaction with a Person not a Related Party. For
purposes of this Section 18.2(g), the sale, transfer or disposition of more than
thirty percent (30%) of its assets (in any transaction or a series of related
transactions) by Lessee or any of its Significant Subsidiaries shall be deemed
to be outside the ordinary course of business.

     (h) Accounting Changes. Lessee will not, and will not permit any of its
Significant Subsidiaries to, make any significant change in accounting treatment
or reporting practices, except as required or permitted by GAAP (or, in the case
of any such Significant Subsidiary domiciled in a jurisdiction other than the
United States, in accordance with generally accepted accounting principles and
practices in such jurisdiction).

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     Section 18.3. Financial and Other Covenants. During the Lease Term, Lessee
shall comply, and shall cause compliance, with the following financial
covenants:

     (a) Liquidity Covenant. Lessee shall not, nor shall it permit any of its
Subsidiaries to, permit Unrestricted Cash Reserves at any time to be less than
the higher of (A) the sum of $100,000,000, plus the principal amount outstanding
under the 4.00% Convertible Subordinated Notes due November 1, 2006 issued by
Lessee pursuant to the Subordinated Indenture, dated as of October 30, 2001
between Lessee and State Street Bank and Trust Company of California, N.A., as
Trustee, as in effect on the Delivery Date and (B) $350,000,000.

     (b) Cash Collateral. (i) With respect to each Cash Collateral Account, on
each Payment Date, Lessee shall furnish or cause to be furnished to Agent and
the applicable Securities Intermediary a certificate for such Cash Collateral
Account, in form reasonably satisfactory to Agent, certifying as to (A) the
value of the Cash Collateral held in such Cash Collateral Account (with a
reasonably detailed calculation thereof) and (B) the Required Cash Collateral
Amount for such Cash Collateral Account. Each Securities Intermediary and Agent
shall provide Lessee with the information necessary for Lessee to prepare such
certificate and shall assist Lessee in the calculations required thereby.

     (ii) If on any date that a certificate is furnished in accordance with
Section 18.3(b)(i), the value of the Cash Collateral in any Cash Collateral
Account shall be less than the Required Cash Collateral Amount for such Cash
Collateral Account, then Lessee shall pledge to the Lessor by depositing into
such Cash Collateral Account, additional Cash Collateral, which Cash Collateral
shall be acceptable to the Lessor or the applicable Series A Assignee benefiting
from such Cash Collateral, in each case in its sole and absolute discretion and
in an amount such that the Cash Collateral in such Cash Collateral Account is
equal to or greater than the Required Cash Collateral Amount for such Cash
Collateral Account. If, on such date, pursuant to the certificate, Lessee has
certified that the value of the Cash Collateral in any Cash Collateral Account
is greater than the Required Cash Collateral Amount for such Cash Collateral
Account and provided that (i) no Lease Default or Lease Event of Default shall
have occurred and be continuing and (ii) Lessor or the applicable Assignee, as
applicable, shall have received prior notice of the amount of Surplus Collateral
(as defined below) to be withdrawn at least (2) Business Days prior to such
withdrawal, then, as applicable, Lessor shall be deemed to have directed, or the
applicable Assignee shall be deemed to have directed, the applicable Securities
Intermediary to promptly release such excess amount to Lessee in an amount such
that, after giving effect to such release and the payment by Lessee of any
applicable breakage costs or other early termination costs and penalties arising
as a result thereof, the value of the Cash Collateral remaining in such Cash
Collateral Account held by the applicable Securities Intermediary for the
ultimate benefit of Lessor or the applicable Assignee, as applicable, shall
equal or exceed the Required Cash Collateral Amount for such Cash Collateral
Account (for the purposes of this subparagraph (ii), such Cash Collateral to be
released, “Surplus Collateral”). In such event, Lessee’s

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certificate shall be deemed to be a representation by Lessee to the applicable
Securities Intermediary, Agent and Lessor or the applicable Assignee, as
applicable, or its assignee, as the case may be, with respect to Cash Collateral
held for the ultimate benefit of such Assignee or its assignee, as the case may
be, (or Lessor, with respect to Cash Collateral held for the ultimate benefit of
Lessor) that no Lease Default or Lease Event of Default exists or would result
from such release. By 5:00 P.M., San Francisco, California time, on the third
Business Day after the date on which Lessee provided the certificate to Agent
and the applicable Securities Intermediary, unless Lessor, with respect to Cash
Collateral held for the ultimate benefit of Lessor or the applicable Assignee,
or its assignee, as the case may be, with respect to Cash Collateral held for
the ultimate benefit of such Assignee or its assignee, as the case may be,
reasonably objects in writing provided to Agent and Lessee to the assertion that
the applicable Cash Collateral Account contains Surplus Collateral, or to the
amount of such Surplus Collateral, the applicable Securities Intermediary shall
release such Surplus Collateral to the Lessee; provided, that no release of
Surplus Collateral shall in any way affect the obligations of the Lessee
pursuant to Section 18.3(b)(i); provided further, that if the applicable
Assignee or its assignee, as the case may be, or Lessor, with respect to Cash
Collateral held for the ultimate benefit of Lessor, has reasonably objected to
the assertion that the applicable Cash Collateral Account contains Surplus
Collateral, or to the amount of such Surplus Collateral, then the Securities
Intermediary shall not release any Cash Collateral until the Lessee and the
applicable Assignee or its assignee or the Lessor, with respect to Cash
Collateral held for the ultimate benefit of Lessor, have resolved such
discrepancy to the reasonable satisfaction of Lessee and such Assignee or its
assignee, or Lessor, as the case may be.

     Section 18.4. General Covenants. Lessee covenants and agrees with Lessor
and Agent that, during the Lease Term, Lessee shall comply with the following
provisions of this Section 18.4:

     (a) Further Assurances. Lessee will cause to be promptly and duly taken,
executed, acknowledged and delivered all such further acts, documents and
assurances as Agent or Lessor reasonably may request from time to time in order
to carry out more effectively the intent and purposes of this Lease and the
other Operative Documents and the Overall Transaction. Lessee, at its own
expense, will cause all financing statements (including precautionary financing
statements), security agreements and other documents, to be recorded or filed at
such places and times in such manner, and will take all such other actions or
cause such actions to be taken, as may be necessary or as may be reasonably
requested by Agent or Lessor in order to establish, preserve, protect and
perfect the title of Lessor in the Items of Equipment, the Lien of Lessor in the
Lessee Collateral and Lessor’s and Agent’s rights under this Lease and the other
Operative Documents.

     (b) [Reserved].

     (c) Securities. Lessee shall not, nor shall it permit anyone authorized to
act on its behalf to, take any action which would subject any interest in any
Item of Equipment or the Lease, or in any security or lease the offering of
which, for purposes of

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the Securities Act or any state securities laws, would be deemed to be part of
the same offering as the offering of the aforementioned items, to the
registration requirements of Section 5 of the Securities Act or any state
securities laws.

     (d) Rates. With respect to each determination of Accrual Rent under the
Lease, Lessee agrees to be bound by Section 2.9 hereof and the applicable
definition in Article I hereof.

     Section 18.5. Covenants of Agent. Agent, in its individual capacity,
covenants with each of the other parties hereto as follows, it being understood
that the sole remedies for the breach of these covenants shall be to sue for
damages or for specific performance and that any such breach shall not modify or
terminate Lessee’s obligations under Article VII:

     (a) so long as this Lease remains in effect or so long as the obligations
of Lessee arising hereunder have not been fully and finally discharged, Agent,
in its individual capacity, (i) will keep this Lease and the Items of Equipment
free and clear of all Lessor Liens attributable to Agent and shall indemnify,
reimburse and hold Lessor and Lessee harmless from any and all claims, losses,
damages, obligations, penalties, liabilities, demands, suits, or causes of
action and all legal proceedings, and any costs or expenses in connection
therewith, including reasonable legal fees and expenses, of whatever kind and
nature, imposed on, incurred by or asserted against Lessor or Lessee in any way
relating to, or arising in any manner out of, Agent’s failure to comply with
this Section 18.5(a) and (ii) will not, provided that no Lease Default or Lease
Event of Default exists, through its own actions, interfere with Lessee’s (or
any permitted sublessee’s or assignee’s) rights hereunder with respect to the
Items of Equipment during the term of this Lease, except as permitted or
required by the terms of this Lease; and

     (b) Agent shall apply funds held by it in its capacity as agent hereunder
as required by this Lease.

     Section 18.6. Covenants of Lessor. Lessor covenants with each of the other
parties hereto as follows, it being understood that the sole remedies for the
breach of these covenants shall be to sue for damages or for specific
performance and that any such breach shall not modify or terminate Lessee’s
obligations under Article VIII:

     (a) provided that no Lease Default or Lease Event of Default exists, it
will not, through its own actions, interfere with Lessee’s (or any permitted
sublessee’s or assignee’s) rights hereunder with respect to the Items of
Equipment during the Lease Term;

     (b) it will keep the Items of Equipment and other Lessee Collateral free
and clear from all Lessor Liens attributable to it; provided that it may contest
any such Lessor Lien pursuant to a Permitted Contest.

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ARTICLE XIX

ASSIGNMENTS

     Section 19.1. Lessor Assignments.

     (a) (i) Except as otherwise provided in this Section 19.1(a)(i), Lessor may
at any time, without the consent of Lessee, assign or transfer all, but not less
than all, of its rights, title, interests and obligations and interest as
“Lessor” and “Seller,” in, to and under this Lease, the other Operative
Documents, the Items of Equipment and any other Lessee Collateral to an Eligible
Lessor Assignee; provided, that (A) such assignment shall comply with this
Section 19.1(a)(i), (B) such assignment shall be evidenced by an Assignment
Agreement, a copy of which shall be furnished to the Agent, Lessee and each
Assignee, (C) each assignment or transfer shall comply with all applicable
securities laws and (D) the Lessor shall give notice of such assignment and the
name of the assignee to Lessee, Agent and each Assignee; provided, further, that
no such assignment shall be made if (1) in the reasonable opinion of Lessee,
such assignment would (A) cause Lessee to be required to cease reporting this
Lease as an operating lease in Lessee’s financial statements or (B) cause Lessee
to be required to consolidate the assets of Lessor onto its balance sheet under
FIN 46R or FASB 94, as applicable and (2) Lessee provides Lessor written notice
of such determination within ten (10) Business Days of (A) Lessee’s receipt of
the notice described in clause (D) above and (B) Lessee’s receipt of information
regarding the proposed assignee as may be reasonably requested by Lessee’s
independent public accountants, which request shall be made within 10 days after
Lessee’s receipt of the notice described in clause (D) above. If Lessee has
objected to a proposed assignee for the reason set forth in clause (1) above,
Lessor may re-submit notice of such proposed assignee to Lessee at a later date
and the reasonableness of Lessee’s opinion in clause (1) shall be determined as
of such later date. So long as no Lease Default or Lease Event of Default has
occurred and is continuing, Lessee may object in writing to the proposed
assignee for any reason other than as set forth in clause (1) above within ten
(10) Business Days of receipt of the notice described in clause (D) above,
whereupon Lessee shall have sixty (60) days from the date of receipt by Lessee
of such notice to find a replacement assignee which shall be an Eligible Lessor
Assignee and if no such replacement assignee is found within such sixty (60) day
period, the Lessor may assign all or any part of its rights, obligations and
interest in, to and under this Lease, the other Operative Documents, the Items
of Equipment and any other Lessee Collateral as contemplated above to such
assignee identified in such notice delivered to Lessee.

     (ii) Lessor may at any time, without the consent of Lessee, assign or
transfer all or any part of its right, title, interest and obligations with
respect to the Series A Lease Balance and/or the Series B Lease Balance,
including, but not limited to, the right to receive Series A Accrual Rent,
Series A Capital Rent, Series B Accrual Rent, Series B Capital Rent, and the
Supplemental Rent, proceeds from the sale of the Equipment in connection with
the enforcement of remedies, Purchase Amount, Early Termination Amount, Casualty
Amount and Sale Recourse Amount relating to each of the Series A Lease Balance
and the Series B Lease Balance and the Cash Collateral relating to the Series A
Lease Balance, to an Eligible Assignee (each such Eligible Assignee, together
with any “Assignee” under the Lessor Assignment Agreement and their respective
permitted successors and assigns being herein called an “Assignee"); provided,
that

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(A) except in the case of an assignment to an Affiliate of Lessor or of all of
the Lessor’s rights, obligations and interest in the Series A Lease Balance and
the Series B Lease Balance, the amount of the assignment permitted hereunder
shall not be less than $5,000,000, (B) such assignment shall be evidenced by a
Lessor Assignment Agreement or a supplement or amendment thereto or other
agreement evidencing such assignment, a copy of which shall be furnished to the
Agent, Lessee, and each Assignee, (C) each assignment or transfer shall comply
with all applicable securities laws and (D) the Lessor shall give notice of such
assignment and the name of the assignee to Lessee, Agent and each Assignee;
provided, further, that with respect to any assignment which occurs after the
Delivery Date, no such assignment shall be made if (1) in the reasonable opinion
of Lessee, such assignment would (A) cause Lessee to be required to cease
reporting this Lease as an operating lease in Lessee’s financial statements or
(B) cause Lessee to be required to consolidate the assets of Lessor or such
assignee onto its balance sheet under FIN 46R or FASB 94, as applicable and
(2) Lessee provides Lessor written notice of such determination within ten
(10) Business Days of (A) Lessee’s receipt of the notice described in clause
(D) above and (B) Lessee’s receipt of information regarding the proposed
assignee as may be reasonably requested by Lessee’s independent public
accountants, which request shall be made within 10 days after Lessee’s receipt
of the notice described in clause (D) above. If, with respect to any assignment
which occurs after the Delivery Date, Lessee has objected to a proposed assignee
for the reason set forth in clause (1) above, Lessor may re-submit notice of
such proposed assignee to Lessee at a later date and the reasonableness of
Lessee’s opinion in clause (1) shall be determined as of such later date. With
respect to any assignment which occurs after the Delivery Date, so long as no
Lease Default or Lease Event of Default has occurred and is continuing, Lessee
may object in writing to the proposed assignee for any reason other than as set
forth in clause (1) above within ten (10) Business Days of receipt of the notice
described in clause (D) above, whereupon Lessee shall have sixty (60) days from
the date of receipt by Lessee of such notice to find a replacement assignee
which shall be an Eligible Assignee and if no such replacement assignee is found
within such sixty (60) day period, the Lessor may assign all or any part of its
rights, obligations and interest in, to and under this Lease, the other
Operative Documents, the Items of Equipment and any other Lessee Collateral as
contemplated above to such assignee identified in such notice delivered to
Lessee.

     (iii) Lessee hereby agrees that notwithstanding anything contained in the
Operative Documents to the contrary, Lessor may, without the consent of Lessee,
borrow on a non-recourse basis from any financial institution and assign to such
financial institution as security for such borrowing, all of Lessor’s right,
title and interest with respect to the Series C Accrual Rent and Series C Lease
Balance retained by Lessor and the Operative Documents relating thereto and the
Series C Cash Collateral held by Lessor as Securities Intermediary and such
financial institution shall be entitled to (A) receive such Series C Accrual
Rent and Series C Lease Balance, (B) act as Securities Intermediary with respect
to the Series C Cash Collateral and (C) exercise such rights and powers under
the Operative Documents with respect to such Series C Accrual Rent and Series C
Lease Balance assigned to such financial institution to the same extent as if
such financial institution was an “Assignee” under the Lessor Assignment
Agreement with respect to such Series C Lease Balance and such financial
institution shall be deemed to be holding a portion of the outstanding Lease
Balance equal to the outstanding principal amount of such non recourse
borrowing. Lessee hereby agrees to execute all such documents, instruments and
amendments as Lessor or such financial institution may reasonably request in
connection with

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such non-recourse borrowing and assignment. Lessee also agrees that Lessor may
assign any or all of its right, title, interest and obligations under such
non-recourse borrowing to any person without the consent of Lessee.

     (b) Required Deliveries. Lessee and Agent may continue to deal solely and
directly with the assignor Lessor in connection with any interest so assigned
until (i) notice of such assignment shall have been given to Lessee and Agent by
Lessor or its assignee; and (ii) the assignor and assignee shall have executed
and delivered to Agent and Lessee an instrument of assignment in the form
attached hereto as Exhibit G. When Agent and Lessee have received the items
listed in clauses (i) and (ii) of the preceding sentence, subject to
subparagraph (a) above, the assignee shall be a party hereto and the other
Operative Documents to which the assignor was (or in the case of a partial
assignment, is) a party and, to the extent of the rights and obligations so
assigned to it, shall have the rights and obligations of a Lessor hereunder and
under such other Operative Documents, and the assignor shall relinquish its
rights and be released from its obligations hereunder and under such other
Operative Documents. The Agent shall maintain a copy of each instrument of
assignment delivered to it.

     Section 19.2. Lessor Participations. Lessor may at any time sell to one or
more Persons participating interests in all or a portion of its rights and
obligations under this Lease, the other Operative Documents, the Items of
Equipment and other Lessee Collateral (including all or any portion of the Rent
owing to it); provided, however, that Lessor shall in no event sell a
participating interest under this Section 19.2 if the result of such sale of a
participating interest would result in the Lessor holding non-participated
interests in an amount equal to or less than 5% of the then outstanding Lease
Balance; provided, further, that:

     (a) no participation contemplated in this Section 19.2 shall relieve Lessor
from its obligations hereunder or under any other Operative Document;

     (b) Lessor shall remain solely responsible for the performance of its
obligations;

     (c) Lessee shall continue to deal solely and directly with Lessor in
connection with Lessor’s rights and obligations under this Lease and the other
Operative Documents and, subject to the rights of the participants under any
agreement evidencing such participation, Lessor shall have the sole right to
enforce its rights under the Operative Documents; and

     (d) no participant (other than the participants party to any agreement
evidencing such participation) shall be entitled to any reimbursement or
indemnification for any Taxes, funding losses, additional costs, capital costs
or reserve requirements pursuant to Section 11.4 or 11.5 in excess of a
proportionate amount which would have been payable to Lessor or to an original
participant from whom such Person directly or indirectly acquired its
participation.

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ARTICLE XX

AGENT

     Section 20.1. Appointment of Agent; Powers and Authorization to Take
Certain Actions. (a) Lessor irrevocably appoints and authorizes Wells Fargo Bank
Northwest, National Association to act as its agent hereunder, with such powers
as are specifically delegated to Agent by the terms hereof, together with such
other powers as are reasonably incidental thereto. Lessor authorizes and directs
Agent to, and Agent agrees for the benefit of Lessor, that, on the Delivery Date
it will accept the documents described in Section 3.1 of this Lease. Agent
accepts the agency hereby created applicable to it and agrees to receive all
payments and proceeds pursuant to the Operative Documents and to disburse such
payments or proceeds in accordance with the Operative Documents. Agent shall
have no duties or responsibilities except those expressly set forth in this
Lease and the other Operative Documents. Agent shall not be responsible to
Lessor (or to any other Person) (i) for any recitals, statements,
representations or warranties of any party contained in this Lease or any other
Operative Documents, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Lease or the other
Operative Documents, other than the representations and warranties made by Agent
in Section 17.3, or (ii) for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of the title to the Items of Equipment (subject to
Agent’s obligations under Section 18.5) or any other document referred to or
provided for herein or (iii) for any failure by Lessee, Lessor or any other
party (other than Agent) to perform any of its obligations under the Operative
Documents. Agent may employ agents, trustees or attorneys-in-fact, may vest any
of them with any property, title, right or power deemed necessary for the
purposes of such appointment and shall not be responsible for the negligence or
misconduct of any of them selected by Agent with reasonable care. Neither Agent
nor any of its directors, officers, employees or agents shall be liable or
responsible for any action taken or omitted to be taken by it or them hereunder,
or in connection herewith, except for its or their own gross negligence or
willful misconduct.

     (b) Agent shall not have any duty or obligation to manage, control, use,
operate, store, lease, sell, dispose of or otherwise deal with the Items of
Equipment or the other Lessee Collateral, or to otherwise take or refrain from
taking any action under, or in connection with, this Lease or any related
document to which Agent is a party, except as expressly provided by the terms of
the Operative Documents, and no implied duties of any kind shall be read into
the Operative Documents against Agent. The permissive right of Agent to take
actions enumerated in this Lease or any other Operative Document shall never be
construed as a duty, unless Agent is instructed or directed to exercise, perform
or enforce one or more rights by Lessor (provided that Agent has received
indemnification reasonably satisfactory to it). Subject to Section 20.1(c)
below, no provision of the Operative Documents shall require Agent to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its obligations under the Operative Documents, or in the exercise of
any of its rights or powers thereunder. It is understood and agreed that the
duties of Agent are ministerial in nature.

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     (c) Except as specifically provided herein, Agent is acting hereunder
solely as agent and, except as specifically provided herein, is not responsible
to any party hereto in its individual capacity, except with respect to any claim
arising from Agent’s gross negligence or willful misconduct, any breach of a
representation or covenant made in its individual capacity or, in the case of
Agent’s handling of funds, failure to act with the same care as Agent uses in
handling its own funds.

     (d) Agent may accept deposits from, lend money to and otherwise deal with
Lessee or any of its Affiliates with the same rights as it would have if it were
not the named Agent hereunder.

     Section 20.2. Reliance. Agent may rely upon, and shall not be bound or
obligated to make any investigation into the facts or matters stated in, any
certificate, notice or other communication (including any communication by
telephone, telecopy, telex, telegram or cable) reasonably believed by it to be
genuine and correct and to have been made, signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Agent with due care
(including any expert selected by Agent to aid Agent in any calculations
required in connection with its duties under the Operative Documents).

     Section 20.3. Action upon Instructions Generally. Subject to Sections 20.4
and 20.6, upon written instructions of Lessor, Agent shall, on behalf of Lessor,
give such notice or direction, exercise such right, remedy or power hereunder or
in respect of the Items of Equipment and the other Lessee Collateral, and give
such consent or enter into such amendment to any document to which it is a party
as Agent as may be specified in such instructions. Agent shall deliver to Lessor
a copy of each notice, report and certificate received by Agent pursuant to the
Operative Documents. Agent shall have no obligation to investigate or determine
whether there has been a Lease Event of Default or a Lease Default. Agent shall
not be deemed to have notice or knowledge of a Lease Event of Default or Lease
Default unless a Responsible Officer of Agent is notified in writing of such
Lease Event of Default or Lease Default; provided that a Responsible Officer of
Agent shall be deemed to have been notified in writing of any failure of Lessee
to pay Basic Rent in the amounts and at the times set forth in Section 6.1 (a
“Payment Default”) immediately upon the occurrence of such Payment Default. If
Agent receives notice of a Lease Default or Lease Event of Default, Agent shall
give prompt notice thereof, at Lessee’s expense, to Lessor. Subject to
Sections 20.4, 20.6 and 22.5, Agent shall take action or refrain from taking
action with respect to such Lease Default or Lease Event of Default as directed
by Lessor; provided that, unless and until Agent receives such directions, Agent
may refrain from taking any action, or may act in its discretion, with respect
to such Lease Default or Lease Event of Default. Prior to the date the Lease
Balance shall have become due and payable by acceleration pursuant to
Section 12.2, the Lessor may deliver written instructions to Agent to waive, and
Agent shall waive pursuant thereto, any Lease Event of Default and its
consequences. As to any matters not expressly provided for by this Lease, Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with instructions signed by Lessor and such instructions
of Lessor and any action taken or failure to act pursuant thereto shall be
binding on Lessor.

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     Section 20.4. Indemnification. Lessor shall reimburse and hold Agent
harmless (but only to the extent that any such indemnified amounts have not in
fact been paid to Agent by, or on behalf of, Lessee in accordance with Section
11.1) from any and all claims, losses, damages, obligations, penalties,
liabilities, demands, suits, judgments, or causes of action, and all legal
proceedings, and any reasonable costs or expenses in connection therewith,
including allocated charges, costs and expenses of internal counsel of Agent and
all other reasonable attorneys’ fees and expenses incurred by Agent, in any way
relating to or arising in any manner out of (i) any Operative Document, the
enforcement hereof or thereof or the consummation of the Overall Transaction, or
(ii) instructions from Lessor (including, without limitation, the costs and
expenses that Lessee is obligated to and does not pay hereunder, but excluding
normal administrative costs and expenses incident to the performance by Agent of
its agency duties hereunder other than materially increased administrative costs
and expenses incurred as a result of a Lease Event of Default); provided that
Lessor shall not be liable for any of the foregoing to the extent they arise
from (a) the gross negligence or willful misconduct of Agent, (b) the inaccuracy
of any representation or warranty or breach of any covenant given by Agent in
Section 17.3 or Section 18.5, (c) in the case of Agent’s handling of funds, the
failure to act with the same care as Agent uses in handling its own funds or
(d) any taxes, fees or other charges payable by Agent based on or measured by
any fees, commissions or compensation received by it for acting as Agent in
connection with the Overall Transaction.

     Section 20.5. Independent Credit Investigation. Lessor, by entering into
this Lease and the other Operative Documents, agrees that it has, independently
and without reliance on Agent and based on such documents and information as it
has deemed appropriate, made its own credit analysis of Lessee and its own
decision to enter into this Lease and each of the other Operative Documents to
which it is a party and that it will, independently and without reliance upon
Agent and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking action
under this Lease and any other Operative Documents to which it is a party. Agent
shall not be required to keep itself informed as to the performance or
observance by Lessee of any other document referred to (directly or indirectly)
or provided for herein or to inspect the properties or books of Lessee.

     Section 20.6. Refusal to Act. Except for notices and actions expressly
required of Agent hereunder and except for the performance of its covenants in
Section 18.5, Agent shall in all cases be fully justified in failing or refusing
to act unless (a) it is indemnified to its reasonable satisfaction by Lessor
against any and all liability and reasonable expense which may be incurred by it
by reason of taking or continuing to take any such action; provided that such
indemnity shall not be required to extend to liability or expense arising from
any matter described in clauses (a) through (d) of Section 20.4, it being
understood that no action taken by Agent in accordance with the instructions of
Lessor shall be deemed to constitute any such matter and (b) it is reasonably
satisfied that such action is not contrary to any Operative Document or to any
Applicable Law and Regulations.

     Section 20.7. Resignation or Removal of Agent; Appointment of Successor.
Subject to the appointment and acceptance of a successor Agent as provided
below, Agent may resign at

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any time by giving notice thereof to Lessor and Lessee or may be removed at any
time, by written notice from Lessor. Upon any such resignation or removal,
Lessor, at the time of the resignation or removal shall have the right to
appoint, with the prior written consent of Lessee (so long as no Lease Event of
Default is continuing), a successor Agent which shall be a financial institution
having a combined capital and surplus of not less than $100,000,000. If, within
30 calendar days after the retiring Agent’s giving of notice of resignation or
receipt of a written notice of removal, a successor Agent is not so appointed
and does not accept such appointment, then the retiring or removed Agent may
appoint a successor Agent and transfer to such successor Agent all rights and
obligations of the retiring Agent. Such successor Agent shall be a financial
institution having combined capital and surplus of not less than $100,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent and the
retiring or removed Agent shall be discharged from duties and obligations as
Agent thereafter arising hereunder and under any related document. If the
retiring Agent does not appoint a successor, Lessor shall be entitled to apply
to a court of competent jurisdiction for such appointment, and such court may
thereupon appoint a successor to act until such time, if any, as a successor
shall have been appointed as above provided.

     Section 20.8. Separate Agent. The Lessor may, and if it fails to do so at
any time when it is so required, Agent may, for the purpose of meeting any legal
requirements of any jurisdiction to which the Items of Equipment or other Lessee
Collateral may be subject, appoint one or more individuals or corporations
either to act as co-agent jointly with Agent or to act as separate agent of all
or any part of the Items of Equipment or other Lessee Collateral, and vest in
such individuals or corporations, in such capacity such rights or duties as
Agent may consider necessary or desirable. Agent shall not be required to
qualify to do business in any jurisdiction where it is not now so qualified.
Agent shall execute, acknowledge and deliver all such instruments as may be
required by any such co-agent or separate agent more fully confirming such
title, rights or duties to such co-agent or separate agent; provided that, so
long as no Lease Event of Default or Material Lease Default has occurred and
continuing, Lessee’s consent is required for the appointment of a co-agent or
separate agent pursuant to this Section 20.8. Upon the acceptance in writing of
such appointment by any such co-agent or separate agent, it, she or he shall be
vested with such interest in the Items of Equipment or the other Lessee
Collateral or any part thereof, and with such rights and duties, not
inconsistent with the provisions of the Operative Documents, as shall be
specified in the instrument of appointment, jointly with Agent (except insofar
as local law makes it necessary for any such co-agent or separate agent to act
alone), subject to all terms of the Operative Documents. Any co-agent or
separate agent, to the fullest extent permitted by legal requirements of the
relevant jurisdiction, at any time, by an instrument in writing, shall
constitute Agent its attorney-in-fact and agent, with full power and authority
to do all acts and things and to exercise all discretion on its behalf and in
its name. If any co-agent or separate agent shall die, become incapable of
acting, resign or be removed, the interest in the Items of Equipment and the
other Lessee Collateral and all rights and duties of such co-agent or separate
agent shall, so far as permitted by law, vest in and be exercised by Agent,
without the appointment of a successor to such co-agent or separate agent.

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     Section 20.9. Termination of Agency. The agency created hereby shall
terminate upon the final disposition by Lessor of all of the Items of Equipment
and other Lessee Collateral and the final distribution by Agent of all monies or
other property or proceeds received pursuant to the Operative Documents in
accordance with their terms, provided that at such time Lessee shall have
complied fully with all the terms hereof.

     Section 20.10. Compensation of Agency. Lessee shall pay Agent its
reasonable fees, costs and expenses for the performance of Agent’s obligations
hereunder (including the reasonable fees and expenses of its counsel) to the
extent provided in the Agent Fee Letter.

     Section 20.11. Limitations. It is expressly understood and agreed by and
among the parties hereto that, except as otherwise provided herein or in the
other Operative Documents: (a) this Lease and the other Operative Documents to
which Agent is a party are executed by Agent, not in its individual capacity
(except with respect to the representations and covenants of Agent in Sections
17.3 and 18.5), but solely as Agent under the Operative Documents in the
exercise of the power and authority conferred and vested in it as such Agent;
(b) each and all of the undertakings and agreements herein made on the part of
Agent are each and every one of them made and intended not as personal
undertakings and agreements by Agent, or for the purpose or with the intention
of binding Agent personally, but are made and intended for the purpose of
binding only the Items of Equipment and the other Lessee Collateral unless
expressly provided otherwise; (c) actions to be taken by Agent pursuant to its
obligations under the Operative Documents may, in certain circumstances, be
taken by Agent only upon specific authority of Lessor; (d) nothing contained in
the Operative Documents shall be construed as creating any liability on Agent,
individually or personally, or any incorporator or any past, present or future
subscriber to the capital stock of, or stockholder, officer or director,
employee, Affiliate or agent of, Agent to perform any covenants either express
or implied contained herein, all such liability, if any, being expressly waived
by the other parties hereto and by any Person claiming by, through or under
them; and (e) so far as Agent, individually or personally, is concerned, the
other parties hereto and any Person claiming by, through or under them shall
look solely to the Items of Equipment, the other Lessee Collateral and Lessee
for the performance of any obligation under any of the instruments referred to
herein; provided, however, that nothing in this Section 20.11 shall be construed
to limit in scope or substance the general corporate liability of Agent in
respect of its gross negligence or willful misconduct, negligence in the
handling of funds or for those representations, warranties and covenants of
Agent in its individual capacity set forth herein or in any of the other
Operative Documents.

     Section 20.12. Assignments. The terms and provisions of this Section XX are
subject to the provisions of the Lessor Assignment Agreement.

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ARTICLE XXI

DISTRIBUTIONS TO LESSOR

     Section 21.1. Distribution. Subject to the provisions of Sections 2.1 and
2.3 of the Lessor Assignment Agreement, all amounts of money received or
realized by Agent pursuant to this Lease and the other Operative Documents which
are to be distributed to Lessor (as distinguished from Lessee or any other
Person) shall be distributed as follows:

     At any time prior to the acceleration of the Lease Balance, all
distributions by Agent constituting or representing (a) Rent, (b) Lease Balance,
(c) Sale Recourse Amount and (d) interest with respect to the amounts described
in clauses (a) and (b) above shall be made to Lessor, and in case moneys are
insufficient to pay in full the whole amount due, owing or unpaid to Lessor,
then application shall be made first, to out of pocket costs of Agent, to the
extent not paid pursuant to any other provision in the Lease or any other
Operative Document; second, to amounts payable pursuant to Section 6.4; third,
to accrued and unpaid Accrual Rent; fourth, to accrued and unpaid Capital Rent;
fifth, to the remaining Lease Balance, if due, in accordance with Section 2.1 of
the Lessor Assignment; sixth, to Supplemental Rent owed proportionately to
Lessor and each Assignee in accordance with the Seller’s Share and the
respective Assignee’s Shares; seventh, to Supplemental Rent owed
disproportionately to Lessor, any Assignee or any Indemnitee (if these amounts
get paid to the Agent rather than the Person entitled thereto); and eighth, to
the Person entitled thereto by law.

At any time after the acceleration of the Lease Balance, all distributions by
Agent shall be made in accordance with the last paragraph of Section 2.1 of the
Lessor Assignment Agreement.

     Section 21.2. Timing of Distribution. The amounts payable by Agent to
Lessor pursuant to this Lease will be payable upon Agent’s receipt of such
amounts pursuant to this Lease, in immediately available funds.

ARTICLE XXII

MISCELLANEOUS

     Section 22.1. Effect of Waiver. No delay or omission to exercise any right,
power or remedy accruing to Lessor upon any breach or default of Lessee
hereunder shall impair any such right, power or remedy nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein or of
or in any similar breach or default thereafter occurring, nor shall any single
or partial exercise of any right, power or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or remedy, nor shall
any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of Lessor of any breach
or default under this Lease must be specifically set forth in writing and must
satisfy the requirements set forth in Section 22.5 with respect to approval by
Lessor.

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     Section 22.2. Survival of Covenants. All representations, warranties and
covenants of the parties hereto shall survive the expiration or termination of
this Lease to the extent arising prior to any such expiration or termination.

     Section 22.3. Governing Law. THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF, THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
OF SUCH STATE.

     Section 22.4. Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be by letter or facsimile (if the sender on the same day sends a
confirming copy of such facsimile by a recognized overnight delivery service
(charges prepaid)) and shall be deemed to have been given (i) in the case of
notice by letter, the earlier of when delivered to the addressee by hand or
courier if delivered on a Business Day and, if not delivered on a Business Day,
the first Business Day thereafter or on the third Business Day after depositing
the same in the mails, registered or certified mail, postage prepaid, return
receipt requested, addressed as provided on Schedule II, and (ii) in the case of
notice by facsimile, when transmitted during business hours on a Business Day
and, if not transmitted during business hours on a Business Day, the first
Business Day thereafter (if the sender on the same day sends a confirming copy
of such facsimile by a recognized overnight delivery service (charges prepaid)),
addressed as provided on Schedule II, or to such other address as any of the
parties hereto may designate by written notice.

     Section 22.5. Amendment; Complete Agreements. This Lease and the other
Operative Documents exclusively and completely state the rights of Agent, Lessor
and Lessee with respect to the Overall Transaction and supersede all prior
agreements, oral or written, with respect thereto. No variation, modification,
amendment or waiver of this Lease shall be valid unless in writing and signed by
Agent and Lessee.

     Section 22.6. Counterparts. This Lease has been executed in several
numbered counterparts. Only the counterpart designated as counterpart “No. 1”
shall be deemed to be an original or to be chattel paper for purposes of the
Uniform Commercial Code, and such copy shall be held by Agent.

     Section 22.7. Severability. Whenever possible, each provision of this Lease
shall be interpreted in such a manner as to be effective and valid under
Applicable Laws and Regulations; but if any provision of this Lease shall be
prohibited by or invalid under Applicable Laws and Regulations, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Lease.

     Section 22.8. Successors and Assigns. This Lease shall be binding upon the
parties hereto and their respective permitted successors

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and assigns and shall inure to the benefit of the parties hereto and their
respective permitted successors and permitted assigns.

     Section 22.9. Captions; Table of Contents. Section captions and the table
of contents used in this Lease (including the Schedules and Exhibits hereto) are
for convenience of reference only and shall not affect the construction of this
Lease.

     Section 22.10. Schedules and Exhibits. The Schedules and Exhibits hereto,
along with all attachments referenced in any of such items, are incorporated
herein by reference and made a part hereof.

     Section 22.11. No Accord and Satisfaction. The acceptance by Lessor of any
sums from Lessee (whether as Capital Rent or otherwise) in amounts which are
less than the amounts due and payable by Lessee hereunder is not intended, nor
shall be construed, to constitute an accord and satisfaction of any dispute
between Lessor and Lessee regarding sums due and payable by Lessee hereunder,
unless the Agent specifically deems it as such in writing.

     Section 22.12. Enforcement of Certain Warranties. Unless a Lease Event of
Default shall have occurred and be continuing, Lessor authorizes Lessee
(directly or through agents), at Lessee’s expense, to assert, during the Lease
Term, all of Lessor’s rights (if any) under any applicable warranty and any
other claim that Lessee or Lessor may have under the warranties provided in
connection with the Items of Equipment and Lessor agrees to cooperate, at
Lessee’s expense, with Lessee and its agents in asserting such rights. Any
amount recovered by Lessee under any such warranties shall be retained by or
paid over to Lessee, subject to Section 22.13.

     Section 22.13. Security Interest in Funds. As long as a Material Lease
Default or Lease Event of Default shall have occurred and be continuing, any
amount that would otherwise be payable to Lessee under the Operative Documents
shall be paid to or retained by Lessor (including amounts to be paid to Lessee
pursuant to Article IX or Section 22.12) as security for the performance by
Lessee in full of its obligations under this Lease and the other Operative
Documents, and, in the case of any existing Lease Event of Default, it may be
applied to the obligations of Lessee hereunder and under the other Operative
Documents and distributed pursuant to Article XXI. At such time as no Material
Lease Default or Lease Event of Default shall be continuing, such amounts, net
of any amounts previously applied to Lessee’s obligations hereunder or under any
other Operative Documents, shall be paid to Lessee. Any such amounts which are
held pending payment to Lessee or application hereunder shall be invested by
Lessor as directed from time to time in writing by Lessee, and at the expense
and risk of Lessee, in Permitted Investments. Any gain (including interest
received) realized as the result of any such investment (net of any fees,
commissions and other expenses, if any, incurred in connection with such
investment) shall be applied from time to time in the same manner as the
principal invested. Lessor shall not be liable for any losses on such
investments. Lessee will promptly pay to Lessor on demand, the amount of any
loss realized as the result of any such investment (together with any fees,
commissions and other

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expenses, if any, incurred in connection with such investment), such amount to
be held, paid and applied in the same manner as other amounts subject to this
Section 22.13.

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     IN WITNESS WHEREOF, the undersigned have each caused this Lease to be duly
executed and delivered by their respective representatives thereunto duly
authorized as of the day and year first above written.

            LSI LOGIC CORPORATION, as Lessee
      By:    /s/ Anita Prasad            Name:    Anita Prasad       Title:  
 Vice President, Treasury and Tax    

 

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            WELLS FARGO BANK NORTHWEST, NATIONAL
          ASSOCIATION, not in its individual capacity,
          except as expressly stated herein, but solely
          as Agent
      By:    /s/ Val T. Orton            Name:    Val T. Orton       Title:  
 Vice President    

 

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            BANK OF THE WEST, as Lessor
      By:    /s/ David W. Maurer            Name:    David W. Maurer      
Title:    Vice President