Document:

exv10w5

 

EXHIBIT 10.5

Execution Version

LSI Logic Corporation

(Lease A)

Omnibus Amendment

in respect of

Lease (Lease A)

Lessor Assignment Agreement (Lease A)

Dated as of September 16, 2004

among

BTM Capital Corporation,

as Lessor,

LSI Logic Corporation,

as Lessee,

RBS Lombard, Inc., as Series A Assignee and Series B Assignee

and

Wells Fargo Bank Northwest, National Association, as Agent

 

 

LSI Logic Corporation

(Lease A)

Omnibus Amendment (Lease A)

     This Omnibus Amendment (Lease A) (this “Omnibus Amendment”) is dated as of
September 16, 2004 and is among LSI Logic Corporation, a Delaware corporation
(“LSI” or “Lessee”); BTM Capital Corporation (“Lessor” or “Seller”); RBS
Lombard, Inc., as Series A Assignee and Series B Assignee (“Assignee”); and
Wells Fargo Bank Northwest, National Association, not in its individual
capacity, except as expressly stated in the Lease, but solely as Agent (“Wells
Fargo” or “Agent”).

Recitals

     A. Lessor, Lessee and Agent have heretofore entered into that certain
Lease and Security Agreement (Lease A), dated as of August 6, 2004 (the
“Lease”), under and pursuant to which Lessee agreed to lease from Lessor, and
Lessor agreed to lease to Lessee, certain Items of Equipment. Capitalized
terms used but not otherwise defined in this Omnibus Amendment shall have the
meanings assigned to such terms in the Lease.

     B. Lessor, the financial institutions defined therein as Assignees, the
Agent and the financial institutions identified therein as Securities
Intermediaries have heretofore entered into that certain Lessor Assignment
Agreement (Lease A), dated as of August 6, 2004 (the “Lessor Assignment
Agreement”) under and pursuant to which Seller sold and assigned to the
Assignees, and the Assignees purchased and assumed from Seller, a percentage
interest in Seller’s right, title, interest and obligations with respect to the
Series A Lease Balance and/or the Series B Lease Balance, as applicable, and,
in each case the rights appurtenant thereto.

     C. The parties now desire to amend the Lease and the Lessor Assignment
Agreement in the manner set forth below.

     D. All requirements of law have been fully complied with and all other
acts and things necessary to make this Omnibus Amendment a legal, valid and
binding instrument according to its terms for the purposes herein expressed
have been done or performed.

     Now, therefore, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this Omnibus Amendment set forth in Section 3
hereof, and in consideration of good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

Agreement

Section 1. Amendment to the Lease.

     Section 1.1. Section 22.5. Section 22.5 of the Lease shall be and is
hereby amended and restated in its entirety to read as follows:

 

 

LSI Logic Corporation

(Lease A)

     “Section 22.5. Amendments; 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. Subject to the
following paragraph, no variation, modification,
amendment or waiver of this Lease shall be valid
unless in writing and signed by Agent and Lessee.

     Notwithstanding anything contained herein or in
any other Operative Document, so long as no Lease
Event of Default exists at the time of execution, no
amendment, modification or waiver of this Lease or any
other Operative Document (other than any Control
Agreement or the applicable sections of the Cash
Collateral Agreement or the Lease which relate solely
to such Control Agreement) shall be effective even
after execution by the applicable parties to such
amendment, modification or waiver unless and until
Lessee shall have delivered to Agent an identical
amendment, modification or waiver to Lease B or the
corresponding Operative Documents (other than any
Control Agreement or the applicable sections of the
Cash Collateral Agreement or the Lease which relate
solely to such Control Agreement) (as such terms are
defined in Lease B), as applicable, in each case
executed by the applicable parties.

     Notwithstanding the foregoing, nothing contained
herein shall be construed to require the consent of
Lessee to any amendment, modification or waiver of any
Operative Document unless such consent of Lessee is
expressly required by the terms of such Operative
Document.”

Section 2. Amendments to the Lessor Assignment Agreement.

     Section 2.1. Section 3.1. Section 3.1 of the Lessor Assignment Agreement
shall be and is hereby amended and restated in its entirety to read as follows:

     “Section 3.1. Sole Administration by Agent. (a)
The parties hereto agree that the Agent will
administer the assignments and transactions
contemplated hereby in accordance with the agency
provisions of Article XX of the Lease. Each Assignee
hereby agrees to and shall have the benefit of such
provisions and
hereby joins in the appointment of Wells Fargo Bank
Northwest, National Association, as Agent.

-2-

 

LSI Logic Corporation

(Lease A)

     (b) The parties hereto also agree that the term
“Lessor” as used in Article XX of the Lease (except
for Section 20.3 of the Lease (other than the second
and fifth sentence of such Section 20.3 of the Lease))
shall mean each Assignee and Seller and that the term
“Lessor” as used in Section 20.3 of the Lease (other
than the second and fifth sentence of such Section
20.3 of the Lease), Article XII of the Lease and
certain other relevant sections of the Lease shall
have the meaning as further described in Section
3.1(b)2 below. Accordingly:

     1. Agent hereby agrees to promptly deliver to
each Assignee copies of each notice, report,
certificate, document, amendment request, waiver
request and other information that (A) Agent is
required to deliver to Lessor under the Lease or the
other Operative Documents and (B) that Agent receives
from Lessor pursuant to the Lease or the other
Operative Documents.

     2. (i) (A) Any act, right, remedy, approval or
power by Lessor or Agent at the direction of Lessor,
as applicable, under the Lease or the other Operative
Documents in connection with the exercise of remedies
and/or the enforcement of the Operative Documents or
(B) any amendment, modification or waiver of any
provision of the Lease or the other Operative
Documents at any time that a Lease Event of Default
exists, in either case, which requires the consent of
or direction by Lessor or Agent at the direction of
Lessor, as applicable, shall require the consent of or
direction by Assignees and Lessor collectively,
holding more than 50% of the outstanding Lease Balance
and (ii) (A) with respect to any other act, right,
approval or power by Lessor or Agent at the direction
of Lessor, as applicable, under the Lease or the other
Operative Documents or (B) any amendment, modification
or waiver of any provision of the Lease or the other
Operative Documents (other than any Control Agreement
or the applicable sections of the Cash Collateral
Agreement or the Lease which relate solely to such
Control Agreement, in each case which shall be
governed by clause (VI) of the following proviso) at
any time that a Lease Event of Default does not exist,
in either case, which requires the consent of or
direction by Lessor or Agent at the direction of
Lessor, as applicable, shall require the consent of or
direction by Assignees, Lessor, Assignees (as defined
in Lease B)
and Lessor (as defined in Lease B) collectively
holding more than 50% of the sum of (x) the
outstanding Lease Balance plus (y) the outstanding
Lease Balance (as defined in Lease B); provided that

-3-

 

LSI Logic Corporation

(Lease A)

(I) any act, right, remedy, approval or power by
Lessor or Agent at the direction of Lessor, as
applicable, under the Lease or the other Operative
Documents or any amendment, modification or waiver
thereof purporting to (i) release any Item of
Equipment or other Lessee Collateral (other than any
Cash Collateral, the release of the lien in which
shall be governed by Sections 3 and 7 of the Control
Agreements) from the Liens created by the Operative
Documents (except as expressly provided in the Lease),
(ii) amend, modify or waive (A) clause (i)(A) or
clause (i)(B) of this Section 3.1(b)2 or (B) clause
(I), (II), (III), (IV), (V) or (VI) of this proviso,
(iii) amend, modify or waive Section 18.3(a) of the
Lease or any defined term used in Section 18.3(a) of
the Lease in a manner that makes Section 18.3(a) of
the Lease less restrictive to Lessee, or (iv) amend,
modify or waive Section 5.1 of the Lease, which
requires the consent of or direction by the Lessor or
Agent shall require the consent of or direction by
each Assignee and Lessor, (II) any act, right, remedy,
approval or power by Lessor or Agent at the direction
of Lessor, as applicable, under the Lease or the other
Operative Documents or any amendment, modification or
waiver thereof relating, in each case, to Section 8.3
or 8.6 of the Lease, or waiving any Lease Event of
Default under the Lease after the Sale Option has been
exercised, which requires the consent of or direction
by the Lessor or Agent at the direction of Lessor, as
applicable, shall require the consent of or direction
by Assignees holding more than 50% of the sum of (x)
the outstanding Series A Lease Balance plus (y) the
outstanding Series B Lease Balance and the consent of
or direction by Lessor, (III) any act, right, remedy,
approval or power by Lessor or Agent, at the direction
of Lessor, as applicable, under the Lease or the other
Operative Documents or any amendment, modification or,
waiver thereof (i) relating to the Sale Option
provisions contained in Article XV of the Lease (other
than the right to receive the Sale Recourse Amount or
any modification of Lessee’s obligation with respect
to the Sale Recourse Amount) or Section 11.7 of the
Lease or (ii) purporting to amend the Lease or any
other Operative Document in connection with an
assignment by Lessor of its interests and obligations
under the Operative Documents pursuant to Section
19.1(a)(ii) of the Lease, if such amendment modifies
or adds representations and warranties, covenants,
events of default or other provisions to the Operative
Documents that are more restrictive to Lessee or more
favorable to the Assignees than the provisions of the
Operative Documents as of the Delivery Date, which
requires the consent of or direction by Lessor or by
Agent, at the direction of Lessor, shall,

-4-

 

LSI Logic Corporation

(Lease A)

in each
case, require the consent of or direction by Lessor
only, (IV) any act, right, remedy, approval or power
by Lessor or Agent, at the direction of Lessor, under
the Lease or any other Operative Document or any
amendment, modification or waiver thereof relating to
the provisions regarding the sale or possession of, or
enforcement of the lien on, the Equipment in
connection with the enforcement of remedies pursuant
to Section 12.2 or Section 12.3 of the Lease which
requires the consent of or direction by Lessor or
Agent, at the direction of Lessor, as applicable,
shall require the consent of or direction by the
Series B Assignees holding more than 50% of the
outstanding Series B Lease Balance, (V) any act,
right, remedy, approval or power by Lessor or Agent,
at the direction of Lessor, as applicable, under the
Lease or the other Operative Documents or any
amendment, modification or, waiver thereof waiving a
Payment Default with respect to a Series or modifying
the definition (including the definition of any
defined term used in any such definition), or the
method of calculation of any payment of Basic Rent
with respect to a Series, Series A Lease Balance,
Series B Lease Balance, Series C Lease Balance or
Lessor’s Interest Related Lease Balance with respect
to a Series (as defined below), Accrual Rent with
respect to a Series or any other amount payable
hereunder with respect to a Series, which requires the
consent of or direction by Lessor or Agent, at the
direction of Lessor, shall require the consent of each
Assignee of such Series and, with respect to interests
in the Series B Lease Balance, the Series C Lease
Balance or the Lessor’s Interest Related Lease
Balance, the consent of Lessor (“Series” shall mean,
as the context may require, the rights and obligations
with respect to (a) the Series A Lease Balance, (b)
the Series B Lease Balance, (c) the Series C Lease
Balance or (d) the Lessor’s Interest Related Lease
Balance), (VI) any act, right, remedy, approval or
power by Lessor or Agent, at the direction of Lessor,
under any Control Agreement or the Cash Collateral
Agreement, or any amendment, modification or waiver of
the Control Agreement or the applicable sections of
the Cash Collateral Agreement or the Lease which
relate solely to such Control Agreement or to the Cash
Collateral which is the subject of such Control
Agreement, in each case which requires the consent of
or direction by Lessor or Agent, at the direction of
Lessor, shall require the consent of or direction
solely by the Assignee or Lessor for whose ultimate
benefit the Securities
Intermediary party to such Control Agreement holds the
Cash Collateral in the Cash Collateral Account which
is the subject of such Control Agreement, and (VII)
any amendment or

-5-

 

LSI Logic Corporation

(Lease A)

modification purporting to modify (i)
this clause (VII), (ii) clause (ii)(A) or clause
(ii)(B) of this Section 3.1(b)2 or (iii) Section 22.5
of the Lease, shall require the consent of or
direction by each Assignee, Lessor, each Assignee (as
defined in Lease B) and Lessor (as defined in Lease
B).

     3. Except as set forth in the third paragraph of
clause (c) below, Lessor shall have no responsibility,
obligation or liability whatsoever with respect to the
administration of the assignments or the transactions
contemplated hereby (including but not limited to any
item listed in this Section 3.1(b)).

     (c) Without limiting the rights of any
Assignee(s) under Section 3.1(b) to direct the Agent
to exercise any act, right, remedy, approval or power
under the Operative Documents, in the event the Lessor
is permitted by the terms of the Lease to exercise any
remedy or take any remedial action under the Operative
Documents, Lessor may and, in the event the Lessor
and/or Assignees holding the requisite percentage of
the Lease Balance necessary to exercise a remedy under
Section 3.1(b) above instruct Lessor to appoint the
Agent to exercise such remedy, Lessor shall appoint
Agent as its agent for purposes of exercising such
remedy or taking such remedial action (and Agent
hereby agrees to accept such appointment) whereupon
Lessor shall have no liability or responsibility
whatsoever with respect thereto, except as otherwise
expressly set forth in the Operative Documents.

Upon the occurrence of a Lease Event of Default and
provided that the requisite percentage of Lessor
and/or Assignees required to give any approval or
direction to the Agent with respect to the
acceleration of the Lease Balance has not been
obtained, the Agent shall, at the direction of Lessor
or any Assignee, request (the “Acceleration Request”)
that the Lessor (if applicable) and each Assignee
elect whether or not to accelerate the Lease Balance
pursuant to Section 12.2(a)(i) of the Lease; provided
that if (i) the Lease Event of Default (A) is of the
type described in Section 12.1(a) or 12.1(c) of the
Lease, (B) has existed for at least sixty (60) days
and (C) an Acceleration Request has been delivered by
Agent on or after such sixty (60) day period and (ii)
Lessor or an Assignee fails to notify the Agent in
writing of whether or not
Lessor or such Assignee has elected to accelerate the
Lease Balance within two weeks following Lessor’s or
such Assignee’s receipt of the Acceleration Request,
then the Lease Balance held by

-6-

 

LSI Logic Corporation

(Lease A)

Lessor or such
Assignee, as applicable, shall be deemed to be not
outstanding for the purpose of determining whether the
requisite percentage of the Lessor and Assignees have
given any approval or directed the taking of any
action by Agent with respect to acceleration of the
Lease Balance pursuant to Section 12.2(a)(i) of the
Lease.

Lessor shall be indemnified and held harmless by
Assignees pursuant to the provisions of Section 4.5
hereof and shall not be liable for any such action
taken or omitted to be taken by it under or in
connection with this Agreement or the other Operative
Documents except for (i) its own gross negligence,
(ii) its willful misconduct, (iii) its negligence in
the handling of funds or (iv) its breach of any of the
Operative Documents. Additionally, Lessor shall not
be responsible in any manner to the Assignees for any
recital, statement, representation or warranty made by
the Lessee, or any officer thereof, contained in any
Operative Document, or in any certificate, report,
statement or other document referred to or provided
for in, or received by Lessor under or in connection
with any Operative Document, or the validity,
effectiveness, genuineness, enforceability or
sufficiency of any Operative Document, or for any
failure of the Lessee or any other party to any
Operative Document to perform its obligations
thereunder. Lessor shall not be under any obligation
to the Assignees to ascertain or to inquire as to the
observance or performance of any of the agreements
contained in, or conditions of, any Operative
Document, or to inspect the properties, books or
records of the Lessee.

Lessor shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex or telephone message,
statement or other document or conversation reasonably
believed by it to be genuine and correct and to have
been signed, sent or made by the proper person or
persons, and upon advice and statements of legal
counsel (including counsels to the Lessee),
independent accountants and other experts selected by
Lessor or the Lessee.

     (d) Agent hereby represents and warrants to
Assignees that the representations and warranties of
Agent set forth in Section 17.3 of the Lease are true
and correct in all material respects.

-7-

 

LSI Logic Corporation

(Lease A)

     (e) In the event that LSI and/or any Affiliate of
LSI (each, an “LSI Assignee”) is or becomes an
Assignee hereunder, no LSI Assignee shall have any
rights whatsoever as an Assignee with respect to any
amendments, modifications, waivers, approvals or
consents, or directions with respect to the taking of
any action, in each case, hereunder or under any other
Operative Document and for the purpose of determining
whether the requisite percentage of Assignees approved
or consented to any amendment, modification, waiver or
consent to be given under any Operative Document, or
have given any other approval or directed the taking
of any action provided herein or therein to be taken
upon the direction of all or a specified percentage of
the Assignees, the principal amount of the Lease
Balance directly or indirectly held by any LSI
Assignee shall be deemed to be not outstanding.

     (f) Each Series A Assignee hereby acknowledges
and agrees that in the event that such Series A
Assignee 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 A Cash Collateral held by or benefiting such
Series A Assignee becomes a part of such Series A
Assignee’s bankruptcy estate, then (i) such Series A
Assignee shall be deemed to have set off and applied
such Series A Cash Collateral against any amounts due
with respect to the portion of the Series A Lease
Balance secured by such Series A Cash Collateral and
(ii) the Lessee shall be deemed to have paid in full
any and all Rent due with respect to the Series A
Lease Balance secured by such Series A Cash
Collateral, in each case in an amount not to exceed
such Series A Cash Collateral.”

     Section 2.2. Section 6.2. Section 6.2 of the Lessor Assignment Agreement
shall be and is hereby amended and restated in its entirety to read as follows:

     “Section 6.2. Amendments and Waivers. No
amendment or waiver of any provision of this
Agreement, and no consent with respect to any
departure by any party from the terms hereof, shall be
effective unless the same shall be in writing and
signed by Agent, Lessor and each Assignee affected
thereby (and, with
respect to (i) Section 3.1(b) and (ii) the last
sentence of 4.4(b), the Lessee) and then any such
waiver or consent shall be effective only in the
specific instance and for the specific purpose for
which given.”

-8-

 

LSI Logic Corporation

(Lease A)

Section 3. Conditions to Effectiveness.

     This Omnibus Amendment shall become effective on September 16, 2004 (the
“Effective Date”) upon the satisfaction of the following conditions precedent:

     (a) This Omnibus Amendment shall have been duly authorized, executed
and delivered by each of the parties hereto;

     (b) After giving effect to this Omnibus Amendment, 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;

     (c) Lessee shall have paid the reasonable fees and expenses of
Chapman and Cutler LLP and Lessor’s special counsel, in each case in
connection with the negotiation, preparation, approval, execution and
delivery of this Omnibus Amendment; and

     (d) The representations and warranties of the Lessee set forth
herein shall be true and correct.

Section 4. Representations and Warranties.

     Section 4.1. Representations and Warranties. Lessee hereby represents and
warrants to Lessor, Agent and the Assignees that, as of the date hereof:

     (a) No Lease Default or Lease Event of Default has occurred and is
continuing, or will occur as a result of, or after giving effect to, this
Omnibus Amendment;

     (b) After giving effect to this Omnibus Amendment, the
representations and warranties of Lessee contained in Section 17.1 of the
Lease are true and correct on and as of the date hereof, except to the
extent such representations and warranties relate to an earlier date, in
which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date. For
purposes of the foregoing representation, the term “Operative Documents”
as used in Section 17.1 of the Lease shall include this Omnibus Amendment
and the other Operative Documents as amended hereby;

     (c) Each of the Operative Documents is in full force and effect; and

     (d) The provisions set forth in Sections 1 and 2 hereof are set
forth, mutatis mutandis, in the Omnibus Amendment (Lease B), dated as of
the date hereof, among LSI, as lessee, Wells Fargo, as agent and the
financial institutions party thereto.

-9-

 

LSI Logic Corporation

(Lease A)

     Section 4.2. Reaffirmation of Lien and Security Interest of Lessee.
Lessee hereby reaffirms its grant to Lessor of a lien on and security interest
in the Lessee Collateral as set forth in the Lease and the Cash Collateral
Agreement, as applicable, and in the case of the Lease, as amended pursuant
hereto.

Section 5. Miscellaneous.

     Section 5.1. Construction. This Omnibus Amendment shall be construed in
connection with and as part of the Operative Documents, and except as modified
and expressly amended by this Omnibus Amendment, all terms, conditions and
covenants contained in the Operative Documents are hereby ratified and shall be
and remain in full force and effect.

     Section 5.2. Headings and Table of Contents. The headings of the Sections
of this Omnibus Amendment are inserted for purposes of convenience only and
shall not be construed to affect the meaning or construction of any of the
provisions hereof and any reference to numbered Sections, unless otherwise
indicated, are to Sections of this Omnibus Amendment.

     Section 5.3. References. Any and all notices, requests, certificates and
other instruments executed and delivered after the execution and delivery of
this Omnibus Amendment may refer to the Lease, the Lessor Assignment Agreement
and the other Operative Documents without making specific reference to this
Omnibus Amendment but nevertheless all such references shall be deemed to
include this Omnibus Amendment unless the context otherwise requires.

     Section 5.4. Counterparts. This Omnibus Amendment may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one amendment.

     Section 5.5. Governing Law. This Omnibus Amendment shall be governed by,
and construed in accordance with, the internal laws of the State of California,
without regard to the conflict of laws principles of such State, except as to
matters relating to the Lessor Assignment Agreement, which shall be governed
by, and construed in accordance with, the internal laws of the State of New
York, without regard to conflict of laws principles of such State.

[Signature Pages Follow]

-10-

 

LSI Logic Corporation

(Lease A)

     In Witness Whereof, each of the undersigned have caused this Omnibus
Amendment to be duly executed and delivered by their properly and duly
authorized officers as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	LSI Logic Corporation
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Anita Prasad

	

	 	 	 	Name:
	 	Anita Prasad

	

	 	 	 	Title:
	 	Vice President, Treasury and Tax

	 	 	 	 	 	 	 
	 	 	Wells
Fargo Bank Northwest, National
Association, not in its
      individual
capacity, but solely as Agent

	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Val T. Orton

	

	 	 	 	Name:
	 	Val T. Orton

	

	 	 	 	Title:
	 	Vice President

	 	 	 	 	 	 	 
	 	 	BTM Capital Corporation, as Lessor

	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Joseph W. O’Brien

	

	 	 	 	Name:
	 	Joseph W. O’Brien

	

	 	 	 	Title:
	 	Senior Vice President

	 	 	 	 	 	 	 
	 	 	RBS Lombard, Inc., as Series A
Assignee

	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Clifford A. Lehman

	

	 	 	 	Name:
	 	Clifford A. Lehman

	

	 	 	 	Title:
	 	Senior Vice President

 

 

LSI Logic Corporation

(Lease A)

	 	 	 	 	 	 	 
	 	 	RBS Lombard, Inc., as Series B Assignee
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Clifford A. Lehman

	

	 	 	 	Name:
	 	Clifford A. Lehman

	

	 	 	 	Title:
	 	Senior Vice Presidentexv10w6

 

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.

 

 

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	 

 

 

	 	 	 	 	 	 	 
	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	 

-ii-

 

	 	 	 	 	 	 	 
	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	 

-iii-

 

	 	 	 	 	 	 	 
	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	 

-iv-

 

	 	 	 
	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

-v-

 

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;

 

 

     (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.

-2-

 

     “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.

-3-

 

     “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

-4-

 

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.

-5-

 

     “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).

-6-

 

     “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

-7-

 

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

-8-

 

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.

-9-

 

     “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);

-10-

 

     (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);

-11-

 

     (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

-12-

 

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

-13-

 

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

-14-

 

     (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.

-15-

 

     “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

-16-

 

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

-17-

 

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;

-18-

 

     (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

-19-

 

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

-20-

 

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

-21-

 

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.

-22-

 

     “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.

-23-

 

     “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.

-24-

 

     “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.

-25-

 

     “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).

-26-

 

     “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.

-27-

 

     “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.

-28-

 

     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;

-29-

 

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.

-30-

 

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

-31-

 

     (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.

-32-

 

     (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

-33-

 

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

-34-

 

     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

-35-

 

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;

-36-

 

(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.

-37-

 

     (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

-38-

 

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;

-39-

 

     (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

-40-

 

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.

-41-

 

     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

-42-

 

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

-43-

 

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;

-44-

 

     (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:

-45-

 

     (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

-46-

 

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

-47-

 

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;

-48-

 

     (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.

-49-

 

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

-50-

 

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

-51-

 

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

-52-

 

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

-53-

 

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

-54-

 

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

-55-

 

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

-56-

 

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

-57-

 

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.

-58-

 

     (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

-59-

 

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

-60-

 

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

-61-

 

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

-62-

 

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

-63-

 

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

-64-

 

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

-65-

 

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.

-66-

 

     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

-67-

 

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

-68-

 

     (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

-69-

 

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

-70-

 

$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;

-71-

 

     (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

-72-

 

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

-73-

 

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.

-74-

 

     (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,

-75-

 

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

-76-

 

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.

-77-

 

     (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

-78-

 

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.

-79-

 

     (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

-80-

 

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

-81-

 

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

-82-

 

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.

-83-

 

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

-84-

 

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

-85-

 

     (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;

-86-

 

     (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.

-87-

 

     (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

-88-

 

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;

-89-

 

     (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.

-90-

 

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:

-91-

 

     (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).

-92-

 

     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

-93-

 

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

-94-

 

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.

-95-

 

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

-96-

 

(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

-97-

 

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.

-98-

 

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.

-99-

 

     (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.

-100-

 

     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

-101-

 

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.

-102-

 

     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.

-103-

 

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.

-104-

 

     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

-105-

 

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

-106-

 

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.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-107-

 

     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	 
	 

 

 

	 	 	 	 	 
	 	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	 
	 

 

 

	 	 	 	 	 
	 	BANK OF THE WEST, as Lessor

 	 
	 	By:  	 /s/ David W. Maurer	 
	  	 
	 	 	Name:  	 David W. Maurer	 
	 	 	Title:  	 Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]