[EXECUTION COPY]
EXHIBIT 10.35
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PARTICIPATION AGREEMENT
among
S.D. WARREN COMPANY
Lessee,
GENERAL ELECTRIC CAPITAL CORPORATION,
Owner Participant,
and
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
as Owner Trustee
Dated as of July 29, 1997
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#3 Paper Machine
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions......................... 2
ARTICLE II
Investment in Lessor's Cost................. 2
SECTION 2.01. Agreement to Invest....................... 2
SECTION 2.02. Payments on the Closing Date.............. 2
SECTION 2.03. Time and Place of Closing; Notice of
Closing Date.................................... 2
SECTION 2.04. Interest Payments to Owner Participant.... 3
ARTICLE III
Transactions to Occur on Closing Date........... 3
SECTION 3.01. Transactions To Occur on Closing Date..... 3
ARTICLE IV
Conditions Precedent.................... 4
SECTION 4.01. Conditions Precedent to Obligations of
Owner Participant and Owner Trustee............. 4
SECTION 4.02. Conditions Precedent to Obligations of
Lessee.......................................... 9
ARTICLE V
Representations and Warranties.................. 11
SECTION 5.01. Representations and Warranties of
Lessee.......................................... 11
SECTION 5.02. Representations and Warranties of Owner
Participant..................................... 18
SECTION 5.03. Representations and Warranties of Trust
Company......................................... 19
ARTICLE VI
Covenants.......................... 21
SECTION 6.01. Covenants of Lessee....................... 21
SECTION 6.02. Covenants of Owner Participant............ 30
SECTION 6.03. Covenants of Owner Trustee................ 31
ARTICLE VII
General Indemnity...................... 32
SECTION 7.01. General Indemnity......................... 32
SECTION 7.02. Payments and Survival..................... 38
ARTICLE VIII
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Page
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General Tax Indemnity.................... 38
SECTION 8.01. Indemnity................................. 38
SECTION 8.02. Exclusions from General Tax Indemnity..... 39
SECTION 8.03. Calculation of General Tax Indemnity
Payments........................................ 40
SECTION 8.04. General Tax Indemnity -- Contests......... 41
SECTION 8.05. General Tax Indemnity -- Reports.......... 42
SECTION 8.06. General Tax Indemnity -- Payment.......... 43
ARTICLE IX
Expenses.......................... 44
SECTION 9.01. Transaction Expenses...................... 44
SECTION 9.02. Post-Closing Expenses....................... 44
SECTION 9.03. Lessee's Obligation......................... 45
ARTICLE X
Transfers of Owner Participant's Interests; Leverage Option 46
SECTION 10.01. Transfers of Owner Participant's
Interests....................................... 46
SECTION 10.02. Leverage Option............................ 48
ARTICLE XI
Miscellaneous......................... 49
SECTION 11.01. Notices.................................... 49
SECTION 11.02. GOVERNING LAW.............................. 49
SECTION 11.03. Amendment.................................. 49
SECTION 11.04. Successors and Assigns..................... 50
SECTION 11.05. Headings................................... 50
SECTION 11.06. Counterparts............................... 50
SECTION 11.07. Severability............................... 50
SECTION 11.08. Survival of Agreements..................... 50
SECTION 11.09. Liabilities of Owner Trustee............... 50
SECTION 11.10. No Guarantees............................. 51
SECTION 11.11. Successor Owner Trustee................... 51
SECTION 11.12. Jurisdictional and Related Matters........ 51
SCHEDULES AND EXHIBITS
Appendix A Definitions
Schedule 1 Addresses for Notices and Payments
Schedule 1A Wire Instructions for Payment of Purchase Price
Schedule 2 Pricing Assumptions
Schedule 3 Recordations and Filings
Schedule 3A Existing Recordations and Filings
Schedule 4 Environmental Disclosure Matters
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Page
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Exhibit A Form of Letter of Credit
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PARTICIPATION AGREEMENT dated as of July 29, 1997, by and
among S.D. WARREN COMPANY, a Pennsylvania corporation, GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation, and STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its
individual capacity, except as otherwise expressly provided
herein, but solely in its capacity as Owner Trustee.
WHEREAS the Owner Participant and the Trust Company have entered into
the Trust Agreement for the purpose of creating the Trust and entering into the
transactions contemplated by this Agreement;
WHEREAS the Lessee desires to sell the Equipment to the Owner Trustee on
the Closing Date by delivering the Bill of Sale and the Conveyance Instrument
against receipt of the Purchase Price therefor;
WHEREAS the Owner Participant desires to cause the Owner Trustee to
purchase the Equipment from the Lessee on the Closing Date by paying the
Purchase Price therefor and accepting delivery of the Bill of Sale and the
Conveyance Instrument;
WHEREAS the Owner Trustee desires to lease the Equipment Site from the
Lessee, and to be granted certain easements and other rights by the Lessee, by
entering into the Ground Lease;
WHEREAS the Lessee desires to lease the Equipment Site to the Owner
Trustee, and to grant certain easements and other rights to the Owner Trustee,
by entering into the Ground Lease;
WHEREAS the Owner Participant desires to cause the Owner Trustee to
lease the Equipment and sublease the Equipment Site to the Lessee by entering
into the Lease; and
WHEREAS the Lessee desires to lease the Equipment and sublease the
Equipment Site from the Owner Trustee by entering into the Lease.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
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For purposes of this Agreement, capitalized terms used herein and not
defined herein have the meanings assigned to them in Appendix A (such
definitions to be equally applicable to both the singular and plural forms of
the terms defined). Any term defined by reference to an agreement, instrument
or other document has the meaning so assigned to it whether or not such document
is in effect. Unless otherwise indicated, references in this Agreement to
sections, paragraphs, clauses, appendices, schedules and exhibits are to be the
same contained in or attached to this Agreement.
ARTICLE II
Investment in Lessor's Cost
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SECTION 2.01. Agreement to Invest. Upon the terms and subject to the
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conditions set forth in Section 4.01 and in reliance on the representations and
warranties hereinafter set forth, the Owner Participant shall make an equity
investment on the Closing Date in an amount equal to the Purchase Price;
provided, however, that such investment shall not exceed $150,400,000.
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SECTION 2.02. Payments on the Closing Date. Upon the terms and subject
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to the conditions of this Agreement, on the Closing Date the Owner Participant
shall make available to the Owner Trustee the amount required to be made
available by it pursuant to Section 2.01 through wire transfer in immediately
available funds to the account of the Owner Trustee specified in Schedule 1
hereto.
SECTION 2.03. Time and Place of Closing; Notice of Closing Date.
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Subject to the conditions of this Agreement, the Closing Date shall be selected
by the Lessee, subject to compliance with the further provisions of this Section
2.03 and provided that the Closing Date shall not be a date later than July 29,
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1997. The closing on the Closing Date shall take place beginning at 10:00 a.m.,
New York City time, at the offices of Dewey Ballantine, 1301 Avenue of the
Americas, New York, New York. At least one Business Day prior to the Closing
Date, the Lessee shall deliver to the Owner Participant and the Owner Trustee
notice of the Closing Date, the Purchase Price to be paid on the Closing Date,
as supported by the Appraisal delivered with respect to the Equipment, and the
amount to be made available pursuant to Section 2.01 by the Owner Participant on
the Closing Date.
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SECTION 2.04. Interest Payments to Owner Participant. (a) If for any
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reason the transactions contemplated hereby are not consummated on the Closing
Date proposed by the Lessee, then the Lessee shall reimburse the Owner
Participant for the loss of the use of any funds that it made available to the
Owner Trustee, after receipt of the notice contemplated by Section 2.03,
occasioned by the transactions contemplated hereby not being consummated on the
Closing Date proposed by the Lessee, by paying to the Owner Participant upon
demand interest at a rate per annum equal to the Prime Rate on the amount of
such funds for the period from and including the proposed Closing Date to but
excluding the earlier of the Business Day on which such funds shall be returned
to the Owner Participant (or, if returned after noon, New York City time, on
such Business Day, then to but excluding the next succeeding Business Day after
such funds are so returned to the Owner Participant) and the date on which the
transactions contemplated for the proposed Closing Date occur less the amount of
any investment earnings returned to the Owner Participant pursuant to the next
sentence. In the event the transactions contemplated for the proposed Closing
Date do not occur on the proposed Closing Date, the funds made available to the
Owner Trustee (plus any investment earnings thereon) shall be returned to the
Owner Participant on the next succeeding Business Day. The Owner Trustee shall
hold such funds in trust, not as part of the Trust Estate under the Trust
Agreement, but solely for the benefit of the Owner Participant.
(b) In the event that funds have been made available to the Owner
Trustee under the circumstances described in Section 2.04(a), the Owner Trustee
shall cause such funds to be invested until they are applied as therein provided
in Permitted Investments at the direction of the Lessee, if such Permitted
Investments are reasonably available for purchase at the time. Earnings on such
investments shall be for the account of the Owner Participant. Neither the
Owner Trustee nor the Owner Participant shall be liable for any losses resulting
from the investment of any amounts in accordance with this Section 2.04(b). The
Lessee shall be liable for any and all such losses and shall pay to the Owner
Trustee upon demand the amount of any such losses certified to the Lessee.
ARTICLE III
Transactions to Occur on Closing Date
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SECTION 3.01. Transactions To Occur on Closing Date. On the Closing
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Date, subject to the conditions set forth in Article IV:
(a) the Owner Participant shall make the equity investment to be made by
it on the Closing Date and authorize and
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direct the Owner Trustee to take the actions specified in clauses (b)(ii) and
(c) below;
(b) (i) the Lessee by executing and delivering the Bill of Sale and
the Conveyance Instrument, shall assign, set over, sell and deliver to the Owner
Trustee all its right, title and interest in and to the Equipment, and (ii) the
Owner Trustee, with the proceeds of the equity investment made by the Owner
Participant on the Closing Date, shall purchase all right, title and interest of
the Lessee in and to the Equipment by transferring an amount equal to the
Purchase Price therefor to such accounts and in such amounts as may be set forth
in Schedule 1A hereto and accepting delivery of the Bill of Sale and the
Conveyance Instrument (it being agreed that the delivery of the Bill of Sale and
the Conveyance Instrument shall constitute delivery of the Equipment and that
the Owner Trustee hereby appoints the Lessee as its agent for the purpose of
accepting physical delivery of the Equipment from the Lessee on the Owner
Trustee's behalf and the Lessee hereby accepts such appointment);
(c) the Lessee and the Owner Trustee shall execute and deliver the
Ground Lease and the Lease; and
(d) the Lessee and the Owner Participant shall execute and deliver the
Tax Indemnity Agreement.
ARTICLE IV
Conditions Precedent
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SECTION 4.01. Conditions Precedent to Obligations of Owner Participant
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and Owner Trustee. The obligation of the Owner Participant to participate in
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the Overall Transaction on the Closing Date (including to direct the Owner
Trustee's participation therein, it being understood that the Owner Trustee's
obligation to so participate is conditioned upon such direction) shall be
subject to the fulfillment to the satisfaction of, or waiver by, the Owner
Participant on or prior to the Closing Date of the following conditions
precedent (except that the obligation of the Owner Participant shall not be
subject to its own performance or compliance):
(a) Notice. The Owner Participant and the Owner Trustee shall have
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received the notice required by Section 2.03.
(b) Receipt of Lessee. The Lessee shall have duly executed and
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delivered to the Owner Trustee an instrument acknowledging receipt of the
amount paid by or on behalf of the Owner Trustee on the Closing Date.
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(c) No Violation of Law. The participation by the Owner Participant or
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any other party hereto in any of the transactions contemplated by the Basic
Agreements shall not violate any Applicable Law or subject the Owner
Participant or any other party hereto to any material penalty or liability
or unduly burdensome condition under or pursuant to any Applicable Laws.
(d) Governmental Action; Consents and Approvals. All Governmental
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Action, and all consents, waivers and approvals by or from any trustee or
holder of any indebtedness or obligation of the Lessee, required in
connection with the transactions contemplated by the Basic Agreements,
shall have been obtained.
(e) Authorizations; Execution and Delivery of Documents. The following
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documents shall have been duly authorized, executed and delivered by the
respective parties thereto, shall be in full force and effect on the
Closing Date without any event or condition having occurred or existing
that constitutes, or with the giving of notice or lapse of time or both
would constitute, a default thereunder or breach thereof or would give any
party thereto the right to terminate any thereof, and an executed
counterpart of each thereof shall have been delivered to the Owner
Participant:
(i) this Agreement;
(ii) the Trust Agreement;
(iii) the Lease;
(iv) the Tax Indemnity Agreement;
(v) the Bill of Sale and the Conveyance Instrument;
(vi) the Ground Lease;
(vii) the Consent and Recognition Agreement;
(viii) the Release and Non-Disturbance Agreement; and
(ix) the Letter of Credit.
(f) Title. On the Closing Date, there shall be vested in the Owner
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Trustee (i) good and marketable title to the Equipment, free and clear of
all Liens except for Liens described in clause (i) of the definition of
"Permitted Liens" and (ii) a valid leasehold interest in the Equipment
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Site pursuant to the Ground Lease free and clear of all Liens.
(g) Filings and Recordings. All filings and recordings necessary or
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advisable in the opinion of the Owner Participant to establish and perfect
the right, title and interest of the Owner Trustee in and to the Equipment
purported to be created by the Basic Agreements and the right, title and
interest of the Owner Trustee under the Ground Lease shall have been duly
authorized, executed and delivered by an authorized officer of the Lessee
and otherwise prepared in appropriate form and substance for filing and
recording with the appropriate authorities, including, without limitation,
the recordings and filings specified in Schedule 3 hereto.
(h) Insurance. Insurance complying with the provisions of Article X of
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the Lease shall be in full force and effect and the Owner Participant shall
have received certificates of insurance signed in each case by the insurer
or an agent of the insurer, together with a report of Aon Risk Services
Inc. of Illinois that such insurance complies with the requirements of
Article X of the Lease.
(i) Resolutions, Certificates, etc. The Owner Participant shall have
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received:
(i) copies of the certificate of incorporation and by-laws of
the Lessee and of resolutions of the Board of Directors of the Lessee
authorizing the transactions contemplated hereby and by the other
Basic Agreements to which it is a party, in each case certified as of
the Closing Date by the Secretary or an Assistant Secretary of the
Lessee, together with a certificate as to incumbency and signatures of
the officer or officers of the Lessee authorized to execute and
deliver such documents on its behalf; and
(ii) a copy of resolutions of the Board of Directors of the
Owner Trustee, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Owner Trustee, authorizing the execution,
delivery and performance by the Owner Trustee of each Basic Agreement
to which it is a party, together with a certificate as to the
incumbency and signature of the officer or officers of the Owner
Trustee authorized to execute and deliver such documents on its
behalf.
(j) Additional Officer's Certificates. The Owner Participant shall have
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received:
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(i) an Officer's Certificate of the Lessee, dated the Closing
Date, stating that (A) the representations and warranties of the
Lessee contained in Section 5.01 are true and correct on and as of
such date as though made on and as of such date except to the extent
that such representations and warranties expressly relate solely to an
earlier date (in which event such representations and warranties shall
have been true and correct on and as of such date), (B) no Default,
Event of Default, Event of Loss or event or condition which, with
notice or lapse of time or both, would become an Event of Loss has
occurred and is continuing or would result from the consummation on
the Closing Date of any transaction contemplated by any of the Basic
Agreements, and (C) each Basic Agreement to which it is a party
remains in full force and effect with respect to it; and
(ii) an Officer's Certificate of the Owner Trustee, dated the
Closing Date, stating that (A) the representations and warranties of
the Owner Trustee contained in Section 5.03 are true and correct on
and as of such date as though made on and as of such date except to
the extent that each representations and warranties expressly relate
solely to an earlier date (in which event such representations and
warranties shall have been true and correct on and as of such date)
and (B) each Basic Agreement to which it is a party remains in full
force and effect with respect to it.
(k) Performance. Each other party to this Agreement shall have
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performed and complied with all material agreements and conditions
contained herein and in any other Basic Agreement to which it is a party
required to be performed or complied with by it on or prior to the Closing
Date.
(l) Opinions of Counsel. The Owner Participant and the Owner Trustee
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shall have received opinions, dated the Closing Date, in form and substance
satisfactory to the Owner Participant, from the counsels listed below:
(i) Jennifer L. Miller, General Counsel of the Lessee;
(ii) Ropes & Gray, special counsel to the Lessee; and
(iii) Pierce Atwood, special Maine and environmental counsel
to the Lessee.
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(m) Opinion of Counsel for Owner Trustee. The Owner Participant shall
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have received an opinion, dated the Closing Date, from Bingham Dana & Gould
LLP, counsel for the Owner Trustee, in form and substance satisfactory to
the Owner Participant.
(n) Opinion as to Tax Matters. The Owner Participant shall have
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received an opinion, dated the Closing Date, from Dewey Ballantine, special
tax counsel for the Owner Participant, in form and substance satisfactory
to the Owner Participant, as to such tax matters related to the Overall
Transaction (including availability of like-kind exchange treatment) as the
Owner Participant may request.
(o) Payment of Taxes, etc. All taxes, fees and other charges payable in
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connection with the execution, delivery, recordation and filing of all
documents and instruments referred to in this Agreement, and all sales and
transfer taxes payable in connection with the sale of the Equipment
hereunder, shall have been paid in full.
(p) Appraisal. The Owner Participant shall have received from the
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Appraiser an Appraisal with respect to the Equipment, dated the Closing
Date and in form and substance satisfactory to the Owner Participant.
(q) Representations and Warranties. The representations and warranties
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of the Lessee and the Owner Trustee contained in the Basic Agreements shall
be true and correct on and as of the Closing Date as though made on and as
of the Closing Date except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which event such
representations and warranties shall have been true and correct on and as
of such date).
(r) Lien Search Records and Releases. The Owner Participant shall have
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received (i) the results of searches of the Uniform Commercial Code
financing statements filed with respect to the Lessee in the jurisdiction
where the Equipment is located and where the chief executive office of the
Lessee is located and a title search with respect to the Equipment Site and
(ii) evidence reasonably satisfactory to the Owner Participant that any and
all Liens on the Equipment have been released or terminated.
(s) No Material Adverse Change. Since April 2, 1997, there shall not
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have been any material adverse change in the financial condition, business,
results of operations or properties of the Lessee or in the ability of the
Lessee to perform its obligations under the Basic Agreements.
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(t) Letter of Credit. The Lessee shall have delivered to the Owner
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Trustee the Letter of Credit pursuant to Section 6.01(h).
(u) Engineering Report. The Owner Participant shall have received from
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Sandwell an engineering report with respect to the Equipment, dated the
Closing Date and in form and substance satisfactory to the Owner
Participant.
(v) Jaakko Poyry Report. The Owner Participant shall have received from
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Jaakko Poyry a report, dated the Closing Date and in form and substance
satisfactory to the Owner Participant.
(w) Environmental Report. The Owner Participant and the Owner Trustee
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shall have received from Geomatrix an environmental report, dated the
Closing Date and in form and substance satisfactory to the Owner
Participant.
(x) Satisfaction of Obligations. The Owner Participant shall have
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received evidence, in form and substance satisfactory to it, that the
Lessee shall have used a portion of the Purchase Price to prepay an amount
of the Term Loan equal to the greater of (A) $100,000,000 and (B) two-
thirds of the Purchase Price.
SECTION 4.02. Conditions Precedent to Obligations of Lessee. The
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obligations of the Lessee on the Closing Date to sell and to lease back the
Equipment and to carry out its other obligations under the Basic Agreements on
the Closing Date (except the obligations that are expressly made to survive
under the Basic Agreements if the closing shall not occur) shall be subject to
the fulfillment to the satisfaction of, or waiver by, the Lessee on or prior to
the Closing Date of the following conditions precedent (except that the
obligations of the Lessee shall not be subject to its own performance or
compliance):
(a) Basic Agreements; Closing Documents and Opinions. The Lessee shall
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have received:
(i) an executed counterpart of each of this Agreement, the
Trust Agreement, the Lease, the Tax Indemnity Agreement and the Ground
Lease;
(ii) copies of the certificates of insurance and the report
referred to in Section 4.01(h);
(iii) original copies of the certificates of the Owner
Trustee referred to in Sections 4.01(i)(ii) and 4.01(j)(ii);
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(iv) an original copy of the opinion referred to in Section
4.01(m); and
(v) a copy of the Appraisal referred to in Section 4.01(p).
The opinion referred to in clause (iv) above shall be addressed to the
Lessee and shall be in form and substance satisfactory to the Lessee.
(b) Due Authorization, Execution and Delivery. All of the documents
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described in Section 4.01(e) shall have been duly authorized, executed and
delivered by the respective parties thereto and shall be in full force and
effect on the Closing Date.
(c) Payment of Purchase Price. The Owner Trustee shall have paid to the
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Lessee in accordance with Section 3.01(b) an amount in immediately
available funds equal to the Purchase Price for the Equipment.
(d) No Violation of Law. The participation by the Lessee in any of the
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transactions contemplated by the Basic Agreements shall not violate any
Applicable Law or subject the Lessee to any material penalty or unduly
burdensome condition pursuant to any Applicable Laws.
(e) Governmental Action; Consents and Approvals. All Governmental
-------------------------------------------
Action, and all consents, waivers and approvals by or from any trustee or
holder of any indebtedness or obligation of the Lessee required in
connection with the consummation by the Lessee of the transactions
contemplated by the Basic Agreements (including releases of Liens on the
Equipment), shall have been obtained.
(f) Opinion of Counsel for the Owner Participant. The Lessee shall have
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received an opinion, dated the Closing Date from counsel to the Owner
Participant, in form and substance satisfactory to the Lessee.
(g) Incumbency Certificate. The Lessee shall have received a
----------------------
certificate as to the incumbency and signature of the officer or officers
of the Owner Participant authorized to execute and deliver on its behalf
each Basic Agreement to which it is a party.
(h) Officer's Certificate. The Lessee shall have received an Officer's
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Certificate of the Owner Participant, dated the Closing Date, stating that
(A) the representations and warranties of the Owner Participant contained
in Section 5.02 are true and correct on and as of such date as though made
on and as of such date except to the extent that such
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representations and warranties relate solely to an earlier date (in which
event such representations and warranties shall have been true and correct
on and as of such date) and (B) each Basic Agreement to which it is a party
remains in full force and effect with respect to it.
(i) Representations and Warranties. The representations and warranties
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of the Owner Trustee and the Owner Participant contained in the Basic
Agreements shall be true and correct on and as of the Closing Date as
though made on and as of the Closing Date except to the extent that such
representations and warranties expressly relate solely to an earlier date
(in which event such representations and warranties shall have been true
and correct on and as of such date).
(j) Filings and Recordings. All filings and recordings necessary or
----------------------
advisable in the opinion of the Lessee to protect the right, title and
interest of the Lessee under the Lease shall have been duly authorized,
executed and delivered by an authorized officer of the Owner Trustee and
otherwise prepared in appropriate form and substance for filing and
recording with the appropriate authorities.
ARTICLE V
Representations and Warranties
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SECTION 5.01. Representations and Warranties of Lessee. The Lessee
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represents and warrants to each of the other parties hereto as follows:
(a) Corporate Organization and Existence. The Lessee is a corporation
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duly organized and validly existing in good standing under the laws of the
Commonwealth of Pennsylvania and is duly qualified to do business in and in
good standing in the State of Maine and the Commonwealth of Massachusetts.
It has the corporate power and authority to own and operate its properties,
to carry on its business as presently conducted, and to enter into and
perform its obligations under the Basic Agreements to which it is a party.
(b) No Consent Required. No order, license, consent, permit,
-------------------
authorization or approval of, or exemption by, or the giving of notice to,
or the registration with or the taking of any other action in respect of,
any Government Authority, and no filing, recording, publication or
registration in any public office or any other place, is required or
necessary on its behalf to authorize the
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execution, delivery and performance by it of, the Basic Agreements to which
it is a party, or for the legality, validity, binding effect or
enforceability thereof against it. No consent, authorization or approval
of, or notice to, or other action in respect of, any holder of indebtedness
of the Lessee or any trustee or agent thereof or under any indenture,
mortgage, contract or other agreement to which the Lessee is a party or by
which any of its property or assets may be bound, is required or necessary
on the Lessee's behalf to authorize the execution, delivery and performance
by it of the Basic Agreements to which it is a party or for the legality,
validity, binding effect or enforceability thereof against it, except for
the release of certain Liens on the Equipment which as of the Closing Date
will have been obtained and will be in full force and effect and
instruments evidencing such release will have been delivered to the Owner
Participant.
(c) No Conflicts, etc. The execution and delivery of this Agreement and
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the other Basic Agreements to which the Lessee is a party, the performance
of its obligations hereunder and thereunder and the consummation by it of
the transactions contemplated hereby and thereby, do not and will not
contravene any Applicable Laws, or conflict with or result in any breach
of, or constitute a default under, its certificate of incorporation or by-
laws or any indenture, mortgage, contract, agreement or instrument to which
it is a party or by which any of its property or assets may be bound or
will result in the imposition of any Lien upon any of its properties.
(d) Due Authorization; Enforceability. The execution and delivery by
---------------------------------
the Lessee of the Basic Agreements to which it is a party, and the
performance thereof and of the transactions contemplated thereby, have been
duly authorized by all necessary corporate action. Each of such Basic
Agreements at the time of delivery thereof will have been duly executed and
delivered by it and will constitute its legal, valid and binding obligation
enforceable in accordance with its terms.
(e) Securities Act. Neither the Lessee nor any Person acting on its
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behalf has directly or indirectly offered or sold the equity investment in
the Equipment, the Trust Estate or any similar securities to, or has
otherwise approached or negotiated with any Person with respect thereto, so
as to bring any of the transactions contemplated hereby within Section 5 of
the Securities Act of 1933.
(f) Litigation. Except as disclosed in the financial statements of the
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Lessee described in Section 5.01(g) below, there are no pending or, to the
knowledge of the Lessee,
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threatened investigations, suits or proceedings against it or affecting it
or its properties that, individually or in the aggregate, are likely
materially and adversely to affect the consummation of the transactions
contemplated by the Basic Agreements to which it is a party or the
performance of its obligations thereunder or its financial condition,
business, results of operations or properties.
(g) Financial Statements; Disclosure; No Material Adverse Change. (i)
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The Lessee has furnished to the Owner Participant copies of the Lessee's
audited consolidated financial statements as at and for the fiscal year
ended October 2, 1996, and unaudited consolidated financial statements as
at and for the fiscal quarter ended April 2, 1997. Such financial
statements are complete and correct in all material respects and present
fairly in all material respects the consolidated financial position of the
Lessee and its subsidiaries as of the dates thereof and the consolidated
results of operations and changes in financial position of the Lessee and
its subsidiaries for the periods covered thereby (subject, in the case of
such unaudited financial statements, to year-end audit adjustments), all in
conformity with generally accepted accounting principles consistently
applied (except as stated therein or in the notes thereto).
(ii) None of the financial statements described in clause (i) of
this Section 5.01(g), the Lessee's Annual Report on Form 10-K for the year
ended October 2, 1996 and the Lessee's Quarterly Report on Form 10-Q for
the quarter ended April 2, 1997 contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein not misleading as at the respective dates thereof. Since April 2,
1997, nothing has occurred which is likely materially and adversely to
affect the ability of the Lessee to carry on its business and operations
and, since such date, there has been no material adverse change in the
financial condition, business, results of operations or properties of the
Lessee or the ability of the Lessee to perform its obligations under the
Basic Agreements which was not disclosed in writing to the Owner
Participant prior to the Closing Date.
(h) Title. On the Closing Date, the Owner Trustee will have received
-----
from the Lessee (i) good and marketable title to the Equipment, free and
clear of all Liens except Liens described in clauses (i), (iii)(A) and
(iv)(A) of the definition of Permitted Liens, and (ii) a valid leasehold
interest in the Equipment Site pursuant to the Ground Lease free and clear
of all Liens except Liens described in clauses (i), (iii)(A) and (iv)(A) of
the definition of Permitted Liens. The description of the Equipment set
forth
13
in Annex A to the Lease shall be, on the Closing Date, a true, correct and
complete description of the Equipment in all material respects. The
description of the Equipment Site set forth in Schedule 1 to the Ground
Lease will be true, correct and complete in all material respects. On the
Closing Date, (i) the filings and recordings listed on Schedule 3 hereto
are all the filings and recordings necessary to establish or perfect the
Owner Trustee's right, title and interest in and to the Equipment and the
Equipment Site or under the Lease or the Ground Lease, each of which
filings will be made in accordance with Section 6.01(l) hereof and will be
in full force and effect as of the date of such filings and recordings,
(ii) no other action, including any action to comply with any fraudulent
conveyance statute, will be required to protect the title and interest of
the Owner Trustee in and to the Equipment and the Equipment Site or under
the Lease or the Ground Lease against the claims of any Person whomsoever,
and (iii) the filings and recordings listed on Schedule 3A hereto are the
only filings and recordings of financing statements, fixture filings,
mortgages, security agreements, memoranda of lease and other like filings
and recordings that relate (in whole or in part) to the Equipment or the
warranties and claims against dealers, manufacturers, contractors or
subcontractors relating to the Equipment.
(i) Investment Company Act. The Lessee is not an "investment company"
----------------------
within the meaning of the Investment Company Act of 1940, as amended.
(j) Chief Executive Office. The chief executive office and chief place
----------------------
of business of the Lessee is, and has been during the four months preceding
the Closing Date, located at 225 Franklin Street, Boston, Massachusetts
02110.
(k) ERISA. Assuming that the Owner Participant is not acquiring its
-----
interest in the Trust with the "plan assets" (within the meaning of ERISA
and the regulations thereunder) of any Employee Benefit Plan or with the
assets of any Plan, the execution and delivery by the Lessee of this
Agreement and the other Basic Agreements to which the Lessee is or is to
become a party and consummation of the transactions contemplated hereby and
thereby will not involve any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code.
(l) No Default, etc. No condition exists that constitutes, or with the
---------------
giving of notice or lapse of time or both would constitute, an Event of
Default or an event of default by the Lessee under any indenture, mortgage,
loan agreement or other material agreement, material lease or
14
material instrument to which the Lessee is a party or by which it or any of
its properties may be bound.
(m) Margin Regulation. None of the proceeds from the participation by
-----------------
the Owner Participant have been or will be used directly or indirectly for
any purposes in violation of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
(n) Taxes. The Lessee has filed or caused to be filed all Federal,
-----
state and local tax returns that are required to be filed by it, which if
not so filed would cause a material adverse effect on the financial
condition, business, results of operations or properties of the Lessee or
on the Lessee's ability to perform its obligations under the Basic
Agreements to which it is or is to be a party or on the Owner Trustee's
title to or rights or interests in the Equipment, and the Lessee has paid
or caused to be paid all taxes shown to be due and payable on such returns
or on any assessments received by it to the extent that such taxes have
become due and payable, except for taxes and assessments currently being
contested in good faith by appropriate proceedings and with respect to
which the Lessee has established reserves to the extent required by
generally accepted accounting principles.
(o) No Broker. The Lessee has not, directly or indirectly, used the
---------
services of any broker, agent or finder in regard to any of the
transactions contemplated hereby other than UBS Lease Finance LLC.
(p) Transaction Costs. All taxes, recording and filing fees due on
-----------------
prior to the Closing Date in connection with the transactions consummated
on such date pursuant hereto will, as of the Closing Date, have been paid.
(q) Status of Equipment. On the Closing Date, (i) the Equipment will be
-------------------
in good working order and in the condition assumed by the Appraisal, (ii)
the Equipment will be located at the Equipment Site and (iii) no Event of
Loss or event or condition which, with notice or lapse of time or both,
would become an Event of Loss will have occurred and be continuing.
(r) Not Subject to Regulation. Neither the Owner Trustee nor the Owner
-------------------------
Participant will become, by reason of its execution, delivery and
performance of the Basic Agreements to which it is a party or the
consummation of the transactions contemplated thereby, subject to
regulation by any Governmental Authority.
15
(s) Environmental Matters. To the best of the Lessee's knowledge, after
---------------------
diligent inquiry as of the Closing Date, except as disclosed in Schedule 4
hereto:
(i) The Equipment, the Equipment Site and the Facility do not contain
any Hazardous Materials in amounts or concentrations which constitute a
violation of any EH&S Requirements of Law or could reasonably be expected
to impair the Lessee's ability to meet its obligations under the Basic
Agreements.
(ii) The Equipment, the Equipment Site and the Facility are in
compliance with all applicable EH&S Requirements of Law and the Lessee has
obtained all permits, licenses, registrations, modifications, exemptions
and other authorizations required under EH&S Requirements of Law relating
to the Equipment and the Equipment Site, the Lessee reasonably believes all
of its contractors operating at the Facility are in compliance with all
applicable EH&S Requirements of Law, and the Lessee reasonably believes
that it will be able to comply with all applicable EH&S Requirements of Law
relating to the Equipment and the Equipment Site in the future and the
Lessee reasonably believes that it will be able to renew or obtain all
permits, licenses, registrations, modifications, exemptions and other
authorizations required under EH&S Requirements of Law necessary for its
operations relating to the Equipment and the Equipment Site in the future.
(iii) The Lessee has not received any written notice of any
violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with EH&S
Requirements of Law with regard to any of the Equipment, the Equipment
Site, or the Facility; and the Lessee is not otherwise aware of the
existence of any such violation, alleged violation, non-compliance,
liability or potential liability which could have a material adverse effect
on the Lessee's ability to perform its obligations under the Basic
Agreements.
(iv) Except as permitted by Applicable Laws, Hazardous Materials have
not been transported, stored, treated, disposed of, emitted, discharged, to
the natural environment or otherwise released or threatened to be released
on, from, or under the Equipment, the Equipment Site or the Facility, nor
has disposal of Hazardous Materials relating to the Equipment or the
Equipment Site been arranged for, (A) by the Lessee or, based on the
Lessee's reasonable belief, any contractor of the Lessee, in violation of
any applicable EH&S
16
Requirements of Law, or (B) in a manner or to a location which is likely to
give rise to liability under any applicable EH&S Requirements of Law which
impose liability without proof of fault (i.e., strict liability).
(v) No (A) judicial proceeding or (B) administrative action of or by
Government Authority or a private plaintiff is pending, or to the knowledge
of the Lessee, threatened, under any EH&S Requirements of Law to which the
Lessee is or will be named as a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any EH&S
Requirements of Law with respect to the Lessee's ownership or operation of
the Equipment, the Equipment Site or the Facility.
(vi) No lien imposed pursuant to any EH&S Requirements of Law exists
with respect to the Equipment, the Equipment Site or the Facility.
(t) Ground Lease. The materials to be supplied to the Owner Trustee
------------
and the rights to be granted to the Owner Trustee pursuant to the Ground
Lease are sufficient to enable the Equipment to be located on the Equipment
Site for the entire Ground Lease Term and can reasonably be expected to
enable the Owner Trustee to occupy, use, possess, own, operate and maintain
the Equipment until the end of the Ground Lease Term in an efficient manner
on a commercially reasonable basis, and there are no facilities, services,
materials, easements or rights required for such operation other than those
granted or to be provided pursuant to the Ground Lease or those that can
reasonably be expected to be available on a commercially reasonable basis
at the Equipment Site for the duration of the Ground Lease Term.
(u) Environmental Disclosure. There is no fact of a material nature
------------------------
concerning the environmental conditions of the Equipment, the Equipment
Site or the Facility, known to the Lessee or which should reasonably have
been known to the Lessee that the environmental consultant was not given an
opportunity to investigate during the course of its due diligence
investigation and preparation of its environmental report prepared pursuant
to Section 4.01(w) hereof. The Owner Participant and the Owner Trustee
acknowledge that they have had the opportunity to (1) conduct an
environmental investigation of the Equipment, Equipment Site and Facility;
(2) interview employees of Lessee with knowledge of environmental issues
related to the Equipment, Equipment Site and Facility, and (3) review all
documents requested in connection therewith.
17
SECTION 5.02. Representations and Warranties of Owner Participant.
---------------------------------------------------
The Owner Participant represents and warrants to each of the other parties
hereto as follows:
(a) Corporate Organization and Existence; Due Authorization;
--------------------------------------------------------
Enforceability. The Owner Participant is a corporation duly organized and
--------------
validly existing in good standing under the laws of the State of New York
and has the corporate power and authority to enter into and perform its
obligations under each of the Basic Agreements to which it is a party. The
execution and delivery by it of each of such Basic Agreements and the
performance thereof and of the transactions contemplated thereby by it have
been duly authorized by all necessary corporate action, and each of such
Basic Agreements at the time of delivery thereof will have been duly
executed and delivered by it and will constitute its legal, valid and
binding obligation enforceable in accordance with its terms.
(b) No Consent Required. No order, license, consent, permit,
-------------------
authorization or approval of, or exemption by, or the giving of notice to,
or the registration with or the taking of any other action in respect of,
any Governmental Authority, and no filing, recording, publication or
registration in any public office or any other place, is required or
necessary on its behalf to authorize the execution, delivery and
performance by it of, the Basic Agreements to which it is a party, or for
the legality, validity, binding effect or enforceability thereof against
it.
(c) No Conflicts, etc. The execution and delivery of this Agreement
-----------------
and the other Basic Agreements to which the Owner Participant is a party,
the performance of its obligations hereunder and thereunder and the
consummation by it of the transactions contemplated hereby and thereby,
will not contravene any Applicable Laws, or conflict with or result in any
breach of or constitute any default under, its restated organization
certificate or by-laws or any material agreement or instrument to which it
is a party or by which any of its property or assets may be bound; provided
--------
that no representation is made in this Section 5.02(c) with respect to
ERISA or as to any Applicable Laws relating to the particular nature of the
Equipment or the use or operation thereof.
(d) Securities Act. It is acquiring its interest in the Trust Estate
--------------
for its own account for investment and not with a present view to, or for
sale in connection with, any distribution, but subject nevertheless to any
requirement of
18
law that the disposition of its property shall at all times be and remain
within its control.
(e) Litigation. There are no pending or, to the knowledge of the Owner
----------
Participant, threatened investigations, suits or proceedings against it or
affecting it or its properties that, individually or in the aggregate, are
likely materially and adversely to affect the consummation of the
transactions contemplated by the Basic Agreements to which it is a party or
the performance of its obligations thereunder.
(f) Lessor Liens. No Lessor Lien attributable to the Owner Participant
------------
is in existence. The execution, delivery and performance by the Owner
Participant of the Basic Agreements to which it is a party will not subject
the Trust Estate, or any portion thereof, to any such Lessor Lien.
(g) ERISA. No part of the funds to be used by it to acquire the
-----
interests to be acquired by it under this Agreement constitutes "plan
assets" (within the meaning of ERISA and the regulations thereunder) of any
Employee Benefit Plan or of any Plan.
SECTION 5.03. Representations and Warranties of Trust Company. The
-----------------------------------------------
Trust Company represents and warrants to each of the other parties hereto as
follows:
(a) Corporate Organization and Existence; Due Authorization;
--------------------------------------------------------
Enforceability. It is a national banking association duly organized and
--------------
validly existing in good standing under the laws of the United States of
America and has the corporate power and authority to enter into and perform
its obligations under each of the Basic Agreements to which it is or is to
be a party (as Owner Trustee or in its individual capacity, as the case may
be). The execution and delivery by it of each of such Basic Agreements and
the performance thereof and of the transactions contemplated thereby have
been duly authorized by all necessary corporate action, and each of such
Basic Agreements at the time of delivery thereof will have been duly
executed and delivered by it and each such Basic Agreement to which it is a
party in its individual capacity will constitute the legal, valid and
binding obligation of it in its individual capacity enforceable against it
in its individual capacity in accordance with its terms.
(b) No Consent Required. No order, license, consent, permit,
-------------------
authorization or approval of, or exemption by, or the giving of notice to,
or the registration with or the taking of any other action in respect of,
any State of Connecticut or Federal Government Authority governing its
19
banking or trust powers, and no filing, recording, publication or
registration in any public office or any other place, is required or
necessary on its behalf under any State of Connecticut or Federal
Applicable Laws governing its banking or trust powers to authorize the
execution, delivery and performance by it (as Owner Trustee or in its
individual capacity, as the case may be) of, the Basic Agreements to which
it is a party (as Owner Trustee or in its individual capacity, as the case
may be), or for the legality, validity, binding effect or enforceability
thereof against it.
(c) No Conflicts, etc. The execution and delivery of this Agreement
-----------------
and the other Basic Agreements to which it is a party (as Owner Trustee or
in its individual capacity, as the case may be), the performance of its
obligations hereunder and thereunder, and the consummation by it of the
transactions contemplated hereby and thereby will not contravene any State
of Connecticut or Federal Applicable Laws governing its banking or trust
powers, or conflict with, result in any breach of or constitute any default
under, its articles of association or by-laws or any agreement or
instrument to which it is a party (as Owner Trustee or in its individual
capacity, as the case may be) or by which any of its property or assets may
be bound.
(d) Securities Act. Neither it nor any Person authorized to act on its
--------------
behalf has directly or indirectly offered or sold the equity investment in
the Equipment, or any similar securities, or any interest in the Trust
Estate, to, or has otherwise approached or negotiated with any Person
(other than the owner Participant and the Lessee) with respect thereto.
(e) Lessor Liens. No Lessor Lien attributable to it in its individual
------------
capacity is in existence.
(f) Litigation. There are no pending or, to its knowledge, threatened
----------
investigations, suits or proceedings against it or affecting it or any of
its properties that, individually or in the aggregate, are likely
materially and adversely to affect the consummation of the transactions
contemplated by the Basic Agreements to which it is a party (as Owner
Trustee or in its individual capacity, as the case may be) or the
performance of its obligations thereunder.
20
ARTICLE VI
Covenants
---------
SECTION 6.01. Covenants of Lessee. The Lessee covenants and agrees with
-------------------
each of the other parties hereto as follows:
(a) Further Assurances. The Lessee shall cause to be promptly and duly
------------------
taken, executed, acknowledged or delivered all such further acts, documents
and assurances as the Owner Participant or the Owner Trustee from time to
time may reasonably request in order to carry out the intent and purposes
of the Basic Agreements and the Overall Transaction. The Lessee shall
take, or cause to be taken, such action with respect to the recording,
filing, rerecording and refiling of any Basic Agreement, any memorandum
thereof and any financing or continuation statements, fixture filings or
other instruments as is necessary to maintain the right, title and interest
of the Owner Trustee in the Equipment and to preserve, protect and perfect
each of the other rights and interests created by the Trust Agreement and
by any other Basic Agreements in favor of the Owner Trustee and the Owner
Participant.
(b) Financial and Other Information. The Lessee shall deliver to the
-------------------------------
Owner Participant the following financial and other information:
(i) within 50 days after the end of each of the first three
quarterly periods of each fiscal year of the Lessee, a consolidated
balance sheet of the Lessee and its subsidiaries as of the close of such
period, together with the related consolidated statements of operations,
stockholder's equity and cash flows for such period and for the portion
of the Lessee's fiscal year then ended (setting forth in each case in
comparative form the figures for the corresponding portion of the
Lessee's previous fiscal year), all in reasonable detail and certified
(subject to normal year-end adjustments and the absence of footnotes) by
a Responsible Officer of the Lessee, provided that the delivery by the
Lessee to the Owner Participant of the Lessee's Quarterly Report on Form
10-Q for such quarterly period filed by the Lessee with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of
this clause (i);
(ii) within 95 days after the close of each fiscal year of the
Lessee, a consolidated balance sheet of the Lessee and its subsidiaries
as of the close of such fiscal year, together with the related
21
consolidated statements of operations, stockholder's equity and cash
flows for such fiscal year, accompanied by a report thereon by a
nationally recognized firm of independent public accountants provided
that the delivery by the Lessee to the Owner Participant of the Lessee's
Annual Report on Form 10-K for such fiscal year filed by the Lessee with
the Securities and Exchange Commission shall satisfy the requirements of
this clause (ii);
(iii) together with the delivery of the financial statements
referred to in subsection (ii) above, a certificate of the Lessee,
signed by a Responsible Officer of the Lessee, to the effect that the
signer has reviewed, or caused to be reviewed by persons under his
supervision, this Agreement, the Lease and such of the other Basic
Agreements as shall be necessary to make the determination required by
this subsection (iii), and that such review has not disclosed the
existence as at the date of such certificate of any condition or event
that constitutes a Default or an Event of Default or, if any such
condition or event exists, specifying the nature and period of existence
thereof and what action the Lessee has taken or is taking or proposes to
take with respect thereto;
(iv) together with the delivery of the financial statements
referred to in subsection (ii) above for every other fiscal year,
commencing with the delivery of such financial statements with respect
to the fiscal year ending September 30, 1998, an opinion of counsel
(which may be Lessee's in-house counsel) as to compliance by the Lessee
with its obligations under the first sentence of Article XVII of the
Lease and identifying any filings and recordings that will be necessary
for the Lessee to continue to comply with such obligations during the
two-year period following the date of such opinion;
(v) promptly upon any Responsible Officer of the Lessee becoming
aware of the existence thereof, a certificate of such officer stating
that a Default or an Event of Default has occurred and specifying the
nature and period of existence thereof and what action the Lessee has
taken or is taking or proposes to take with respect thereto;
(vi) promptly upon their becoming available, copies of all
regular and periodic reports filed by the Lessee with the Securities and
Exchange Commission;
22
(vii) prompt written notice of any development or event which
could reasonably be expected to have a material adverse effect on the
financial condition, business, results of operations or properties of
the Lessee or on the ability the Lessee to perform its obligations under
the Basic Agreements; and
(viii) from time to time such other information as the Owner
Participant may reasonably request.
(c) Change in Chief Executive Office. The Lessee shall notify the
--------------------------------
Owner Trustee and the Owner Participant promptly after any change in its
name, its chief executive office and place of business or the office where
it keeps its records concerning its accounts.
(d) Merger, etc. The Lessee shall not merge, consolidate or liquidate
-----------
with or into, or sell or transfer all or substantially all its assets to,
another Person (the Person surviving any such merger or consolidation, or
the Person into which the Lessee is liquidated or which acquires all or
substantially all assets of the Lessee, being referred to as the
"Successor"), unless (i) the Successor (if not the Lessee) unconditionally
---------
and expressly assumes (pursuant to an agreement reasonably satisfactory in
form and substance to the Lessor) all the liabilities and obligations of
the Lessee under the Basic Agreements to which the Lessee is a party, (ii)
the Successor's net worth immediately after giving effect to such
transaction would not be less than $290 million, (iii) immediately after
giving effect to such transaction, no Event of Default or Specified Default
shall have occurred and be continuing, (iv) the Lessee shall have delivered
to the Owner Trustee and the Owner Participant a certificate signed by a
Responsible Officer of the Lessee and an opinion of outside counsel, each
stating that such merger, conveyance, transfer or lease and the assumption
agreement referred to above comply with this Section 6.01(d) and that all
conditions precedent herein provided for relating to such transaction have
been complied with, (v) if such Successor is not a corporation, limited
partnership, limited liability company or other legal entity organized in
any of the states of the United States of America or the District of
Columbia, the Lessee shall have delivered to the Owner Trustee and the
Owner Participant an opinion of outside counsel stating that the filings
and recordings listed in Schedule 3 hereto (as amended to reflect the
identity of such Successor, and together with any additional filings and
recordings made in connection with such merger, consolidation, liquidation
or sale) continue to be effective to establish and perfect the Owner
Trustee's right, title and interest in and to the Equipment and the
Equipment Site and under the Lease and the
23
Ground Lease to the same extent as when such filings and recordings were
initially accomplished as contemplated by Section 6.01(l) hereof (but after
giving effect to all transactions permitted under the Lease and the other
Basic Agreements that shall have affected such right, title and interest),
and (vi) the Owner Trustee and the Owner Participant shall have received at
least 15 days' prior notice of the proposed merger, consolidation,
liquidation or sale, which notice shall specify the name and address of the
proposed Successor and the facts necessary to determine whether such
proposed Successor and such proposed merger, consolidation, liquidation or
sale will comply with the provisions of this Section 6.01(d). Upon the
consummation of any such transaction in accordance with this Section
6.01(d), the Successor (if not the Lessee) shall succeed to, and be
substituted for, and shall be entitled to exercise every right and power
of, the Lessee under the Basic Agreements to which the Lessee is a party
with the same effect as if such Successor had been named as the Lessee
therein, provided that notwithstanding such transaction, the Lessee shall
not be released from its obligations under the Basic Agreements without the
consent of the Owner Participant.
The Owner Trustee agrees that it shall, to the extent so requested
by the Lessee and at the Lessee's expense, use reasonable efforts to
cooperate with the Lessee in effecting any merger, consolidation,
liquidation or sale permitted by this Section 6.01(d); and, if requested by
the Lessee or any surviving or acquiring entity party to such transaction,
the Owner Trustee will give its written consent to any such transfer
complying with the provisions of this Section 6.01(d) promptly after a
request therefor.
(e) Compliance with Law. The Lessee shall comply in all material
-------------------
respects with all Applicable Laws applicable to it or by which the Lessee
or any of the Lessee's properties are bound or affected.
(f) Maintenance of Corporate Existence. The Lessee at all times shall
----------------------------------
preserve, renew and keep in full force and effect its corporate existence
and take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business
except as otherwise permitted under Section 6.01(d).
(g) Environmental Matters. (i) The Lessee shall comply with, and shall
---------------------
make reasonable efforts to assure that its contractors operating at the
Facility or the Equipment comply with, all applicable EH&S Requirements of
Law applicable to the Equipment, the Equipment Site and the Facility and
shall obtain, comply with, maintain in force
24
and timely renew, and maintain, any and all permits, licenses,
registrations, modifications, exemptions and other authorizations required
by applicable EH&S Requirements of Law. The Lessee shall not cause or
suffer or allow the causation of conditions at, on, or under the Equipment,
the Equipment Site or the Facility that could reasonably be concluded would
result in material liability under any EH&S Requirements of Law. The
Lessee shall conduct all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under EH&S Requirements of
Law applicable to the Equipment, the Equipment Site and the Facility,
subject to Section 7.07 of the Lease. For the purposes of this Section
6.01(g), the term "applicable EH&S Requirements of Law" shall include all
current and subsequently enacted EH&S Requirements of Law.
(ii) The Lessee shall provide to the Owner Trustee and the Owner
Participant, annually on or before August 1, a copy of all publicly
disclosed documents filed in the preceding year (e.g., August 2 through
July 31) pursuant to federal securities law if requested by the Owner
Trustee or the Owner Participant; and copies of the following documents, to
the extent they relate to the Equipment or the Facility: (1) Toxic Release
Inventory Forms ("Forms R's") filed pursuant to EPCRA Section 313; (2)
spill reports filed pursuant to CERCLA or the Maine Hazardous Matter Law
and 801 DEP Regs. Section 4; and (3) notices of violation of EH&S
Requirements of Law, which Lessee reasonably believes may affect operation
of the Equipment or result in material liability related to contamination
of the Equipment Site, and responses thereto submitted by the Lessee.
(h) Letter of Credit. (i) On the Closing Date the Lessee shall
----------------
provide to Owner Trustee, and at all times on and after the Closing Date to
and including the date which is 30 days after the Basic Lease Term
Termination Date or earlier termination of the Lease, the Lessee shall
continue to provide to the Owner Trustee, an irrevocable, unconditional
letter of credit satisfying the requirements set forth in clause (ii) of
this Section (the "Letter of Credit").
----------------
(ii) The Letter of Credit (A) shall be in favor of the Owner
Trustee, (B) shall be issued by a banking institution domiciled in the
United States or a U.S. branch or agency (which agency shall be acceptable
to the Owner Participant) of a foreign banking institution, in each case
whose long-term senior unsecured debt obligations are rated "A" or better
by Standard & Poor's at the time the Letter of Credit is issued (the Person
issuing the Letter of Credit being herein referred to as the "Issuing
-------
Bank"), (C) shall
----
25
be in a stated amount of $10,000,000 (or such higher stated amount as may
be required pursuant to clause (iii) of this Section 6.01(h)), (D) shall be
payable at an office of the Issuing Bank in New York, New York, (E) shall
have a stated expiration date of not earlier than 360 days after the date
of original issuance or any extension or renewal thereof, (F) shall permit
the beneficiary thereof to transfer its interest therein without the
consent of the Issuing Bank or the Lessee, and (G) shall be substantially
in the form of Exhibit A hereto or otherwise in form and substance
satisfactory to the Owner Trustee.
(iii) If at any time the long-term senior unsecured debt
obligations of the Issuing Bank shall cease to have an "A-" or better
rating by Standard & Poor's, the Lessee shall, promptly (and in any event
within 10 days) after the earlier of (A) the giving of notice by the Owner
Trustee or the Owner Participant to the Lessee of such cessation and (B) a
Responsible Officer of the Lessee obtaining actual knowledge of such
cessation, replace the Letter of Credit with a replacement Letter of Credit
satisfying the requirements set forth in clause (ii) of this Section. Upon
its receipt of such replacement Letter of Credit, the Owner Trustee shall
surrender the original Letter of Credit being replaced to the issuer of the
Letter of Credit being replaced. In addition, the Lessee shall, at least
10 Business Days prior to the stated expiration date of any Letter of
Credit, deliver to the Owner Trustee a replacement Letter of Credit, or a
renewal or extension of such expiring Letter of Credit, in either case
satisfying the requirements set forth in clause (ii) of this Section
6.01(h). If at any time Lessee's senior secured debt shall cease to have
both a "BB" or better rating by Standard & Poor's and a "Ba2" or better
rating by Moody's, the Letter of Credit shall be required to be in a stated
amount of $15,000,000, and the Lessee shall, promptly (and in any event
within 10 Business Days) after the earlier of (A) the giving of notice by
the Owner Trustee or the Owner Participant of such cessation and (B) a
responsible Officer of the Lessee obtaining actual knowledge of such
cessation, replace the Letter of Credit with an amended Letter of Credit or
a replacement Letter of Credit satisfying the requirements set forth in
clause (ii) of this Section 6.01(h).
(iv) At the time of issuance of any Letter of Credit, such Letter
of Credit shall be accompanied by an opinion of counsel to the Issuing Bank
as to due authorization, execution and delivery by and enforceability
against such Issuing Bank; provided, however, that such opinion of counsel
-------- -------
shall not be required in case of renewal
26
or extension of an existing Letter of Credit with the issuer of such
existing Letter of Credit.
(v) The Lessee shall give the Owner Trustee and the Owner
Participant notice of the scheduled expiration of each Letter of Credit not
less than 45 days before its scheduled expiration date.
(vi) The Owner Trustee may make partial or full drawings under
the Letter of Credit (A) at any time an Event of Default has occurred and
is continuing, or (B) if the Letter of Credit is not extended or renewed,
or replaced by another Letter of Credit satisfying the requirements set
forth in clause (ii) of this Section 6.01(h), in each case in accordance
with clause (iii) of this Section 6.01(h) (each of the events or
circumstances referred to in clause (A) or (B) of this sentence being
referred to as a "Drawing Event"). If the proceeds of any drawing by the
--------------
Owner Trustee under the Letter of Credit exceed the amounts due and owing
by the Lessee under the Basic Agreements, such excess (together with any
interest or gain thereon) shall be held by the Owner Trustee as collateral
security for the Lessee's obligations under the Basic Agreements and may be
applied by the Owner Trustee to satisfy the obligations of the Lessee under
the Basic Agreements. If the amount of such proceeds held by the Owner
Trustee exceeds $100,000, such proceeds shall be invested from time to time
in Permitted Investments as directed in writing by Lessee (or, in the
absence of a timely direction, in Permitted Investments specified in clause
(i), (ii) or (viii) of the definition of the term "Permitted Investments"),
and at the expense and risk of the Lessee. Any income or gain realized as a
result of any such investment shall be applied to make up any losses
resulting from any such investment to the extent such losses shall not have
been recovered from Lessee, as provided below in this clause (vi), and any
balance shall be held and applied as above provided. Upon incurring any
losses from any such investment, which losses are not made up from income
or gain as aforesaid, the Owner Trustee shall promptly notify the Lessee
thereof and, upon receipt of such notice, the Lessee shall promptly pay to
the Owner Trustee the amount of such loss. Neither the Owner Trustee nor
the Owner Participant shall have any liability for any loss resulting from
any such investment. Any such investment may be sold (without regard to
maturity date) by the Owner Trustee whenever necessary to make any payment
of Rent required by any Basic Agreement.
(vii) Notwithstanding the foregoing, the Lessee shall not be
required to provide the Letter of Credit hereunder if and so long as all of
the following are satisfied: (A) no Default or Event of Default shall have
27
occurred and be continuing; and (B) Lessee's senior secured debt shall be
rated both "BBB" or better by Standard & Poor's and "Baa2" or better by
Moody's. It is understood and agreed that if the Lessee does not have a
rated senior secured debt for the purposes of this provision, a private
rating may be obtained from Standard and Poor's and Moody's, and if and so
long as such private ratings shall be at least the equivalent of the
ratings set forth in clause (B) of the preceding sentence, then clause (B)
of the preceding sentence shall be deemed to be satisfied.
(i) Prepayment of Term Loan. The Lessee shall use a portion of the
-----------------------
Purchase Price to prepay an amount of the Term Loan equal to the greater of
(A) $100,000,000 and (B) two-thirds of the Purchase Price.
(j) Limitation on Senior Indebtedness. (i) The Lessee shall not
---------------------------------
create, incur, assume or suffer to exist any additional Senior Indebtedness
in connection with a merger, consolidation or acquisition, or in connection
with any purchase, repayment or redemption of, or payment of any dividends
or distributions on, Junior Securities (other than any redemption prior to
the third anniversary of the Closing Date of any of the Lessee's 14% Series
B Senior Exchangeable Preferred Stock issued and outstanding on the Closing
Date (and any of such Preferred Stock issued as a pay-in-kind dividend
thereon in accordance with the terms of such Preferred Stock as in effect
on the Closing Date), in which event clause (ii) of this Section 6.01(j)
shall be applicable to any such redemption), except if:
(A) immediately after giving effect to such transaction, the
senior secured debt of the Lessee, or its Successor, as the case may
be, is rated both "BBB-" or better by Standard & Poor's and "Baa3" or
better by Moody's; or
(B) the Lessee shall have complied with clause (iv) of this
Section 6.01(j) and, immediately after giving effect to such
transaction, both (I) the Capitalization Ratio of the Lessee, or its
Successor, as the case may be, is not greater than 0.6 to 1.0, and
(II) the Interest Coverage Ratio as of the date of such transaction is
not less than 1.5 to 1.0.
(ii) The Lessee shall not create, incur, assume or suffer to exist
any additional Senior Indebtedness in connection with any redemption prior
to the third anniversary of the Closing Date of the Lessee's 14% Series B
Senior Exchangeable Preferred Stock (and any of such Preferred Stock issued
as a pay-in-kind dividend thereon in accordance with the terms of such
Preferred Stock as in
28
effect on the Closing Date) issued and outstanding on the Closing Date,
except if:
(A) immediately after giving effect to any such redemption, the
senior secured debt of the Lessee is rated both "BBB-" or better by
Standard & Poor's and "Baa3" or better by Moody's; or
(B) the Lessee shall have complied with clause (iv) of this
Section 6.01(j) and both (I) immediately prior to and without giving
effect to any such redemption, the Capitalization Ratio of the Lessee
is not greater than 0.6 to 1.0, and (II) immediately after giving
effect to any such redemption, the Interest Coverage Ratio as of the
date of such redemption is not less than 1.5 to 1.0.
(iii) It is understood that "additional Senior Indebtedness" as
used in this Section 6.01(j) shall not include additional Senior
Indebtedness incurred as a revolving credit loan under the Credit
Agreement, or under any replacement revolving credit facility of the
Lessee, in each case up to the maximum principal amount of $250 million.
(iv) At least 20 days prior to the consummation of any transaction
referred to clause (i) or (ii) of this Section 6.01(j), the Lessee shall
provide to the Owner Participant notice of the proposed transaction,
showing in reasonable detail the calculation of the Consolidated EBITDA and
the projection of the Consolidated Cash Interest Expense referred to in the
definition of Interest Coverage Ratio. The Lessee shall also provide such
other information as the Owner Participant may reasonably request to
support such calculation and projection. At least three Business Days
prior to the consummation of such transaction, the Lessee shall provide to
the Owner Participant a certificate signed by a Responsible Officer of the
Lessee certifying (A) that such transaction complies with this Section
6.01(j), which certificate shall set forth in reasonable detail the
calculations and projection required to establish that such transaction
complies with this Section 6.01(j) and (B) that such projection has been
prepared using assumptions believed in good faith by management of the
Lessee to be reasonable at the time made and that such Responsible Officer
has no reason to believe that such projection is incorrect or misleading in
any material respect. Notwithstanding the foregoing, the Lessee shall not
be required to comply with the preceding provisions of this clause (iv) if
at the time of consummation of such transaction the senior secured debt of
the Lessee or its Successor, as applicable, shall have
29
the ratings referred to in clause (i)(A) or (ii)(A) of this Section
6.01(j), as applicable.
(k) Inspection. (i) At such times and as often as may be reasonably
----------
requested, the Owner Trustee and the Owner Participant and their respective
authorized representatives may inspect the Equipment, any Part thereof, the
Equipment Site and the books and records of Lessee or to which Lessee has
access relative thereto, and may make copies and extracts therefrom, at
their expense and subject to appropriate safety restrictions and
precautions; provided, however, that, unless an Event of Default has
-------- -------
occurred and is continuing, the Owner Trustee and the Owner Participant
shall conduct any such inspection during the Lessee's normal business hours
and so as not to interfere materially with the operation of the Equipment
or the conduct by the Lessee of its business, shall provide the Lessee with
reasonable prior notice thereof and shall be limited to two inspections of
the Equipment during any consecutive twelve-month period; and provided
--------
further, however, that during the continuance of an Event of Default, the
------- -------
Lessee shall pay the reasonable out-of-pocket expenses incurred by the
Owner Trustee or the Owner Participant in exercising its inspection rights.
Neither the Owner Trustee nor the Owner Participant shall have any duty to
make any such inspection or shall incur any liability by reason of not
making same.
(ii) During the Lease Term, at such times and as often as may be
reasonably requested, the Lessee will permit the Owner Trustee and the
Owner Participant and their respective authorized representatives to
discuss the Lessee's financial affairs with senior officers of the Lessee.
(l) Filings and Recordings. As promptly as possible after the Closing
----------------------
Date, but in any event not later than five Business Days after the Closing
Date, (i) all filings and recordings specified in Schedule 3 hereto shall
have been duly filed in the respective places specified in Schedule 3
hereto (ii) and UCC financing statement releases with respect to the
Equipment shall have been duly filed with respect to the financing
statements specified in Schedule 3A hereto.
SECTION 6.02. Covenants of Owner Participant. The Owner Participant
------------------------------
covenants and agrees with each of the other parties hereto as follows:
(a) No Lessor Liens. The Owner Participant shall not, directly or
---------------
indirectly, create, incur, assume or suffer to exist, and, at its expense
(without any right of indemnity under this Agreement or any other Basic
Agreement), shall
30
promptly take such action as may be necessary duly to discharge, any Lessor
Lien attributable to it. For all purposes of this Agreement and the other
Basic Agreements, any Lessor Lien relating to or arising out of the
nonpayment of any Tax imposed on or measured by the net income of the Trust
Estate shall be attributed to the Owner Participant.
(b) Amendments of Trust Agreement; Appointment of Successor Owner
-------------------------------------------------------------
Trustee. The Owner Participant agrees that, prior to the expiration or
-------
termination of the Lease Term, the Owner Participant shall not (i)
terminate, or consent to the termination of, or, in any way materially
adverse to the Lessee or that would increase Lessee's liabilities or
obligations under the Basic Agreements (unless the Owner Participant agrees
to indemnify Lessee for such increased liabilities or obligations pursuant
to an agreement in form and substance reasonably satisfactory to the
Lessee), amend or supplement or consent to any such amendment of or
supplement to, the Trust Agreement without the prior written consent of the
Lessee, which consent shall not unreasonably be withheld, or (ii) so long
as no Event of Default shall have occurred and be continuing, appoint a
successor Owner Trustee under the Trust Agreement that has not been
approved by the Lessee (such approval not to be unreasonably withheld).
(c) Owner Participant's Obligations under Section 3.03 of the Lease.
---------------------------------------------------------------
The Owner Participant shall perform the obligations of the Owner
Participant under Section 3.03 of the Lease.
(d) Instructions to Owner Trustee. The Owner Participant will not
-----------------------------
instruct the Owner Trustee to take any action in violation of the express
covenants and agreements of the Owner Trustee to the Lessee in the Basic
Agreements.
SECTION 6.03. Covenants of Owner Trustee. The Owner Trustee in its
--------------------------
individual capacity and, to the extent set forth below, as Owner Trustee,
covenants and agrees with each of the other parties hereto as follows:
(a) No Lessor Liens. The Owner Trustee agrees that it will not (as
---------------
Owner Trustee or in its individual capacity), directly or indirectly,
create, incur, assume or suffer to exist, and, at its expense (without any
right of indemnity under this Agreement, the Trust Agreement or any other
Basic Agreement), shall promptly take such action as may be necessary duly
to discharge any Lessor Lien attributable to it or him.
(b) Transfer of Owner Trustee's Interest. The Owner Trustee agrees
------------------------------------
that, prior to the expiration or termination
31
of the Lease Term, the Owner Trustee shall not assign, convey, pledge,
mortgage or otherwise transfer or encumber all or any part of its right,
title and interest in and to the Equipment, this Agreement and the other
Basic Agreements except (i) as expressly provided in the Trust Agreement or
required by the terms of the Basic Agreements, (ii) with the prior written
consent of the Lessee, which consent shall not be unreasonably withheld as
to a like-kind exchange, or (iii) as provided in Section 10.02; provided
--------
that the foregoing restrictions shall not apply after the expiration or
termination of the Lease Term.
(c) Successor Mortgagee of Equipment Site. The Owner Trustee agrees
-------------------------------------
that if, prior to the expiration or termination of the Lease, the Lessee
grants a mortgage Lien on the Lessee's fee title to the Equipment Site to
secure Senior Indebtedness which is a Permitted Lien described in clause
(viii) of the definition thereof, promptly after request by the Lessee and
at the Lessee's expense, the Owner Trustee will enter into agreements with
the holder of such Lien substantially identical to the Consent and
Recognition Agreement and, to the extent relevant, the Release and Non-
Disturbance Agreement, so long as in each case the Lessee and any other
appropriate Persons also enter into such agreements.
ARTICLE VII
General Indemnity
-----------------
SECTION 7.01. General Indemnity. The Lessee hereby assumes
-----------------
liability for, and does hereby agree (whether or not any of the transactions
contemplated hereby shall be consummated) to indemnify, protect, save and hold
harmless and keep whole, on an After-Tax Basis, each Indemnified Person from
and against, any and all Expenses that may be imposed on, incurred by or
asserted against such Indemnified Person in any way relating to or arising out
of or resulting from: (a) the Equipment or the Equipment Site, or any part
thereof or interest therein; or (b) any of the Basic Agreements or the Overall
Transaction; or (c) the manufacture, construction, financing, refinancing,
purchase, acquisition, preparation, installation, acceptance, possession,
rejection, ownership, delivery, nondelivery, transportation, use, assembly,
operation, leasing, subleasing, condition, maintenance, repair, modification,
sale, storage, return, dismantling, abandonment, repossession, redelivery or
other disposition of, or the imposition of any Lien other than Lessor Liens (or
incurrence of any liability to refund or pay over any amount as a result of any
such Lien) on, the Equipment, the Equipment Site, the Mill or the Mill Site, or
any part thereof or interest therein, including, without limitation, (i) any
claim or penalty arising
32
out of negligence, violations of or the imposition of liability with or without
fault under Applicable Laws (including, without limitation, any EH&S
Requirements of Law), or in tort (by application of the doctrine of strict
liability or otherwise) (provided, however, that no indemnification will be
-------- -------
provided for any such Expenses referred to in this clause (i) incurred as the
result of any action taken by an Indemnified Person during any period during
which such Indemnified Person is operating the Equipment), (ii) latent or other
defects, whether or not discoverable by the Owner Participant, the Owner
Trustee, the Lessee or any other Person, (iii) loss or damage to any property or
the environment (including, without limitation, all expenses associated with
remediation, response, removal, corrective action, clean-up, remedial action,
treatment, compliance, restoration, abatement, containment, monitoring,
sampling, investigation, the protection of wildlife and aquatic and vegetation,
the interference with or contamination of any wetland or body of water or
aquifer, and any relevant mitigative action under any EH&S Requirements of Law
relating to the Equipment, the Equipment Site or the Facility and any expenses
associated with the existence or presence of any Hazardous Material at, in or
under the Equipment, the Equipment Site or the Facility, or any part thereof, or
the release, emission or discharge of any Hazardous Material into the
environment), or damages to or destruction of any natural resources, or death
of, illness of, or injury to any Person (provided, however, that no
-------- -------
indemnification will be provided for any such Expenses referred to in this
clause (iii) incurred as the result of any action taken by an Indemnified Person
during any period during which such Indemnified Person is operating the
Equipment), and (iv) any claim for patent, trademark or copyright infringement;
or (d) any breach of or failure to perform or observe, or other noncompliance
with, any covenant, condition or agreement to be performed or observed by the
Lessee under any of the Basic Agreements, or the inaccuracy of any
representation or warranty of the Lessee under any of the Basic Agreements or in
any certificate delivered in connection therewith or pursuant thereto; provided,
--------
however, that the foregoing indemnity shall not extend to any Expense imposed
- -------
on, incurred by or asserted against any Indemnified Person to the extent the
same arises out of or results from one or more of the following circumstances:
(1) the incorrectness of any representation or warranty of such
Indemnified Person contained in or made pursuant to this Agreement or any
of the other Basic Agreements or any other document delivered in connection
therewith;
(2) the breach by such Indemnified Person of, or failure of such
Indemnified Person to perform or observe, any covenant, agreement or
condition on its part required to
33
be performed or observed in this Agreement or any of the other Basic
Agreements;
(3) the wilful misconduct or gross negligence of such Indemnified
Person or any of its Affiliates or any of their respective successors,
assigns, officers, directors, employees or agents (other than wilful
misconduct or gross negligence imputed to such Indemnified Person or any
such Affiliate, successor, assign, officer, director, employee or agent by
reason of its interest in the Equipment or any part thereof or by reason of
operation of law as a result of its interest in the Equipment or any part
thereof or its participation in the Overall Transaction);
(4) a disposition or offer (voluntary or involuntary) by the Owner
Trustee or the Owner Participant of all or any part of its interest in the
Trust Estate, the Equipment, the Lease or any of the other properties,
rights and interests constituting the Trust Estate, including any
disposition or offer by the Owner Participant contemplated by Article X of
this Agreement, but excluding any disposition or offer (A) requested by the
Lessee, (B) during the continuance of an Event of Default, (C) involving a
transfer of the Trust Estate to a successor trustee or co-trustee in
accordance with the Trust Agreement or (D) contemplated or required by the
Basic Agreements (but excluding from this clause (D) any disposition or
offer contemplated by Article X of this Agreement);
(5) any Tax, whether or not the Lessee is required to indemnify for
such Tax pursuant to Article VIII or the Tax Indemnity Agreement (it being
understood that Article VIII, the Tax Indemnity Agreement and provisions of
the Basic Agreements requiring payments to be made on an After-Tax Basis
exclusively provide for the Lessee's liability with respect to Taxes and
payments or indemnities with respect thereto);
(6) with respect to the Equipment, acts or events that occur after
the Lessee returns the Equipment to the Lessor upon the expiration or
termination of the Lease, or after the recovery of possession by the Lessor
of possession of the Equipment pursuant to the Lease, unless fairly
attributable to the period prior to such return or recovery or fairly
attributable to any noncompliance with Article XVI of the Lease in
connection with such return or recovery;
(7) a failure on the part of the Owner Trustee to distribute in
accordance with the Trust Agreement any amounts received and distributable
by it thereunder;
34
(8) Expenses incurred by any Indemnified Person in giving or
withholding of any amendment, modification, supplement, waiver,
termination, approval or consent with respect to this Agreement or any of
the other Basic Agreements that is requested by the Owner Participant or
the Owner Trustee and not expressly contemplated by the Basic Agreements;
and
(9) any Expense that is (x) included in Transaction Expenses and for
which the Owner Participant is responsible pursuant to Article IX, or (y)
incurred by any Indemnified Person (or any Affiliate of such Indemnified
Person or any successor, assign, officer, director, employee or agent of
such Indemnified Person or any such Affiliate) to the extent that such
Indemnified Person shall have expressly agreed in this Agreement or any
other Basic Agreement or otherwise in writing to bear such Expense without
right of reimbursement or indemnity under this Agreement or any other Basic
Agreement.
Without limitation of the foregoing, whether or not any of the
transactions contemplated hereby are consummated, except to the extent that any
of the items hereinafter described are Transaction Expenses that are the
responsibility of the Owner Trustee pursuant to Article IX, the Lessee shall
pay: (a) the reasonable fees, expenses and disbursements of the Owner Trustee,
as trustee under the Trust Agreement, with respect to the administration of the
Trust Estate during the Lease Term, including the reasonable fees and expenses
of its counsel; and (b) all the reasonable costs and expenses (including the
reasonable fees and expenses of counsel but not including costs and expenses in
respect of overhead or internal administration) incurred by the Owner
Participant and the Owner Trustee in connection with (i) the entering into or
giving or withholding of any proposed amendment, modification, supplement,
waiver, termination, approval or consent with respect to any Basic Agreement
after the Closing Date (except those requested by the Owner Participant or the
Owner Trustee and not expressly contemplated by the Basic Agreements, other than
those requested in connection with a transfer by the Owner Participant of any of
its right, title or interest in and to the Trust Estate in accordance with
Section 10.01 hereof (except during the continuance of an Event of Default) or
the exercise by the Owner Trustee of the Leverage Option in accordance with
Section 10.02 hereof), (ii) any Event of Loss, (iii) any Event of Default or
(iv) any transfer of the Letter of Credit.
If the Lessee shall obtain knowledge of any Expense indemnified against
under this Section 7.01, the Lessee shall give prompt notice thereof to the
appropriate Indemnified Person or Persons, and if any Indemnified Person shall
obtain any such knowledge, such Indemnified Person shall give prompt notice
35
thereof to the Lessee (but failure to so notify shall not affect any right
hereunder; provided that nothing herein shall affect the Lessee's right to bring
--------
a separate action for damages to the extent the Lessee is materially prejudiced
as a result of such failure). With respect to any amount that the Lessee is
requested by an Indemnified Person to pay by reason of this Section 7.01, such
Indemnified Person 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 properly to substantiate the requested payment.
In case any action, suit or proceeding shall be commenced (or any
written threat or assertion of a claim is received) that could give rise to an
Expense indemnified against under this Section 7.01, the affected Indemnified
Person shall notify the Lessee thereof (but the failure to do so shall not
relieve the Lessee of its obligation to indemnify such Indemnified Person;
provided that nothing herein shall affect the Lessee's right to bring a separate
- --------
action for damages to the extent that the Lessee is prejudiced as a result of
such failure), and the Lessee shall be entitled, at its expense, acting through
counsel selected by the Lessee and reasonably acceptable to such Indemnified
Person, to participate in, and, to the extent that the Lessee desires, to assume
and control the defense thereof; provided, however, that the Lessee shall not be
-------- -------
entitled to assume and control the defense of any such action, suit or
proceeding (i) if an Event of Default or Specified Default has occurred and is
continuing, (ii) unless the Lessee has acknowledged in writing to the affected
Indemnified Person its obligation to indemnify such Indemnified Person for any
Expense resulting from a settlement of or adverse determination of such action,
suit or proceeding, (iii) if the affected Indemnified Person notifies the Lessee
that it has determined, on advice of counsel, that defense of such action, suit
or proceeding by the Lessee would involve a conflict of interest between the
Lessee and such Indemnified Person, (iv) if such action, suit or proceeding
involves a material risk of the sale, forfeiture or loss of the Equipment or any
part thereof or interest therein, (v) if such action, suit or proceeding entails
any risk of criminal liability of the affected Indemnified Person or (vi) if
there is a reasonable likelihood that such action, suit or proceeding will be
adversely determined and the Lessee has not demonstrated to the reasonable
satisfaction of the affected Indemnified Person its ability to pay any Expense
arising as a result thereof (taking into consideration any applicable insurance
coverage). In the event that the Lessee shall have assumed control of the
defense of any action, suit or proceeding (or other claim) as provided above,
the Indemnified Person shall cooperate with the Lessee in such defense and shall
be entitled, at its expense, acting through counsel reasonably acceptable to the
Lessee, to participate in any such action, suit or proceeding. In any event, the
Lessee
36
shall not have any right to settle any such action, suit or proceeding (or other
claim) in any manner or on any basis that involves the imposition of any
liability or obligation on any Indemnified Person (other than a monetary
liability that is fully discharged by the Lessee) without the prior written
consent of such Indemnified Person. Nothing contained in this Article VII shall
be deemed to require an Indemnified Person to contest any Expense or to assume
responsibility for, or control of, any action, suit or proceeding with respect
thereto.
Each Indemnified Person shall at the expense of the Lessee use its good
faith efforts to supply the Lessee with such information and documents
reasonably requested by the Lessee as are necessary or advisable for the Lessee
to participate in or defend any action, suit or proceeding (or other claim) to
the extent permitted by this Section 7.01. If any Indemnified Person enters
into any settlement or other compromise with respect to any Expense without the
prior written consent of the Lessee (which consent shall not be unreasonably
withheld, and shall not be required if an Event of Default or Specified Default
has occurred and is continuing at the time of such settlement or compromise), or
does not permit the Lessee to participate in or defend an action, suit or
proceeding (or other claim) that the Lessee is entitled to participate in or
defend hereunder, then such Indemnified Person shall be deemed to have waived
its right to be indemnified under this Section 7.01 with respect thereto.
Upon payment of any Expense by the Lessee pursuant to this Section 7.01
to or on behalf of an Indemnified Person, the Lessee, without any further act,
shall be subrogated to any and all claims that such Indemnified Person may have
relating thereto (other than claims in respect of insurance policies maintained
by such Indemnified Person at its own expense and other than claims against the
Owner Participant under the Trust Agreement). Such Indemnified Person shall
cooperate with the Lessee and give such further assurances as are necessary or
advisable to enable the Lessee to pursue such claims, at the Lessee's expense
(but not in an amount in excess of the amount Lessee has paid to such
Indemnified Person in respect of such Expense).
So long as no Event of Default or Specified Default has occurred and is
continuing, if an Indemnified Person obtains a refund of all or any part of any
Expense paid, reimbursed or otherwise indemnified by the Lessee hereunder, such
Indemnified Person shall pay to the Lessee the amount so refunded, including any
interest thereon actually received from the party from whom such refund was
obtained, net of any Taxes payable by such Indemnified Person in respect of the
receipt or accrual of such refund or interest (but not an amount in excess of
the amount Lessee has paid to such Indemnified Person in respect of such
Expense). If an Event of Default or Specified Default has occurred and is
continuing, any such amount shall be held by such
37
Indemnified Person as security for the obligations of the Lessee under the Basic
Agreements and may be applied against Lessee's obligations under the Basic
Agreements, and, at such time thereafter as no Event of Default or Specified
Default shall be continuing, such amount, to the extent not theretofore applied
against such obligations, shall be paid promptly to the Lessee.
The Lessee shall be obligated (as a primary obligor) under this Section
irrespective of whether any Indemnified Person indemnified hereunder is also
indemnified with respect to the same matter under any other agreement by any
other Person, and the Indemnified Person seeking to enforce the indemnification
may proceed directly against the Lessee under this Section without first
resorting to any such other rights of indemnification.
Nothing contained in this Article VII shall be construed to confer any
right upon, or to be enforceable by, any Person other than an Indemnified
Person.
SECTION 7.02. Payments and Survival. All amounts payable by Lessee
---------------------
pursuant to this Article VII shall be payable directly to the Persons entitled
to payment or indemnification. The provisions of this Article VII shall survive
the expiration or termination of this Agreement, the Lease and the other Basic
Agreements.
ARTICLE VIII
General Tax Indemnity
---------------------
SECTION 8.01. Indemnity. Except as provided in Section 8.02 of this
---------
Agreement, the Lessee shall pay, and on written demand shall indemnify and hold
each Indemnified Person harmless from and against, (A) any and all Taxes imposed
on or with respect to any Indemnified Person, the Lessee, the Equipment, the
Mill, the Mill Site, the Equipment Site, the ground leasehold estate, or any
portion thereof or interest therein by the State or Maine or any local
government or taxing authority thereof (or by any other jurisdiction in which
all or any portion of the Equipment is located), and (B) any U.S. federal excise
or similar Tax, in either case in connection with or in any way relating to (a)
the financing, refinancing, purchase, acquisition, acceptance, rejection,
delivery, nondelivery, transport, ownership, assembly, possession, repossession,
operation, use, condition, maintenance, repair, sale, dismantling, return,
abandonment, preparation, installation, storage, replacement, redelivery,
leasing, subleasing, modification, transfer of title, rebuilding, rental,
importation, exportation or other application or disposition of, or the
imposition of any Lien (or incurrence of any liability to refund or pay over any
amount as a result of any Lien) on, the Equipment, or any portion thereof or
interest
38
therein, (b) the payment of Rent or the receipts or earnings arising from or
received with respect to the Equipment, or any portion thereof or any interest
therein or any applications or dispositions thereof, (c) any other amount paid
or payable pursuant to any Basic Agreements, (d) the Equipment, or any portion
thereof or any interest therein or the applicability of the Lease to the
Equipment or any portion thereof or any interest therein, (e) all or any of the
Basic Agreements, any other documents contemplated thereby, and amendments and
supplements thereto, and (f) otherwise with respect to or in connection with the
Overall Transaction.
The provisions of this Section 8.01 shall survive the expiration or
termination of this Participation Agreement, the Lease and the other Basic
Agreements.
SECTION 8.02. Exclusions from General Tax Indemnity. Section 8.01
-------------------------------------
shall not apply to:
(a) any Tax (i) based on, or measured by, the net income, net
receipts, capital or net worth of any Indemnified Person or (ii) in the
nature of a minimum tax or a tax on or measured by items of tax preference
(in each case other than in the nature of sales, use, value added or rental
taxes); provided, however, that the provisions of this paragraph (a) shall
-------- ------
not apply to any Tax required to be taken into account in making any
payment on an "After-Tax Basis";
(b) any Tax which is based on, or measured by, the fees or other
compensation received by the Owner Trustee for acting as trustee under the
Trust Agreement;
(c) Taxes upon any voluntary or involuntary transfer by an
Indemnified Person of any interest in the Equipment, or any interest in an
Indemnified Person, or any interest arising under the Basic Agreements,
other than (A) as expressly contemplated by the Lease, this Agreement or
any other Basic Agreement (including any such disposition arising from the
exercise of remedies or in connection with an Event of Loss or the exercise
by the Lessee of any purchase option under the Lease, but excluding any
transfer pursuant to Article X hereof), or (B) while an Event of Default
shall have occurred and be continuing;
(d) any Tax that is imposed on any Indemnified Person as a result
of such Indemnified Person's gross negligence or wilful misconduct (other
than gross negligence or wilful misconduct imputed to such Indemnified
Person solely by reason of its interest in the Equipment);
39
(e) any interest, penalties or additions to tax resulting from
failure of any Indemnified Person to file a return that is proper and
timely, unless such failure (i) results from the transactions contemplated
by the Basic Agreements in circumstances where the Lessee did not give
timely notice to such Indemnified Person of such filing requirement that
would have permitted a timely filing of such (ii) results from the failure
of the Lessee to supply information in its possession that was requested by
such Indemnified Person and not in its possession;
(f) any Tax related to the Equipment, ground leasehold estate,
support facilities and support services, including without limitation, all
services and materials provided by the Lessee under the Ground Lease,
arising from any act, event, ownership position or omission occurring after
the Separation Date; and
(g) any Tax which is being contested in accordance with the
provisions of Section 8.04 of this Agreement during the pendency of such
contest so long as the Owner Trustee shall be receiving all amounts of Rent
when payable without reduction by reason of such Tax.
SECTION 8.03. Calculation of General Tax Indemnity Payments. (a)
---------------------------------------------
Any payment which the Lessee shall be required to make to or for the account of
any Indemnified Person with respect to any Tax which is subject to
indemnification under this Article VIII shall be made on an After-Tax Basis.
(b) If an Indemnified Person (i) shall obtain a repayment of any
Tax paid by the Lessee pursuant to this Article VIII, or (ii) shall realize a
reduction in any Tax not indemnified under this Article VIII by reason of the
payment or accrual of any Tax or other amount for which the Lessee has made,
pursuant to any Basic Agreement, an indemnity payment or a payment calculated on
an After-Tax Basis (which reduction in Tax was not taken into account in
calculating the amount of the payment made by the Lessee), such Indemnified
Person shall, so long as no Default or Event of Default shall have occurred and
be continuing, promptly pay to the Lessee an amount which, when decreased by the
net Tax saving or increased by the net Tax detriment, as the case may be, to
such Indemnified Person of the receipt and payment to the Lessee of such
repayment of or reduction in Tax, shall be equal to the amount of such repayment
of or reduction in Tax, together with an amount which, when reduced by the net
Tax saving or increased by the net Tax detriment, as the case may be, to such
Indemnified Person of the receipt and payment to the Lessee of such interest,
shall equal any interest (other than interest for the Period, if any, after such
Tax was paid by such Indemnified Person until such Tax was paid or reimbursed by
the Lessee) received by such Indemnified
40
Person on account of such repayment or reduction; provided, however, that any
-------- -------
amount so paid by such Indemnified Person with respect to such repayment or
reduction in Tax (not including the amount of such interest on account of such
repayment or reduction) shall not exceed the amount previously paid by the
Lessee in respect of the Tax or other amount with respect to which such
repayment or reduction was received. Any subsequent loss or disallowance of any
Tax repayment or reduction for which Tax repayment or reduction such Indemnified
Person has made a payment to the Lessee pursuant to this paragraph shall be an
indemnified Tax hereunder without regard to Section 8.02.
SECTION 8.04. General Tax Indemnity -- Contests. (a) If a written
---------------------------------
claim shall be made against any Indemnified Person for any Tax for which the
Lessee may be obligated to indemnify pursuant to this Article VIII or if any
Indemnified Person shall determine that any Tax as to which the Lessee shall
have any indemnity obligation pursuant to this Article VIII shall be payable,
such Indemnified Person shall notify the Lessee promptly of such claim upon
becoming aware of the same (but the failure to so notify the Lessee shall not
affect the Lessee's obligations hereunder except to the extent such failure
precludes the Lessee's ability to contest such claim or Tax or increases any
applicable fine or penalty). If the Lessee shall so request within 30 days
after receipt of such notice, such Indemnified Person shall in good faith and at
the Lessee's expense contest the imposition of such Tax (including taking such
appeals as the Lessee shall request); provided, however, that such Indemnified
-------- -------
Person may in its sole discretion select the forum for such contest and
determine whether any such contest shall be by (i) resisting payment of such
Tax, (ii) paying such Tax under protest or (iii) paying such Tax and seeking a
refund thereof; provided further, however, that at such Indemnified Person's
-------- ------- -------
option, such contest required to be conducted by such Indemnified Person shall
be conducted by the Lessee in the name of such Indemnified Person (subject to
the preceding proviso).
(b) In no event shall such Indemnified Person be required to contest
the imposition of any Tax for which the Lessee is obligated to indemnify
pursuant to this Article VIII unless: (i) the Lessee shall have agreed to pay
such Indemnified Person on demand and on an After-Tax Basis all reasonable costs
and expenses that such Indemnified Person may incur in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, penalties, interest
and additions to tax); (ii) such Indemnified Person shall have determined that
the action to be taken will not result in any danger of sale, forfeiture or loss
of, or the creation of any Lien (except if the Lessee shall have adequately
bonded such Lien or otherwise made provision to protect the interests of such
Indemnified Person in a manner reasonably satisfactory to such Indemnified
Person) on the
41
Equipment, or any portion thereof or any interest therein; (iii) if such contest
shall be conducted in a manner requiring the payment of the claim, the Lessee
shall have advanced the amount required at no after-tax cost to any Indemnified
Person; (iv) no Default or Event of Default shall have occurred and be
continuing, unless the Lessee shall have provided security reasonably acceptable
to the Owner Participant for the Lessee's obligation to pay any amount that
would become payable if the contest were unsuccessful; and (v) prior to the
commencement of any judicial proceedings (A) independent tax counsel for the
Lessee shall have provided an opinion that there is a reasonable basis for such
contest and (B) the Lessee shall have acknowledged its indemnity obligation.
(c) Notwithstanding anything contained in this Section 8.04 to the
contrary, no Indemnified Person shall be required to contest any claim (A) in
the U.S. Supreme Court or (B) if the subject matter thereof shall be of a
continuing or recurring nature and shall have previously been decided adversely
pursuant to the contest provisions of this Section 8.04 unless there shall have
been a change in the law enacted, promulgated or effective after such claim
shall have been so previously decided, and such Indemnified Person shall have
received an opinion of tax counsel to the Lessee, furnished at the Lessee's sole
expense, to the effect that as a result of such change there is a reasonable
basis for such contest.
(d) Notwithstanding anything contained in this Section 8.04, an
Indemnified Person shall not be required to contest or continue to contest the
imposition of any Tax for which the Lessee is obligated to indemnify pursuant to
this Article VIII if such Indemnified Person (i) shall waive in writing its
rights to indemnification under this Article VIII with respect to such Tax (and
any claim made by any taxing authority with respect to other taxable periods
that is determined by the resolution of such claim) and (ii) shall pay to the
Lessee any amount previously paid or advanced by the Lessee pursuant to this
Article VIII with respect to such Tax or the contest of such Tax other than the
expenses of the conduct of such contest.
SECTION 8.05. General Tax Indemnity -- Reports. If any report,
--------------------------------
return or statement is required to be filed with respect to any Tax that is
subject to indemnification under this Article VIII, the Lessee shall timely file
the same in such manner as will show the ownership of the Equipment in the Owner
Trustee (and send a copy of such report, return or statement to the Owner
Participant and Owner Trustee), or, where not so permitted or where the
necessary information is not within the control of the Lessee, shall timely
notify the Owner Participant and the Owner Trustee of such requirement of which
it is aware or should be aware and prepare and deliver such report, return or
statement to the Owner Participant and the Owner Trustee and within a
42
reasonable time prior to the time such report, return or statement is to be
filed. Each Indemnified Person, on behalf of itself and each Indemnified Person
claiming through it, agrees for the benefit of the Lessee that, in filing its
tax returns and in its dealings with taxing authorities, such Indemnified Person
shall in good faith use reasonable efforts to minimize its exposure to Taxes
(including, where appropriate, the filing of claims for refunds of Taxes
indemnified hereunder); provided that such actions will not, in the judgment of
--------
such Indemnified Person, subject such Indemnified Person to any risk of adverse
Tax or non-Tax consequences.
SECTION 8.06. General Tax Indemnity -- Payment. Unless otherwise
--------------------------------
requested by the appropriate Indemnified Person, the Lessee shall if appropriate
pay any Tax for which it is liable pursuant to this Article VIII directly to the
appropriate taxing authority and shall pay to such Indemnified Person promptly
on demand in immediately available funds any other amount due such Indemnified
Person pursuant to this Article VIII with respect to such Tax; provided that
Lessee shall not be required to pay to or for the account of any Indemnified
Person that is not a party to this Agreement unless and until such Indemnified
Person shall have agreed to be bound by the provisions of this Article VIII.
Each Indemnified Person shall promptly forward to the Lessee any notice, bill or
advice received by it concerning any Tax subject to indemnification under this
Article VIII (but the failure to so notify the Lessee shall not affect the
Lessee's obligations hereunder except to the extent such failure precludes the
Lessee's ability to contest such claim or Tax or increases any applicable fine
or penalty). Within 30 days after the date of each payment by the Lessee of any
Tax or if later, ten days after receiving a receipt for such payment, the Lessee
shall furnish the appropriate Indemnified Person with the original or a
certified copy of a receipt for the Lessee's payment of such Tax or such other
evidence of payment of such Tax as is reasonably acceptable to such Indemnified
Person. The Lessee shall also furnish promptly upon request such data as any
Indemnified Person may require to enable such Indemnified Person to comply with
the requirements of any taxing jurisdiction. Any amount payable to the Lessee
by an Indemnified Person pursuant to this Article VIII shall be payable in
immediately available funds 30 days after the date on which the Tax return which
reflects such Tax savings is required to be filed (whether in the normal course
or pursuant to any properly requested and allowed extensions of a filing date).
The obligations of an Indemnified Person hereunder shall survive termination of
this Agreement.
43
ARTICLE IX
Expenses
--------
SECTION 9.01. Transaction Expenses. Subject to the provisions of
--------------------
Section 9.03, the Owner Trustee hereby agrees that, with funds to be provided by
the Owner Participant, the Owner Trustee shall pay when due, or reimburse any
Person who has previously paid, the fees and out-of-pocket expenses,
disbursements and costs (each of which shall be evidenced by appropriate bills
or invoices) incurred by the parties hereto in connection with the preparation,
execution and delivery of the Basic Agreements and the consummation of the
transactions provided for therein ("Transaction Expenses"), including, without
--------------------
limitation:
(a) the fees and disbursements of the counsel referred to in paragraphs
(m) and (n) of Section 4.01 and paragraph (f) of Section 4.02 of this
Agreement, for their services rendered in connection with the preparation,
execution and delivery of this Agreement and the other Basic Agreements;
(b) the initial (but not the ongoing) fees and expenses of the Owner
Trustee;
(c) all out-of-pocket expenses (other than investment banking or
brokerage fees, except as provided in clause (f) below) incurred in
connection with the preparation, execution and delivery of the Basic
Agreements and satisfaction of the conditions set forth in paragraph (g) of
Section 4.01;
(d) the fees and expenses of the Appraiser;
(e) the fees and expenses of Sandwell, Jaako Poyry, and Geomatrix; and
(f) the fees and expenses of UBS Lease Finance LLC in connection with
the transactions contemplated by this Agreement.
Subject to the provisions of Section 9.03, the Owner Participant shall provide
funds to the Owner Trustee for the timely payment of Transaction Expenses.
SECTION 9.02. Post-Closing Expenses. The Lessee shall pay, as
---------------------
Supplemental Rent, (a) the reasonable ongoing fees, costs and expenses
(including, but not limited to, reasonable legal fees and expenses, but not
including costs in respect of overhead and internal administration) of or
incurred by the Owner Trustee in connection with the administration of the Trust
Estate during the Lease Term, (b) on an After-Tax Basis to the Owner
44
Participant, all reasonable costs and expenses (including, but not limited to,
reasonable legal fees and expenses, but not including costs in respect of
overhead and internal administration), incurred by the Owner Participant and the
Owner Trustee in connection with the entering into or giving or withholding of
any amendment, modification, supplement, waiver, termination, approval, consent
or other action with respect to any Basic Agreement (except those requested by
the Owner Participant or the Owner Trustee and not expressly contemplated by the
Basic Agreements, other than those requested in connection with a transfer by
the Owner Participant of any of its right, title or interest in and to the Trust
Estate in accordance with Section 10.01 hereof (except during the continuance of
an Event of Default) or the exercise by the Owner Trustee of the Leverage Option
in accordance with Section 10.02 hereof), and (c) the costs and expenses of any
transfer of the Letter of Credit.
SECTION 9.03. Lessee's Obligation. Notwithstanding Section 9.01, in the
-------------------
event the transactions contemplated by Section 3.01 of this Agreement shall not
be consummated, the Lessee shall pay or cause to be paid, and shall indemnify
and hold harmless the Owner Participant and the Owner Trustee in respect of, all
reasonable Transaction Expenses incurred in connection with such transactions
unless, in the case of the Owner Participant, such failure results solely from
the Owner Participant's default in making its equity investment hereunder after
all conditions set forth in Section 4.01 (other than those within the Owner
Participant's control) are satisfied or the Owner Participant's failure to
obtain like-kind exchange treatment in respect of the acquisition of the
Equipment, in which event the Owner Participant shall be responsible for its own
out-of-pocket expenses, including the fees and expenses of its counsel, but not
any other Transaction Expenses (including the expenses of the Owner Trustee and
the Lessee), which shall be paid by the Lessee; provided, however, that, if such
-------- -------
failure results solely from the Lessee's election not to proceed with the
transactions contemplated by Section 3.01 hereof due to the fact that the
Lessee's implicit rate increases as a result of the Appraiser's evaluation of
the Early Buyout Price, the Lessee shall pay or cause to be paid, and shall
indemnify and hold harmless the Owner Participant and the Owner Trustee in
respect of, all reasonable Transaction Expenses incurred in connection with such
transactions up to a maximum of $150,000, and to the extent that such
Transaction Expenses exceed $150,000, such excess shall be borne equally by the
Lessee and the Owner Trustee.
45
ARTICLE X
Transfers of Owner Participant's Interests; Leverage Option
-----------------------------------------------------------
SECTION 10.01. Transfers of Owner Participant's Interests. Except with
------------------------------------------
the consent of the Lessee, the Owner Participant shall not directly or
indirectly assign, convey or otherwise transfer any of its right, title or
interest in and to the Trust Estate, this Agreement, the Trust Agreement, the
Tax Indemnity Agreement or any other Basic Agreement; provided, however, that,
-------- -------
after the Closing Date, subject only to fulfillment of the conditions set forth
below and without the consent of the Lessee, the Owner Participant (and any
Person to whom a transfer is duly made pursuant to this Article X) may transfer
all or part of its right, title and interest in and to the Trust Estate, this
Agreement, the Trust Agreement, the Tax Indemnity Agreement and each other Basic
Agreement to any Person (a "Transferee"); provided, further, that the
---------- -------- -------
restrictions of this Section shall not be applicable following the Lease Term or
so long as an Event of Default has occurred and is continuing. Each such
transfer shall be subject to the fulfillment of the following conditions:
(a) the Transferee to whom such transfer is to be made is a bank,
insurance company, financial institution, leasing company, credit or
finance company or institutional investor, or any majority-owned Affiliate
of any of the foregoing, who has a net worth, or a combined capital and
surplus, at the time of the transfer of at least $150,000,000 (or the
obligations of which under the Basic Agreements are guaranteed by a Person
who has a net worth, or a combined capital and surplus, at the time of
transfer of at least $150,000,000);
(b) the Owner Trustee and the Lessee shall have received at least 15
days' prior notice of the proposed transfer, which notice shall specify the
name and address of the proposed transferee and the facts necessary to
determine whether such proposed transferee qualifies as a Transferee under
paragraph (a) above;
(c) the Transferee shall have all requisite power and authority to enter
into and perform the obligations of an Owner Participant under this
Agreement and the other Basic Agreements;
(d) the Transferee shall have duly authorized, executed and delivered to
the Owner Trustee and the Lessee an agreement in a form reasonably
satisfactory to the Lessee whereby the transferee confirms that (i) it has
all requisite power and authority to enter into and perform the obligations
of an Owner Participant under this Agreement and
46
the other Basic Agreements and (ii) it shall be bound by and obligated to
perform and observe each covenant and agreement required to be performed or
observed by the "Owner Participant" in this Agreement and the other Basic
Agreements arising after the transfer, except to the extent such covenant
or agreement is applicable to another Owner Participant and such other
Owner Participant is obligated to perform and observe the same;
(e) such transfer shall not violate any provision of any Applicable Laws
(provided that Applicable Laws for this purpose shall not include ERISA);
(f) no part of the funds to be used by the Transferee to acquire its
interest hereunder constitutes "plan assets" (within the meaning of ERISA
and the regulations thereunder) of any Employee Benefit Plan or any Plan;
(g) the Transferee shall not be substantially engaged in the paper
manufacturing business;
(h) the transferring Owner Participant or the Transferee shall have
delivered to the Owner Trustee and the Lessee a favorable opinion of
counsel (which may be in-house counsel of the transferring Owner
Participant or the Transferee) reasonably acceptable to the Lessee as to
the due authorization, execution, delivery and enforceability of any
guarantee referred to in paragraph (a) above and the agreement referred to
in paragraph (d) above, which opinion shall be reasonably acceptable to the
Lessee in form and substance; and
(i) such transfer shall not result in there being more than four Owner
Participants at any time.
From and after any transfer effected in accordance with this Article X,
(i) the Transferee shall be deemed an "Owner Participant" for all purposes of
the Basic Agreements and shall be deemed to have made all payments in respect of
the portion of the right, title and interest so transferred, and shall have a
ratable interest therein, and, except as provided in the last sentence of this
paragraph, each reference to the Owner Participant contained in the Basic
Agreements shall be deemed to include a reference to the Transferee for all
purposes and (ii) whenever any action shall be required or permitted by the
Owner Participant it shall be sufficient if such action shall be taken by Owner
Participants having interests aggregating more than 50% of the aggregate right,
title and interest in and to the Trust Estate. Notwithstanding any transfer
effected in accordance with this Article X, the transferring Owner Participant
shall nevertheless be entitled to all benefits accrued and all rights vested
prior to such transfer, including, without limitation, any
47
right to indemnification under this Agreement or the Tax Indemnity Agreement,
and shall be released from its obligations under the Basic Agreements to the
extent assumed by the Transferee.
The Lessee agrees that it shall, to the extent so requested by the Owner
Participant, use reasonable efforts to cooperate with the Owner Participant in
effecting any transfer permitted pursuant to this Section 10.01 and, if
requested by the transferor or transferee, the Lessee will give its written
consent to any such transfer complying with the provisions of this Section 10.01
promptly after a request therefor.
SECTION 10.02. Leverage Option. (a) Subject to the limitations set
---------------
forth in this Section 10.02, the Owner Trustee may elect at any time to issue
secured debt instruments ("Bonds") in order to effectuate a leveraged lease of
-----
the Equipment (the "Leverage Option") by providing written notice to the Lessee
---------------
to that effect, provided, however, that without the consent of the Lessee, which
-------- -------
consent shall not be unreasonably withheld, (i) the Bonds shall not be issued in
a public offering and (ii) the purchasers of the Bonds shall be limited to
banks, insurance companies, financial institutions, leasing companies, credit or
finance companies or institutional investors, or any majority-owned Affiliates
of any of the foregoing. The original principal amount of the Bonds shall not
exceed 80% of Lessor's Cost.
(b) Principal of and premium, if any, and interest on the Bonds shall be
payable solely from the Trust Estate, without recourse to the Owner Trustee or
the Lessee. If the Owner Trustee elects to issue Bonds, the Owner Trustee shall
enter into an indenture or security agreement with the purchaser or purchasers
of the Bonds or a trustee on their behalf and, pursuant thereto, grant a
mortgage and security interest in all or any portion of its right, title and
interest in and to the Equipment and the Basic Agreements, and assign part or
all of the payments of Basic Rent to secure payment of the Bonds. Each
purchaser of the Bonds shall represent and warrant that no part of its purchase
will be made out of the assets of any account maintained by it in which any
employee benefit plan (as such term is defined in ERISA) has an interest or that
such purchase is otherwise not violative of ERISA. Neither the Lessee nor any
Affiliate of the Lessee may at any time acquire Bonds.
(c) The Owner Trustee or the Owner Participant shall pay all their
expenses and all reasonable costs and expenses of the Lessee (including, without
limitation, the reasonable fees and expenses of the Lessee's counsel) in
connection with the exercise of the Leverage Option, including the offering,
issuance and sale of the Bonds, the reasonable fees, costs and expenses of any
trustee on behalf of the holders of the Bonds and the
48
reasonable incremental fees, costs and expenses of the Owner Trustee resulting
from the exercise of the Leverage Option.
(d) If the Owner Trustee elects the Leverage Option, the parties hereto
shall cooperate in good faith to cause Bonds to be issued and sold on a date
specified by the Owner Trustee. Each party agrees to execute and deliver
security assignments, consents, opinions and other customary closing documents
and to amend the Basic Agreements as reasonably necessary in connection with the
issue and sale of such Bonds, except that the Lessee shall not be obligated to
execute and deliver any document or agree to any amendment that could reasonably
be expected to increase the obligations of the Lessee under the Basic Agreements
or to interfere with the Lessee's rights under the Lease. Without limiting the
generality of the foregoing, it is understood and agreed that any Lien on the
Equipment granted by the Owner Trustee to secure the Bonds shall be subject to
the Lessee's rights under the Lease and shall expressly provide for release of
such Lien on the Equipment if purchased by the Lessee in accordance with the
Lease.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Notices. All notices, demands, declarations, consents,
-------
directions, approvals, instructions, requests and other communications required
or permitted by the terms hereof shall be in writing and shall be given in
person or by means of telecopy or other wire transmission, or mailed by
registered or certified mail, or sent by courier, in each case addressed as
provided in Schedule 1 hereto or at such other address or facsimile number as
any party hereto may from time to time designate by notice given in accordance
with this Section 11.01 to the other parties hereto. Any such communication
shall become effective and shall be deemed to have been received (i) when
delivered personally or by courier (or when delivery is tendered, if such
delivery is refused), (ii) in the case of mail delivery, upon delivery (or when
delivery is tendered, if such delivery is refused), or (iii) in the case of
telecopy or other wire transmission, at the time of dispatch with a transmission
confirmation appearing at the end of the communication.
SECTION 11.02. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
-------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 11.03. Amendment. The terms and provisions of this Agreement
---------
may be changed, waived, discharged or terminated, but only by an instrument in
writing signed by the party against
49
which enforcement of the change, waiver, discharge or termination is sought.
SECTION 11.04. Successors and Assigns. Subject to the other provisions
----------------------
hereof relating to assignments, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their permitted successors and assigns.
Notwithstanding anything to the contrary contained in any of the Basic
Agreements, upon notice to the Lessee, each of the Owner Trustee's and the Owner
Participant's rights (but not any of its obligations other than the obligation
to pay the Purchase Price for the Equipment) under this Agreement to acquire the
Equipment shall be freely assignable in connection with a like-kind exchange
under Section 1031 of the Code.
SECTION 11.05. Headings. Section headings and the Table of Contents are
--------
for convenience only and shall not be construed as part of this Agreement.
SECTION 11.06. Counterparts. This Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original for all purposes, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.07. Severability. If any term or provision hereof or the
------------
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or such provision shall not, to
the extent permitted by Applicable Laws, invalidate or render unenforceable any
remaining terms and provisions hereof or the application of such term or
provision to circumstances other than those as to which it is held invalid or
unenforceable. To the extent permitted by Applicable Laws, the parties hereto
hereby waive any provision of law that renders any term or provision hereof
invalid or unenforceable in any respect.
SECTION 11.08. Survival of Agreements. The representations, warranties
----------------------
and agreements of the parties provided for in the Basic Agreements, and the
parties' obligations under any and all thereof, shall survive the execution and
delivery of this Agreement, the participation by the Owner Participant pursuant
to this Agreement and any disposition of any interest of the Owner Participant
in the Trust Estate or the Equipment, and shall be and continue in effect
notwithstanding the fact that the Owner Trustee or the Owner Participant may
waive compliance with any of the other terms, provisions or conditions of any of
the Basic Agreements.
SECTION 11.09. Liabilities of Owner Trustee. The Lessee and the Owner
----------------------------
Participant each agrees that the Owner Trustee in its individual capacity shall
not have any personal
50
liability whatsoever to the Lessee, the Owner Participant or any of their
respective successors and assigns for any claim based on or in respect of this
Agreement or any of the other Basic Agreements or arising in any way from the
transactions contemplated hereby or thereby; provided, however, that the Owner
-------- -------
Trustee shall be liable in its individual capacity (a) for its own wilful
misconduct or gross negligence, (b) for liabilities that may result from the
incorrectness of any representation or warranty expressly made by it in Section
5.03, or from its failure to perform the covenants and agreements set forth in
Section 6.03 hereof, or (c) for any Tax based on or measured by any fees,
commission or compensation received by it for acting as Owner Trustee in
connection with any of the transactions contemplated by the Basic Agreements, or
(d) to the Owner Participant as expressly provided in the Trust Agreement.
Notwithstanding the foregoing provisions of this Section 11.09 nothing herein
shall be deemed to prevent any party hereto (other than the Owner Participant)
from having recourse to and seeking enforcement against the Trust Estate for
performance and observance of covenants, agreements and conditions required to
be performed or observed by the Owner Trustee (in its capacity as the Owner
Trustee) in this Agreement and the other Basic Agreements.
SECTION 11.10. No Guarantees. The indemnities set forth in Articles
-------------
VII and VIII shall not constitute a guarantee to the Owner Participant or the
Owner Trustee of the residual value of the Equipment.
SECTION 11.11. Successor Owner Trustee. (a) If a successor Owner
-----------------------
Trustee is appointed in accordance with the terms of the Trust Agreement, such
successor Owner Trustee shall, without further act, succeed to all the rights,
powers, duties and obligations of its predecessor as Owner Trustee hereunder and
under the other Basic Agreements, all without in any way altering the term of
this Agreement or any of the other Basic Agreements or the obligations of the
parties to this Agreement or to any of the other Basic Agreements.
(b) If requested by the Lessee, any successor Owner Trustee shall
deliver to the Lessee an Officer's Certificate confirming that such successor
Owner Trustee is bound by all of the terms of, and has undertaken all of the
obligations of the Owner Trustee contained in, each of the Basic Agreements to
which the Owner Trustee is a party.
SECTION 11.12. Jurisdictional and Related Matters. (a) Jurisdiction.
---------------------------------- ------------
The Lessee (i) hereby irrevocably submits for itself and its property to the
nonexclusive jurisdiction of the courts of the State of New York in New York
County, and to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York, and any appellate court from
51
any thereof, for the purposes of any suit, action or other proceeding arising
out of this Agreement, the Lease, the Tax Indemnity Agreement or any other Basic
Agreement to which it is a party, the subject matter of any thereof or any of
the transactions contemplated hereby or thereby brought by any party or parties
hereto or thereto, or their successors or assigns, and (ii) hereby waives, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
suit, action or proceeding, to the extent permitted by Applicable Laws, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper, or that this Agreement, the
Lease, the Tax Indemnity Agreement or any other Basic Agreement or the subject
matter of any thereof or any of the transactions contemplated hereby or thereby
may not be enforced in or by such courts.
(b) Service of Process. The Lessee hereby generally consents to service
------------------
of process by registered mail, return receipt requested, addressed to it at the
address specified on Schedule 1 hereto, or such other office as from time to
time may be designated by it in writing to the Owner Trustee, or the Owner
Participant, as applicable.
(c) Judgments. Final judgment against any party obtained in any suit
---------
commenced in the courts of the State of New York in New York County or in the
United States District Court for the Southern District of New York shall be
conclusive, and, to the extent permitted by Applicable Laws, may be enforced in
other jurisdictions by suit on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and of the amount of any indebtedness
or liability of the Lessee therein described; provided that the plaintiff may
---------
at its option bring suit, or constitute other judicial proceedings against, such
party or any of its assets in the courts of any country or place where such
party or such assets may be found.
52
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed and delivered as of the day and year above written.
S.D. WARREN COMPANY,
Lessee
By
------------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION,
Owner Participant
By
------------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, in its
individual capacity only to the extent set forth
herein and otherwise solely in its capacity as
Owner Trustee
By
------------------------------------------
Name:
Title:
[Participation Agreement]
SCHEDULE 1
TO PARTICIPATION AGREEMENT
Participation Agreement
-----------------------
Addresses for Notices and Payments
----------------------------------
NOTICES
Lessee
- ------
S.D. Warren Company
225 Franklin Street
Boston, MA 02110
Attention: General Counsel
Telephone: (617) 423-5447
Telecopy: (617) 423-5493
Owner Participant
- -----------------
General Electric Capital Corporation
c/o Structured Finance Group
120 Long Ridge Road
3rd Floor
Stamford, CT 06927
Attention: Account Executive
Reference: 929-2; 1997 S.D. Warren Lease
Telecopy: (203) 961-2017
Owner Trustee
- -------------
State Street Bank and Trust Company of Connecticut,
National Association
225 Asylum Street
Goodwin Square
Hartford, CT 06103
Attention: Corporate Trust Department
Telecopy: (860) 244-1889
SCH1-1
PAYMENTS
Owner Participant
- -----------------
General Electric Capital Corporation
Bankers Trust
New York, New York
ABA No. 0210-0103-3
Credit: GECC/T&I Depository Account
Account No. 50-205-776
Reference: 929-2; 1997 S.D.Warren Lease
with sufficient information to identify the source and application of such
funds.
Owner Trustee
- -------------
State Street Bank and Trust Company
of Connecticut, National Association
State Street Bank and Trust Company
Boston, MA
ABA No. 011-00-0028
Credit: Corporate Trust Department
- ------
Account No. 9900-3147
Reference: S.D. Warren
with sufficient information to identify the source and application of such
funds.
SCH1-2
SCHEDULE 1A
TO PARTICIPATION AGREEMENT
Wire Instructions for Payment of Purchase Price
-----------------------------------------------
On the Closing Date, the Purchase Price shall be transferred as follows
pursuant to Section 3.01 of the Participation Agreement:
Account Name: Chase Manhattan Bank - S.D. Warren
Chase Manhattan Bank
ABA # 021-000-021
Account # 323-50-1664
Reference: S.D. Warren
Amount: $100,266,667.00
Contact Person: Linda Hill
Account Name: S.D. Warren Company
Chase Manhattan Bank
ABA # 021-000-021
Account # 323-08-1525
Reference: S.D. Warren
Amount: $50,133,333.00
Contact Person: Johnny Kahn
SCH1A-1
SCHEDULE 2
TO PARTICIPATION AGREEMENT
Pricing Assumptions
-------------------
Closing Date: July 29, 1997
Purchase Price/Lessor's Cost: $150,400,000
Investment Amount: 100% of Lessor's Cost
Full Lease Term: 15 years
Rental Payment Dates: Semi-annual in arrears
payable on January 29 and
July 29
Depreciable Life (method): 100% of Lessor's Cost 7
yr. MACRS
Transaction Expenses: $1,537,250 amortized over
the Lease Term for
Federal tax purposes
First Early Buyout
Date and First
Early Buyout Price: January 29, 2003
81.47% of Lessor's Cost
Second Early Buyout
Date and Second
Early Buyout Price: January 29, 2008
50.10% of Lessor's Cost
Lease Rental Factor: 5.05354842% (for the Basic Rent
Payment Dates through January 29, 2008)
5.80780938% (for the Basic Rent Payment
Dates from July 29, 2008 to July 29,
2012)
Discount Rate for Present
Value Calculation: 10%
Composite Tax Rate: 40%
Tax Assumption: Lease treated as a True Lease and Lessor
treated as owner for Federal income tax
purposes
SCH2-1
SCHEDULE 3
TO PARTICIPATION AGREEMENT
Recordations and Filings
------------------------
A. State of Maine
(i) Secretary of State of the State of Maine: a precautionary
financing statement on Form UCC-1 in respect of the Equipment
naming S.D. Warren Company as debtor, and State Street Bank and
Trust Company of Connecticut, National Association, as Owner
Trustee and as secured party.
(ii) Registry of Deeds of Somerset County: a fixture filing financing
statement on Form UCC-1 in respect of the Equipment naming S.D.
Warren Company as debtor, and State Street Bank and Trust Company
of Connecticut, National Association, as Owner Trustee and as
secured party.
(iii) Registry of Deeds of Somerset County: Conveyance Instrument
(iv) Registry of Deeds of Somerset County: Ground Lease
(v) Registry of Deeds of Somerset County: Memorandum of Lease
(vi) Land Records of Somerset County: Release and Non-Disturbance
Agreement
B. Commonwealth of Massachusetts
(i) Secretary of State of the Commonwealth of Massachusetts: a
precautionary financing statement on Form UCC-1 in respect of the
Equipment naming S.D. Warren Company as debtor, and State
Street Bank and Trust Company of Connecticut, National
Association, as Owner Trustee and secured party.
(ii) City Clerk of the City of Boston: a precautionary financing
statement on Form UCC-1 in respect of the Equipment naming S.D.
Warren Company as debtor, and State Street Bank and Trust Company
of Connecticut, National Association, as Owner Trustee and
secured party.
SCH3-1
SCHEDULE 3A
TO PARTICIPATION AGREEMENT
Existing Recordations and Filings
---------------------------------
A. UCC Filings
Place of Date of Number of
UCC-1 Filing UCC-1 Filing UCC-1 Filing
------------ ------------ ------------
Massachusetts 12/28/94 282951
Secretary of State
Boston 12/28/94 379373
City Clerk
Maine Secretary 12/28/94 1107581
of State
10/17/95 1145542
10/17/95 1145563
Somerset County, 12/29/94 Book 2069, Page 24
Maine
10/23/95 Book 2148, Page 203
10/23/95 Book 2148, Page 208
B. Mortgage Filings
Mortgage, Security Agreement and Financing Statement dated as of December
20, 1994 from the Lessee to Chase, recorded in the Somerset County, Maine
Registry of Deeds on December 23, 1994 at Book 2067, Page 259
SCH3A-1
SCHEDULE 4
TO PARTICIPATION AGREEMENT
Environmental Disclosure Matters
--------------------------------
The representation and warranties included in Section 5.01(s) of
the Participation Agreement with regard to compliance with EH&S Requirements of
Law exclude:
1. Instances of non-compliance with EH&S Requirements of Law,
existing, pending or threatened notices of violations, and existing or
pending consent decrees and/or administrative settlements related to
alleged violations of EH&S Requirements of Law that are not related to
the Equipment, Equipment Site or Facility.
2. All liabilities related to past violations of EH&S Requirements of
Law or which resulted from the disposal of Hazardous Materials, at the
Facility or other locations, which were assumed by Kimberly Clark
pursuant to the transaction between SAPPI, Inc./S.D. Warren and
Kimberly Clark which closed on or about December 20, 1994.
3. Hazardous Materials spills that have been reported to DEP
including, but not limited to, those spills identified on Attachment A
to this Schedule 4. Attachment A to this Schedule 4 was supplied by a
consultant/contractor, hired by the Owner Trustee and the Owner
Participant, to the Owner Trustee.
4. Incidental spills that have not been reported to environmental
regulators which could be interpreted to constitute a violation of
EH&S Requirements of Law, but which are not likely to result in a
material liability.
5. Four water permit discharge exceedances which S.D. Warren has
reported, since 1980, on monthly Discharge Monitoring Reports filed
with the Maine Department of Environmental Protection. The
exceedances related to the following parameters: (1) biological oxygen
demand on or about March 1980; (2) total suspended solids on or about
September 1983; (3) pH on or about November 30, 1989; and (4) pH on or
about October 23, 1996.
6. Bypasses, upsets or overflows from the wastewater treatment plant
which could be interpreted to constitute a violation of EH&S
Requirements of Law, but which are not likely to result in a material
liability.
SCH4-1
7. Technical violations of EH&S Requirements of Law that could not
reasonably be expected to result in material liability.
8. All exceptions contained in Exhibit D in a letter from Pierce
Atwood to General Electric Capital Corporation Re: SD Warren Company
Single Investor Lease Transaction, dated July 29, 1997.
9. Any liabilities resulting from certain employee complaints,
resulting inspections and investigations by the Occupational Health
and Safety Administration ("OSHA"), and the resulting issuance of OSHA
citations to S.D. Warren. Several of these citations, including but
not limited to two alleged willful violations, two serious citations,
and two other than serious citations, have been or will be contested
by S.D. Warren. In addition, investigations of a number of nonformal
employee complaints are ongoing.
10. Minor violations of EH&S Requirements of Law, and other violations
of EH&S Requirements of Law that are not reasonably likely to have an
adverse effect on the Equipment, that relate to any of the power
generating systems.
SCH4-2
EXHIBIT A
TO PARTICIPATION AGREEMENT
Form of Letter of Credit
------------------------
A-1