PARTICIPATION AGREEMENT
among
TRIQUINT SEMICONDUCTOR, INC.,
WOLVERINE LEASING CORP.,
MATISSE HOLDING COMPANY
and
UNITED STATES NATIONAL BANK OF OREGON
May 17, 1996
Headquarters and Manufacturing Facility
Dawson Creek Park
Hillsboro, Oregon
TABLE OF CONTENTS
SECTION 1. DEFINITIONS; INTERPRETATION........................................2
SECTION 2. CLOSING DATE.......................................................2
SECTION 3. FUNDING COMMITMENTS; DISBURSEMENT OF ADVANCES......................2
SECTION 3.1. WOLVERINE COMMITMENT............................................2
SECTION 3.2. Matisse COMMITMENT..............................................2
SECTION 3.3. BANK'S COMMITMENT...............................................3
SECTION 3.4. PROCEDURES FOR ADVANCES, LOAN ADVANCES, AND DESIGNATION OF
INTEREST RATES................................................................4
SECTION 3.5. ALLOCATION OF ADVANCES AMONG THE COMMITMENTS....................8
SECTION 3.6. INTEREST RATES AND PAYMENT DATES................................8
SECTION 3.7. COMPUTATION OF INTEREST........................................10
SECTION 3.8. PAYMENTS.......................................................11
SECTION 3.9. [Reserved......................................................11
SECTION 3.10. BASIC RENT....................................................11
SECTION 3.11. PURCHASE-PAYMENTS BY LESSEE...................................12
SECTION 3.12. RESIDUAL VALUE GUARANTEE AMOUNT PAYMENT BY LESSEE.............13
SECTION 3.13. Proceeds of Pledged Collateral................................13
SECTION 3.14 SUPPLEMENTAL RENT.............................................13
SECTION 3.15. EXCEPTED PAYMENTS.............................................14
SECTION 3.16. DISTRIBUTION OF PAYMENTS AFTER LEASE EVENT OF DEFAULT.........14
SECTION 3.17. OTHER PAYMENTS................................................15
SECTION 3.18. CASUALTY AND CONDEMNATION PROCEEDS............................15
SECTION 3.19. ORDER OF APPLICATION..........................................16
SECTION 4. FEES..............................................................16
SECTION 4.1. UPFRONT FEE....................................................16
SECTION 4.2. Administrative Fee.............................................16
SECTION 5. CERTAIN INTENTIONS OF THE PARTIES.................................17
SECTION 5.1. Nature OF TRANSACTION..........................................17
SECTION 5.2. AMOUNTS DUE UNDER LEASE........................................18
SECTION 6. CONDITIONS PRECEDENT TO LOAN AND LEASE ADVANCES...................19
SECTION 6.1. CONDITIONS PRECEDENT -- INITIAL ADVANCE........................19
SECTION 6.2. CONDITIONS PRECEDENT -- SUBSEQUENT ADVANCES....................23
SECTION 6.3. Further Conditions Precedent...................................25
SECTION 7. COMPLETION DATE CONDITIONS........................................26
SECTION 7.1. CONDITIONS......................................................26
SECTION 8. REPRESENTATIONS...................................................27
SECTION 8.1. Representations of Wolverine...................................27
SECTION 8.2. Representations of Matisse.....................................29
SECTION 8.3. Representations of the Lessee..................................32
SECTION 8.4. Representations of the Lessee With Respect to the Property on
each Funding Date............................................................36
SECTION 9. PAYMENT OF CERTAIN EXPENSES.......................................39
SECTION 9.1. Transaction Expenses...........................................39
SECTION 9.2. Brokers' Fees and Stamp Taxes..................................40
SECTION 9.3. Obligations....................................................40
SECTION 10. OTHER COVENANTS AND AGREEMENTS...................................41
SECTION 10.1. Covenants of the Lessee.......................................41
SECTION 10.2. Cooperation with the Lessee...................................45
SECTION 10.3. Covenants of Wolverine........................................46
SECTION 10.4. COVENANTS OF MATISSE..........................................49
SECTION 10.5 BANK'S COVENANTS...............................................52
SECTION 11. LOAN EVENTS OF DEFAULT AND REMEDIES..............................52
SECTION 11.1. LOAN EVENTS OF DEFAULT........................................52
SECTION 11.2 Remedies.......................................................54
SECTION 12. ARBITRATION......................................................55
[SECTION 12.1. Arbitration].................................................55
SECTION 13. INDEMNIFICATION..................................................56
SECTION 13.1. General Indemnification.......................................56
SECTION 13.2. End of Term Indemnity.........................................60
SECTION 13.3. Environmental Indemnity.......................................61
SECTION 13.4. Proceedings in Respect of Claims..............................62
SECTION 13.5. General Impositions Indemnity.................................64
SECTION 13.6. FUNDING LOSSES................................................70
SECTION 13.7. [RESERVED]....................................................71
SECTION 13.8. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR....71
SECTION 13.9. ILLEGALITY....................................................71
SECTION 13.10. INCREASED COST AND REDUCED RETURN............................72
SECTION 13.11. INDEMNITY PAYMENTS IN ADDITION TO RESIDUAL VALUE GUARANTEE
AMOUNT; SURVIVAL.............................................................73
SECTION 14 MISCELLANEOUS.....................................................74
SECTION 14.1. SURVIVAL OF AGREEMENTS........................................74
SECTION 14.2. NO BROKER, ETC................................................74
SECTION 14.3. NOTICES.......................................................74
SECTION 14.4. COUNTERPARTS..................................................75
SECTION 14.5. AMENDMENTS....................................................75
SECTION 14.6. HEADINGS, ETC.................................................75
SECTION 14.7. PARTIES IN INTEREST...........................................75
SECTION 14.8. GOVERNING LAW.................................................75
SECTION 14.9. SEVERABILITY..................................................75
SECTION 14.10. LIMITATIONS OF WOLVERINE AND MATISSE'S LIABILITY.............76
SECTION 14.11. FURTHER ASSURANCES...........................................76
SECTION 14.12. SUBMISSION TO JURISDICTION...................................77
SECTION 14.13. WAIVER OF JURY TRIAL.........................................77
SECTION 14.14. USURY SAVINGS CLAUSE.........................................77
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of May 17, 1996 (this "PARTICIPATION
AGREEMENT"), is entered into by and among TRIQUINT SEMICONDUCTOR, INC., a
California corporation, as Lessee (together with its permitted successors and
assigns, the "LESSEE"); WOLVERINE LEASING CORP., a Texas corporation (together
with its permitted successors and assigns, "WOLVERINE"), MATISSE HOLDING
COMPANY, a Texas corporation (together with its permitted successors and
assigns, "Matisse") and UNITED STATES NATIONAL BANK OF OREGON (together with its
successors and assigns, the "BANK").
PRELIMINARY STATEMENTS
A. The Lessee has requested Wolverine, Matisse and the Bank to provide to
the Lessee a lease facility pursuant to which Wolverine would (a) lease certain
real property owned by Wolverine and more particularly described in EXHIBIT A
attached hereto (the "Land") to the Lessee, and (b) using proceeds of loans from
Bank and Matisse and certain equity funds provided by Matisse, make advances to
cover the costs of certain improvements to such real property and to pay certain
related financing costs, transaction expenses and other costs and expenses.
B. Wolverine and Matisse have requested the Bank to provide them certain
credit facilities pursuant to which the amounts to be advanced to the Lessee
could be funded.
C. Wolverine has requested Matisse to lend to Wolverine and make an
equity investment in Wolverine using certain of the funds advanced to Matisse by
Bank.
D. The Lessee, Wolverine, Matisse and the Bank are willing to enter into
such, lease and credit facilities upon the terms and subject to the conditions
set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Participation Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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SECTION 1.
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in APPENDIX 1 hereto for
all purposes hereof; and the rules of interpretation set forth in APPENDIX 1
hereto shall apply to this Participation Agreement.
SECTION 2.
CLOSING DATE
The Closing Date shall occur on the earliest date (on or before June 20,
1996) on which all the conditions precedent thereto set forth in SECTIONS 6.1
and 6.3 hereof shall have been satisfied or waived by the applicable parties as
set forth therein.
SECTION 3.
FUNDING COMMITMENTS; DISBURSEMENT OF ADVANCES
SECTION 3.1. WOLVERINE COMMITMENT. Subject to the conditions and terms
hereof, Wolverine shall take the following actions at the written request of the
Lessee from time to time during the Commitment Period:
(a) at the request of the Lessee from time to time during the
Commitment Period, make or cause to be made Lease Advances (out of funds
provided by the Bank and Matisse in an amount not to exceed the sum of the
Wolverine/Bank Commitment, the Wolverine/Matisse Commitment and the Matisse
Equity Commitment) for the purpose of financing Property Costs; and
(b) lease the Property as lessor to the Lessee under the Lease.
SECTION 3.2. MATISSE COMMITMENT. Subject to the terms and conditions
hereof, Matisse agrees to make or cause to be made for the account of Wolverine
during the Commitment Period, from Loan Advances made for the account of Matisse
out of the proceeds of the Matisse/Bank Loan, advances of the Wolverine/Matisse
Loan in an amount not to exceed the Wolverine/Matisse Commitment and equity
contributions in an amount not to exceed the Matisse Equity Commitment for the
purpose of funding Lease Advances to be made by Wolverine pursuant to SECTION
3.1 above, by making or causing to be made available for the account of
Wolverine on each Funding Date an amount in immediately available funds equal to
the amount of the Loan Advance under the Matisse/Bank Loan being funded on such
Funding Date.
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SECTION 3.3. BANK'S COMMITMENTS.
(a) WOLVERINE/BANK COMMITMENT. Bank agrees to make during the Commitment
Period Loan Advances of the Wolverine/Bank Loan for the account of Wolverine in
an amount not to exceed the Wolverine/Bank Commitment, for the purpose of
funding Lease Advances to be made by Wolverine pursuant to SECTION 3.1 above by
making available for the account of Wolverine on each Funding Date an amount in
immediately available funds equal to the Wolverine/Bank Commitment Percentage of
the amount of the Lease Advance being funded on such Funding Date.
(b) MATISSE/BANK COMMITMENT. Subject to the terms and conditions hereof,
Bank further agrees to make during the Commitment Period Loan Advances of the
Matisse/Bank Loan for the account of Matisse in an amount not to exceed the
Matisse/Bank Commitment, for the purpose of funding Advances to be made by
Matisse to Wolverine under SECTION 3.2 above, by making available for the
account of Matisse on each Funding Date an amount in immediately available funds
equal to the Matisse/Bank Commitment Percentage of the amount of the Lease
Advance being funded on such Funding Date.
(c) APPLICATION AS LEASE ADVANCES; LEASE ADVANCES ALLOCABLE TO MATISSE.
The Loan Advances by the Bank under the Wolverine/Bank Loan and the Matisse/Bank
Loan shall be made by Bank directly to Lessee as Lease Advances for the account
of Wolverine and Matisse, respectively, and all Lease Advances made for the
account of Matisse from proceeds of Loan Advances under the Matisse/Bank Loan
shall, as between Wolverine and Matisse, be deemed, to the extent of a
percentage equal to the sum of the Wolverine/Matisse Commitment Percentage and
Matisse Equity Percentage thereof, to be made by Matisse for the account of
Wolverine.
(d) ADVANCES DIRECTLY TO LESSEE. All Loan Advances shall be funded
directly as Lease Advances to or at the direction of Lessee in accordance with
the terms set forth herein (except for Interest Payment Advances, which shall be
funded in accordance with SECTION 3.6(d) below), and neither Wolverine nor
Matisse shall be entitled to receive the proceeds of Loan Advances directly.
Wolverine and Matisse hereby consent to the disbursement of the Wolverine/Bank
Loan and the Matisse/Bank Loan directly to the Lessee and for their accounts and
further consent to and agree to be bound by all interest rate elections made by
the Lessee pursuant hereto. If under any circumstances whatsoever, either
Wolverine or Matisse shall ever come into possession of any proceeds of the
Wolverine/Bank Loan or the Matisse/Bank Loan, it shall immediately return those
funds to the Bank for disbursement to the Lessee in accordance herewith.
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SECTION 3.4. PROCEDURES FOR LEASE ADVANCES, LOAN ADVANCES, AND DESIGNATION
OF INTEREST RATES.
(a) FUNDING REQUESTS. With respect to each funding of a Lease
Advance, the Lessee shall deliver to Wolverine and the Bank a Funding
Request substantially in the form of EXHIBIT B (a "FUNDING REQUEST")
specifying the amount and purpose of the Lease Advance requested, the payee
of such Lease Advance and the information required in SECTION 3.4(b) below.
The Lessee shall not request more than two (2) Funding Dates during any
calendar month. Each Lease Advance shall be in a minimum amount equal to
$500,000. Subject to the satisfaction or waiver of the conditions
precedent to such Lease Advance set forth in SECTION 6, the Bank shall
credit the Lessee's demand deposit account with the Bank with an amount
equal to the amount of the Lease Advance so requested, not later than 12:00
noon, Portland, Oregon time, on the applicable Funding Date. Upon the
Lessee's receipt of the funds provided by the Bank with respect to a Lease
Advance, the Lessee shall use the Lease Advance provided to pay (or retain
for reimbursement of) the costs described in the Funding Request.
(b) DESIGNATION OF INTEREST RATE IN CONNECTION WITH FUNDING REQUESTS.
(i) Lessee shall have the right to elect that a Lease Advance be
funded through a Loan Advance made as a Eurodollar Advance or a
Alternate Base Rate Advance; PROVIDED that, unless the Bank shall
otherwise agree in writing, Lessee may not elect that a Lease Advance
be funded through a Loan Advance made as a Eurodollar Advance if
(A) after giving effect to such Loan Advance there shall be more than
three (3) different Eurodollar Advances outstanding at any time, or
(B) the designated Interest Period or Rental Period for any requested
Eurodollar Advance terminates after the Maturity Date.
(ii) TIMING OF NOTICE. Each Funding Request shall be submitted
to and received by Bank prior to 12:00 noon (Portland, Oregon time)
(A) at least two (2) Business Days prior to the specified Funding
Date, in the case of Eurodollar Advances; and (B) at least one (1)
Business Day prior to the specified Funding Date, in the case of
Alternate Base Rate Advances.
(iii) CONTENTS OF NOTICE. In addition to the information
required in SECTION 3.4(a), each Funding Request shall set forth the
following information with respect to the Loan or Lease Advance
subject thereto:
(A) a single, specific Funding Date, which shall be a
Business Day;
4
(B) a single, exact amount for the Loan or Lease Advance,
which shall be in an aggregate minimum principal amount of
$500,000;
(C) if the Loan or Lease Advance is to be made as a
Eurodollar Advance, the applicable Interest Period or Rental
Period. If a Funding Request shall fail to specify the
applicable Interest Period or Rental Period for any Eurodollar
Advance requested, such Loan or Lease Advance will be made in
accordance with SECTION 3.4(b)(v).
(iv) FREQUENCY OF BORROWINGS. No more than two (2) Funding
Requests may be given in any calendar month.
(v) AUTOMATIC EURODOLLAR ADVANCE. Subject to SECTION
3.4(b)(i)-(iv), if in connection with any Funding Request, the Lessee
shall fail to specify the applicable Interest Period or Rental Period
for any Eurodollar Advance requested, such Loan or Lease Advance will
be made as a Eurodollar Advance for an Interest Period or Rental
Period equal to one month; PROVIDED, HOWEVER, that the Bank reserves
the right not to have such Loan or Lease Advance constitute a one
month Eurodollar Advance (and instead to make such Loan or Lease
Advance as an Alternate Base Rate Advance) if (A) a Lease Event of
Default shall exist, (B) after giving effect to the such Loan or Lease
Advance there shall be (i) more than three (3) different Eurodollar
Advances outstanding or (ii) the aggregate outstanding principal
amount of all Eurodollar Advances having the same Interest or Rental
Period shall have been reduced, by payment, prepayment, or partial
conversion to less than $500,000, (C) the designated Interest Period
or Rental Period terminates after the Maturity Date, or (D) any
representations or warranties of the Lessee contained in or made
pursuant to the Operative Documents, including those contained in
SECTION 8.3, are not true and correct as of the date of the Requested
Lease Advance (as defined in the Funding Request), both before and
after giving effect to such Loan or Lease Advance.
(c) DESIGNATION OF INTEREST RATE IN CONNECTION WITH
CONVERSION/CONTINUATION REQUESTS. Each conversion or continuation of an
outstanding Alternate Base Rate Advance or Eurodollar Advance shall be made
upon the irrevocable written notice delivered to the Bank by Lessee in the
form of a request, substantially in the form of EXHIBIT C (a
"Conversion/Continuation Request"), as follows:
(i) DESIGNATION OF INTEREST RATE. Lessee shall have the right
to make the following elections with respect to the conversion or
continuation of any outstanding Alternate Base Rate Advance or
Eurodollar Advance:
5
(A) to convert, on any Business Day, any Alternate Base
Rate Advance, in a minimum principal amount of $500,000, into a
Eurodollar Advance; or
(B) to convert, on the last day of any Interest or Rental
Period with respect to a Eurodollar Advance (or, on any other day
of any Interest or Rental Period, upon payment of any loss or
expense incurred or sustained by the Bank with respect to the
early termination of such Eurodollar Advance prior to the last
day of the Interest or Rental Period as provided in SECTION
13.6), such Eurodollar Advance into a Alternate Base Rate
Advance; or
(C) to continue, on the last day of any Interest or Rental
Period with respect to a Eurodollar Advance (or, on any other day
of any Interest or Rental Period, upon payment any loss or
expense incurred or sustained by the Bank with respect to the
early termination of such Eurodollar Advance prior to the last
day of the Interest or Rental Period as provided in SECTION
13.6), such Eurodollar Advance (or any part thereof in a minimum
principal amount of $500,000) for a subsequent Interest Period or
Rental Period;
PROVIDED, that unless the Bank shall otherwise agree in writing,
Lessee may not elect to have any outstanding Eurodollar Advance
or Alternate Base Rate Advance (or any portion thereof) continued
as or converted into a Eurodollar Advance if (A) a Lease Event of
Default shall exist, (B) after giving effect to the such
continuation or conversion there shall be more (i) than three (3)
different Eurodollar Advances outstanding or (ii) the aggregate
outstanding principal amount of all Eurodollar Advances having
the same Interest or Rental Period shall have been reduced, by
payment, prepayment, or partial conversion to less than $500,000,
or (C) the designated Interest or Rental Period terminates after
the Maturity Date
(ii) TIMING OF NOTICE. Each Conversion/Continuation Request
shall be submitted to and received by Bank prior to 12:00 noon
(Portland, Oregon time): (A) at least two (2) Business Days prior to
the Pricing Conversion Date of any outstanding Loan Advance or Lease
Advance to be converted into or continued as a Eurodollar Advance; and
(B) at least one (1) Business Day prior to the Pricing Conversion Date
of any outstanding Loan Advance or Lease Advance to be converted into
or continued as a Alternate Base Rate Advance.
(iii) CONTENTS OF NOTICE. The Conversion/Continuation
Request shall set forth the following information with respect to the
Loan or Lease Advance subject thereto:
(A) the Pricing Conversion Date, which shall be a Business
Day;
6
(B) the amount of the Eurodollar Advance or Alternate Base
Rate Advance to be converted or continued;
(C) whether such Loan or Lease Advance is to be converted
into/continued as a Eurodollar Advance or a Alternate Base Rate
Advance; and
(D) if such Loan or Lease Advance (or any portion thereof)
is to be converted into/continued as a Eurodollar Advance, the
applicable Interest Period or Rental Period.
(d) AUTOMATIC CONVERSION - EURODOLLAR ROLLOVER. Subject to SECTION
3.4(e), if the Bank does not receive a timely Conversion/Continuation
Request under SECTION 3.4(c), any outstanding Eurodollar Advance shall
automatically continue for a subsequent Interest Period equal to one month,
without notice to the Bank, effective on the last day of the applicable
Interest Period or Rental Period, provided that as of such date, the Lessee
shall be deemed to have made each of the certifications set forth in the
Conversion/Continuation Request; PROVIDED, HOWEVER, that the Bank reserves
the right not to have any outstanding Eurodollar Advance continued as a
Eurodollar Advance if (A) a Lease Event of Default shall exist, (B) after
giving effect to the such continuation there shall be more (i) than three
(3) different Eurodollar Advances outstanding or (ii) the aggregate
outstanding principal amount of all Eurodollar Advances having the same
Interest or Rental Period shall have been reduced, by payment, prepayment,
or partial conversion to less than $500,000, (C) the designated Interest or
Rental Period terminates after the Maturity Date, or (D) any
representations or warranties of the Lessee contained in or made pursuant
to the Operative Documents, including those contained in SECTION 8.3, is
not true and correct in all material respects as of the Pricing Conversion
Date, both before and after giving effect to the continuation of the
Eurodollar Advance.
(e) AUTOMATIC CONVERSIONS - ALTERNATE BASE RATE. Any outstanding
Eurodollar Advance shall automatically convert to a Alternate Base Rate
Advance, effective on the last day of the applicable Interest Period or
Rental Period, if as of such date:
(i) LEASE EVENT OF DEFAULT. A Lease Event of Default shall
exist;
(ii) FAILURE TO MAINTAIN MINIMUM LOANS. If the aggregate
outstanding principal amount of Eurodollar Advances having the same
Interest or Rental Period shall have been reduced, by payment,
prepayment, or partial conversion to be less than $500,000
(iii) EURODOLLAR ADVANCES. After giving effect to the such
continuation there shall be (i) more than three (3) different
Eurodollar
7
Advances outstanding or (ii) the aggregate outstanding principal
amount of all Eurodollar Advances having the same Interest or Rental
Period shall have been reduced, by payment, prepayment, or partial
conversion to less than $500,000;
(iv) INTEREST PERIOD EXCEEDS MATURITY DATE. The designated
Interest or Rental Period terminates after the Maturity Date; or
(v) REPRESENTATIONS AND WARRANTIES. Any representations or
warranties of the Lessee contained in or made pursuant to the
Operative Documents, including those contained in SECTION 8.3, are not
true and correct as of the Pricing Conversion Date, both before and
after giving effect to such conversion.
SECTION 3.5. ALLOCATION OF ADVANCES AMONG THE COMMITMENTS. The amount of
each Lease Advance funded by the Bank through Loan Advances pursuant to SECTION
3.4 shall irrevocably and unconditionally be deemed, as of the time such Loan
Advance is credited to the account of the Lessee, to be, and shall for all
purposes of the Operative Documents be: (i) a Loan Advance of the proceeds of
the Wolverine/Bank Loan by Bank for the account of Wolverine, in an amount equal
to the Wolverine/Bank Commitment Percentage of the amount of such Lease Advance,
which advance shall be evidenced by the Wolverine/Bank Note and shall reduce the
Available Wolverine/Bank Commitment; and (ii) a Loan Advance of the proceeds of
the Matisse/Bank Loan by Bank for the account of Matisse, in an amount equal to
the Matisse/Bank Commitment Percentage of the amount of such Lease Advance,
which advance shall be evidenced by the Matisse Note and shall reduce the
Available Matisse/Bank Commitment. That portion of the amount of such Lease
Advance deemed in accordance with the provisions of clause (ii) above to be a
Loan Advance of the proceeds of the Matisse/Bank Loan by Bank for the account of
Matisse shall irrevocably and unconditionally be deemed, as of the time such
Lease Advance is credited to the account of the Lessee, to be, and shall for all
purposes of the Operative Documents be: (A) a Loan Advance of the proceeds of
the Wolverine/Matisse Loan by Matisse for the account of Wolverine, in an amount
equal to the Wolverine/Matisse Commitment Percentage of the amount of such Loan
Advance of the proceeds of the Matisse/Bank Loan, which shall be evidenced by
the Wolverine/Matisse Note and shall reduce the Available Wolverine/Matisse
Commitment; and (B) an equity contribution by Matisse to Wolverine in an amount
equal to the Matisse Equity Commitment Percentage of the amount of such Loan
Advance of the proceeds of the Matisse/Bank Loan and shall reduce the Available
Matisse Equity Commitment.
SECTION 3.6. INTEREST RATES AND PAYMENT DATES.
(a) RATES. Subject to SECTION 3.6(b), each Loan Advance shall bear
interest on the outstanding principal amount thereof from the date such
Loan Advance is made until the date such Loan Advance becomes due (or, if
earlier, the date such Loan Advance is repaid) at a rate per annum equal to
the Eurodollar
8
Rate or the Alternate Base Rate, as designated in accordance with
SECTION 3.4, PLUS the Applicable Margin. Any additional interest or other
amounts required to be paid under the terms of the promissory note
evidencing such loan shall be payable as provided therein.
(b) OVERDUE SUMS. If all or a portion of (i) the amount of any Loan
Advance, (ii) any interest payable thereon or (iii) any other amount
payable hereunder shall not be paid within five (5) Business Days after the
date on which such payment is due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a
rate per annum which is equal to the Overdue Rate.
(c) SCHEDULED PAYMENTS. Interest on the Wolverine/Bank Loan,
interest on the Matisse/Bank Loan and interest on the Wolverine/Matisse
Loan shall be payable in immediately available funds (except as provided in
PARAGRAPH (d) below) in arrears on each Scheduled Payment Date, PROVIDED
that (i) interest accruing pursuant to PARAGRAPH (b) of this SECTION 3.6
shall be payable from time to time on demand, (ii) any prepayment of any
portion of the Wolverine/Bank Loan, the Matisse/Bank Loan or the
Wolverine/Matisse Loan shall be accompanied by accrued interest to the date
of such prepayment on the amount so prepaid, (iii) upon any prepayment,
Wolverine and Matisse shall also pay such additional sums as are then
payable under the promissory notes evidencing the loans made to them, and
(iv) such interest shall be paid in accordance with SECTION 3.6(d) during
the Commitment Period.
(d) INTEREST AND RENTAL PAYMENT ADVANCES. On each date which is two
(2) Business Days prior to each Scheduled Payment Date during the
Commitment Period, the Lessee shall be deemed to have requested a Lease
Advance pursuant to SECTION 3.4 constituting an Interest Payment Advance
(under the Wolverine/Bank Loan and Matisse/Bank Loan) and a Rental Payment
Advance (under the Lease) in an amount equal to the aggregate accrued but
unpaid interest on the Wolverine/Bank Loan and the Matisse/Bank Loan and
the accrued Basic Rent under the Lease through such Scheduled Payment Date
(and not previously covered by an Interest Payment Advance or Rental
Payment Advance made or deemed made hereunder), which Lease Advance shall
be made as a one-month Eurodollar Advance, unless (A) a Lease Event of
Default shall exist, (B) after giving effect to such Lease Advance there
shall be (i) more than three (3) different Eurodollar Advances outstanding
or (ii) the aggregate outstanding principal amount of all Eurodollar
Advances having the same Interest or Rental Period shall have been reduced,
by payment, prepayment, or partial conversion to less than $500,000, (C)
the designated Interest Period or Rental Period terminates after the
Maturity Date, (D) the Lessee requests that such Lease Advance be made as
an Alternative Base Rate Advance or as a Eurodollar Advance with a longer
Interest Period or Rental Period, in which case such Lease Advance shall be
made as an
9
Alternative Base Rate Advance or as a Eurodollar Advance with a longer
Interest Period or Rental Period. The Funding Date with respect to any
such Interest Payment Advance or Rental Payment Advance shall be the
relevant Scheduled Payment Date (PROVIDED that each such Interest Payment
Advance or Rental Payment Advance shall be subject to satisfaction of the
applicable conditions precedent set forth in SECTION 6) and the proceeds of
such payment shall be applied to pay such accrued interest and Basic Rent,
as the case may be; proceeds applied to pay accrued but unpaid interest on
the Matisse/Bank Loan shall discharge the obligation of Wolverine to pay
accrued but unpaid Basic Interest under the Wolverine/Matisse Loan (in an
amount not to exceed the accrued but unpaid Basic Interest on the
Wolverine/Matisse Loan through the Scheduled Payment Date in question). On
each Funding Date on which an Interest Payment Advance is funded, the
Property Costs shall be increased by an amount equal to the Interest
Payment Advance so made. Each Interest Payment Advance shall be allocated
among the Wolverine/Bank Commitment, the Matisse/Bank Commitment, the
Wolverine/Matisse Commitment and the Matisse Equity Commitment in
accordance with the provisions of SECTION 3.5 above.
(e) PREPAYMENT. Loan Advances may be prepaid prior to the Expiration
Date only upon any purchase or sale of the Property prior to the Expiration
Date pursuant to the terms of the Lease; PROVIDED, HOWEVER, that, if any
such purchase or sale occurs on any day which is not the last day of an
Interest Period for such advance, the Lessee shall also pay on the date of
such purchase or sale all amounts payable under SECTION 13.6 hereof. Loan
Advances so prepaid may not be reborrowed.
(f) PAYMENTS DUE UPON MATURITY. Wolverine shall repay the
Wolverine/Bank Loan plus all accrued but unpaid interest thereon and all
other sums due under the promissory note evidencing such loan on the
Maturity Date. Wolverine shall repay the Wolverine/Matisse Loan plus all
accrued but unpaid interest thereon and all other sums due under the
promissory note evidencing such loan on the Maturity Date. Matisse shall
repay the Matisse/Bank Loan plus all accrued but unpaid interest thereon
and all other sums due under the promissory note evidencing such loan on
the Maturity Date.
(g) PURCHASE OPTION. The parties acknowledge that Lessee has the
right to exercise the Purchase Option set forth in SECTION 20.1 OF THE
LEASE on the terms set forth therein.
SECTION 3.7. COMPUTATION OF INTEREST.
(a) CALCULATION, EFFECTIVE DATE OF CHANGES. Whenever they are
calculated on the basis of the Alternate Base Rate, interest and Basic Rent
shall be calculated on the basis of a 365- (or 366-, as the case may be)
day year for the actual days elapsed; and, otherwise, interest and Basic
Rent shall be calculated on
10
the basis of a 360-day year for the actual days elapsed. The Bank shall as
soon as practicable notify the Lessee of each determination of a Eurodollar
Rate. Any change in the interest rate on a Loan Advance or in the rate of
Basic Rent on any Lease Advance resulting from a change in the Alternate
Base Rate or the Eurocurrency Reserve Requirements (and resulting changes
in Basic Rent) shall become effective as of the opening of business on the
day on which such change becomes effective. The Bank shall as soon as
practicable notify the Lessee of the effective date and the amount of each
such change in interest rate.
(b) DETERMINATIONS BINDING. Each determination of an interest rate
by the Bank pursuant to any provision of this Agreement shall be conclusive
and binding on Wolverine, Matisse and the Lessee in the absence of manifest
error. The Bank shall, at the request of such parties, deliver to such
parties a statement showing the quotations used by the Bank in determining
any interest rate pursuant to SECTIONS 3.4, 3.6 AND 3.7(a).
SECTION 3.8. PAYMENTS. All payments (including prepayments) to be made by
the Lessee, Wolverine or Matisse under the Operative Documents to the Bank,
whether on account of principal, interest, Basic Rent, Supplemental Rent, or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 noon, Portland, Oregon time, on the due date thereof to United States
National Bank of Oregon, Oregon Commercial Loan Servicing, Plaza Building 7th
Floor, P.O. Box 5308, Portland, Oregon 97228, in Dollars and in immediately
available funds; provided, however, that Lessee may designate in writing an
account maintained with the Bank from which such payments may be debited on the
due date thereof. Such designation shall remain in effect until the Bank is
notified in writing that the designation is canceled. The Bank shall distribute
such payments in accordance with the succeeding provisions of this ARTICLE III
promptly upon receipt. If any payment under the Operative Documents becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day. In the case of any extension of any
payment pursuant to the preceding sentence, interest thereon shall be payable at
the then applicable rate during such extension.
SECTION 3.9. RESERVED.
SECTION 3.10. BASIC RENT. Each payment (or portion thereof) of Basic Rent
(and any payment of interest on overdue installments of Basic Rent) received by
the Bank shall be applied first to pay accrued but unpaid interest on the
Wolverine/Bank Loan and the Matisse/Bank Loan, including any interest accrued at
the Overdue Rate (pro rata in accordance with the respective outstanding
balances of the Wolverine/Bank Loan and the Matisse/Bank Loan), and then, any
residue shall be deposited into an account for Matisse to be established at the
Bank. That portion of the payment so applied to pay interest on the
Matisse/Bank Loan in an amount equal to the Wolverine/Matisse Commitment
Percentage thereof shall be deemed to pay accrued but unpaid interest on the
Wolverine/Matisse Loan.
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SECTION 3.11. PURCHASE PAYMENTS BY LESSEE. Any payment received by the
Bank as a result of:
(a) the purchase of the Property in connection with Lessee's exercise
of its Purchase Option under SECTION 20.1 OF THE LEASE, or
(b) Lessee's compliance with its obligation to purchase the Property
in accordance with SECTION 20.2 OF THE LEASE, or
(c) the payment of the Asset Termination Value in accordance with
SECTIONS 16.2(b), 16.3 OR 16.4 OF THE LEASE, or
(d) the Lessee failing to fulfill one or more of the conditions to
exercise of the Remarketing Option pursuant to SECTION 22.1 OF THE LEASE
and the Bank's receipt pursuant to the next-to-last paragraph of SECTION
22.1 OF THE LEASE of the Asset Termination Value in accordance with SECTION
20.2 OF THE LEASE, or
(e) the sale of the Property sold pursuant to the Lessee's exercise
of the Remarketing Option pursuant to ARTICLE XXII OF THE LEASE, together
with any payment made by the Lessee as a result of an appraisal pursuant to
SECTION 13.2 OF THIS AGREEMENT,
shall be applied first to pay the outstanding principal balance of the
Wolverine/Bank Loan and the Matisse/Bank Loan plus accrued but unpaid interest,
including any interest accrued at the Overdue Rate (pro rata in accordance with
the respective outstanding balances of the Wolverine/Bank Loan and the
Matisse/Bank Loan), until such loans are paid in full, and then any residue (but
not in excess of any then accrued but unpaid Basic Rent not paid to Bank under
the preceding provisions of this Section, as certified to Bank jointly by Lessee
and Matisse) shall be paid to Matisse; provided, however, that if the amount
paid to the Bank is insufficient to pay such loans in full, then the amount so
paid to the Bank plus accrued but unpaid interest, including any interest
accrued at the Overdue Rate, shall be applied first to pay the outstanding
principal balance of, plus accrued but unpaid interest, including any interest
accrued at the Overdue Rate, on the Wolverine/Bank Loan until such loan is paid
in full, then to pay the outstanding principal balance of, plus accrued but
unpaid interest, including any interest accrued at the Overdue Rate, on the
Matisse/Bank Loan until such loan is paid in full. That portion of any such
payment applied to pay the principal of, plus accrued but unpaid interest,
including any interest accrued at the Overdue Rate, on the Matisse/Bank Loan
shall be deemed, as between Wolverine and Matisse, to reduce in an amount equal
to the Wolverine/Matisse Commitment Percentage of such payment, the outstanding
principal of, accrued but unpaid interest on and all other amounts payable under
the Wolverine/Matisse Loan. In case the amount so received shall exceed the
sums described herein the balance shall be paid to the Lessee.
12
SECTION 3.12. RESIDUAL VALUE GUARANTEE AMOUNT PAYMENT BY LESSEE. The
payment by the Lessee of the Residual Value Guarantee Amount to the Bank in
accordance with ARTICLE XXII OF THE LEASE upon the Lessee's exercise of the
Remarketing Option shall be applied to pay the outstanding principal balance of,
plus accrued but unpaid interest, including any interest accrued at the Overdue
Rate, on the Wolverine/Bank Loan and the Matisse/Bank Loan (pro rata in
accordance with the respective outstanding balances of the Wolverine/Bank Loan
and the Matisse/Bank Loan) until such loans are paid in full, and then any
residue (but not in excess of any then accrued but unpaid Basic Rent not paid to
Bank under the preceding provisions of this Section, as certified to Bank
jointly by Lessee and Matisse) shall be paid to Matisse; provided, however, that
if the amount paid to the Bank is insufficient to pay such loans in full, then
the amount so paid to the Bank shall be applied first to pay the outstanding
principal balance of, plus accrued but unpaid interest, including any interest
accrued at the Overdue Rate, on the Wolverine/Bank Loan until such loan is paid
in full, then to pay the outstanding principal balance of, plus accrued but
unpaid interest, including any interest accrued at the Overdue Rate, on the
Matisse/Bank Loan until such loan is paid in full. That portion of any such
payment applied to pay the principal of the Matisse/Bank Loan plus accrued but
unpaid interest, including any interest accrued at the Overdue Rate, shall be
deemed, as between Wolverine and Matisse, to reduce in an amount equal to the
Wolverine/Matisse Commitment Percentage of such payment, the outstanding
principal of, accrued but unpaid interest on and all other amounts payable under
the Wolverine/Matisse Loan. In case the amount so received shall exceed the
sums described herein the balance shall be paid to the Lessee.
SECTION 3.13. PROCEEDS OF PLEDGED COLLATERAL. Any payments received by
the Bank as proceeds of Pledged Collateral shall be applied to pay the
outstanding principal balance of, plus accrued but unpaid interest, including
any interest accrued at the Overdue Rate, on the Wolverine/Bank Loan until it is
paid in full, and then to pay the outstanding principal balance of, plus accrued
but unpaid interest, including any interest accrued at the Overdue Rate, on the
Matisse/Bank Loan until such loan is paid in full. If the amount paid to the
Bank exceeds the amount necessary to pay such loans in full, the balance, if
any, shall be distributed to, or as directed by, the Lessee. That portion of
any such payment applied to pay the principal of the Matisse/Bank Loan plus
accrued but unpaid interest, including any interest accrued at the Overdue Rate,
shall be deemed, as between Wolverine and Matisse, to reduce in an amount equal
to the Wolverine/Matisse Commitment Percentage of such payment, the outstanding
principal of, plus accrued but unpaid interest on and all other sums payable on
the Wolverine/Matisse Loan.
SECTION 3.14 SUPPLEMENTAL RENT. All payments of Supplemental Rent
received by Wolverine, Matisse or the Bank (excluding any amounts payable
pursuant to the preceding provisions of this SECTION 3) shall be paid promptly
by such Person upon receipt thereof to the Persons entitled thereto pursuant to
the Operative Documents.
13
SECTION 3.15. EXCEPTED PAYMENTS. Notwithstanding any other provision of
this Agreement or the Operative Documents, any Excepted Payment received at any
time by Wolverine, Matisse or the Bank shall be paid promptly to the Person
entitled to receive such Excepted Payment pursuant to the Operative Documents.
SECTION 3.16. DISTRIBUTION OF PAYMENTS AFTER LEASE EVENT OF DEFAULT. All
payments received and amounts realized by Wolverine, Matisse or the Bank after
any Lease Event of Default exists, including proceeds from the sale of any of
the Property, proceeds of any amounts from any insurer or any Governmental
Authority in connection with any Casualty or Condemnation, or from the Lessee as
payment in accordance with the Lease, including any payment received from the
Lessee pursuant to ARTICLE XVII THE LEASE, shall, if received by Wolverine or
Matisse, be paid to the Bank as promptly as possible and shall be distributed by
the Bank as promptly as possible in the following order of priority:
FIRST, so much of such payment or amount as shall be required to
reimburse the Bank for any tax, expense or other loss incurred by the Bank
with respect to the Lease in accordance with the Operative Documents shall
be distributed to it for its own account;
SECOND, so much of such payments or amounts as shall be required to
reimburse the Bank as assignee of lessor's interest in the Lease for
payments made by it to cure defaults under the Lease pursuant to SECTION
18.1 OF THE LEASE (to the extent not previously reimbursed) and to pay the
Bank the amounts payable to it pursuant to any expense reimbursement or
indemnification provisions of the Operative Documents shall be distributed
to the Bank;
THIRD, (i) in the case of a sale of the Property, in the order of
priority set forth in SECTION 3.13 and (ii) in all other cases, to pay the
outstanding principal balance of, plus accrued but unpaid interest,
including any interest accrued at the Overdue Rate, on the Wolverine/Bank
Loan and the Matisse/Bank Loan (pro rata in accordance with the respective
outstanding balances of the Wolverine/Bank Loan and the Matisse/Bank Loan)
until such loans are paid in full, and then any residue (but not in excess
of any then accrued but unpaid Basic Rent not paid to Bank under the
preceding provisions of this Section, as certified to Bank jointly by
Lessee and Matisse) shall be paid to Matisse; provided, however, that if
the amount paid to the Bank is insufficient to pay such loans in full, then
the amount so paid to the Bank shall be applied first to pay the
outstanding principal balance of, plus accrued but unpaid interest,
including any interest accrued at the Overdue Rate, on the Wolverine/Bank
Loan until such loan is paid in full, then to pay the outstanding principal
balance of, plus accrued but unpaid interest, including any interest
accrued at the Overdue Rate, on the Matisse/Bank Loan until such loan is
paid in full. That portion of any such payment applied to pay the
principal of, plus accrued but unpaid interest, including any interest
accrued at the Overdue Rate, on the Matisse/Bank Loan shall be deemed, as
between Wolverine and
14
Matisse, to reduce the outstanding principal of, accrued but unpaid
interest on and all other amounts payable on the Wolverine/Matisse Loan;
FOURTH, to Wolverine, to the extent of any unpaid amount due to
Wolverine from Lessee pursuant to SECTION 13;
FIFTH, to Matisse, to the extent of any unpaid amount due to Matisse
from Lessee pursuant to SECTION 13;
SIXTH, the balance, if any, of such payment or amounts remaining
thereafter shall be promptly distributed to, or as directed by, the Lessee.
SECTION 3.17. OTHER PAYMENTS.
(a) Except as otherwise provided in SECTIONS 3.10, 3.11, 3.16 and
PARAGRAPH (b) below,
(i) any payment received by the Bank for which no provision as
to the application thereof is made in the Operative Documents or
elsewhere in this SECTION 3, and
(ii) all payments received and amounts realized by the Bank as
assignee of Lessor's interest under the Lease or otherwise with
respect to the Property to the extent received or realized at any time
after indefeasible payment in full of the Wolverine/Bank Loan and the
Matisse Loan,
shall be distributed forthwith by the Bank in the order of priority set
forth in SECTION 3.11 (in the case of any payment described in CLAUSE (i)
above) or in SECTION 3.16 hereof (in the case of any payment described in
CLAUSE (ii) above), except, that in the case of any payment described in
CLAUSE (ii) above, such payment shall be distributed omitting CLAUSE THIRD
of such SECTION 3.16; and the balance, if any (in the case of any payment
described in CLAUSE (i) OR (ii) above), shall be distributed to, or as
directed by, the Lessee.
(b) Except as otherwise provided in SECTIONS 3.10 and 3.11 hereof,
any payment received by the Bank for which provision as to the application
thereof is made in an Operative Document but not elsewhere in this SECTION
3 shall be distributed forthwith by the Bank to the Person and for the
purpose for which such payment was made in accordance with the terms of
such Operative Document.
SECTION 3.18. CASUALTY AND CONDEMNATION PROCEEDS. Any proceeds payable to
the Lessor under the Lease as a result of a Casualty or Condemnation pursuant to
SECTION 15.1 OF THE LEASE (but excluding any amounts payable pursuant to SECTION
16.2 OF THE LEASE) shall, if no Lease Event of Default exists, be paid over to
the Lessee for the rebuilding or restoration of that portion of the Property
affected by such Casualty or
15
Condemnation, and any excess proceeds shall be applied pursuant to SECTION 3.19
OF THIS AGREEMENT. If a Lease Event of Default exists, then during the
continuance of such Lease Event of Default, all such proceeds shall be delivered
pursuant to the Investment Collateral Security Agreement to be held as
collateral and invested in Treasury Securities having the shortest possible
maturity from the date of purchase (in which case the collateral release
provisions of SECTION 3.3(c) OF THE INVESTMENT COLLATERAL SECURITY AGREEMENT
shall not apply to such proceeds, and the amount of Pledged Collateral required
to be held pursuant to the Investment Collateral Security Agreement shall be
increased by the amount of such proceeds for so long as and to the extent that
such proceeds shall remain in the account described therein, pending their
release to the Lessee in compliance with the Lease) and upon exercise of the
Lessor's remedies under the Operative Document shall be distributed pursuant to
SECTION 3.16.
SECTION 3.19. ORDER OF APPLICATION. To the extent any payment made
pursuant to SECTIONS 3.11, 3.12, 3.13, 3.16, or 3.17 is insufficient to pay in
full outstanding principal balance of, plus accrued but unpaid interest on, the
Wolverine/Bank Loan and the Matisse Bank Loan, then each such payment shall be
applied first to accrued interest and then to principal (in each case except as
otherwise expressly provided herein, pro rata between the Wolverine/Bank Loan
and the Matisse/Bank Loan). Any payments made (i) on a day other than the last
day of an Interest Period for any Loan Advance shall be applied first to any
Alternate Base Rate Advances then outstanding and then to any Eurodollar
Advances then outstanding, in the order designated in writing by Lessee, or, if
Lessee has made no such designation, in the order of such Eurodollar Advances'
stated maturities and (ii) on the last day of an Interest Period for any
Eurodollar Advance shall be applied first to such maturing Eurodollar Advance,
then to any Alternate Base Rate Advances outstanding, and then to any other
Eurodollar Advances then outstanding, in the order of such Eurodollar Advances'
stated maturities.
SECTION 4.
FEES
SECTION 4.1. UPFRONT FEE. The Lessee shall pay to the Bank for its own
account the Upfront Fee on or before the Closing Date, and as a condition to the
initial Lease Advance.
SECTION 4.2. ADMINISTRATION FEE. The Lessee shall pay to Wolverine for its
own account an annual administrative fee of $2,500 which shall be payable in
advance on the Closing Date and on each anniversary thereof during the Term.
16
SECTION 5.
CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1. NATURE OF TRANSACTION.
(a) It is the intent of the parties hereto that: (i) the Lease
constitutes an "operating lease" pursuant to Statement of Financial
Accounting Standards No. 13, as amended, for purposes of Lessee's financial
reporting, and (ii) for purposes of federal, state and local income or
franchise taxes and for any other tax imposed on or measured by income, the
transaction contemplated hereby is to be treated as a financing arrangement
for the construction and term financing of the Property (and not as a "true
lease"). Accordingly, and notwithstanding any provision of this
Participation Agreement to the contrary, the parties hereto agree and
declare that: (i) the transactions contemplated by the Lease are intended
to have a dual, rather than single, form; and (ii) all references in this
Participation Agreement to the "lease" of the Property which fail to
reference such dual form do so as a matter of convenience only and do not
reflect the intent of the parties hereto as to the true form of such
arrangements.
(b) It is the intent of the parties hereto that (i) subject to
ARTICLE XXII OF THE LEASE, the obligations of the Lessee under the Lease to
pay Basic Rent and Supplemental Rent or Asset Termination Value in
connection with any purchase of the Property pursuant to the Lease shall be
treated as payments of interest on and principal of, respectively, loans
from the Bank and Matisse through Wolverine to the Lessee, and (ii) the
Lease grants a security interest and mortgage or deed of trust or lien, as
the case may be, in the Property to Wolverine and, as a result of the
Assignment of Lease-Related Documents, to the Bank, as collateral agent for
itself and Matisse, which, together with the other Lease-Related Documents,
secure the Lessee's performance and payment of all amounts under the Lease
and the other Operative Documents. Nevertheless, the Lessee acknowledges
and agrees that neither the Bank, nor Matisse, nor Wolverine has made any
representations or warranties to the Lessee concerning the tax, accounting
or legal characteristics of the Operative Documents and that the Lessee has
obtained and relied upon such tax, accounting and legal advice concerning
the Operative Documents as it deems appropriate. Furthermore, the Lessee
acknowledges and agrees that neither the Bank, nor Matisse, nor Wolverine
has made any representations or warranties to the Lessee concerning any
reporting requirements under applicable securities laws, and the Lessee
assumes full responsibility (i) for any disclosures made by Lessee, or that
should be made by Lessee, or that are required to be made to any security
holders of Lessee, under or with respect to any applicable laws, (ii) for
the accurate financial reporting by Lessee of the transactions contemplated
by the Operative Documents, and (iii) for the accuracy of any press release
issued by Lessee with respect to the transactions
17
contemplated by the Operative Documents, it being understood that each of
the Bank, Matisse, and Wolverine disclaim any obligation with respect
thereto or in connection therewith.
(c) Specifically, without limiting the generality of SECTION 5.1(b)
and subject to ARTICLE XXII OF THE LEASE, the parties hereto intend and
agree that with respect to the nature of the transactions evidenced by the
Lease in the context of the exercise of remedies under the Operative
Documents, including, without limitation, in the case of any insolvency or
receivership proceedings or a petition under the United States bankruptcy
laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting the
Lessee, Wolverine, Matisse or the Bank or any enforcement or collection
actions, the transactions evidenced by the Operative Documents are loans
made by the Bank and Matisse through Wolverine as unrelated third party
lenders to the Lessee secured by the Property and the Pledged Collateral.
(d) Specifically, without limiting the generality of SECTIONS 5.1(a),
(b) and (c), the parties hereto intend and agree that, for purposes of
filing federal, state and local returns, reports and other statements
relating to income or franchise taxes, or any other taxes imposed upon or
measured by income, (i) the transactions contemplated by the Operative
Documents shall be treated as a financing arrangement for the construction
and term financing of the Property (rather than as a "true lease") and the
Lessee shall be entitled to take any deduction, credit, allowance or other
reporting position consistent with such treatment; and (ii) neither
Wolverine, nor Matisse, nor the Bank shall take a position on its federal,
state and local returns, reports and other statements relating to income or
franchise taxes that is inconsistent with such treatment. Matisse and the
Bank acknowledge and agree that they have no legal or beneficial ownership
interest in the Property except for the interest of a secured party.
SECTION 5.2. AMOUNTS DUE UNDER LEASE. Anything else herein or elsewhere
to the contrary notwithstanding, it is the intention of the Lessee, Wolverine,
Matisse and the Bank that: (i) subject to ARTICLE XXII OF THE LEASE, the amount
and timing of installments of Basic Rent due and payable from time to time from
the Lessee under the Lease shall be at least equal to the aggregate payments due
to the Bank under the Wolverine/Bank Loan and the Matisse/Bank Loan on each
Payment Date; (ii) if the Lessee elects the Purchase Option or becomes obligated
to purchase the Property under the Lease, the Wolverine/Bank Loan, the
Matisse/Bank Loan, all accrued fees and all of the interest on overdue amounts
thereon and all other obligations of the Lessee owing to Wolverine, Matisse and
the Bank shall be paid in full by the Lessee; (iii) if the Lessee properly
elects the Remarketing Option, the Lessee shall only be required to pay, or
cause to be paid, the proceeds of the sale of the Property, the Residual Value
Guarantee Amount and any amounts due pursuant to SECTION 13 OF THIS
PARTICIPATION AGREEMENT and ARTICLE XXII OF THE LEASE (which aggregate amounts
may be less than the Asset Termination Value); and
18
(iv) upon a Lease Event of Default resulting in an acceleration of the Lessee's
obligation to purchase the Property under the Lease, the amounts then due and
payable by the Lessee under the Lease shall include all amounts necessary to pay
in full the Asset Termination Value, plus all other amounts then due from the
Lessee to the Bank, Matisse and Wolverine under the Operative Documents.
SECTION 6.
CONDITIONS PRECEDENT TO LOAN AND LEASE ADVANCES
SECTION 6.1. CONDITIONS PRECEDENT -- INITIAL ADVANCE. The obligation of
the Bank to make the initial Loan Advances under the Wolverine/Bank Loan and the
Matisse/Bank Loan and of Wolverine to make the Initial Lease Advance is subject
to satisfaction or waiver of the following conditions precedent and the
conditions precedent set forth in SECTION 6.3 on or prior to the Closing Date:
(a) FUNDING REQUEST. The Bank shall have received a fully executed
counterpart of the Funding Request, appropriately completed by the Lessee,
in accordance with SECTIONS 3.3 AND 3.4.
(b) OPERATIVE DOCUMENTS. Each of the Operative Documents shall have
been duly authorized, executed and delivered by the parties thereto, and
shall be in full force and effect, and Lessee shall have delivered to Bank
the Pledged Collateral required in respect of such initial Lease and Loan
Advances. No Loan Default, Loan Event of Default, Lease Default or Lease
Event of Default shall exist thereunder (both before and after giving
effect to the transactions contemplated by the Operative Documents), and
Wolverine, Matisse and the Bank shall each have received a fully executed
copy of each of the Operative Documents (other than the Lease and the
Memorandum of Lease, of which the Bank shall receive the original and
Wolverine and Matisse shall receive specimens, and other than the
Wolverine/Bank Note, the Matisse/Bank Note and the Wolverine/Matisse Note,
as to which a single original shall be delivered to Bank). The Operative
Documents (or memoranda thereof), any supplements thereto and any financing
statements in connection therewith required under the Uniform Commercial
Code shall have been recorded, registered and filed, if necessary, in such
manner as to enable the counsel to the Lessee, Wolverine and Matisse to
render the opinions referred to in CLAUSES (1)(i), (ii) AND (iii) below.
(c) ENVIRONMENTAL AND ACCESSIBILITY LAWS QUESTIONNAIRE AND DISCLOSURE
STATEMENT. The Bank, Matisse and Wolverine shall have received an
Environmental and Accessibility Laws Questionnaire and Disclosure Statement
in form and substance satisfactory to Bank (an "ENVIRONMENTAL AND
ACCESSIBILITY LAWS QUESTIONNAIRE AND DISCLOSURE STATEMENT") with respect to
the Property, PROVIDED that such Environmental and Accessibility Laws
Questionnaire and Disclosure Statement shall be delivered not less than
five (5) Business Days prior
19
to the Closing Date and shall be accompanied by the Environmental Audit for
the Property, each of which shall have been approved by the Bank, Matisse
and Wolverine.
(d) APPRAISAL. The Bank shall have received an Appraisal of the
Property, which Appraisal shall (i) show, as of the projected Completion
Date, the Fair Market Sales Value of such Land Interest and the Financed
Improvements, to be constructed thereon in accordance with the Plans and
Specifications, which shall be not less than $15,000,000, and (ii) meet the
other requirements set forth in the definition of the term "Appraisal"
contained in APPENDIX 1.
(e) [Reserved].
(f) DESCRIPTIONS OF FINANCED IMPROVEMENTS. The Bank shall have
received reasonably detailed descriptions of the Financed Improvements and
a copy of the Plans and Specifications therefor, as well as breakdown of
the projected costs for completion of, and construction timetable for the
Financed Improvements, all in form and substance reasonably satisfactory to
Bank.
(g) SURVEY AND TITLE INSURANCE; UCC SEARCHES. The Lessee shall have
delivered either (i) an ALTA/ACSM (1992) (Urban) Survey of the Property,
certified to Wolverine, Matisse, the Bank and the title company and
otherwise in form acceptable to the Bank, or (ii) a plat of the Property in
a form acceptable to the Bank. The Lessee shall also have delivered: (i)
to Wolverine, an ALTA (1970) owner's title insurance policy with extended
coverage over the general exceptions, in the amount of $20,000,000,
insuring fee title in Wolverine to the Land Interest and the Improvements,
subject only to the Permitted Exceptions with such endorsements as
Wolverine and the Bank may require, including, without limitation, Oregon
Land Title Association ("OLTA") endorsement numbers 80 and 74; and (ii) to
Bank and Matisse (as their interests may appear), an ALTA (1970) Loan
Policy in the amount of $6,750,000, insuring Matisse and the Bank that the
Wolverine/Matisse Deed of Trust has been duly assigned to the Bank of
record, and that the Lien thereof is first and primary in the Lessor's Land
Interest and the Improvements, subject only to the Permitted Exceptions,
with such endorsements as the Bank may require, including, without
limitation, OLTA endorsement numbers 52, 80, 63, and 74, and including a
package of ten statutory construction lien endorsements. The Bank shall
also have received a report, as of a current date, of judgment liens, lis
pendens, tax liens and Uniform Commercial Code filings with respect to
Lessee, Wolverine, Matisse and the Land filed of record in each applicable
jurisdiction.
(h) EVIDENCE OF RECORDING AND FILING. The Bank shall have received
evidence reasonably satisfactory to it that each of the Memorandum of
Lease, the Assignment of Lease-Related Documents, the Wolverine/Matisse
Deed of Trust and the recordable assignment of the Wolverine/Matisse Deed
of Trust shall have
20
been or are being recorded with the appropriate Governmental Authorities in
the order in which such documents are listed in this clause, and the UCC
Financing Statements shall have been or are being filed with the
appropriate Governmental Authorities.
(i) EVIDENCE OF INSURANCE. The Bank, Wolverine and Matisse shall
have received evidence of the insurance required to be maintained by the
Lessee pursuant to the Lease.
(j) EVIDENCE OF USE OF PROCEEDS. The Bank shall have received
evidence reasonably satisfactory to the Bank as to the anticipated use of
the proceeds of such Lease Advance in accordance with this Participation
Agreement.
(k) TAXES. All taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Documents shall have been paid or provisions for such payment shall have
been made to the satisfaction of the Bank, Matisse and Wolverine.
(l) OPINIONS OF COUNSEL. (i) Wolverine shall have delivered to the
Bank opinions of Texas and Oregon counsel satisfactory to the Bank and the
Lessee; (ii) the Lessee shall have delivered to Wolverine, Matisse and the
Bank an opinion of Oregon counsel satisfactory to the Bank; and (iii)
Matisse shall have delivered to the Bank opinions of Texas and Oregon
counsel satisfactory to the Bank and the Lessee.
(m) APPROVALS. All necessary Governmental Actions and consents and
approvals of or by any other Person, in shall have been obtained or made
and be in full force and effect.
(n) LITIGATION. No action or proceeding shall have been instituted,
nor shall any action or proceeding be overtly threatened, before any
Governmental Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental Authority (i) to set
aside, restrain, enjoin or prevent the full performance of any Operative
Document or any transaction contemplated thereby or (ii) which is
reasonably likely to materially and adversely affect the Lessee, Wolverine
or Matisse.
(o) REQUIREMENTS OF LAW. In the reasonable opinion of the Bank, or
its counsel, the transactions contemplated by the Operative Documents do
not and will not violate any Requirement of Law.
(p) RESPONSIBLE OFFICER'S CERTIFICATE OF THE LESSEE. The Bank shall
have received, in form and substance satisfactory to Bank, a Responsible
Officer's Certificate, dated as of the Closing Date, of the Lessee stating
that (i) each and every representation and warranty of the Lessee contained
in the Operative
21
Documents to which it is a party is true and correct in all material
respects on and as of the Closing Date; (ii) no Lease Default or Lease
Event of Default has occurred and is continuing; and (iii) each Operative
Document to which the Lessee is a party is in full force and effect with
respect to it.
(q) THE LESSEE'S RESOLUTIONS AND INCUMBENCY CERTIFICATE, ETC. The
Bank shall have received, in form and substance satisfactory to Bank, (i) a
certificate of the Secretary or an Assistant Secretary of the Lessee
attaching and certifying as to (A) the resolutions of the Board of
Directors duly authorizing the execution, delivery and performance by the
Lessee of documents and agreements of the type represented by each
Operative Document to which it is or will be a party, (B) its certificate
of incorporation and by-laws, and (C) the incumbency and signature of
persons authorized to execute and deliver on its behalf the Operative
Documents to which it is a party, and (ii) a certificate of existence from
the appropriate officer of the state in which the Property is located.
(r) OFFICER'S CERTIFICATE OF WOLVERINE. The Bank shall have
received, in form and substance satisfactory to Bank, a certificate of an
authorized officer of Wolverine, dated as of the Closing Date, stating that
(i) each and every representation and warranty of Wolverine contained in
the Operative Documents to which it is a party is true and correct in all
material respects on and as of the Closing Date, (ii) each Operative
Document to which Wolverine is a party is in full force and effect with
respect to it, and (iii) Wolverine has duly performed and complied with all
covenants, agreements and conditions contained herein or in any Operative
Document required to be performed or complied with by it on or prior to the
Closing Date and no Loan Default or Loan Event of Default has occurred and
is continuing.
(s) WOLVERINE'S RESOLUTIONS AND INCUMBENCY CERTIFICATE, ETC. The
Bank shall have received, in form and substance satisfactory to Bank, (i) a
certificate of the Secretary or an Assistant Secretary of Wolverine
attaching and certifying as to (A) the resolutions of the Board of
Directors duly authorizing the execution, delivery and performance by
Wolverine of documents and agreements of the type represented by each
Operative Document to which it is or will be a party, (B) its certificate
of incorporation and by-laws, and (C) the incumbency and signature of
persons authorized to execute and deliver on its behalf the Operative
Documents to which it is a party, and (ii) a certificate of existence from
the appropriate officer of the state in which the Property is located.
(t) OFFICER'S CERTIFICATE OF MATISSE. The Bank shall have received,
in form and substance satisfactory to Bank, a certificate of an authorized
officer of Matisse, dated as of the Closing Date, stating that (i) each and
every representation and warranty of Matisse contained in the Operative
Documents to which it is a party is true and correct in all material
respects on and as of the Closing Date, (ii) each Operative Document to
which Matisse is a party is in full
22
force and effect with respect to it, and (iii) Matisse has duly performed
and complied with all covenants, agreements and conditions contained herein
or in any Operative Document required to be performed or complied with by
it on or prior to the Closing Date, and no Loan Default or Loan Event of
Default has occurred and is continuing.
(u) MATISSE'S RESOLUTIONS AND INCUMBENCY CERTIFICATE, ETC. The Bank
shall have received, in form and substance satisfactory to Bank, a
certificate of the Secretary or an Assistant Secretary of Matisse attaching
and certifying as to (A) the resolutions of the Board of Directors duly
authorizing the execution, delivery and performance by Matisse of documents
and agreements of the type represented by each Operative Document to which
it is or will be a party, (B) its certificate of incorporation and by-laws
and (C) the incumbency and signature of persons authorized to execute and
deliver on its behalf the Operative Documents to which it is a party.
(v) NO MATERIAL ADVERSE CHANGE. As of the Closing Date, there shall
not have occurred any material adverse change in the financial condition of
Wolverine or Matisse from that in effect on the date of the respective
commitment letters delivered by the Bank to Wolverine and Matisse for the
financial accommodations hereunder, nor any change since that date in the
senior management of the Lessee, Wolverine or Matisse, nor shall the Bank
have discovered any information which the Bank reasonably determines has a
material adverse effect on the transactions contemplated by the Operative
Documents.
(w) PURCHASE AGREEMENT AND DEED. The Bank shall have received a
certified copy of the Purchase Agreement and the deed for the acquisition
of the Land by Wolverine.
(x) RELEASE OF PREVIOUS TRANSACTION. The financing provided by Bank
to Wolverine, evidenced by the Note, dated December 21, 1995, in the
principal amount of $3,500,000, shall, using the proceeds of such initial
Lease Advance, be paid, and any lease (other than the Lease) of the
Property between Wolverine and Lessee shall have been canceled.
Notwithstanding anything in this Participation Agreement to the contrary, the
Bank shall not be obligated to fund directly any Loan Advance or indirectly any
Lease Advance pursuant to this Participation Agreement unless the Closing Date
shall have occurred and all conditions to the initial Loan Advance and Lease
Advance hereunder shall have been satisfied on or prior to 5:00 P.M., Portland,
Oregon time, on June 20, 1996.
SECTION 6.2. CONDITIONS PRECEDENT -- SUBSEQUENT ADVANCES. The obligation
of the Bank to make any Loan Advances under the Wolverine/Bank Loan and the
Matisse/Bank Loan and of Wolverine to make any Lease Advances on any Funding
Date
23
subsequent to the Closing Date is subject to satisfaction or waiver of the
following conditions precedent and the conditions precedent set forth in SECTION
6.3 on or prior to such Funding Date, as the case may be:
(a) FUNDING REQUEST. The Bank shall have received a fully executed
counterpart of the Funding Request, appropriately completed by the Lessee,
in accordance with SECTION 3.4.
(b) CONDITIONS PRECEDENT TO INITIAL ADVANCE. Each of the conditions
precedent to the initial Loan Advance and Lease Advance set forth in
SECTION 6.1 shall have been satisfied on or prior to the Closing Date.
(c) EVIDENCE OF USE OF PROCEEDS. The Bank shall have received
evidence reasonably satisfactory to the Bank as to the anticipated use of
the proceeds of such Loan Advance and Lease Advance in accordance with this
Participation Agreement.
(d) APPROVALS. All necessary Governmental Actions and consents and
approvals of or by any other Person shall have been obtained or made and be
in full force and effect.
(e) LITIGATION. No action or proceeding shall have been instituted,
nor shall any action or proceeding be overtly threatened, before any
Governmental Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental Authority (i) to set
aside, restrain, enjoin or prevent the full performance of any Operative
Document or any transaction contemplated thereby or (ii) which is
reasonably likely to have a material adverse effect either on the ability
of the Lessee to perform its obligations under any of the Operative
Documents, or on the operation or value of the Property.
(f) REQUIREMENTS OF LAW. In the reasonable opinion of the Bank or
its counsel, the transactions contemplated by the Operative Documents do
not and will not violate any material Requirement of Law and do not and
will not subject the Bank to any adverse regulatory prohibitions.
(g) NO SALES. Lessee shall not have sent any notice exercising the
Purchase Option pursuant to SECTION 20.1 OF THE LEASE or the REMARKETING
OPTION pursuant to SECTION 22.1 OF THE LEASE.
(h) PLEDGED COLLATERAL. Lessee shall have delivered to the Bank such
additional Pledged Collateral in respect of the Lease Advance and Loan
Advance requested on such Funding Date, as required by the Investment
Collateral Security Agreement.
24
SECTION 6.3. FURTHER CONDITIONS PRECEDENT. The obligation of the Bank to
make any Loan Advances under the Wolverine/Bank Loan and the Matisse/Bank Loan
and of Wolverine to make any Lease Advances on any Funding Date is subject to
satisfaction or waiver of the further conditions precedent that:
(a) REPRESENTATIONS AND WARRANTIES. On such date the representations
and warranties of the Lessee, Wolverine and Matisse contained herein and in
each of the other Operative Documents shall be true and correct in all
material respects as though made on and as of such date, except to the
extent such representations or warranties relate solely to an earlier date,
in which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date.
(b) TITLE. Title to the Property shall conform to the
representations and warranties set forth in SECTION 8.4(c).
(c) NO DEFAULT. There shall not have occurred and be continuing any
Lease Event of Default or Loan Event of Default under any of the Operative
Documents, and no Lease Event of Default or Loan Event of Default under any
of the Operative Documents will have occurred after giving effect to the
making of such Loan Advance or Lease Advance.
(d) CONSTRUCTION ASSURANCES. Within sixty (60) days after the date
hereof, Lessee shall deliver to Wolverine, Matisse and the Bank a copy of
the construction contract entered into between Lessee and the contractor
for the Financed Improvements, together with the contractor's consent
described in the Construction Agency Agreement. With respect to each
material construction, architectural and engineering contract in effect as
of such Funding Date, Lessee shall have delivered to the Bank on or prior
to such Funding Date a consent and agreement from each party to such
contract, in form and substance satisfactory to the Bank, acknowledging and
covenanting that (i) such party will provide written notice to the Bank of
any material breach under such contract and the Bank shall have at least
thirty (30) days following the receipt of such notice to cure such breach,
and (ii) upon written request of the Bank, such party shall provide to the
Bank an estoppel certificate in respect to such contract in a form
reasonably requested by the Bank.
25
SECTION 7.
COMPLETION DATE CONDITIONS
SECTION 7.1. CONDITIONS. The occurrence of the Completion Date shall be
subject to the fulfillment to the satisfaction of, or waiver by, the Bank of the
following conditions precedent:
(a) CONSTRUCTION COMPLETION. The construction of the Financed
Improvements shall have been completed substantially in accordance with the
Plans and Specifications and all Requirements of Law, and such Property
shall be ready for occupancy and operation. All fixtures contemplated
under the Plans and Specifications (excluding without limitation trade
fixtures not contemplated by the Plans and Specifications) to be
incorporated into or installed in the Property or otherwise financed
through Loan Advances shall have been incorporated or installed free and
clear of all Liens except for Permitted Exceptions.
(b) LESSEE CERTIFICATION. The Lessee shall have furnished the Bank
with a certification of the Lessee (substantially in the form of EXHIBIT D)
as follows:
(i) The representations and warranties of the Lessee with
respect to the Property set forth in SECTION 8.4(b) are true and
correct in all material respects as of the Completion Date, except to
the extent such representations or warranties relate solely to an
earlier date, in which case such representations and warranties shall
have been true and correct in all material respects on and as of such
earlier date. All amounts owing to third parties for the construction
of the Financed Improvements have been paid in full (other than
contingent obligations for which the Lessee has made adequate reserves
and mechanics' liens which are being contested in accordance with the
Lease), and a final inspection has occurred.
(ii) No changes or modifications were made to the related Plans
and Specifications after the Closing Date that have had a material
adverse effect on the value, use or useful life of the Property except
those agreed to in writing by the Bank and those made pursuant to
SECTION 3.2 OF THE CONSTRUCTION AGENCY AGREEMENT.
(iii) The Improvements have been completed substantially in
accordance with Construction Documents and Plans and Specifications
prepared in accordance with the Architect's Agreement and such
Improvements are ready for occupancy.
(iv) The Improvements, as so completed, comply in all material
respects with applicable laws and ordinances pertaining to the
construction
26
and occupancy thereof, including applicable building and zoning laws
and ordinances.
(v) Attached hereto or delivered previously or concurrently
herewith, are true and complete copies of an "as built" or "record"
set of the plans and specifications for the Improvements, and a plat
of survey of such Property "as built" showing all paving, driveways,
fences and exterior improvements.
SECTION 8.
REPRESENTATIONS
SECTION 8.1. REPRESENTATIONS OF WOLVERINE. Wolverine represents and
warrants to the Bank and the Lessee as follows:
(a) DUE ORGANIZATION, ETC. Wolverine (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas, (ii) is duly qualified and in good standing in every
jurisdiction where it is required to qualify in order to execute, deliver
and perform its obligations under the Operative Documents and (iii) has the
corporate power and authority to enter into and perform its obligations
under each of the Operative Documents to which it is or will be a party and
each other agreement, instrument and document to be executed and delivered
by it in connection with or as contemplated by each such Operative Document
to which it is or will be a party.
(b) AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance of each Operative Document to which it is or will be a party
has been duly authorized by all necessary action on its part and neither
the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will require any approval or
consent of any trustee or holders of any of its indebtedness or
obligations, (ii) does or will contravene any current applicable law,
governmental rule or regulation, (iii) does or will contravene or result in
any breach of or constitute any default under, or result in the creation of
any Lien upon any of its property under, its articles of incorporation or
by-laws, or any indenture, mortgage, deed of trust, conditional sales
contract, credit agreement or other agreement or instrument to which it is
a party or by which it or its properties may be bound or affected or (iv)
does or will require any Governmental Action by any Governmental Authority,
except such as have been obtained.
(c) ENFORCEABILITY, ETC. Each Operative Document to which Wolverine
is or will be a party has been, or on or before the Closing Date will be,
duly executed and delivered by Wolverine and each such Operative Document
to which Wolverine is a party constitutes, or upon execution and delivery
will
27
constitute, a legal, valid and binding obligation enforceable against
Wolverine in accordance with the terms thereof, except as the same may be
limited by insolvency, bankruptcy, reorganization or other laws relating to
or affecting creditors' rights or by general equitable principles.
(d) LITIGATION. There is no action or proceeding pending or, to its
knowledge, overtly threatened to which it is a party, before any
Governmental Authority that, if adversely determined, would materially and
adversely affect its ability to perform its obligations under the Operative
Documents to which it is a party, would have a material adverse effect on
the financial condition of Wolverine or would question the validity or
enforceability of any of the Operative Documents to which it is or will
become a party.
(e) ASSIGNMENT. It has not assigned or transferred any of its right,
title or interest in or under the Lease except to the Bank as collateral
agent for itself and Matisse in accordance with this Agreement and the
other Operative Documents.
(f) DEFAULTS. No Loan Event of Default under the Operative Documents
attributable to it has occurred and is continuing.
(g) USE OF PROCEEDS. Loan Advances of the Wolverine/Bank Loan and
advances of the Wolverine/Matisse Loan received by Wolverine shall be
applied by Wolverine solely in accordance with the provisions of the
Operative Documents.
(h) SECURITIES ACT. Neither Wolverine nor any Person authorized by
Wolverine to act on its behalf has offered or sold any interest in the
Lease, or in any similar security relating to the Property, or in any
security the offering of which for the purposes of the Securities Act would
be deemed to be part of the same offering as the offering of the
aforementioned securities to, or solicited any offer to acquire any of the
same from, any Person other than the Bank and neither Wolverine nor any
Person authorized by Wolverine to act on its behalf will take any action
which would subject the issuance or sale of any interest in the Lease or
the Property to the provisions of Section 5 of the Securities Act or
require the qualification of any Operative Document under the Trust
Indenture Act of 1939, as amended.
(i) CHIEF PLACE OF BUSINESS. Unless otherwise notified by Wolverine
in accordance with SECTION 10.3(b) hereof, Wolverine's chief place of
business, chief executive office and office where the documents, accounts
and records relating to the transactions contemplated by this Participation
Agreement and each other Operative Document are kept are located at 6750
LBJ Freeway, Suite 1100, Dallas, Texas 75240.
28
(j) FEDERAL RESERVE REGULATIONS. Wolverine is not engaged
principally in, and does not have as one of its important activities, the
business of extending credit for the purpose of purchasing or carrying any
margin stock (within the meaning of Regulation U of the Board), and no part
of the Wolverine/Bank Loan on the Wolverine/Matisse Loan will be used by it
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any purpose
that violates, or is inconsistent with, the provisions of Regulation G, T,
U, or X of the Board.
(k) INVESTMENT COMPANY ACT. Wolverine is not an "investment company"
or a company controlled by an "investment company" within the meaning of
the Investment Company Act.
(l) NO PLAN ASSETS. Wolverine is not acquiring its interests in the
Property with the assets of any Plan (or its related trust).
(m) TITLE; NO LESSOR LIENS. Wolverine holds a valid fee estate in
the Property, subject only to Permitted Exceptions. Wolverine will at all
times during the Term have good title to all property located on the
Property (if acquired through Lease Advances) and in any Improvements,
subject only to Permitted Exceptions and Liens arising as a result of
actions of, or claims against, the Lessee. The Land is free and clear of
all Lessor Liens.
(n) ADVERSE INFORMATION. All material information and materials
regarding Wolverine which have been or will be provided by Wolverine to the
Bank are or will be true and accurate in all material respects on the date
as of which such information and materials are dated or certified and do
not and will not omit to state any material fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided. There is no particular fact of which
Wolverine has knowledge that has not been disclosed by Wolverine in writing
to the Bank that, as far as Wolverine can reasonably foresee, is reasonably
likely to have a Material adverse effect.
SECTION 8.2. REPRESENTATIONS OF MATISSE. Matisse represents and warrants
to the Bank and to the Lessee as follows:
(a) DUE ORGANIZATION, ETC. Matisse (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas, (ii) is duly qualified and in good standing in every
jurisdiction where it is required to qualify in order to execute, deliver
and perform its obligations under the Operative Documents and (iii) has the
corporate power and authority to enter into and perform its obligations
under each of the Operative Documents to which it is or will be a party and
each other agreement, instrument and document to be
29
executed and delivered by it in connection with or as contemplated by each
such Operative Document to which it is or will be a party.
(b) AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance of each Operative Document to which it is or will be a party
has been duly authorized by all necessary action on its part and neither
the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will require any approval or
consent of any trustee or holders of any of its indebtedness or
obligations, (ii) does or will contravene any current applicable law,
governmental rule or regulation, (iii) does or will contravene or result in
any breach of, or constitute any default under, or result in the creation
of any Lien upon any of its property under, its articles of incorporation
or by-laws, or any indenture, mortgage, deed of trust, conditional sales
contract, credit agreement or other agreement or instrument to which it is
a party or by which it or its properties may be bound or affected or (iv)
does or will require any Governmental Action by any Governmental Authority,
except such as have been obtained.
(c) ENFORCEABILITY, ETC. Each Operative Document to which Matisse is
or will be a party has been, or on or before the Closing Date will be, duly
executed and delivered by Matisse and each such Operative Document to which
Matisse is a party constitutes, or upon execution and delivery will
constitute, a legal, valid and binding obligation enforceable against
Matisse in accordance with the terms thereof, except as the same may be
limited by insolvency, bankruptcy, reorganization or other laws relating to
or affecting creditors' rights or by general equitable principles. Matisse
has delivered to the Bank true and correct copies of the Matisse
Subscription Agreements which have been delivered by the shareholders in
Matisse. The obligation of each shareholder of Matisse to contribute
capital to Matisse in accordance with the terms of the Matisse Subscription
Agreement entered into by it constitutes a legal, valid and binding
obligation enforceable against such shareholder in accordance with the
terms thereof, except as the same may be limited by insolvency, bankruptcy,
reorganization or other laws relating to or affecting creditors' rights or
by general equitable principles.
(d) LITIGATION. There is no action or proceeding pending or, to its
knowledge, overtly threatened to which it is a party, before any
Governmental Authority that, if adversely determined, would materially and
adversely affect its ability to perform its obligations under the Operative
Documents to which it is a party, would have a material adverse effect on
the financial condition of Matisse or would question the validity or
enforceability of any of the Operative Documents to which it is or will
become a party.
30
(e) ASSIGNMENT. It has not assigned or transferred any of its right,
title or interest in or under the Wolverine/Matisse Loan Documents except
to the Bank in accordance with this Agreement and the other Operative
Documents.
(f) DEFAULTS. No Loan Event of Default under the Operative Documents
attributable to it has occurred and is continuing.
(g) USE OF PROCEEDS. The Loan Advances of the Matisse/Bank Loan
shall be applied by Matisse solely in accordance with the provisions of the
Operative Documents.
(h) SECURITIES ACT. Neither Matisse nor any Person authorized by
Matisse to act on its behalf has offered or sold any interest in the Lease,
or in any similar security relating to the Property, or in any security the
offering of which for the purposes of the Securities Act would be deemed to
be part of the same offering as the offering of the aforementioned
securities to, or solicited any offer to acquire any of the same from, any
Person other than the Bank, and neither Matisse nor any Person authorized
by Matisse to act on its behalf will take any action which would subject
the issuance or sale of any interest in the Lease or the Property to the
provisions of Section 5 of the Securities Act or require the qualification
of any Operative Document under the Trust Indenture Act of 1939, as
amended.
(i) CHIEF PLACE OF BUSINESS. Unless otherwise notified by Matisse in
accordance with SECTION 10.4(b) hereof, Matisse's chief place of business,
chief executive office and office where the documents, accounts and records
relating to the transactions contemplated by this Participation Agreement
and each other Operative Document are kept are located at 6750 LBJ Freeway,
Suite 1100, Dallas, Texas 75240.
(j) FEDERAL RESERVE REGULATIONS. Matisse is not engaged principally
in, and does not have as one of its important activities, the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board), and no part of the
proceeds of the Matisse/Bank Loan will be used by it to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any purpose that
violates, or is inconsistent with, the provisions of Regulation G, T, U, or
X of the Board.
(k) INVESTMENT COMPANY ACT. Matisse is not an "investment company"
or a company controlled by an "investment company" within the meaning of
the Investment Company Act.
(l) NO PLAN ASSETS. Matisse is not acquiring its interests in the
Property with the assets of any Plan (or its related trust).
31
(m) LESSOR LIENS. The Land is free and clear of all Lessor Liens
attributable to it.
(n) ADVERSE INFORMATION. All material information and materials
regarding Matisse which have been or will be provided by Matisse to the
Bank are or will be true and accurate in all material respects on the date
as of which such information and materials are dated or certified and do
not and will not omit to state any material fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided. There is no particular fact of which
Matisse has knowledge that has not been disclosed by Matisse in writing to
the Bank that, as far as Matisse can reasonably foresee, is reasonably
likely to have a Material adverse effect.
SECTION 8.3. REPRESENTATIONS OF THE LESSEE. The Lessee represents and
warrants to the Bank, Wolverine, and Matisse that:
(a) CORPORATE STATUS. The Lessee (i) is a duly organized and validly
existing corporation under the laws of the State of California and is in
active status under the laws of the State of Oregon and (ii) has duly
qualified and is authorized to do business and is in good standing in the
jurisdiction where the Property is located and in each other jurisdiction
where the failure to so qualify is reasonably likely to be Material and
adverse.
(b) CORPORATE POWER AND AUTHORITY. The Lessee has the corporate
power and authority to execute, deliver and carry out the terms and
provisions of the Operative Documents to which it is or will be a party and
has taken all necessary corporate action to authorize the execution,
delivery and performance of the Operative Documents to which it is or will
be a party and has or will have duly executed and delivered each Operative
Document required to be executed and delivered by it and, assuming the due
authorization, execution and delivery thereof on the part of each other
party thereto, each such Operative Document to which it is a party or will
be a party constitutes or will constitute a legal, valid and binding
obligation enforceable against it in accordance with its terms, except as
the same may be limited by insolvency, bankruptcy, reorganization or other
laws relating to or affecting the enforcement of creditors' rights or by
general equitable principles.
(c) NO VIOLATION. Neither the execution, delivery and performance by
the Lessee of the Operative Documents to which it is or will be a party,
nor compliance with the terms and provisions thereof, nor the consummation
by the Lessee of the transactions contemplated therein (i) will result in a
violation by the Lessee of any applicable provision of any law, statute,
rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality having jurisdiction over the Lessee or the
Property that would materially and adversely affect (x) the validity or
enforceability of the Operative Documents to which the
32
Lessee is a party, or the title to, or value or condition of, the Property
or the Pledged Collateral, or (y) the consolidated financial position,
business or consolidated results of operations of the Lessee or the ability
of the Lessee to perform its obligations under the Operative Documents,
(ii) will result in any material breach under, or (other than pursuant to
the Operative Documents) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets
of the Lessee pursuant to the terms of, any indenture, loan agreement or
other agreement for borrowed money or other material contract to which the
Lessee is a party or by which it or any of its property or assets is bound
or to which it may be subject (other than Permitted Exceptions), or (iii)
will violate any provision of the articles of incorporation or bylaws of
the Lessee.
(d) LITIGATION. Except as set forth on SCHEDULE 8.3(d), there are no
actions, suits or proceedings pending or, to the knowledge of the Lessee,
overtly threatened that are reasonably likely to have a material adverse
effect on (i) the Lessee, the Property or the Pledged Collateral or (ii)
the validity of the Operative Documents or enforceability of the rights or
remedies of Wolverine, Matisse or the Bank under the Operative Documents.
(e) GOVERNMENTAL APPROVALS. No Governmental Action (other than those
which have been obtained from the Governmental Authority having
jurisdiction) is required to authorize, or is required in connection with,
the execution, delivery and performance by the Lessee of, or is required in
connection with the legality, validity, binding effect or enforceability
against the Lessee of, any Operative Document.
(f) INVESTMENT COMPANY ACT. The Lessee is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act.
(g) PUBLIC UTILITY HOLDING COMPANY ACT. The Lessee is not a "holding
company," or a "subsidiary company," or an "affiliate" of a "holding
company," or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(h) INFORMATION.
(i) The consolidation balance sheet of Lessee and its
consolidated Subsidiaries as of December 31, 1995 and the related
consolidated statements of operations, cash flows and common
shareholders' equity for the fiscal year then ended, reported on by
KPMG Peat Marwick, a copy of which has been delivered to the Bank,
fairly present, in conformity with GAAP, the consolidated financial
position of Lessee and its consolidated Subsidiaries as of such date
and their
33
consolidated results of operations and changes in financial position
for such fiscal year.
(ii) The consolidation balance sheet of Lessee and its
consolidated Subsidiaries as of December 31, 1995 and the related
consolidated statements of operations and cash flows for the portion
of Lessee's fiscal year ended at the end of such quarter, a copy of
which has been delivered to the Bank, fairly present, in conformity
with GAAP, the consolidated financial position of Lessee and its
consolidated Subsidiaries as of such date and their consolidated
results of operations and changes in financial position for such
fiscal quarter, subject to normal year-end auditing adjustments.
(iii) All regular or periodic reports filed by the Lessee with
the Securities and Exchange Commission and all other material
information and materials regarding the Lessee and the Property which
have been or will be provided by the Lessee to the Bank are or will be
true and accurate in all material respects on the date as of which
such information and materials are filed, dated or certified and do
not and will not omit to state any material fact necessary to make
such information not misleading at such time in light of the
circumstances under which such information was provided.
(iv) The information provided or to be provided by Lessee and its
Affiliates to the appraiser who performs an Appraisal and which forms
the basis for the conclusion set forth in each Appraisal, taken as a
whole, was or when provided will be true and correct in all material
respects and did not or when provided will not omit any information
known and available to Lessee necessary to make the information
provided not materially misleading.
(i) TAXES. All United States federal income tax returns and all
other Material tax returns which are required to have been filed by or on
behalf of Lessee have been or will be prepared in accordance with
applicable law and filed by or on behalf of the Lessee by the respective
due dates, including extensions, and all taxes due with respect to the
Lessee pursuant to such returns or pursuant to any assessment received by
the Lessee have been or will be paid when due, except any such taxes which
are being contested in good faith by appropriate proceedings and with
respect to which the Lessee has established proper reserves in accordance
with GAAP. The charges, accruals and reserves on the books of the Lessee
in respect of taxes or other governmental charges are, in the opinion of
the Lessee, adequate.
(j) COMPLIANCE WITH ERISA. Except in a respect which could not
reasonably be expected to result in a liability to the Lessee in excess of
34
$1,000,000 in any single occurrence or $2,000,000 in the aggregate, (i)
each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all Material respects with the presently applicable
provisions of ERISA and the Code with respect to the Plan and (ii) no
member of the ERISA Group has (A) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (B) failed
to make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the
Code or (C) incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
(k) ENVIRONMENTAL AND OTHER REGULATIONS. To the Lessee's knowledge:
(i) The Property is in compliance with all Environmental Laws,
except such non-compliance as would not (if enforced in accordance
with Environmental Laws) result in liability in excess of $500,000 in
the aggregate.
(ii) The Lessee has obtained and maintained Governmental Actions
required under any Environmental Law with respect to the Property; all
such Governmental Actions are in good standing, and Lessee is in
compliance in all material respects with all terms and conditions
thereof.
(iii) There are no outstanding written orders from or agreements
with any Governmental Authority with respect to which Lessee or the
Property is not in compliance, nor any judicial or docketed
administrative proceedings respecting any Environmental Law, Hazardous
Activity, Hazardous Condition or Hazardous Substance to which the
Lessee or the Property is subject.
(iv) Other than Permitted Hazardous Substance Activity, there is
no Hazardous Activity with respect to the Property, or arising from
operations thereon, that would reasonably be expected to give rise to
any Hazardous Condition. In addition, (i) there are not located on
the Property underground storage tanks (x) that are not properly
registered or permitted under applicable Environmental Laws, or
(y) that are leaking or emitting Hazardous Substances whether on-or
off-site, and (ii) the Lessee has notified all of its employees of the
existence, if any, of any health hazard arising from the conditions of
their employment and have met all notification requirements under
Environmental Laws.
35
(v) The Lessee is in compliance with all Environmental Laws
relating to pollution and environmental control or employee safety,
except for violations which would not have a material adverse effect
on the consolidated results of operations, business, or consolidated
financial position of the Lessee.
(l) OFFER OF SECURITIES, ETC. Neither the Lessee nor any Person
authorized to act on its behalf has, directly or indirectly, offered any
interest in the Property or the Lease or any other interest similar thereto
(the sale or offer of which would be integrated with the sale or offer of
such interest in the Property or the Lease), for sale to, or solicited any
offer to acquire any of the same from, any Person other than the Bank,
Wolverine, Matisse and other "accredited investors" (as defined in
Regulation D of the Securities and Exchange Commission).
(m) SOLVENCY. The consummation by Lessee of the transactions
contemplated by the Operative Documents do not constitute a fraudulent
transfer within the meaning of the Oregon Uniform Fraudulent Transfer Act,
ORS 95.200 ET. SEQ.
(n) BEYOND WORDS. Lessee has delivered to Wolverine, Matisse and the
Bank a true and current copy of the lease entered into with Beyond Words
Publishing Co. Said lease is in full force and effect, without default on
the part of Lessee or, to Lessee's knowledge, Beyond Words Publishing
Company thereunder. The expiration date of said lease is no later than May
31, 1997 and the Lessee has no option to renew the term thereof.
SECTION 8.4. REPRESENTATIONS OF THE LESSEE WITH RESPECT TO THE PROPERTY ON
EACH FUNDING DATE. The Lessee hereby represents and warrants to the Bank,
Wolverine, and Matisse as of each Funding Date as follows:
(a) REPRESENTATIONS. The representations and warranties of the
Construction Agent and the Lessee set forth in the Operative Documents are
true and correct as of such Funding Date as if made on such Funding Date.
The Construction Agent and the Lessee are in compliance in all material
respects with their respective obligations under the Operative Documents
and there exists no Lease Event of Default. No Lease Event of Default will
occur as a result of, or after giving effect to, the Lease Advances
requested by the Funding Request on such Funding Date.
(b) PROPERTY. The Property consists of a Land Interest in the Land.
On the Land Interest, the Lessee will be or is constructing, pursuant to
the Construction Agency Agreement, a manufacturing, research and
development corporate campus containing approximately 190,000 square feet
of floor area to house corporate headquarters and administrative offices,
and research and development, manufacturing and related uses for the
manufacture and marketing
36
of semiconductors and other goods, together with parking, landscaping, and
recreational and related facilities, amenities and improvements. Such
Property is improved in accordance with the related Plans and
Specifications and the use thereof by the Lessee and its agents, assignees,
employees, invitees, lessees, licensees, contractors and tenants will
comply in all material respects with all Requirements of Law (including,
without limitation, Title III of the Americans with Disabilities Act, all
zoning and land use laws and Environmental Laws) and Insurance
Requirements, except for such Requirements of Law as the Lessee shall be
contesting in good faith by appropriate proceedings. The related Plans and
Specifications have been prepared and are in accordance with all material
applicable Requirements of Law (including, without limitation, Title III of
the Americans with Disabilities Act, applicable Environmental Laws and
building, planning, zoning and fire codes). The Land complies in all
material respects with all applicable zoning ordinances, regulations and
restrictive covenants and all requirements thereof necessary for the use,
occupancy and operation of the Land as a manufacturing and office facility
have been satisfied, and the current use of the Land is a conforming use.
Upon completion of the Financed Improvements in accordance with the Plans
and Specifications, such Financed Improvements and the other Improvements
on such Property will not encroach in any manner onto any adjoining land
(except as permitted by express written easements or as insured over by
appropriate title insurance) and such Financed Improvements and other
Improvements will comply in all material respects with all applicable
Requirements of Law (including, without limitation, Title III of the
Americans with Disabilities Act, all applicable Environmental Laws and
building, planning, zoning and fire codes). Upon completion of such
facility in accordance with the related Plans and Specifications, the
improvements including, without limitation, structural members, the
plumbing, heating, air conditioning and electrical systems thereof, and all
water, sewer, electric, gas, telephone and drainage facilities will be
completed substantially in accordance with the Plans and Specifications and
will be in condition and fit for use as a manufacturing research and
development corporate campus as described above, and all other utilities
required to adequately service the Financed Improvements for their intended
use are or will be available and "tapped on" and hooked up pursuant to
adequate permits (including any that may be required under applicable
Environmental Laws). There is no action, suit or proceeding (including any
proceeding in condemnation or eminent domain or under any Environmental
Law) pending or, to the Lessee's knowledge, threatened in writing with
respect to the Lessee, its affiliates or the Property which materially and
adversely affects the title to, or the marketability, use, operation or
value of, the Property, except for mechanics' liens which are being
contested in accordance with the Lease. As of such Funding Date, no fire
or other casualty with respect to the Property has occurred that
constitutes a Significant Casualty with respect to which the Lessee has
delivered a Termination Notice under SECTION 16.1 OF THE LEASE. The
Property has or, upon completion of the contemplated improvements, will
have available all material services of public facilities and other
utilities
37
necessary for use and operation of such Financed Improvements and the other
Improvements for their primary intended purposes, including, without
limitation, adequate water, gas and electrical supply, storm and sanitary
sewerage facilities, telephone, other required public utilities and means
of access to such facility from publicly dedicated streets and public
highways for pedestrians and motor vehicles. All utilities serving such
Property, or proposed to serve such Property in accordance with the related
Plans and Specifications, are located in, and vehicular access to the
Improvements on such Property is provided by, either public rights-of-way
abutting such Property or Appurtenant Rights. All material licenses,
approvals, authorizations, consents, permits (including, without
limitation, building, demolition and environmental permits, licenses,
approvals, authorizations and consents), easements and rights-of-way,
including proof of dedication, required for (x) the use, treatment,
storage, transport, disposal or disposition of any Hazardous Substance on,
at, under or from such Property during the construction of the Financed
Improvements thereon, and (y) construction of such Financed Improvements in
accordance with the related Plans and Specifications and the Construction
Agency Agreement have either been obtained from the appropriate
Governmental Authorities having jurisdiction or from private parties, as
the case may be, or will be obtained from the appropriate Governmental
Authorities having jurisdiction or from private parties, as the case may
be, prior to commencing any such construction or use and operation, as
applicable.
(c) TITLE. Wolverine holds a valid fee estate in the Property,
subject only to Permitted Exceptions and Lessor Liens.
(d) INSURANCE. Insurance coverage covering the Property which meets
the requirements of ARTICLE XIV OF THE LEASE is in full force and effect.
(e) LEASE. Upon the execution and delivery of the Lease, (i) the
Lessee will have unconditionally accepted the Property and will be bound by
the terms of the Lease and will have a valid leasehold interest in the
Property, subject only to the Permitted Exceptions; (ii) the Lessee's
obligation to pay Rent will be an independent covenant and no right of
deduction or offset will exist with respect to any Rent or other sums
payable under the Lease; and (iii) no Rent under the Lease will have been
prepaid and the Lessee will have no right to prepay the Rent, except as
specifically set forth therein.
(f) PROTECTION OF INTERESTS. (i) The Memorandum of Lease, the
Assignment of Lease-Related Documents, the Consent to Assignment and the
Wolverine/Matisse Deed of Trust are each in a form sufficient, and will
have been recorded in all recording offices necessary, to grant perfected
first priority liens on the Property to the Bank, Wolverine, or Matisse, as
the case may be, (ii) the Lessee Financing Statements are each in a form
sufficient, and have been filed in all filing offices necessary, to perfect
a valid first priority security interest in all of
38
the Property which might constitute personal property; and (iii) Wolverine
Financing Statements are each in a form sufficient, and have been filed in
all filing offices necessary, to perfect the Lessor's interest under the
Lease to the extent the Lease is a security agreement covering personal
property.
(g) FLOOD HAZARD AREAS; SEISMIC RISK. No portion of the Property is
located in an area identified as a special flood hazard area by the Federal
Emergency Management Agency or other applicable agency, or if any portion
of the Property is located in an area identified as a special flood hazard
area by the Federal Emergency Management Agency or other applicable agency,
then flood insurance has been obtained for the Property or such portion
thereof in accordance with SECTION 14.2 OF THE LEASE and in accordance with
the National Flood Insurance Act of 1968, as amended. To Lessee's
knowledge, the Land is not subject to any special seismic risks, based on
and except as disclosed in that certain Preliminary Geotechnical
Investigation and Soils Report dated October, 1995, prepared by AGRA Earth
& Environmental, Inc.
(h) NO LIENS. There have been no Liens asserted against the Property
since the Closing Date other than Permitted Exceptions.
(i) ADVANCE. The amount of the Lease Advance requested on such
Funding Date represents amounts owing in respect of amounts that are due to
third parties in respect of Property Costs. The conditions precedent to
such Lease Advance and the related remittances by the Bank with respect
thereto set forth in SECTION 6 have been satisfied.
SECTION 8.5. EFFECT OF MISREPRESENTATION. In no event shall any
misrepresentation by any party entitle any party other than the Bank to refuse
to perform any obligations hereunder or under the other Operative Documents.
SECTION 9.
PAYMENT OF CERTAIN EXPENSES
The Lessee agrees, for the benefit of Wolverine, Matisse and the Bank,
that:
SECTION 9.1. TRANSACTION EXPENSES.
(a) The Lessee shall pay, or cause to be paid, from time to time all
Transaction Expenses in respect of the transactions consummated on the
Closing Date or any Funding Date (including the fee payable by Lessee to
The Staubach Company), IT BEING UNDERSTOOD AND AGREED that neither the
Bank, Wolverine nor Matisse shall be required to pay for such Transaction
Expenses. Such Transaction Expenses and the Upfront Fee may be paid from a
Lease Advance.
39
(b) The Lessee shall pay or cause to be paid (i) the Upfront Fee,
(ii) all Transaction Expenses incurred by the Lessee, the Bank, Matisse and
Wolverine in entering into any future amendments or supplements with
respect to any of the Operative Documents, whether or not such amendments
or supplements are ultimately entered into, or giving or withholding of
waivers or consents hereto or thereto, in each case (except after the
occurrence of a Lease Event of Default) which have been requested by or
approved by the Lessee, (iii) all Transaction Expenses incurred by
Wolverine, Matisse, the Lessee or the Bank in connection with any purchase
of the Property by the Lessee or other Person pursuant to ARTICLES XVI,
XVII, XX OR XXII OF THE LEASE, (iv) all Transaction Expenses incurred by
any of the parties hereto in respect of enforcement of any of their rights
or remedies against the Lessee in respect of the Operative Documents after
any Lease Event of Default and (v) all costs for any reappraisal of the
Property and/or of any appraisal review required by applicable Requirements
of Law applicable to the Bank or conducted in accordance with ARTICLE XXII
OF THE LEASE, provided that the maximum costs for which the Lessee shall be
responsible in connection with any single such reappraisal or appraisal
review shall not exceed the sum of $10,000.
SECTION 9.2. BROKERS' FEES AND STAMP TAXES. The Lessee shall pay or cause
to be paid any brokers' fees and any and all stamp, transfer and other similar
taxes, fees and excises, if any, including any interest and penalties, which are
payable in connection with the transactions contemplated by this Participation
Agreement and the other Operative Documents, except those arising from any
Lessor Liens or any transfer by Matisse, Wolverine or the Bank of any of their
respective interests in the Property or the Operative Documents.
SECTION 9.3. OBLIGATIONS. The Lessee shall pay, on or before the due date
thereof, all payments due to third parties and all costs and expenses required
to be paid under the Wolverine/Matisse Deed of Trust and the Assignment of
Lease-Related Documents, including, without limitation, those of Wolverine;
provided that to the extent that the amount or due date of such expense is not
set forth in the Wolverine/Matisse Deed of Trust or the Assignment of Lease-
Related Documents, Lessee is notified in writing, at least ten (10) Business
Days prior to the date on which payment is due, of the amount and nature of such
expense and the name and address of the Person to whom payment is to be made and
is provided with a copy of the statement, bill, invoice, or other documentation
evidencing such expense.
40
SECTION 10.
OTHER COVENANTS AND AGREEMENTS
SECTION 10.1. COVENANTS OF THE LESSEE. The Lessee hereby agrees that so
long as this Participation Agreement is in effect:
(a) INFORMATION. The Lessee will deliver to the Bank, Wolverine, and
Matisse:
(i) within ten (10) Business Days after such statement is filed
with the Securities and Exchange Commission after the end of each
fiscal year of the Lessee, an audited statement of financial position
of the Lessee and its consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of income,
shareholder's equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous
fiscal year, all accompanied by the unqualified opinion of KPMG Peat
Marwick or other independent public accountants of nationally
recognized standing stating that such consolidated financial
statements present fairly the financial position of the Lessee and the
Lessee for the periods indicated, in conformity with GAAP, and, for
years subsequent to the Lessee's first fiscal year, applied on a basis
consistent with prior years; together with a Responsible Officer's
Certificate containing a computation of, and showing compliance with,
each of the financial ratios and restrictions contained in SECTIONS
10.1(d), (e), AND (f) and to the effect that the Responsible Officer
executing such certificate is not aware of any Lease Event of Default
or Lease Default that has occurred and is continuing, or if such
officer is aware of any such Lease Event of Default or Lease Default,
describing it and the steps, if any, being taken to cure it;
(ii) as soon as available and in any event within fifty (50) days
after the end of each of the first three quarters of each fiscal year
of the Lessee, a consolidated statement of financial position of the
Lessee as of the end of such quarter and the related consolidated
statements of income, shareholders, equity and cash flows for such
quarter and for the portion of the Lessee's fiscal year ended at the
end of such quarter, together with a Responsible Officer's Certificate
containing a computation of, and showing compliance with, each of the
financial ratios and restrictions contained in SECTIONS 10.1(d), (e),
AND (f) and that no Lease Default or Lease Event of Default has
occurred or is continuing or, if any Lease Default or Lease Event of
Default has occurred and is continuing, describing it and the steps,
if any, being taken to cure it;
41
(iii) promptly after the filing thereof, copies (without
exhibits thereto other than, in the case of reports on Form 10-K, the
portions of the annual report incorporated therein by reference) of
all reports on Forms 10-K, 10-Q and 8-K (or their equivalents), which
the Lessee shall have filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended;
(iv) if and when any member of the ERISA Group (1) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or
is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the
PBGC; (2) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (3) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (4) applies for a waiver
of the minimum funding standard under Section 412 of the Code, a copy
of such application; (5) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (6) gives notice of withdrawal from
any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(7) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes
any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or
other security, a certificate of the chief financial officer or the
chief accounting officer of the Lessee setting forth details as to
such occurrence and action, if any, which the Lessee or applicable
member of the ERISA Group is required or proposes to take; and the
aggregate liability of the Lessee or any member of the ERISA Group
with respect to any of the matters described in CLAUSES (1) THROUGH
(5) is reasonably likely to exceed $1,000,000 in any single occurrence
or $2,000,000 in the aggregate;
(v) within ten (10) days after the end of each month during the
Construction Period, a monthly summary report on a form approved by
the Bank, setting forth such details concerning construction of the
Financed Improvements as the Bank shall require, including (i) a
summary of the status of the completion and costs of the various
phases of construction of the Financed Improvements, showing the
amounts expended (on a month-to-date and project-to-date basis) for
such construction and the amounts
42
then due and unpaid, an estimate of the amount necessary to complete
construction of the Financed Improvements in their entirety, and a
certificate by Lessee that construction of the Financed Improvements
to the date of such certificate complies with the Plans and
Specifications therefor and (ii) if requested by the Bank, a list of
the names and addresses of all material dealers, laborers and
subcontractors with whom written agreements have been made by Lessee
or Lessee's general contractor (if any);
(vi) promptly after the occurrence of any Lease Default or Lease
Event of Default, notice thereof in writing, together with information
regarding the steps, if any, being taken to cure it;
(vii) promptly upon Lessee's receiving notice or actual
knowledge of (x) the intent by a Governmental Authority to take an
action which would constitute a Condemnation, investigate the Land for
a material violation of any Requirements of Law on or at the Land,
including any Environmental Law, under which liability may be imposed
upon Wolverine, Matisse, the Bank, or Lessee, or investigate the Land
(other than routine fire, life-safety and similar inspections) for any
violation of Requirements of Law under which criminal liability may be
imposed upon Wolverine, Matisse, the Bank, the Bank or Lessee, or (y)
the commencement of any litigation, action, proceeding or labor
controversy materially adversely affecting, or which may materially
adversely affect, the Land, written notice thereof.
(viii) from time to time such additional information regarding
the Lessee or the Property as Wolverine, Matisse or the Bank may
reasonably request.
(b) COMPLIANCE WITH LAWS. The Lessee will, and will cause its
Subsidiaries to, comply in all material respects with all Requirements of
Law except where the necessity of compliance therewith is contested in good
faith by appropriate proceedings and such contest is not reasonably likely
to result in a Material adverse effect.
(c) FURTHER ASSURANCE. Subject to SECTION 10.3(j) HEREOF, the Lessee
shall take or cause to be taken from time to time all action within its
control necessary to assure during the Term that title to the Property
remains in Wolverine as contemplated by the Operative Documents (provided
that the Lessee shall not be responsible for removing Lessor Liens with
respect to the Property), that Wolverine holds a perfected Lien on the
Property securing the Asset Termination Value as contemplated by SECTION
17.4 OF THE LEASE, and that the Bank as collateral agent for itself and
Matisse holds a perfected assignment of the rights of Wolverine under the
Lease.
43
(d) MAXIMUM CONSOLIDATED TOTAL LIABILITIES TO CONSOLIDATED TANGIBLE
NET WORTH. The Lessee will maintain a maximum ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth of 0.75:1.0 at all times
during the Term.
(e) MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Lessee's
Consolidated Tangible Net Worth at all times during the Term shall be equal
to or greater than $50,000,000.
(f) MINIMUM CASH EQUIVALENTS. The Lessee shall not permit the market
value of its Cash Equivalents (inclusive of the amount of the Pledged
Collateral) at any time during the Term to be less than $45,000,000.
(g) CORPORATE EXISTENCE; FRANCHISES; BUSINESSES. Except as otherwise
expressly permitted in this Agreement, the Lessee shall: (i) maintain in
full force and effect its separate existence and all material rights,
licenses, leases and franchises reasonably necessary to the conduct of
Lessee's business and (ii) continue doing business as a whole in the
semiconductor manufacturing and related businesses.
(h) LIENS. The Lessee shall not create or permit to exist any Lien
with respect to the Property (other than the Permitted Exceptions), the
Pledged Collateral, or such Cash Equivalents required to be maintained by
Lessee under SECTION 10.1(f) (other than Liens on the Pledged Collateral in
favor of Bank).
(i) TAKEOVERS, MERGERS, CONSOLIDATIONS, SALES. No person or group
(as such terms are defined in the Securities Exchange Act of 1934, as
amended) shall acquire beneficial ownership (as defined in the Securities
Exchange Act of 1934, as amended) of voting stock of the Lessee that
constitutes, immediately following such acquisition, more than thirty-three
percent (33%) of the outstanding voting stock of the Lessee. In addition,
the Lessee shall not, and shall not permit any Material Subsidiary to, be a
party to any merger or consolidation, or purchase or otherwise acquire all
or substantially all of the assets or stock of any class of, or any
partnership or joint venture interest in, any other Person, or, except in
the ordinary course of its business, sell, transfer, convey, or lease all
or any substantial part of its assets, or sell or assign with or without
recourse any receivables not in connection with the borrowing of money,
except for:
(i) Any such merger, consolidation, purchase, or acquisition in
which (A) the Lessee shall be the surviving entity and shall continue
to comply with SECTION 10.1(g), and (B) at least thirty (30) days
prior to the consummation of such merger, consolidation, purchase, or
acquisition, the Lessee shall deliver to the Bank a certificate, in
such detail as the Bank may reasonably request, certifying that no
Lease Event of Default under
44
SECTIONS 10.1(d), (e), (f), (h) OR (j) of this Agreement will exist
on a pro forma basis after such consummation;
(ii) Any such merger or consolidation, sale, transfer,
conveyance, lease or assignment of or by any wholly-owned Subsidiary
into the Lessee or into, with or to any other wholly-owned Subsidiary;
(iii) Any such purchase or other acquisition by the Lessee or
any wholly-owned Subsidiary of the assets or stock of any wholly-owned
Subsidiary;
(iv) Any sales by the Lessee and its Subsidiaries of receivables,
whether or not in connection with the borrowing of money and whether
or not with recourse, provided that all such sales are for cash in an
amount equal to or greater than the face value of such receivables
less a discount not exceeding fifteen percent (15%); and
(v) Agreements with suppliers, subcontractors, vendors and
customers, and research and development joint ventures or other
research and development arrangements, entered into in the ordinary
course of business.
(j) INVESTMENTS. Neither the Lessee nor any of its Subsidiaries
shall make any Investments, except for:
(i) Investments permitted by Section 10.1(i);
(ii) Investments permitted by the investment policy attached
hereto as SCHEDULE 1 hereto or any amendment thereto approved by the
Bank; and
(iii) Investments in Subsidiaries.
(j) BEYOND WORDS. If required by Bank, Lessee shall request and
diligently seek to obtain from Beyond Words Publishing Co. a subordination
and attornment agreement in a form reasonably acceptable to Bank, within
thirty (30) days after Bank's request therefor. All provisions of the
Lease and the other Operative Documents relating to subleases shall apply
to any amendment of the lease to Beyond Words Publishing Co.
SECTION 10.2. COOPERATION WITH THE LESSEE. Wolverine and Matisse shall,
to the extent reasonably requested by the Lessee (but without assuming
additional liabilities, duties or other obligations on account thereof), at the
Lessee's expense, cooperate with the Lessee in connection with its covenants
contained herein including, without limitation, at any time and from time to
time, upon the request of the Lessee, to promptly and duly execute and deliver
any and all such further instruments, documents and
45
financing statements (and continuation statements related thereto) as the Lessee
may reasonably request in order to perform such covenants.
SECTION 10.3. COVENANTS OF WOLVERINE. Wolverine hereby agrees that so
long as this Participation Agreement is in effect:
(a) DISCHARGE OF LIENS. Wolverine will not create or permit to exist
at any time, and will, at its own cost and expense, promptly take such
action as may be necessary duly to discharge, or to cause to be discharged,
all Lessor Liens on the Property; PROVIDED, HOWEVER, that Wolverine shall
not be required to so discharge any such Lessor Lien while the same is
being contested in good faith by appropriate proceedings diligently
prosecuted so long as Wolverine delivers to the Bank a good and sufficient
bond in amounts and on terms satisfactory to the Bank securing the
discharge of the same and such proceedings shall not involve any material
danger of impairment of the Liens of the Lease or the other Operative
Documents or of the sale, forfeiture or loss of, shall not interfere with
the use or disposition of, the Property or title thereto or any interest
therein or the payment of Rent, shall not result in any cost or expense to
the Lessee or the Bank and shall be completed prior to the consummation of
any purchase or sale of the Property pursuant to the terms of the Lease.
(b) CHANGE OF CHIEF PLACE OF BUSINESS. Wolverine shall give prompt
notice to the Lessee and the Bank if Wolverine's chief place of business or
chief executive office, or the office where the records concerning the
accounts or contract rights relating to the Property are kept, shall cease
to be located at 6750 LBJ Freeway, Suite 1100, Dallas, Texas 75240, or if
it shall change its name, identity or corporate structure.
(c) SALE OF THE PROPERTY. Wolverine shall not sell, transfer,
encumber, hypothecate, mortgage or otherwise dispose of all or any portion
of the Property or any interest therein, or grant any easement, right or
restriction with respect thereto at any time prior to the Expiration Date,
except for the Wolverine/Matisse Deed of Trust and except as otherwise
permitted or required by the Operative Documents.
(d) NATURE OF BUSINESS. Without the prior written consent of both the
Bank and the Lessee, Wolverine shall not contract for, assume, create or
incur any Indebtedness, Guaranty Obligations or other contractual
obligations, except for its Indebtedness under the Wolverine/Bank Loan
Documents, its Indebtedness under the Wolverine/Matisse Loan Documents, its
contractual obligations under the Operative Documents and Indebtedness and
contractual obligations arising in connection with Permitted Synthetic
Leasing Activities.
46
(e) INFORMATION. Wolverine will deliver to the Bank, and upon
written request, Lessee:
(i) within thirty (30) days after Wolverine has filed its
federal income tax return for the previous fiscal year, a copy of an
unaudited financial statement for Wolverine and federal income tax
return for Wolverine for the previous fiscal year, certified by a
Responsible Officer of Wolverine as being true and correct in all
material respects, together with a Responsible Officer's Certificate
to the effect that the Responsible Officer executing such certificate
is not aware of any Loan Event of Default or Loan Default that has
occurred and is continuing, or if such officer is aware of any such
Loan Event of Default or Loan Default, describing it and the steps, if
any, being taken to cure it;
(ii) within forty-five (45) days after the end of the first and
third fiscal quarters of Wolverine, a Responsible Officer's
Certificate to the effect that the Responsible Officer executing such
certificate is not aware of any Loan Event of Default or Loan Default
that has occurred and is continuing, or if such officer is aware of
any such Loan Event of Default or Loan Default, describing it and the
steps, if any, being taken to cure it;
(iii) from time to time upon the written request of the Bank
or Lessee, such information regarding Wolverine and its financial
condition, business, assets and liabilities as the Bank or Lessee may
reasonably request; and
(iv) promptly after the occurrence of any Loan Default or Loan
Event of Default attributable to it, notice thereof in writing,
together with information regarding the steps, if any, being taken to
cure it.
(f) COMPLIANCE WITH LAWS. Wolverine shall comply in all material
respects with all applicable Requirements of Law relating to the
transactions under the Operative Documents other than those for which
Lessee is responsible thereunder.
(g) CORPORATE EXISTENCE; FRANCHISES; BUSINESSES. Wolverine shall
maintain in full force and effect its separate existence and all material
rights, licenses, leases and franchises reasonably necessary to the conduct
of its business. Wolverine shall at all times remian qualified to do
business in, and shall maintain a registered agent for service of process
in, the State of Oregon.
(h) LIENS. Except for the Liens granted by it in the Operative
Documents and except for Liens granted by it in connection with Permitted
Synthetic Leasing Activities, Wolverine shall not create or permit to exist
any Lien with respect to any assets now owned or hereafter acquired,
except:
47
(i) Liens existing on the date hereof;
(ii) Liens on assets (other than the Property or its rights under
any of the Operative Documents) owned by it which are leased to third
parties in connection with Permitted Synthetic Leasing Activities,
which Liens are permitted under the terms of the documents for such
Permitted Synthetic Leasing Activities.
(i) ASSURANCES CONCERNING TITLE. Wolverine shall take, or cause to
be taken, from time to time all action necessary to assure that, during the
Term, title to the Property remains in Wolverine as contemplated by Section
12.1 of the Lease, that Wolverine holds a perfected Lien on the Property
securing the Asset Termination Value as contemplated by Section 12.1 of the
Lease, and that the Bank as collateral agent for itself and Matisse holds a
perfected assignment of the rights of Wolverine under the Lease. Wolverine
further covenants that, subject to its indemnification rights under SECTION
13, Wolverine will, upon the request of the Lessee, take any reasonable
action required in fulfillment of this subsection 10.3(i).
(j) TRANSFER OF TITLE. Within sixty (60) days after the occurrence
of any Loan Event of Default which is not a Lease Event of Default or a
Loan Event of Default described in Section 11,1(c) OR (d) hereof, and so
long as no Lease Event of Default shall have occurred or be continuing,
upon written request by the Lessee, and subject to the following
conditions, Wolverine shall convey the Land, and assign all of its interest
in the Operative Documents, to a third party transferee identified by the
Lessee that assumes all of Wolverine's obligations thereunder; provided,
however, that no such transfer shall occur without the prior written
consent of the Bank, which consent may be given, withheld, or conditioned
in the reasonable discretion of the Bank. In addition to the Bank's
consent, it shall be a condition to any such transfer that: (i) such
transfer shall be at no cost or expense to the Bank and Matisse and without
any increased liability to the Bank; (ii) the Lessee shall provide to the
Bank and Matisse upon the Bank's request (A) an opinion of counsel
acceptable to the Bank to the effect that after such transfer, each of the
Operative Documents will be valid, binding, and enforceable obligations of
such transferee and such other opinions as Bank may request, (B) a title
policy insuring the Bank's and Matisse's interest with respect to the
Property, (C) any other documentation that Bank may request in its sole
discretion; and (iii) such transferee shall be able to truthfully make all
of the representations and warranties of Wolverine (and delivers to the
Bank and Matisse a certification to such effect) other than representations
and warranties that are unique to Wolverine (such as state of
incorporation, location of principal place of business, notice address,
etc.) with respect to which such transferee shall make comparable
representations; (iv) such Loan Event of Default, if it is monetary in
nature or otherwise reasonably susceptible of cure, shall be cured prior to
or upon the
48
consummation of such transfer. In the event that, pursuant to Section
10.3(j) Wolverine conveys its entire interest in the Property and its
entire interest in the Operative Documents, Wolverine shall be relieved of
any further obligation or liability under the Operative Documents arising
after the date of the conveyance; provided, however, that Wolverine shall
not be relieved of any obligation or liability under the Operative
Documents attributable to a breach of the Operative Documents by it on or
before such date, subject to the provisions of SECTION 14.11 hereof and
SECTION 31.7 OF THE LEASE.
SECTION 10.4. COVENANTS OF MATISSE. Matisse hereby agrees that so long as
this Participation Agreement is in effect:
(a) DISCHARGE OF LIEN. Matisse will not create or permit to exist at
any time, and will, at its own cost and expense, promptly take such action
as may be necessary duly to discharge, or to cause to be discharged, all
Lessor Liens on the Property attributable to it; PROVIDED, HOWEVER, that
Matisse shall not be required to so discharge any such Lessor Lien while
the same is being contested in good faith by appropriate proceedings
diligently prosecuted so long as Matisse delivers to the Bank a good and
sufficient bond in amounts and on terms satisfactory to the Bank securing
the discharge of the same and such proceedings shall not involve any
material danger of impairment of the Liens of the Lease or the other
Operative Documents or of the sale, forfeiture or loss of, shall not
interfere with the use or disposition of, the Property or title thereto or
any interest therein or the payment of Rent, shall not result in any cost
or expense to the Lessee or the Bank and shall be completed prior to the
consummation of any purchase or sale of the Property pursuant to the terms
of the Lease.
(b) CHANGE OF CHIEF PLACE OF BUSINESS. Matisse shall give prompt
notice to the Lessee and the Bank if Matisse's chief place of business or
chief executive office, or the office where the records concerning the
accounts or contract rights relating to the Property are kept, shall cease
to be located at 6750 LBJ Freeway, Suite 1100, Dallas, Texas 75240, or if
it shall change its name, identity or corporate structure.
(c) NATURE OF BUSINESS. Without the prior written consent of the
Bank, Matisse shall not contract for, assume, create or incur any
Indebtedness, Guaranty Obligations or other contractual obligations, except
for its Indebtedness under the Matisse/Bank Loan Documents, its contractual
obligations under the Operative Documents and Indebtedness and contractual
obligations arising in connection with Permitted Synthetic Leasing
Activities.
(d) INFORMATION. Matisse will deliver to the Bank, and upon written
request, Lessee:
49
(i) within thirty (30) days after Matisse's filing of its tax
return at the end of the fiscal year of Matisse, a copy of an
unaudited financial statement for Matisse and federal income tax
return for Matisse for the previous fiscal year, certified by a
Responsible Officer of Matisse as being true and correct in all
material respects, together with a Responsible Officer's Certificate
to the effect that the Responsible Officer executing such certificate
is not aware of any Loan Event of Default or Loan Default that has
occurred and is continuing, or if such officer is aware of any such
Loan Event of Default or Loan Default, describing it and the steps, if
any, being taken to cure it;
(ii) within forty-five (45) days after the end of the second
fiscal quarter of Matisse, a Responsible Officer's Certificate to the
effect that the Responsible Officer executing such certificate is not
aware of any Loan Event of Default or Loan Default that has occurred
and is continuing, or if such officer is aware of any such Loan Event
of Default or Loan Default, describing it and the steps, if any, being
taken to cure it;
(iii) from time to time upon the written request of the Bank
or Lessee, such information regarding Matisse and its financial
condition, business, assets and liabilities as the Bank or Lessee may
reasonably request; and
(iv) promptly after the occurrence of any Loan Default or Loan
Event of Default attributable to it, notice thereof in writing,
together with information regarding the steps, if any, being taken to
cure it.
(e) COMPLIANCE WITH LAWS. Matisse shall comply in all material
respects with all applicable Requirements of Law relating to the
transactions under the Operative Documents other than those for which
Lessee is responsible thereunder.
(f) CORPORATE EXISTENCE; FRANCHISES; BUSINESSES. Matisse shall
maintain in full force and effect its separate existence and all material
rights, licenses, leases and franchises reasonably necessary to the conduct
of its business.
(g) SALE OF LIENS. Matisse shall not convey, transfer, sell, pledge
or encumber (except to the Bank) all or any portion of interest in the
Wolverine/Matisse Loan Documents or in any of the collateral covered by the
Matisse Subscription Pledge Agreement. Except for the Liens granted by it
in the Operative Documents and except for Liens granted by it in connection
with Permitted Synthetic Leasing Activities, Matisse shall not create or
permit to exist any Lien with respect to any assets now owned or hereafter
acquired, except:
(i) Liens existing on the date hereof; and
50
(ii) Liens (on assets other than the Property or its rights under
any of the Operative Documents) owned by it which are leased to third
parties in connection with Permitted Synthetic Leasing Activities,
which Liens are permitted under the terms of the documents for such
Permitted Synthetic Leasing Activities.
(h) OWNERSHIP OF WOLVERINE; MAINTENANCE OF MATISSE SUBSCRIPTION
AGREEMENTS. Prior to the full repayment of the Wolverine/Bank Loan and the
Matisse/Bank Loan and for so long as the Lease is outstanding, (i) Matisse
shall not assign, sell, hypothecate, or otherwise transfer any of its
interest in the stock of Wolverine, or any interest in such stock, (ii)
neither the Matisse Subscription Agreements, nor the obligations of the
shareholders thereunder, shall be amended or modified in any respect, or
terminated, and (iii) Matisse shall maintain the Matisse Subscription
Agreements in full force and effect, valid, binding, and enforceable
against such shareholders without diminution.
(i) ASSIGNMENT OF INTEREST. Within sixty (60) days after the
occurrence of any Loan Event of Default which is not a Lease Event of
Default or a Loan Event of Default described in SECTION 11.1(c) OR (d)
hereof, and so long as no Lease Event of Default shall have occurred or be
continuing, upon written request by the Lessee, and subject to the
following conditions, Matisse shall assign all of its interest in the
Operative Documents to a third party transferee identified by the Lessee
that assumes all of Matisse's obligations thereunder; provided, however,
that no such transfer shall occur without the prior written consent of the
Bank, which consent may be given, withheld, or conditioned in the
reasonable discretion of the Bank. In addition to the Bank's consent, it
shall be a condition to any such transfer that: (i) such transfer shall be
at no cost or expense to the Bank and without any increased liability to
the Bank; (ii) the Lessee shall provide to the Bank upon the Bank's request
(A) an opinion of counsel acceptable to the Bank to the effect that after
such transfer, each of the Operative Documents will be valid, binding, and
enforceable obligations of such transferee and such other opinions as Bank
may request, (B) any other documentation that Bank may request in its sole
discretion; (iii) such transferee shall be able to truthfully make all of
the representations and warranties of Matisse (and delivers to the Bank a
certification to such effect) other than representations and warranties
that are unique to Matisse (such as state of incorporation, location of
principal place of business, notice address, etc.) with respect to which
such transferee shall make comparable representations; and (iv) such Loan
Event of Default, if it is monetary in nature or otherwise reasonably
susceptible of cure, shall be cured prior to or upon the consummation of
such transfer. In the event that, pursuant to SECTION 10.4(I), Matisse
conveys its entire interest in the Operative Documents, Matisse shall be
relieved of any further obligation or liability under the Operative
Documents arising after the date of the conveyance; provided, however, that
Matisse shall not be relieved of any obligation or liability under the
Operative Documents
51
attributable to a breach of the Operative Documents by it on or before such
date subject to the provisions of SECTION 14.11 hereof. Upon any such
transfer, the Matisse Shareholder Subscription Pledge shall be null and
void.
(j) COOPERATION. Provided that the conditions set forth in Section
10.3(j) OR 10.4(I) hereof, as the case may be, are met, Wolverine and
Matisse shall cooperate with Lessee and the assignees or transferees of
Wolverine or Matisse, as the case may be, in any further amendments or
modifications to the Operative Documents submitted to the Bank for its
approval (which shall be granted or withheld in good faith) as may be
necessary to accomplish the assignment or transfer of the rights or
interests of Wolverine or Matisse pursuant to such Sections.
SECTION 10.5 BANK'S COVENANTS. Without affecting in any way the validity
of any such notice given to Wolverine and Matisse, the Bank agrees to send to
Lessee a copy of any notice of any Loan Default or Loan Event of Default that
the Bank sends to either Wolverine or Matisse under the Operative Documents.
Bank agrees to accept any cure from Lessee of any Loan Default or Loan Event of
Default which can be cured by the payment of money, provided that Lessee
reimburses Bank for any out-of-pocket costs incurred by Bank as a result of such
Loan Event of Default. If Bank shall become the owner of the Property as a
result of Bank's foreclosure thereon, or accepting a deed in lieu thereof, Bank
shall not disturb the tenancy of Lessee under the Lease so long as no Lease
Event of Default has occurred thereunder, and the protections afforded the Bank
under SECTION 13 shall not be diminished by virtue of any such foreclosure or
deed in lieu thereof.
SECTION 11.
LOAN EVENTS OF DEFAULT AND REMEDIES
SECTION 11.1. LOAN EVENTS OF DEFAULT. The occurrence of any one or more
of the following events (whether such event shall be voluntary or involuntary or
shall arise by operation of law or pursuant to any Governmental Action) shall
constitute a "Loan Event of Default":
(a) Wolverine or Matisse shall fail to observe or perform any term,
covenant or condition of Wolverine or Matisse set forth in SECTIONS
10.3(c), (d), OR (h) OR 10.4(c) OR (g) hereof OR set forth in SECTION 5.1
OF THE LEASE.
(b) Wolverine or Matisse shall fail to observe or perform any term,
covenant or condition of Wolverine or Matisse under any Operative Document
to which it is a party (other than those described in SECTION 11.1(a) OR
(f) hereof), or any representation or warranty given by Wolverine or
Matisse set forth in this Participation Agreement or in any other Operative
Document or in any document entered into in connection herewith or
therewith or in any document, certificate or
52
financial or other statement delivered by Wolverine or Matisse pursuant
hereto or thereto shall be false or inaccurate in any material way, and
such failure or misrepresentation or breach of warranty shall remain
uncured for a period of thirty (30) days after receipt of written notice
thereof;
(c) Wolverine or Matisse shall (i) admit in writing its inability to
pay its debts generally as they become due, (ii) file a petition under the
United States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof, (iii) make a general assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver for itself or the whole or
any substantial part of its property, (v) fail to cause the discharge of
any custodian, trustee or receiver appointed for Wolverine or Matisse or
the whole or a substantial part of its property within ninety (60) days
after such appointment, or (vi) file a petition or answer seeking or
consenting to reorganization under the United States bankruptcy laws or any
other applicable insolvency law or statute of the United States of America
or any State or Commonwealth thereof;
(d) Insolvency proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency law or statute of the
United States of America or any State or Commonwealth thereof shall be
filed against Wolverine or Matisse and not dismissed within sixty (60) days
from the date of its filing, or a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of Wolverine or
Matisse, a receiver of Wolverine or Matisse or the whole or a substantial
part of its property, and such order or decree shall not be vacated or set
aside within sixty (60) days from the date of the entry thereof;
(e) One or more final non-appealable judgments, decrees or orders for
the payment of money in excess of $25,000 in the aggregate shall be
rendered against Wolverine or Matisse and such judgments, decrees or orders
shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without Wolverine or Matisse's having obtained a written
agreement delivered to Bank (or after the expiration or termination of such
agreement) of the Persons entitled to enforce such judgment, decrees or
orders not to enforce the same pending negotiations with Wolverine or
Matisse concerning the satisfaction or other discharge of the same and
without the same having otherwise been satisfied or stayed;
(f) Any act, event or occurrence specifically described as a Loan
Event of Default under any of the Operative Documents shall occur;
(g) The occurrence of any Lease Event of Default; or
53
(h) The occurrence of any material adverse change in Wolverine's or
Matisse's capital structure, ownership or consolidated assets, liabilities,
results of operations, or financial condition from that in effect on the
Closing Date.
SECTION 11.2. REMEDIES.
(a) Upon the occurrence of a Loan Event of Default hereunder, (i) if
such event is a Loan Event of Default specified in CLAUSE (c) OR (d) of
SECTION 11.1 hereunder or SECTION 17.1(f) OR (g) OF THE LEASE,
automatically, the Wolverine/Bank Loan and the Matisse/Bank Loan (with
accrued interest thereon) and all other amounts owing under this
Participation Agreement and the Wolverine/Bank Note and Matisse/Bank Note
shall immediately become due and Loan payable, and (ii) if such event is
any other Loan Event of Default, the Bank may by notice of default to
Wolverine and Matisse, declare the Wolverine/Bank Loan and the Matisse/Bank
Loan (with accrued interest thereon) and all other amounts owing under this
Participation Agreement and the Wolverine/Bank Note and Matisse/Bank Note
to be due and payable forthwith, whereupon the same shall immediately
become due and payable. If at any time the Matisse/Bank Loan shall become
or be declared due and payable, then automatically, without notice, the
Wolverine/Matisse Loan (including all accrued interest and all other sums
due thereunder) shall be due and payable.
(b) Upon the occurrence of any Loan Event of Default, the Bank may
exercise any or all of the rights and powers and pursue any and all of the
remedies available to it hereunder and (subject to the terms thereof) under
the Wolverine/Bank Loan Documents and Matisse/Bank Loan Documents, and
shall have and may exercise any and all rights and remedies available under
the Uniform Commercial Code or any provision of law.
(c) Upon the occurrence of any Loan Event of Default, the Bank may
proceed to protect and enforce this Participation Agreement, the
Wolverine/Bank Note, the other Wolverine/Bank Loan Documents, the
Matisse/Bank Note, the other Matisse/Bank Loan Documents, the Wolverine/
Matisse Note and the other Wolverine/Matisse Loan Documents, by suit or
suits or proceedings in equity, at law or in bankruptcy, and whether for
the specific performance of any covenant or agreement herein contained or
in execution or aid of any power herein granted, or for foreclosure, or for
the appointment of a receiver or receivers for any property securing the
Wolverine/Bank Loan and Matisse/Bank Loan, or for the recovery of judgment
for the indebtedness thereunder or for the enforcement of any other proper,
legal or equitable remedy available under any applicable law.
(d) Subject to SECTION 14.10 and the reimbursement obligations of
Lessee under the Lease, Wolverine and Matisse shall be liable for any and
all accrued and unpaid amounts due hereunder before, after or during the
exercise of any of the foregoing remedies, including all reasonable legal
fees and other
54
reasonable costs and expenses incurred by the Bank by reason of the
occurrence of any Loan Event of Default or the exercise of remedies with
respect thereto.
(e) Except as expressly provided above, no remedy under this SECTION
11.2 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy provided under this SECTION 11.2 or under the
other Operative Documents or otherwise available at law or in equity. The
exercise by the Bank of any one or more of such remedies shall not preclude
the simultaneous or later exercise of any other remedy or remedies. No
express or implied waiver by the Bank of any Loan Event of Default shall in
any way be, or be construed to be, a waiver of any future or subsequent
Loan Event of Default. The failure or delay or the Bank in exercising any
rights granted it hereunder upon any occurrence of any of the contingencies
set forth herein shall not constitute a waiver of any such right upon the
continuation or recurrence of any such contingencies or similar
contingencies and any single or partial exercise of any particular right by
the Bank shall not exhaust the same or constitute a waiver of any other
right provided herein.
(f) No failure to exercise and no delay in exercising, on the part of
the Bank, any right, remedy, power or privilege hereunder shall operate as
waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
(g) In the event of a Loan Event of Default that constitutes or
results from a Lease Event of Default, the Bank may, pursuant to the
Assignment of Lease-Related Documents, exercise all rights and remedies
available to the Lessor under the Lease.
SECTION 12.
ARBITRATION
SECTION 12.1. ARBITRATION.
(a) ARBITRATION OF CLAIMS. Except as set forth in SECTION 12.1(d), the
Lessee, Wolverine, Matisse, or the Bank may require that all disputes, claims,
counterclaims, and defenses, including those based on or arising from any
alleged tort, relating in any way to this Agreement, any loan, any of the
Operative Documents, or any transaction of which this Agreement is a part (each
a "Claim"), be settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and Title 9 of the
U.S. Code. All Claims will be subject to the statutes of limitation applicable
if they were litigated. This provision is void if the effect of the arbitration
procedure (as opposed to any Claims of any of the aforementioned parties) would
be to
55
materially impair the Bank's ability to realize (either for itself or as
assignee of Matisse) on any collateral securing the Wolverine/Bank Loan, the
Matisse/Bank Loan, or the Wolverine/Matisse Loan.
(b) ARBITRATORS. If arbitration occurs and each party's Claim is less
than $100,000, one neutral arbitrator will decide all issues; if any party's
Claim is $100,000 or more three neutral arbitrators will decide all issues. All
arbitrators will be active Oregon State Bar members in good standing, and shall
have substantial experience in advising clients with respect to sale-leasebacks,
leveraged leases or other complex real estate transactions. All arbitration
hearings will be held in Portland, Oregon. In addition to all other powers, the
arbitrator(s) shall have the exclusive right to determine all issues of
arbitrability. Judgment on any arbitration award may be entered in any court
with jurisdiction.
(c) OTHER REMEDIES. If any party institutes any judicial proceeding
relating to any Claim, such action shall not be a waiver of the right to submit
any Claim to arbitration. In addition, each has the right before, during, and
after any arbitration to exercise any number of the following remedies, in any
order or concurrently: (a) setoff; (b) self-help repossession; (c) judicial or
non-judicial foreclosure against real or personal property collateral; (d)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery and replevin.
(d) GOVERNING PROVISION. Each of the Lessee, Wolverine, Matisse, and the
Bank agrees that, notwithstanding any contrary provision herein or in any other
Operative Document, the provisions of this Article shall govern the arbitration
of all matters described herein; provided, however, that Lessee shall have the
absolute right, without arbitration, to pursue in a court of competent
jurisdiction, the remedy of specific performance of any obligation of the Lessor
under the Operative Documents to convey title to the Property..
SECTION 13.
INDEMNIFICATION
SECTION 13.1. GENERAL INDEMNIFICATION. The Lessee agrees, whether or not
any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After Tax Basis, from and against, any and all Claims that may
be imposed on, incurred by or asserted against such Indemnitee (whether because
of action or omission by such Indemnitee or otherwise), whether or not such
Claim arises or accrues prior to the Closing Date or after the Expiration Date,
relating to or arising out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby or any violation thereof, and any amendment,
modification or waiver in respect thereof;
56
(b) the Property, the Lease or any part thereof or interest therein;
(c) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
maintenance, repair, alteration, modification, addition or substitution,
storage, transfer of title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any
sale pursuant to SECTIONS 16.2, 16.3, 16.4, 17.2(c), 17.2(e) OR 17.4 OF THE
LEASE or any sale pursuant to ARTICLES XX OR XXII OF THE LEASE), return or
other disposition of all or any part or any interest in the Property or the
imposition of any Lien (or incurring of any liability to refund or pay over
any amount as a result of any Lien) thereon, including, without limitation,
any of the following relating to the Property: (1) Claims or penalties
arising from any violation of federal, state or local law, rule, regulation
or order or in tort (strict liability or otherwise), (2) latent or other
defects, whether or not discoverable, (3) any Claim based upon a violation
or alleged violation of the terms of any restriction, easement, condition
or covenant or other matter affecting title to the Property, (4) the making
of any modifications in violation of any standards imposed by any insurance
policies required to be maintained by Lessee pursuant to the Lease which
are in effect at any time with respect to the Property or any part thereof,
(5) any Claim of patent, trademark or copyright infringement, (6) Claims
arising from any public improvements with respect to the Property resulting
in any charge or special assessments being levied against the Property or
any plans to widen, modify or realign any street or highway adjacent to the
Property, and (7) Claims arising from any condition of the Property, the
Improvements or any street, curb or sidewalk adjoining the Property, or of
any passageways or spaces therein or appurtenant thereto.
(d) the breach by the Lessee of any covenant, representation or
warranty made by it or deemed made by it in any Operative Document or any
certificate required to be delivered by any Operative Document;
(e) the existence of any Lien on or with respect to the Property, the
Improvements, any Basic Rent or Supplemental Rent, title thereto, or any
interest therein, including any Liens which arise out of the possession,
use, occupancy, construction, repair or rebuilding of the Property or by
reason of labor or materials furnished or claimed to have been furnished to
the Lessee, Wolverine, Matisse, any prior owner of the Land or any of their
contractors or agents or by reason of the financing of the Property or any
personalty or equipment purchased or leased by the Lessee or Improvements
or Modifications constructed by the Lessee, except Lessor Liens and Liens
in favor of the Bank, Wolverine or Matisse arising under the Operative
Documents;
(f) the transactions contemplated by the Lessee hereby or by any
other Operative Document, in respect of the application of Parts 4 and 5 of
Subtitle B of
57
Title I of ERISA and any prohibited transaction described in Section
4975(c) of the Code (provided that (i) Wolverine shall not be entitled to
indemnification under this CLAUSE (f) if it shall have been determined by a
court of competent jurisdiction to have breached the representation made by
it in SECTION 8.1(1) hereof and (ii) Matisse shall not be entitled to
indemnification under this CLAUSE (f) if it shall have been determined by a
court of competent jurisdiction to have breached the representation made by
it in SECTION 8.2(l) hereof);
(g) [Reserved];
(h) any act or negligence of the Lessee, its agents, servants,
employees or licensees, or arising from any accident, injury or damage
whatsoever caused to any Person, in or about the Property, or upon the
sidewalk and the land adjacent thereto;
(i) the occurrence of any Loan Default described in SECTION 11.1(c)
OR (d) of this Agreement;
(j) any disclosure requirements of Lessee or in favor of any of
Lessee's security holders under applicable securities laws or any financial
reporting requirements under applicable laws relating to the Lessee, the
Property, or the transactions contemplated by the Operative Documents.
PROVIDED, HOWEVER, that the Lessee shall not be required to indemnify an
Indemnitee (herein, an "Excluded Indemnitee") under this SECTION 13.1 for
any of the following:
(i) Any Claim to the extent resulting from the willful
misconduct or gross negligence of such Excluded Indemnitee (it being
understood that the Lessee shall, except as otherwise provided in this
SECTION 13.1, be required to indemnify each Indemnitee even if the
ordinary (but not gross) negligence of such Indemnitee caused or
contributed to such Claim);
(ii) Any Claim to the extent resulting from Lessor Liens
attributable to such Excluded Indemnitee or from a transfer by such
Excluded Indemnitee in violation of the Operative Documents;
(iii) Any Claim to the extent resulting from the wrongful
failure of such Indemnitee to pay to any other party to this
Agreement, as required by the Operative Documents, any funds received
by such Excluded Indemnitee;
(iv) Any Imposition or other claims for Taxes; or
58
(v) any Claim arising as a result of the violation by an
Indemnitee of any federal or state banking or securities law, rule or
regulation;
provided, further, that nothing contained herein shall limit the
obligations of the Lessee to indemnify all Indemnitees other than the
Excluded Indemnitee as a result of any of the acts or occurrences described
in CLAUSES (i), (ii) OR (iii) above.
It is expressly understood and agreed that the indemnity provided for
herein shall survive the expiration or termination of and shall be separate
and independent from any remedy under the Lease or any other Operative
Document. Without limiting the express rights of any indemnitee under this
SECTION 13.1, this SECTION 13.1 shall be construed as an indemnity only and
not a guaranty of residual value of the Property or as a guaranty of the
Wolverine/Bank Loan, the Matisse/Bank Loan or the Wolverine/Matisse Loan.
Each of Wolverine and Matisse agrees to execute such documents and perform
such acts as may be necessary to enable Lessee to perform its
indemnification obligations hereunder.
SECTION 13.2. END OF TERM INDEMNITY.
(a) If the Lessee elects the Remarketing Option and there would,
after giving effect to the proposed remarketing transactions, be a
Shortfall Amount, then prior to the Termination Date or Maturity Date, as
the case may be, and as a condition to the Lessee's right to complete the
remarketing of the Property pursuant to SECTION 22.1 OF THE LEASE, as the
case may be, the Lessee shall cause to be delivered to the Lessor at least
sixty (60) days prior to the Expiration Date in the case of a marketing
pursuant to SECTION 22.1 OF THE LEASE, at the Lessee's sole cost and
expense, both (i) an appraisal of the Property by an appraiser selected by
the Lessor and reasonably satisfactory to the Lessee and the Bank and (ii)
a report from such appraiser in form and substance satisfactory to the Bank
which shall state the appraiser's conclusions as to the reason for any
decline in the Fair Market Sales Value of the Property from that
anticipated for the Property upon completion (such appraisal and report to
be referred to as the "END OF THE TERM REPORT").
(b) Prior to the Termination Date or Expiration Date, as the case may
be, the Lessee shall pay to the Lessor an amount (not to exceed the
Shortfall Amount) equal to the portion of the Shortfall Amount that the End
of the Term Report indicates was the result of a decline in the Fair Market
Sales Value of the Property due to:
(i) the failure of the Lessee to maintain the Property in the
condition acquired on the Closing Date, as improved pursuant to the
Plans and Specifications (ordinary wear and tear excepted) or the
failure of the
59
Lessee to maintain the Property in accordance with the Maintenance
Standard;
(ii) any modification made to, or any rebuilding of, the Property
or any part thereof by the Lessee; or
(iii) the existence of any Hazardous Activity, Hazardous
Substance or Hazardous Conditions; or
(iv) any restoration or rebuilding carried out by the Lessee; or
(v) any condemnation of any portion of the Property pursuant to
ARTICLE XV OF THE LEASE (except to the extent the proceeds thereof
previously applied to reduce the Asset Termination Value or the
principal balances of the Wolverine/Bank Loan or the Matisse/Bank
Loan); or
(vi) any use of the Property or any part thereof by the Lessee
other than as permitted by the Operative Documents or by any
sublessee; or
(vii) any grant, release, dedication, transfer, annexation or
amendment made pursuant to SECTION 12.2 OF THE LEASE; or
(viii) the failure of the Lessor to have good and marketable
title to the Improvements and a valid fee estate in the Land Interest
free and clear of all Liens and exceptions to title (except for
Permitted Exceptions), whether or not such Liens or exceptions to
title existed on the Closing Date or were disclosed in any title
report; PROVIDED, that any portion of the Shortfall Amount that is (A)
attributable to the existence of Lessor Liens or Liens shown on the
policy of title insurance delivered pursuant to SECTION 6.1 hereof or
(B) offset by the proceeds of title insurance payable under such
policy, shall not be subject to indemnification under this SECTION
13.2.
SECTION 13.3. ENVIRONMENTAL INDEMNITY. Without limitation of the other
provisions of this SECTION 13, the Lessee hereby agrees to indemnify, hold
harmless and defend each Indemnitee from and against any and all claims
(including without limitation third party claims for personal injury or real or
personal property damage), losses (including but not limited to any loss of
value of the Property), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings) and
orders, judgments, remedial action, requirements, enforcement actions of any
kind, and all reasonable and documented costs and expenses incurred in
connection therewith (including but not limited to reasonable and documented
attorneys' and/or paralegals' fees and expenses), including, but not limited to,
all costs incurred in connection with any investigation or monitoring of site
conditions or any clean-up,
60
remedial, removal or restoration work by any federal, state or local government
agency, which such Indemnitee becomes subject to with respect to with the
Property, the transactions contemplated by the Operative Documents or any other
matter referred to in SECTIONS 13.1(a)-(h) arising in whole or in part, out of:
(a) the presence on or under the Property of any Hazardous
Substances, or any Hazardous Activity, or any Releases of any Hazardous
Substances on, under, from or onto the Property at any time;
(b) any activity, including, without limitation, construction,
carried on or undertaken on or off the Property, and whether by the Lessee,
the Lessor (if such activity was undertaken with the consent or at the
direction of the Lessee), any predecessor in title or any employees,
agents, contractors or subcontractors of the Lessee, the Lessor, or any
predecessor in title, or any other Persons, in connection with the
handling, treatment, removal, storage, decontamination, cleanup, transport
or disposal of any Hazardous Substances that at any time are located or
present on or under or that at any time migrate, flow, percolate, diffuse
or in any way move onto or under the Property; provided that this
SUBSECTION 13.3(b) shall not apply with respect to the Lessor, its
officers, directors, shareholders, employees, agents and assigns in the
case of any activity carried on by the Lessor, its officers, directors,
shareholders, employees, agents or assigns without the written consent of
Lessee.
(c) loss of or damage to any property or the environment (including,
without limitation, cleanup costs, response costs, remediation and removal
costs, cost of corrective action, costs of financial assurance, fines and
penalties and natural resource damages), or death or injury to any Person,
and all expenses associated with the protection of wildlife, aquatic
species, vegetation, flora and fauna, and any mitigative action required by
or under Environmental Laws as a result of any condition of the Property;
(d) any claim concerning lack of compliance with Environmental Laws,
or any act or omission causing an environmental condition that requires
remediation or would allow any Governmental Authority to record a Lien on
the land records as a result of any condition of the Property; or
(e) any residual contamination on or under the Property, or affecting
any natural resources, or any contamination of any property or natural
resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such Hazardous Substances, and
irrespective of whether any of such activities were or will be undertaken
in accordance with applicable Environmental Laws;
PROVIDED, HOWEVER, the Lessee shall not be required to indemnify an Indemnitee
under this SECTION 13.3 for (1) any Claim to the extent resulting from the
willful misconduct or
61
gross negligence of such Indemnitee (IT BEING UNDERSTOOD that the Lessee shall
be required to indemnify an Indemnitee even if the ordinary (but not gross)
negligence of such Indemnitee caused or contributed to such Claim), (2) subject
to the provisions SECTION 15.2 OF THE LEASE, any Claim to the extent
attributable to the initial introduction onto the Property of any Hazardous
Substances after the consummation of a purchase of the Property by Lessee or a
third party in accordance with the Lease or the cessation of occupancy of the
Property by Lessee as a result of the completion of foreclosure, eviction or
other dispossessory remedies against Lessee (other than as a result of
migration, flowage, percolation, diffusion or other movement of Hazardous
Substances present on the Property prior to any such purchase or cessation of
occupancy), (3) any Imposition or other claims for Taxes of the type(s)
described in SECTION 13.5 or (4) any Claims of the type(s) described in SECTIONS
13.2 (only with respect to claims in respect of a decline in the Fair Market
Sales Value of the Property and the Lessee's exercise of the Remarketing
Option), 13.6, 13.8 and 13.10. It is expressly understood and agreed that the
indemnity provided for herein shall survive the expiration, termination,
reconveyance or release of, and shall be separate and independent from any
remedy under, the Lease or any other Operative Document.
SECTION 13.4. PROCEEDINGS IN RESPECT OF CLAIMS.
(a) With respect to any amount that the Lessee is requested by an
Indemnitee to pay by reason of SECTION 13.1 or 13.3, such Indemnitee shall,
if so requested by the Lessee and prior to any payment, submit such
additional information to the Lessee as the Lessee may reasonably request
and which is in the possession of such Indemnitee or an affiliate, officer,
director, employee, agent or assign of such Indemnitee to substantiate
properly the requested payment;
(b) In case any action, suit or proceeding shall be brought against
any Indemnitee, such Indemnitee shall notify the Lessee of the commencement
thereof, and the Lessee shall be entitled, at its expense, to participate
in, and, to the extent that the Lessee desires to, assume and control the
defense thereof; PROVIDED, HOWEVER, that the Lessee shall have acknowledged
in writing its obligation to fully indemnify such Indemnitee in respect of
such action, suit or proceeding (and such Indemnitee is reasonably
satisfied that Lessee is capable of doing so), and the Lessee shall keep
such Indemnitee fully apprised of the status of such action, suit or
proceeding and shall provide such Indemnitee with all information with
respect to such action, suit or proceeding as such indemnitee shall
reasonably request, and PROVIDED FURTHER, that the Lessee shall not be
entitled to assume and control the defense of any such action, suit or
proceeding if and to the extent that, (i) in the reasonable opinion of such
Indemnitee, (x) such action, suit or proceeding involves any possibility of
imposition of criminal liability or any risk of material civil liability on
such Indemnitee or will involve a material risk of the sale, forfeiture or
loss of, or the creation of any Lien (other than a
62
Permitted Exception) on the Property or any part thereof unless, in the
case of civil liability, the Lessee shall have posted a bond or other
security satisfactory to the relevant Indemnitee in respect to such risk or
(y) the control of such action, suit or proceeding would involve an actual
or potential conflict of interest, (ii) such proceeding involves Claims not
fully indemnified by the Lessee which the Lessee and the Indemnitee have
been unable to sever from the indemnified claim(s), (such Indemnitee hereby
agreeing to cooperate with Lessee in efforts to sever such claims) or (iii)
a Lease Event of Default has occurred and is continuing. The Indemnitee
may participate in a reasonable manner at its own expense and with its own
counsel in any proceeding conducted by the Lessee in accordance with the
foregoing. The Lessee shall not enter into any settlement or other
compromise with respect to any Claim which is entitled to be indemnified
under SECTION 13.1 or without the prior written consent of the Indemnitee
which consent shall not be unreasonably withheld in the case of a money
settlement not involving an admission of liability of such Indemnitee.
(c) Each Indemnitee shall at the expense of the Lessee supply the
Lessee with such information and documents reasonably requested by the
Lessee as are necessary or advisable for the Lessee to participate in any
action, suit or proceeding to the extent permitted by SECTION 13.1 or 13.3.
Unless a Lease Event of Default shall have occurred and be continuing, no
Indemnitee shall enter into any settlement or other compromise with respect
to any Claim which is entitled to be indemnified under SECTION 13.L or 13.3
without the prior written consent of the Lessee, which consent shall not be
unreasonably withheld, unless such Indemnitee waives its right to be
indemnified under SECTION 13.1 or 13.3 with respect to such Claim.
(d) Upon payment in full of any Claim by the Lessee pursuant to
SECTION 13.1 or 13.3 to or on behalf of an Indemnitee, the Lessee, without
any further action, shall be subrogated to any and all claims that such
Indemnitee may have relating thereto (other than claims in respect of
insurance policies maintained by such Indemnitee at its own expense), and
such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents,
instruments and agreements as may be necessary to preserve any such claims
and otherwise cooperate with the Lessee and give such further assurances as
are necessary or advisable to enable the Lessee vigorously to pursue such
claims.
(e) Any amount payable to an Indemnitee pursuant to SECTION 13.1 or
13.3 shall be paid to such Indemnitee promptly upon receipt of a written
demand therefor from such Indemnitee, accompanied by a written statement
describing in reasonable detail the basis for such indemnity and the
computation of the amount so payable and, if requested by the Lessee, such
determination shall be verified by
63
a nationally recognized independent accounting firm mutually acceptable to
the Lessee and the Indemnitee at the expense of the Lessee.
SECTION 13.5. GENERAL IMPOSITIONS INDEMNITY.
(a) INDEMNIFICATION. The Lessee shall pay and assume liability for,
and does hereby agree to indemnify, protect and defend the Property and all
Indemnitees, and hold them harmless against, all Impositions on an After
Tax Basis.
(b) PAYMENTS.
(i) Subject to the terms of SECTION 13.5(F), the Lessee shall
pay or cause to be paid all Impositions directly to the taxing
authorities where feasible and otherwise to the Indemnitee, as
appropriate, and the Lessee shall at its own expense, upon such
Indemnitee's reasonable request, furnish to such Indemnitee copies of
official receipts or other satisfactory proof evidencing such payment.
(ii) In the case of Impositions for which no contest is conducted
pursuant to SECTION 13.5(f) and which the Lessee pays directly to the
taxing authorities, the Lessee shall pay such Impositions prior to the
latest time permitted by the relevant taxing authority for timely
payment. In the case of Impositions for which the Lessee reimburses
an Indemnitee, the Lessee shall do so within twenty (20) days after
receipt by the Lessee of demand by such Indemnitee describing in
reasonable detail the nature of the Imposition and the basis for the
demand (including the computation of the amount payable), but in no
event shall the Lessee be required to pay such reimbursement prior to
the latest time permitted by the relevant taxing authority for timely
payment. In the case of Impositions for which a contest is conducted
pursuant to SECTION 13.5(f), the Lessee shall pay such Impositions or
reimburse such Indemnitee for such Impositions, to the extent not
previously paid or reimbursed pursuant to SECTION 13.5(a), prior to
the latest time permitted by the relevant taxing authority for timely
payment after conclusion of all contests under SECTION 13.5(f).
(iii) Impositions imposed with respect to the Property for a
period during which the Lease expires or terminates (unless the Lessee
has exercised the Renewal Option or the Purchase Option with respect
to the Property) shall be adjusted and prorated on a daily basis
between the Lessee and Wolverine, whether or not such Imposition is
imposed before or after such expiration or termination and each party
shall pay or reimburse the other for each party's pro rata share
thereof.
64
(iv) At the Lessee's request, the amount of any indemnification
payment by the Lessee pursuant to SECTION 13.5(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 fee shall be paid by the Indemnitee.
(v) In the event that the Indemnitee receives a refund (or like
adjustment) in respect of any Impositions (or deduction or withholding
thereof) paid by the Lessee or for which the Indemnitee has been
reimbursed by the Lessee, the Indemnitee shall within ten (10) days
remit the amount of such refund (or like adjustment) to the Lessee,
net of all reasonable costs and expenses incurred by such Indemnitee.
(c) REPORTS AND RETURNS.
(i) Except as provided in Section 13.5(c)(ii), the Lessee shall
be responsible for preparing and filing any real and personal property
or ad valorem tax returns in respect of the Property.
(ii) In the case of real property, personal property tax and
other ad valorem tax returns with respect to the Property (or any
portion thereof) that are required to be filed by or in the name of an
Indemnitee and in the case any other report or tax return which shall
be required to be made with respect to any obligations of the Lessee
under or arising out of SECTION 13.5(a) and of which the Lessee has
knowledge or should have knowledge, the Lessee, at its sole cost and
expense, shall notify the relevant Indemnitee of such requirement and
(except if such Indemnitee notifies the Lessee that such Indemnitee
intends to file such report or return) and: (A) to the extent required
or permitted by and consistent with Requirements of Law, shall make
and file in its own name such return, statement or report; and (B) in
the case of any other such return, statement or report required to be
made in the name of such Indemnitee, shall advise such Indemnitee of
such fact and prepare such return, statement or report for filing by
such Indemnitee or, where such return, statement or report shall be
required to reflect items in addition to any obligations of the Lessee
under or arising out of SECTION 13.5(a), provide such Indemnitee at
the Lessee's expense with information sufficient to permit such
return, statement or report to be properly made with respect to any
obligations of the Lessee under or arising out of SECTION 13.5(a).
Such Indemnitee shall, upon the Lessee's request and at the Lessee's
expense, provide any data maintained by-such Indemnitee (and not
otherwise available to or within
65
the control of the Lessee) with respect to the Property which the
Lessee may reasonably require to prepare any required tax returns or
reports.
(iii) If pursuant to SECTION 13.5(c)(ii) an Indemnitee
notifies the Lessee of its intention to file a return or report itself
with respect to the Property (or any portion thereof) or with respect
to a Tax or Imposition for which such Indemnitee is entitled to
indemnification pursuant to this SECTION 13.5 or if Lessee has
prepared a return or report for filing by an Indemnitee pursuant to
SECTION 13.5(c)(ii)(b), such Indemnitee shall timely file such return
and provide a copy of such return to the Lessee within ten days after
it is filed. Prior to filing any return with respect to the Property
(or any portion thereof), an Indemnitee shall consult with Lessee as
to the proposed form of the return and shall provide a copy of the
proposed return to Lessee at least ten days before such return is due.
(iv) Each Indemnitee shall promptly forward to Lessee, by means
calculated to provide Lessee with sufficient time to respond, any
correspondence or other written communication received from a taxing
authority or jurisdiction with respect to the Property (or any portion
thereof).
(d) INCOME INCLUSIONS. If as a result of the payment or
reimbursement by the Lessee of any expenses of Wolverine, Matisse or the
Bank or the payment of any Transaction Expenses incurred in connection with
the transactions contemplated by the Operative Documents, Wolverine,
Matisse, or any Bank shall suffer a net increase in any federal, state or
local income tax liability, the Lessee shall indemnify such Persons
(without duplication of any indemnification required by SECTION 13.5(a)) on
an After Tax Basis for the amount of such increase. The calculation of any
such net increase shall take into account any current or future tax savings
realized or reasonably expected to be realized by such person in respect
thereof, as well as any interest, penalties and additions to tax payable by
Wolverine, Matisse, the Bank or such Affiliate, in respect thereof,
provided that the amount of such tax increase and savings shall be
calculated based on the following assumptions: (A) the Indemnitee is, and
will be, taxed at the highest marginal rate for all Taxes; and (B) the
Indemnitee will claim, and will be able to fully utilize in the year in
which they are first allowable, all tax deductions, credits and other tax
benefits that are allowable with respect to such expense, payment or
reimbursement (including, without limitation, the federal income tax
deduction for state and local income taxes).
(e) WITHHOLDING TAXES. As between the Lessee on one hand, and
Wolverine, Matisse or the Bank on the other hand, the Lessee shall be
responsible for, and the Lessee shall indemnify and hold harmless
Wolverine, Matisse and the Bank (without duplication of any indemnification
required by SECTION 13.5(a)) on an After Tax Basis against, any obligation
for United States withholding taxes
66
imposed in respect of payments with respect to the Wolverine/Bank Loan, the
Matisse/Bank Loan or the Wolverine/Matisse Loan and with respect to Rent
payments under the Lease or payments of the Asset Termination Value (and,
if Wolverine, Matisse or the Bank receives a demand for such payment from
any taxing authority, the Lessee shall discharge such demand on behalf of
Wolverine, Matisse or the Bank). Notwithstanding the foregoing, the Lessee
shall not be required to indemnify for such withholding taxes to the extent
that (i) they are actually creditable against a pre-existing net income tax
liability of the Person receiving the payment subject to withholding, or
(ii) arise as a result of an assignment, participation, or syndication by
the Bank of its rights under the Operative Documents to a Person who is not
a "United States person" within the meaning of Code Section 7701(a)(30).
Any taxes withheld with respect to any payment pursuant to the previous
sentence shall be deemed, for purposes of the Operative Documents, to have
been paid to the Person to whom the payment was due and shall be credited
as though such payment had been made to the Person to whom the payment was
due. Wolverine, Matisse and the Bank shall use commercially reasonable
efforts to avoid withholding, including, without limitation, timely filing
all necessary forms with the appropriate taxing authorities and Lessee as
are required to avoid the imposition of such withholding, PROVIDED, that
such efforts shall not include the incurrence of any expense or submitting
to taxation in any jurisdiction where they were not previously subject to
tax.
(f) CONTESTS OF IMPOSITIONS.
(i) If a written claim is made against any Indemnitee or if any
proceeding shall be commenced against such Indemnitee (including a
written notice of such proceeding), for any Impositions, or an
Indemnitee receives a "thirty day letter" from the Internal Revenue
Service or similar notice of proposed adjustment from the Internal
Revenue Service or any state or local taxing authority; such
Indemnitee shall promptly notify the Lessee in writing and shall not
take action with respect to such claim or proceeding without the
consent of the Lessee for thirty (30) days after the receipt of such
notice by the Lessee; provided, however, that, in the case of any such
claim or proceeding, if action shall be required by law or regulation
to be taken prior to the end of such 30-day period, such Indemnitee
shall, in such notice to the Lessee, inform the Lessee of such shorter
period, and no action shall be taken with respect to such claim or
proceeding without the consent of the Lessee before two (2) days
before the end of such shorter period; provided, further, that the
failure of such Indemnitee to give the notices referred to in this
sentence shall not diminish the Lessee's obligation hereunder except
to the extent such failure precludes the Lessee from contesting all or
part of such claim.
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(ii) If, within thirty (30) days of receipt of such notice from
the Indemnitee (or such shorter period as the Indemnitee has notified
the Lessee is required by law or regulation for the Indemnitee to
commence such contest), the Lessee shall request in writing that such
Indemnitee contest such Imposition, the Indemnitee shall, at the
expense of the Lessee, in good faith conduct and control such contest
(including, without limitation, by pursuit of appeals) relating to the
validity, applicability or amount of such Impositions (provided,
however, that (A) if such contest involves a tax other than a tax on
net income and can be pursued independently from any other proceeding
involving a tax liability of such Indemnitee, the Indemnitee, at the
Lessee's request, shall allow the Lessee to conduct and control such
contest and (B) in the case of any contest, the Indemnitee may request
the Lessee to conduct and control such contest) by, in the sole
discretion of the Person conducting and controlling such contest, (1)
resisting payment thereof, (2) not paying the same except under
protest, if protest is necessary and proper, (3) if the payment be
made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, or (4) taking
such other action as is reasonably requested by the Lessee from time
to time.
(iii) The party controlling any contest shall consult in good
faith with the non-controlling party and shall keep the non-controlling
party reasonably informed as to the conduct of such contest; provided,
that all decisions with respect to the prosecution of the consent
ultimately shall be made in the sole discretion of the controlling
party. The parties agree that an Indemnitee may at any time decline
to take further action with respect to the contest of any Imposition
and may settle such contest if such Indemnitee shall waive its rights
to any indemnity from the Lessee that otherwise would be payable in
respect of such claim (and any future claim by any taxing authority,
the contest of which is precluded by reason of such resolution of such
claim) and shall pay to the Lessee any amount previously paid or
advanced by the Lessee pursuant to this SECTION 13.5 by way of
indemnification or advance for the payment of an Imposition other than
expenses of such contest.
(iv) Notwithstanding the foregoing provisions of this SECTION
13.5, an Indemnitee shall not be required to take any action and the
Lessee shall not be permitted to contest any Impositions in its own
name or that of the Indemnitee unless (A) the Lessee shall have agreed
to pay and shall pay to such Indemnitee on demand and on an After Tax
Basis all reasonable costs, losses and expenses that such Indemnitee
actually incurs in connection with contesting such Impositions,
including, without limitation, all reasonable legal, accounting and
investigatory fees and disbursements, (B) in the case of a claim that
must be pursued in the name
68
of an Indemnitee (or an Affiliate thereof), the amount of the
potential indemnity (taking into account all similar or logically
related claims that have been or could be raised in any audit
involving such Indemnitee for which the Lessee may be liable to pay an
indemnity under this SECTION 13) exceeds $10,000, (C) the Indemnitee
shall have reasonably determined that the action to be taken will not
result in any material danger of sale, forfeiture or loss of the
Property, or any part thereof or interest therein, will not interfere
with the payment of Rent, and will not result in risk of criminal
liability, (D) if such contest shall involve the payment of the
Imposition prior to the contest, the 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 cost to such Indemnitee), (E) in the case of a claim
that must be pursued in the name of an Indemnitee (or an Affiliate
thereof), the Lessee shall have provided to such Indemnitee an opinion
of independent tax counsel selected by the Indemnitee and reasonably
satisfactory to the Lessee stating that a reasonable basis exists to
contest such claim (or, in the case of an appeal of an adverse
judicial determination, an opinion of such counsel to the effect that
the position asserted in such appeal will more likely than not
prevail) and (F) no Lease Event of Default hereunder shall have
occurred and be continuing. In no event shall an Indemnitee be
required to appeal an adverse judicial determination to the United
States Supreme Court. In addition, an Indemnitee shall not be
required to contest any claim in its name (or that of an Affiliate) if
the subject matter thereof shall be of a continuing nature and shall
have previously been decided adversely by a court of competent
jurisdiction pursuant to the contest completed in accordance with the
provisions of this SECTION 13.5, which decision has become final
unless there shall have been a change in law (or interpretation
thereof) and the Indemnitee shall have received, at the Lessee's
expense, an opinion of independent tax counsel selected by the Lessee
and reasonably acceptable to the Indemnitee stating that as a result
of such change in law (or interpretation thereof), it is more likely
than not that the Indemnitee will prevail in such contest.
(g) DOCUMENTATION OF WITHHOLDING STATUS.
(i) Any party to the Operative Documents that is organized under
the laws of a jurisdiction outside of the United States of America,
shall on or before the date it is to receive any payment under any
Operative Document, deliver to the Bank and the Lessee any
certificates, documents, or other evidence that shall be required by
the Code or Treasury Regulations issued pursuant thereto to establish
its exemption from United States Federal withholding requirements,
including two valid, duly completed, original copies of Internal
Revenue Service Form 1001 or
69
Form 4224 or successor applicable form, properly and duly executed,
certifying in each case that such party is entitled to receive
payments pursuant to the Operative Documents without deduction or
withholding of United States Federal income taxes.
(ii) Each Person required to deliver any form pursuant to CLAUSE
(i) above shall, on or before the date that such form expires or
becomes obsolete, or after the occurrence of any event requiring a
change in the most recent such form previously delivered to the Bank
and the Lessee, deliver to the Bank and the Lessee two further valid,
duly completed, original copies of any such form or certification,
properly and duly executed.
(h) LIMITATION ON TAX INDEMNIFICATION. The Lessee shall not be
required to indemnify any Indemnitee, or to pay any increased amounts to
any Indemnitee or tax authority with respect to any Impositions pursuant to
this SECTION 13.5 to the extent that (i) any obligation to withhold,
deduct, or pay amounts with respect to Tax existed on the date such
Indemnitee became a party to any Operative Document (and, in such case, the
Lessee may deduct and withhold such Tax from payments pursuant to the
Operative Documents), or (ii) such Indemnitee fails to comply with the
provisions of SECTION 13.5(g) (and, in such case, the Lessee may deduct and
withhold all Taxes required by law as a result of such noncompliance from
payments made by the Lessee pursuant to the Operative Documents).
(i) COOPERATION BY INDEMNITEES. Each Indemnitee agrees it will
conduct its negotiations and any administrative and judicial proceedings
under this SECTION 13.5 concerning any Imposition reasonably and in good
faith. Each Indemnitee shall provide Lessee with information, at Lessee's
expense, and shall confer with Lessee or Lessee's independent tax counsel
about the progress and course of any audit, contest or proceeding, as
Lessee may reasonably request from time to time. Each Indemnitee shall
provide to Lessee a copy of any written notice from the Internal Revenue
Service or state or local taxing authority of any adjustment or tax for
which Lessee is liable pursuant to this SECTION 13.5 and shall use its best
efforts to provide Lessee's counsel the opportunity to review and comment
in advance on submissions to such taxing authorities (including the
Internal Revenue Service) contesting such adjustment or tax. Without
limiting the foregoing, each Indemnitee agrees to cooperate in all
reasonable respects with any property tax appeal requested by Lessee, and
shall execute such documents as Lessee may reasonably request in connection
therewith.
SECTION 13.6. FUNDING LOSSES. In the event of (a) any failure to borrow
or accept a Eurodollar Advance or to continue or convert into a Eurodollar
Advance after the Lessee has given (or is deemed to have given) a Funding
Request or a Conversion/Continuation Request therefor; (b) any failure to pay a
Eurodollar Advance
70
on the Termination Date after the Lessee has given a notice in accordance with
SECTION 20.1 OF THE LEASE; (c) the prepayment of a Eurodollar Advance on a day
which is not the last day of the Interest or Rental Period with respect thereto;
or (d) the conversion of any Eurodollar Advance to a Alternate Base Rate Advance
on a day that is not the last day of the Interest or Rental Period with respect
thereto, then the Lessee shall reimburse the Bank within fifteen (15) days after
demand for any resulting loss or expense incurred by it, including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties (such amount or amounts to include an amount equal to the
excess, if any, of (i) the amount of interest that would have accrued on the
amount not borrowed or otherwise obtained, not prepaid, prepaid, or converted
for the period from the date of such failure to borrow, failure to prepay,
prepayment, or conversion to the last day of then current Interest or Rental
Period (or in the case of a failure to borrow, the Interest or Rental Period
which would have commenced on the date of such failure) at the interest rate
applicable to that Eurodollar Advance, over (ii) the amount of interest that
would accrue to the Bank on such amount at the Eurodollar Rate in effect on such
date by placing such amount on deposit for a comparable period with leading
banks in the London interbank market), PROVIDED that the Bank shall have
delivered to the Lessee a certificate as to the amount of such loss or expense,
which certificate shall constitute prima facie evidence of the matters set forth
therein. The Bank will, at the request of the Lessee, furnish such additional
information concerning the determination of such loss as the Lessee may
reasonably request.
SECTION 13.7. [RESERVED]
SECTION 13.8. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If Bank shall have determined that reasonable means do not exist for
ascertaining the Eurodollar Rate for any requested Interest or Rental Period
with respect to a proposed Eurodollar Advance, Bank will forthwith give notice
of such determination to the Lessee. Thereafter, the obligation of the Bank to
make or maintain Eurodollar Advances hereunder shall be suspended until Bank
revokes such notice in writing. Upon receipt of such notice, the Lessee may
revoke any Funding Request or Conversion/Continuation Request then submitted by
it. If the Lessee does not revoke such notice, the Bank shall make, convert or
continue the Loan or Lease Advances, as proposed by the Lessee, in the amount
specified in the applicable notice submitted by the Lessee, but such Loan and
Lease Advances shall be made, converted or continued as Alternate Base Rate
Advances instead of Eurodollar Advances.
SECTION 13.9. ILLEGALITY. If, on or after the date of this Participation
Agreement, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for the Bank to purchase, maintain or fund Loan or
71
Lease Advances in any Eurodollar Advance and the Bank shall so notify the
Lessee, whereupon until the circumstances giving rise to such suspension no
longer exist, the obligation of the Bank to fund in any such Eurodollar Advance
shall be suspended. Before giving any notice pursuant to this Section, the Bank
shall, if practicable, with the consent of the Lessee (which consent shall not
unreasonably be withheld), designate a different funding office (if one exists)
if such designation will avoid the need for giving such notice and will not, in
the judgment of the Bank, adversely affect the Bank. If such notice is given
(i) the Lessee shall be entitled upon its request to a reasonable explanation of
the factors underlying such notice and (ii) each Eurodollar Advance then
outstanding shall begin to bear interest or Basic Rent at the Alternate Base
Rate either (a) on the last day of the then current Interest or Rental Period
applicable to such Loan or Lease Advance if the Bank may lawfully continue to
maintain and fund such to such day or (b) immediately if the Bank shall
determine that it may not lawfully continue to maintain and fund such Eurodollar
Advance to such day.
SECTION 13.10. INCREASED COST AND REDUCED RETURN.
(a) In the event that, after the Closing Date, the adoption of any
applicable law, rule or regulation, or any change therein or in the
interpretation or application thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by the Bank with any request or
directive after the date hereof (whether or not having the force of law) of
any such authority, central bank or comparable agency:
(i) does or shall subject the Bank to any additional tax of any
kind whatsoever with respect to the Operative Documents or any Loan or
Lease Advance, or change the basis or the applicable rate of taxation
of payments due under the Operative Documents to the Bank or any other
amount payable hereunder (except for the imposition of or change in
any tax on or measured by the overall net income of the Bank (other
than any such tax imposed by means of withholding) or otherwise
excluded from the tax indemnification in SECTION 13.5);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, insurance assessment, compulsory loan or similar
requirement against assets held by, or deposits or other liabilities
in or for the account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of the
Bank which are not otherwise included in determination of the rate of
interest on Eurodollar Advances hereunder; or
(iii) does or shall impose on the Bank any other condition
with respect to the Operative Documents or any class of Loan or Lease
Advances or commitments of which the Loan or Lease Advances or the
Bank's Commitment forms a part;
72
and the result of any of the foregoing is to increase the cost to the Bank
of making, funding or maintaining any Eurodollar Advance or to reduce any
amount receivable hereunder with respect thereto, then in any such case,
the Lessee shall promptly pay the Bank, upon its demand, any additional
amounts necessary to compensate the Bank for such increased cost or reduced
amount receivable which the Bank deems to be material.
(b) If the Bank shall have determined that the adoption after the
Closing Date of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of
return on capital of the Bank (or any entity directly or indirectly
controlling the Bank) as a consequence of the Bank's obligations under the
Operative Documents to a level below that which the Bank (or any entity
directly or indirectly controlling the Bank) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by the Bank
to be material, and such reduction is not reflected in the Eurodollar Rate
or Alternate Base Rate, as the case may be, then from time to time, within
fifteen (15) days after demand by the Bank, the Lessee shall pay to the
Bank such additional amount or amounts as will compensate the Bank (or its
parent) for such reduction.
(c) The Bank will promptly notify the Lessee of any event of which it
has knowledge, occurring after the date hereof, which will entitle the Bank
to compensation pursuant to this Section and will, if practicable, with the
consent of the Lessee (which consent shall not unreasonably be withheld),
designate a different funding office or take any other reasonable action if
such designation or action will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of the Bank, be
otherwise disadvantageous to the Bank. A certificate of the Bank claiming
compensation under this Section and setting forth in reasonable detail its
computation of the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In determining such
amount, the Bank may use any reasonable averaging and attribution methods.
This Section shall survive the termination of this Participation Agreement
and payment of the outstanding Loan Advances.
SECTION 13.11. INDEMNITY PAYMENTS IN ADDITION TO RESIDUAL VALUE GUARANTEE
AMOUNT; SURVIVAL. The Lessee acknowledges and agrees that its obligations to
make indemnity payments under this SECTION 13 are separate from, in addition to,
and do not reduce, its obligation to pay the Residual Value Guarantee Amount
under the Lease. The
73
agreements and obligations of the Lessee in this SECTION 13 shall survive the
payment of all other obligations due under the Operative Documents.
SECTION 14.
MISCELLANEOUS
SECTION 14.1. SURVIVAL OF AGREEMENTS. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Participation Agreement, the
construction of any Improvements, any disposition of any interest of Wolverine
in the Property or any Improvements, payment of the Wolverine/Bank Loan, the
Matisse/Bank Loan and the Wolverine/ Matisse Loan and any disposition thereof
and shall be and continue in effect notwithstanding any investigation made by
any party and the fact that any party may waive compliance with any of the other
terms, provisions or conditions of any of the Operative Documents. Except as
otherwise expressly set forth herein or in other Operative Documents, the
indemnities of the parties provided for in the Operative Documents shall survive
the expiration, termination, reconveyance or release of any thereof. All
references in the Operative Documents to the "Guarantor" and to the "Guarantor"
are hereby declared to be null, void and of no effect.
SECTION 14.2. NO BROKER, ETC. Each of the parties hereto represents to
the others that it has not retained or employed any broker, finder or financial
adviser to act on its behalf in connection with this Participation Agreement or
the transactions contemplated herein, nor has it authorized any broker, finder
or financial adviser retained or employed by any other Person so to act;
PROVIDED, that the Lessee has retained The Staubach Company and shall be solely
responsible for the payment of its fees and expenses. Any party who is in
breach of this representation shall indemnify and hold the other parties
harmless from and against any liability arising out of such breach of this
representation.
SECTION 14.3. NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Wolverine, the Lessee, Matisse or the Bank under this Agreement or the other
Operative Documents shall be in writing and faxed, mailed or delivered to such
Person at its respective facsimile number or address set forth in SCHEDULE 2 (or
to such other facsimile number or address for any party as indicated in any
notice given by that party to the other parties). All such notices and.
communications shall be effective (a) when sent by overnight service of
recognized standing upon delivery; (b) when mailed, first class postage prepaid
and addressed as aforesaid through the United States Postal Service, three (3)
Business Days after mailing; (c) when delivered by hand, upon delivery; and (d)
when faxed, upon confirmation of receipt as indicated in the sender's facsimile
activity report. In the event that delivery by mail overnight delivery service,
courier or personal service is refused, delivery shall be deemed to occur on the
date that delivery is refused.
74
SECTION 14.4. COUNTERPARTS. This Participation Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 14.5. AMENDMENTS. No Operative Document nor any of the terms
thereof may be terminated, amended, supplemented, waived or modified without the
written agreement or consent of the Lessee, Wolverine, Matisse and the Bank.
SECTION 14.6. HEADINGS, ETC.. The Table of Contents and headings of the
various Sections of this Agreement are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions hereof.
SECTION 14.7. PARTIES IN INTEREST. Except as expressly provided herein,
none of the provisions of this Participation Agreement are intended for the
benefit of any Person except the parties hereto. Subject to the provisions of
SECTION 25.1 of the Lease, the Lessee shall not assign or transfer any of its
rights or obligations under the Operative Documents without the prior written
consent of the Bank. In the event that the Bank assigns or transfers any of the
Operative Documents in whole or in part, or any rights or interest therein, to
more than one person or entity, Bank shall designate in writing one person to
whom notices may be sent on behalf of both Bank and any assignee or transferee
thereof. Neither Wolverine nor Matisse may assign any of its rights and
obligations under the Operative Documents (including any right, title and
interest in and to the Property) to another Person, without the prior written
consent of the Bank and the Lessee. Subject to the foregoing, this
Participation Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns.
SECTION 14.8. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF OREGON (EXCLUDING ANY CONFLICT-
OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE
INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, BUT IF THE BANK HAS GREATER RIGHTS OR REMEDIES UNDER
FEDERAL LAW, THEN SUCH RIGHTS AND REMEDIES UNDER FEDERAL LAW WILL ALSO BE
AVAILABLE TO THE BANK.
SECTION 14.9. SEVERABILITY. Any provision of this Participation Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
75
SECTION 14.10. LIMITATIONS OF WOLVERINE AND MATISSE'S LIABILITY. Except
in the case of the representations, warranties and covenants of Wolverine and
Matisse made in SECTIONS 8.1, 8.2, 10.3(a), (c), (d), (f) AND (h), AND 10.4(a),
(c), (e), (f), (g) AND (h), and except in the case of the gross negligence or
willful misconduct of Wolverine and Matisse, as to which individual liability
shall attach to the extent of any damages resulting therefrom, anything in this
Participation Agreement to the contrary notwithstanding, neither the Bank nor
any other holder of the Wolverine/Bank Note, the Matisse/Bank Note or the
Wolverine/Matisse Note, nor the successors or assigns of any said Persons, shall
have any claim, remedy or right to proceed against Wolverine and Matisse or any
past, present or future stockholder, subscriber or capital stock, officer,
employee, director, incorporator or partner of Wolverine and Matisse whether by
virtue of any constitutional provision, statute or rule of law or by enforcement
of any penalty or assessment or otherwise, for the payment of any deficiency of
any other sum owing on account of the indebtedness evidenced by the
Wolverine/Bank Note, the Matisse/Bank Note or the Wolverine/Matisse Note or for
the payment of any liability resulting from the breach of any representation,
agreement or warranty of any nature whatsoever in this Participation Agreement
or any other Operative Document, from any source other than the collateral for
the Wolverine/Bank Loan, the collateral for the Matisse/Bank Loan, and the
collateral for the Wolverine/Matisse Note (excluding the Excepted Payments), and
the Bank and each holder of the Wolverine/Bank Note, the Matisse/Bank Note and
the Wolverine/Matisse Loan agree to look solely to the collateral for the
Wolverine/Bank Loan, the collateral for the Matisse/Bank Loan, and the
collateral for the Wolverine/Matisse Note (excluding the Excepted Payments) for
the payment of said indebtedness or the satisfaction of such liability;
PROVIDED, HOWEVER, that nothing herein contained shall limit, restrict or impair
the rights of the Bank to accelerate the maturity of the Wolverine/Bank Note,
the Matisse/Bank Note or the Wolverine/Matisse Note upon a Loan Event of Default
or, subject to the limitations hereinabove described, to bring suit and obtain a
judgment against Wolverine on the Wolverine/Bank Note and the Wolverine/Matisse
Loan and Matisse on the Matisse/Bank Note or to exercise all rights and remedies
provided under this Participation Agreement or otherwise realize upon the
collateral for the Wolverine/Bank Loan, the collateral for the Matisse/Bank Loan
and the collateral for the Wolverine/Matisse Note, including, without
limitation, the rights under the Matisse Shareholder Subscription Pledge and
against the shareholders in Matisse under the Matisse Subscription Agreements
granted thereby and in accordance with the express terms of the Matisse
Shareholder Subscription Pledge.
SECTION 14.11. FURTHER ASSURANCES. The parties hereto shall promptly
cause to be taken, executed, acknowledged or delivered, at the sole expense of
the Lessee, all such further acts, conveyances, subordinations, documents and
assurances as the other parties may from time to time reasonably request in
order to carry out and effectuate the intent and purposes of this Participation
Agreement, the other Operative Documents, and the transactions contemplated
hereby and thereby (including, without limitation, the preparation, execution
and filing of any and all Uniform Commercial Code financing statements and other
filings or registrations which the parties hereto may from time to
76
time request to be filed or effected). The Lessee, at its own expense and
without need of any prior request from any other party, shall take such action
as may be necessary (including any action specified in the preceding sentence),
or (if Wolverine, Matisse or the Bank shall so request) as so requested, in
order to maintain and protect all security interests provided for hereunder or
under any other Operative Document.
SECTION 14.12. SUBMISSION TO JURISDICTION. Each of the Lessee, Wolverine,
Matisse and the Bank hereby submits to the nonexclusive jurisdiction of the
United States District Court for the District of Oregon and of any Oregon State
court sitting in Portland, Oregon for purposes of all legal proceedings arising
out of or relating to the Operative Documents or the transactions contemplated
hereby. Each of the Lessee, Wolverine, Matisse and the Bank irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
SECTION 14.13. WAIVER OF JURY TRIAL. EACH OF THE LESSEE, WOLVERINE,
MATISSE AND THE BANK HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE OPERATIVE
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 14.14. USURY SAVINGS CLAUSE. Nothing contained in this
Participation Agreement or the other Operative Documents shall be deemed to
require the payment of interest or other charges by Lessee, Wolverine, Matisse
or any other Person in excess of the amount which may be lawfully charged under
any applicable usury laws. In the event that the Bank, Wolverine, Matisse or
any other Person shall collect moneys under this Participation Agreement or any
other Operative Document, which are deemed to constitute interest (including,
without limitation, the Basic Rent or Supplemental Rent) which would increase
the effective interest rate to a rate in excess of that permitted to be charged
by applicable law, all such sums deemed to constitute interest in excess of the
legal rate shall, upon such determination, at the option of the Person to whom
such payment was made, be returned to the Person making such payment or credited
against other amounts owed by the person making such payment.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE BANK
AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE
NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
THE BANK TO BE ENFORCEABLE.
WARNING: UNLESS THE BANK IS PROVIDED WITH EVIDENCE OF THE INSURANCE COVERAGE AS
REQUIRED BY THE OPERATIVE DOCUMENTS,
77
THE BANK MAY PURCHASE INSURANCE AT THE LESSEE'S EXPENSE TO PROTECT THE BANK'S
INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT THE LESSEE'S INTEREST.
IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE THE BANK PURCHASES MAY NOT PAY
ANY CLAIM THE PARTIES HERETO MAKE OR ANY CLAIM MADE AGAINST ANY OF SUCH PARTIES.
THIS COVERAGE MAY BE CANCELED LATER BY PROVIDING EVIDENCE THAT PROPERTY COVERAGE
HAS BEEN OBTAINED ELSEWHERE. THE LESSEE IS RESPONSIBLE FOR THE COST OF ANY
INSURANCE PURCHASED BY THE BANK. THE COST OF THIS INSURANCE MAY BE ADDED TO THE
LESSEE'S CONTRACT OR LOAN BALANCE. IF THE COST IS ADDED TO THE LESSEE'S
CONTRACT OR LOAN BALANCE, THE INTEREST RATE ON THE UNDERLYING CONTRACT OR LOAN
WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE MAY BE THE DATE
THE LESSEE'S PRIOR COVERAGE LAPSED OR THE DATE THE LESSEE FAILED TO PROVIDE
PROOF OF COVERAGE. THE COVERAGE THE BANK PURCHASES MAY BE CONSIDERABLY MORE
EXPENSIVE THAN INSURANCE THE LESSEE CAN OBTAIN ON ITS OWN AND MAY NOT SATISFY
78
ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE
REQUIREMENTS IMPOSED BY APPLICABLE LAW.
IN WITNESS WHEREOF, the undersigned has executed this Participation
Agreement as of the day and year first hereinabove written.
MATISSE MATISSE HOLDING COMPANY, a Texas
corporation
By: /s/ Kristen S. Markham
-----------------------------------
Name: Kristen S. Markham
-----------------------------------
Its: Vice President
-----------------------------------
LESSEE TRIQUINT SEMICONDUCTOR, INC., a
California corporation
By: /s/ Joseph I. Martin
-----------------------------------
Name: Joseph I. Martin
-----------------------------------
Its: CFO
-----------------------------------
WOLVERINE WOLVERINE LEASING CORP., a Texas
corporation
By: /s/ Kristen S. Markham
-----------------------------------
Name: Kristen S. Markham
-----------------------------------
Its: Vice President
-----------------------------------
BANK UNITED STATES NATIONAL BANK OF
OREGON, a national banking association
By: /s/ Jeff A. Killian
-----------------------------------
Name: Jeff A. Killian
-----------------------------------
Its: Vice President
-----------------------------------
79