-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T+WIJ3qqkVSafiv44QLILlI/gfiALFgFIm29Jmwx37pIP8wnerDiHuO7mcMIHFpl EVi71UYjmTN/DrDI2Z3YQg== 0001012870-00-006018.txt : 20001204 0001012870-00-006018.hdr.sgml : 20001204 ACCESSION NUMBER: 0001012870-00-006018 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001116 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PALM INC CENTRAL INDEX KEY: 0001100389 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 943150688 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-29597 FILM NUMBER: 782119 BUSINESS ADDRESS: STREET 1: 5470 GREAT AMERICA PARKWAY CITY: SANTA CLARA STATE: CA ZIP: 95052 BUSINESS PHONE: 4083269000 MAIL ADDRESS: STREET 1: 5470 GREAT AMERICA PARKWAY CITY: SANTA CLARA STATE: CA ZIP: 95052-8145 8-K 1 0001.txt FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 16, 2000 PALM, INC. ______________ (Exact name of registrant as specified in its charter) Delaware 0-29597 94-3150688 - -------------------------------- ------- ---------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.)
5470 Great America Parkway Santa Clara, CA 95052 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 326-9000 -------------------------------------------------- (Former name or former address, if changed since last report) ================================================================================ Item 5. Other Events On November 16, 2000, Palm entered into a seven year master lease pursuant to which it leased from Societe Generale Financial Corporation approximately 39 acres of property intended for 1.6 million square feet of general office facilities in San Jose, California. Payments under the lease are based on a spread over the London Interbank Offered Rate applied to the $460 million cost of the first phase of the facilities totaling 620,000 square feet as funded by the lessor and its affiliates. Palm has the ability to purchase the property at any time prior to the expiration of the lease for the remaining lease balance, and may, at its option, remarket the property prior to the end of the lease. Upon the occurrence of certain events, Palm may be required to purchase the property from the lessor. Palm has guaranteed the payment and performance of the lessor under certain promissory notes made by the lessor with respect to the property. Under the terms of the master lease, Palm will be required post up to $460 million of investment securities, as determined in the master lease, as collateral for the term of the lease. The investment securities are restricted as to their withdrawal from a third party trustee and will be classified as restricted cash on Palm's balance sheet until such assets are released from the collateral. This summary is qualified in its entirety by reference to exhibits filed with this current report. Item 7. Financial Statements and Exhibits (c) Exhibits The following exhibits are filed herewith: Exhibit No. Description of Exhibits - ----------- ----------------------- 10.1 Master Lease, dated as of November 16, 2000 by and between Palm, Inc. and Societe Generale Financial Corporation, as supplemented. 10.2 Participation Agreement, dated as of November 16, 2000 by and among Palm, Inc., Societe Generale Financial Corporation, Societe Generale and certain other parties. 10.3 Guaranty, dated as of November 16, 2000 by and between Palm, Inc. and Societe Generale, New York Branch. -2- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PALM, INC. Date: December 1, 2000 By: /s/ Stephen Yu ------------------------------------- Stephen Yu Vice President, General Counsel and Secretary EXHIBIT INDEX Exhibit No. Description of Exhibits - ----------- ----------------------- 10.1 Master Lease, dated as of November 16, 2000 by and between Palm, Inc. and Societe Generale Financial Corporation, as supplemented. 10.2 Participation Agreement, dated as of November 16, 2000 by and among Palm, Inc., Societe Generale Financial Corporation, Societe Generale and certain other parties. 10.3 Guaranty, dated as of November 16, 2000 by and between Palm, Inc. and Societe Generale, New York Branch. -4- EX-10.1 2 0002.txt MASTER LEASE EXHIBIT 10.1 EXECUTION COPY MASTER LEASE THIS DOCUMENT SECURES FUTURE ADVANCES Dated as of November 16 , 2000 between PALM, INC., as the Lessee, and SOCIETE GENERALE FINANCIAL CORPORATION, as the Lessor. This Master Lease is subject to a lien in favor of the Administrative Agent under the Loan Agreements. This Master Lease has been executed in several counterparts. To the extent, if any, that this Master Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Master Lease may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by Societe Generale, New York Branch as Administrative Agent for the benefit of the Lenders, on or following the signature page hereof. This counterpart is not the original counterpart. TABLE OF CONTENTS ----------------- ARTICLE I DEFINITIONS; INTERPRETATION............................................................ 1 1.1 Definitions; Interpretation..................................................... 1 ARTICLE II MASTER LEASE........................................................................... 2 2.1 Acceptance and Lease of Property................................................ 2 2.2 Acceptance Procedure............................................................ 2 2.3 Lease Term ..................................................................... 2 2.4 Title........................................................................... 2 ARTICLE III PAYMENT OF RENT........................................................................ 3 3.1 Rent............................................................................ 3 3.2 Payment of Rent................................................................. 3 3.3 Supplemental Rent............................................................... 3 3.4 Method of Payment............................................................... 4 3.5 Certain Payments................................................................ 4 ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT...................................................... 4 4.1 Quiet Enjoyment................................................................. 4 4.2 Right to Inspect................................................................ 4 ARTICLE V NET LEASE, ETC......................................................................... 5 5.1 Net Lease....................................................................... 5 5.2 No Termination or Abatement..................................................... 6 ARTICLE VI SUBLEASES AND ASSIGNMENTS.............................................................. 6
i 6.1 Subletting...................................................................... 6 6.2 Assignment...................................................................... 6 ARTICLE VII LESSEE ACKNOWLEDGMENTS................................................................. 7 7.1 Condition of the Property....................................................... 7 7.2 Risk of Loss.................................................................... 7 ARTICLE VIII POSSESSION AND USE OF THE PROPERTY, ETC................................................ 8 8.1 Utility Charges................................................................. 8 8.2 Possession and Use of the Property.............................................. 8 8.3 Compliance with Requirements of Laws and Insurance Requirements.................................................................... 8 ARTICLE IX MAINTENANCE AND REPAIR; RETURN......................................................... 9 9.1 Maintenance and Repair; Return.................................................. 9 ARTICLE X MODIFICATIONS, ETC..................................................................... 10 10.1 Modifications, Substitutions and Replacements.................................. 10 ARTICLE XI WARRANT OF TITLE; EASEMENTS............................................................ 11 11.1 Warrant of Title................................................................ 11 11.2 Grants and Releases of Easements; Lessor's Waivers.............................. 11 ARTICLE XII PERMITTED CONTESTS..................................................................... 12 12.1 Permitted Contests in Respect of Applicable Law Other Than Impositions................................................................... 12 ARTICLE XIII INSURANCE.............................................................................. 13
ii 13.1 Insurance by the Lessee During the Interim Lease Term.......................... 13 13.2 Insurance by the Lessee During the Basic Lease Term............................ 13 ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS....................................... 18 14.1 Casualty and Condemnation...................................................... 18 14.2 Environmental Matters.......................................................... 20 14.3 Notice of Environmental Matters................................................ 21 ARTICLE XV TERMINATION OF LEASE................................................................... 21 15.1 Termination upon Certain Events................................................. 21 15.2 Termination Procedures.......................................................... 21 ARTICLE XVI EVENTS OF DEFAULT ..................................................................... 22 16.1 Lease Events of Default......................................................... 22 16.2 Remedies........................................................................ 25 16.3 Waiver of Certain Rights........................................................ 30 ARTICLE XVII LESSOR'S RIGHT TO CURE................................................................. 31 17.1 The Lessor's Right to Cure the Lessee's Lease Defaults.......................... 31 ARTICLE XVIII PURCHASE PROVISIONS.................................................................... 31 18.1 Purchase of the Property........................................................ 31 18.2 Undeveloped Land Purchase Option................................................ 32 ARTICLE XIX EXTENSION OF EXPIRATION DATE........................................................... 33 19.1 Extension of Expiration Date.................................................... 33
iii ARTICLE XX REMARKETING OPTION..................................................................... 33 20.1 Option to Remarket.............................................................. 33 20.2 No Duty to Solicit.............................................................. 37 ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR REMARKETING......................................... 37 21.1 Provisions Relating to the Exercise of the Purchase Option or Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other Events...... 37 ARTICLE XXII ESTOPPEL CERTIFICATES.................................................................. 38 22.1 Estoppel Certificates........................................................... 38 ARTICLE XXIII ACCEPTANCE OF SURRENDER................................................................ 38 23.1 Acceptance of Surrender......................................................... 38 ARTICLE XXIV NO MERGER OF TITLE..................................................................... 39 24.1 No Merger of Title.............................................................. 39 ARTICLE XXV INTENT OF THE PARTIES.................................................................. 39 25.1 Nature of Transaction........................................................... 39 ARTICLE XXVI MISCELLANEOUS.......................................................................... 40 26.1 Survival; Severability; Etc..................................................... 40 26.2 Amendments and Modifications.................................................... 40 26.3 No Waiver....................................................................... 41 26.4 Notices ........................................................................ 41 26.5 Successors and Assigns.......................................................... 41
iv 26.6 Headings and Table of Contents.................................................. 41 26.7 Counterparts ................................................................... 41 26.8 GOVERNING LAW................................................................... 41 26.9 Liability Limited............................................................... 41 26.10 Priority........................................................................ 42 26.11 Original Master Lease........................................................... 42
v SCHEDULE I Release Parcel Area Description vi MASTER LEASE THIS DOCUMENT SECURES FUTURE ADVANCES THIS MASTER LEASE (this "Master Lease"), dated as of November 16, ------------ 2000, between SOCIETE GENERALE FINANCIAL CORPORATION, a Delaware corporation, as Lessor (in such capacity, the "Lessor") and PALM, INC., a Delaware corporation, ------ as Lessee (in such capacity, the "Lessee"). ------ W I T N E S S E T H: WHEREAS, pursuant to the Land Lease, dated as of September 5, 2000, between the Lessor and the Lessee, the Lessor leased the Land to the Lessee; WHEREAS, pursuant to the Participation Agreement, dated as of the date hereof, among the Lessee, the Lessor and Societe Generale, New York Branch as Administrative Agent and the Lenders party thereto (the "Lenders") under the ------- Loan Agreements, the Lenders and the Lessor have agreed to finance the Construction of Improvements on the Land; WHEREAS, the Lessor, on each Funding Date, will finance the Construction of Improvements on the Land and on the Initial Funding Date, will finance certain Land Costs; WHEREAS, the Lessee, as Construction Agent for the Lessor, will cause the Construction of the Improvements to be effected pursuant to the Construction Agency Agreement; and WHEREAS, the Lessor and the Lessee desire to amend and restate the Land Lease in its entirety so that the Lessor pursuant to this Master Lease will lease to the Lessee the Property; NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto restate the Land Lease and agree as follows: ARTICLE I DEFINITIONS; INTERPRETATION 1.1 Definitions; Interpretation. Capitalized terms used but not --------------------------- otherwise defined in this Master Lease have the respective meanings specified in Appendix A to this Master Lease (as the same may be amended, supplemented, amended and restated or otherwise modified from time to time, "Appendix A"); and ---------- the rules of interpretation set forth in Appendix A shall apply to this Master Lease. 2 ARTICLE II MASTER LEASE 2.1 Acceptance and Lease of Property. The Lessor hereby leases to the -------------------------------- Lessee hereunder for the Lease Term, the Lessor's interest in the Land together with any Improvements which may be constructed hereafter on the Land pursuant to the Construction Agency Agreement and this Master Lease, and the Lessee hereby leases from the Lessor for the Lease Term, the Lessor's interest in the Land, together with any Improvements which hereafter may be constructed on the Land pursuant to the Construction Agency Agreement and this Master Lease. 2.2 Acceptance Procedure. The Lessee hereby agrees that it accepts -------------------- the Property and upon acceptance shall execute the Lease Supplement (Improvements) with respect to the Improvements and the Lease Supplement (Land) with respect to the Land. 2.3 Lease Term. The Interim Lease Term of this Master Lease shall ---------- commence on the Documentation Date and expire on the Completion Date, provided, -------- however, if Construction does not commence within six (6) months of the - ------- Documentation Date, the Interim Lease Term shall expire on such date. The Basic Lease Term (the "Basic Lease Term") of this Master Lease shall commence at the ---------------- end of the Interim Lease Term and shall end on the Expiration Date. In the event that the Lessee does not notify the Lessor of its election of either the Purchase Option or the Remarketing Option with respect to the Land then the Lessee shall be deemed to have elected the Purchase Option pursuant to Section ------- 18.1. In the event the Basic Lease Term terminates on any day other than the day - ---- following the last day of the then effective Interest Period, the Lessee shall pay any Break Costs associated with the early termination of the Interest Period. 2.4 Title. The Property is leased to the Lessee without any ----- representation or warranty, express or implied, by the Lessor and subject to the rights of parties in possession, the existing state of title (including, without limitation, all Liens other than Lessor Liens) and all applicable Requirements of Law. The Lessee shall in no event have any recourse against the Lessor for any defect in or exception to title to the Property other than resulting from Lessor Liens. 3 ARTICLE III PAYMENT OF RENT 3.1 Rent. ---- (a) During the Basic Lease Term for the Property, the Lessee shall pay Basic Rent for the Property to the Lessor on each Basic Rent Payment Date, on the date required under Section 20.1(g) hereof in connection with the --------------- Lessee's exercise of the Remarketing Option and on any date on which this Master Lease shall terminate with respect to the Property. The Land Portion of the Basic Rent shall be paid as Rent for the Land and the Improvements Portion of the Basic Rent shall be paid as Rent for the Improvements. (b) The Lessee's inability or failure to take possession of all or any portion of the Property upon Completion shall not delay or otherwise affect the Lessee's obligation to pay Rent for the Property in accordance with the terms of this Master Lease. (c) Notwithstanding paragraph (a) of this Section 3.1, the Land ----------- Portion of the Basic Rent and the Improvement Portion of the Basic Rent will accrue and be capitalized as provided in Section 3.7 of the Participation ----------- Agreement, from the Documentation Date and ending on the Completion Date. 3.2 Payment of Rent. Rent shall be paid absolutely net to each Person --------------- entitled thereto, so that this Master Lease shall yield to such Person the full amount thereof, without setoff, deduction or reduction (except as permitted under Section 3.5 hereof and Section 7.12 of the Participation Agreement and ----------- ------------ Section 21 of the Basic Term Pledge Agreement). - ---------- 3.3 Supplemental Rent. The Lessee shall pay to the Lessor or any ----------------- other Person entitled thereto any and all Supplemental Rent promptly as the same shall become due and payable, and if the Lessee fails to pay any Supplemental Rent, the Lessor and such other Persons entitled to the receipt of such payment shall have all rights, powers and remedies provided for herein or by law or equity or otherwise. The Lessee shall pay to the Lessor, as Supplemental Rent, among other things, on demand, to the extent permitted by applicable Requirements of Law, interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due or demanded by the Lessor for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. The expiration or other termination of the Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the obligations of the Lessee with respect to Supplemental Rent. Unless 4 expressly provided otherwise in this Master Lease, in the event of any failure on the part of the Lessee to pay and discharge any Supplemental Rent as and when due, the Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added under any agreement to which Lessee is a party or which is authorized in writing by the Lessee with a third party for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. 3.4 Method of Payment. Each payment of Rent payable by the Lessee to ----------------- the Lessor under this Master Lease or any other Operative Document shall be made by the Lessee to the Lessor or any other person or persons entitled thereto prior to 2:00 P.M., New York City time, to the Account in immediately available funds consisting of Dollars on the date when such payment shall be due. 3.5 Certain Payments. Payments of Basic Rent, Supplemental Rent and ---------------- other amounts payable hereunder in respect of amounts due to a Related Party Lender are, as provided in Section 7.12 of the Participation Agreement and ------------ Section 2.9 of the Basic Term Loan Agreement, to be made net of amounts due to - ----------- such Related Party Lender. ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT 4.1 Quiet Enjoyment. Subject to Sections 2.4 and 4.2, and subject to --------------- ------------ --- the rights of the Lessor contained in Article XV and Article XVI and the other ---------- ----------- terms of the Operative Documents to which the Lessee is a party, the Lessee shall peaceably and quietly have, hold and enjoy the Property for the Lease Term, free of any claim or other action by the Lessor or anyone claiming by, through or under the Lessor, other than any liens or matters arising or created pursuant to the Operative Documents. Such right of quiet enjoyment is independent of, and shall not affect the Lessor's rights otherwise to initiate legal action to enforce the obligations of the Lessee under this Master Lease. 4.2 Right to Inspect. During the Lease Term, the Lessee shall upon ---------------- reasonable notice from the Lessor (except if there exists a Lease Default or an emergency in which event notice will not be required), permit the Lessor, the Administrative Agent, and their respective authorized representatives to have access to and to inspect the Property. 5 ARTICLE V NET LEASE, ETC. 5.1 Net Lease. This Master Lease shall constitute a net lease. Any --------- present or future law to the contrary notwithstanding, this Master Lease shall not terminate, nor shall the Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall the obligations of the Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) by reason of: (i) any defect in the condition, merchantability, design, construction, quality or fitness for use of the Property or any part thereof, or the failure of the Property to comply with all Requirements of Law, including any inability to occupy or use, as the case may be, the Property by reason of such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of the Property or any part thereof; (iii) any restriction, prevention or curtailment of or interference with the construction on or any use of the Property or any part thereof including eviction; (iv) any defect in title to or rights to the Property or any Lien on such title or rights or on the Property (other than Lessor Liens); (v) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by the Lessor, the Lenders or the Administrative Agent; (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to the Lessee, the Lessor, the Lenders, the Administrative Agent or any other Person, or any action taken with respect to this Master Lease by any trustee or receiver of the Lessee, the Lessor, the Lenders or the Administrative Agent or any other Person, or by any court, in any such proceeding; (vii) any claim that the Lessee has or might have against any Person, including without limitation the Lessor, the Lenders, the Administrative Agent or any vendor, manufacturer, contractor of or for the Property; (viii) any failure on the part of the Lessor to perform or comply with any of the terms of this Master Lease, of any other Operative Document or of any other agreement; (ix) any invalidity or unenforceability or illegality or disaffirmance of this Master Lease against or by the Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof; (x) the impossibility or illegality of performance by the Lessee, the Lessor or both; (xi) any action by any court, administrative agency or other Governmental Authority; or (xii) any other cause or circumstances whether similar or dissimilar to the foregoing and whether or not the Lessee shall have notice or knowledge of any of the foregoing. The Lessee's agreement in the preceding sentence shall not affect any claim, action or right the Lessee may have against the Lessor or any other Person. The parties intend that the obligations of the Lessee hereunder shall be covenants and agreements that are separate and independent from any obligations of the Lessor hereunder or under any other Operative Documents and the obligations of the Lessee shall continue unaffected unless such obligations shall have been modified or terminated in accordance with an express provision of this Master Lease. 6 5.2 No Termination or Abatement. The Lessee shall remain obligated --------------------------- under this Master Lease in accordance with its terms and shall not take any action to terminate, rescind or avoid this Master Lease (except as provided herein, including among such exceptions the right to exercise purchase options hereunder), notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting the Lessor or any Participant, or any action with respect to this Master Lease which may be taken by any trustee, receiver or liquidator of the Lessor or any Participant or by any court with respect to the Lessor or any Participant. The Lessee hereby waives all right to terminate or surrender this Master Lease (except as provided herein) or, except as a consequence of the payment of the Lease Balance as a result of the payment of Casualty or Condemnation proceeds pursuant to the terms of Section 14.1 of this Master Lease, or as a result of a ------------ purchase of the Property pursuant to Section 18.1, to avail itself of any ------------ abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to the Lease Balance. The Lessee shall remain obligated under this Master Lease in accordance with its terms and the Lessee hereby waives any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Master Lease and the Operative Documents. Notwithstanding any such statute or otherwise, the Lessee shall be bound by all of the terms and conditions contained in this Master Lease. ARTICLE VI SUBLEASES AND ASSIGNMENTS 6.1 Subletting. The Lessee may from time to time, sublease the ---------- Property or any portion thereof to any Person and extend, modify or renew any sublease without the approval of Lessor or Administrative Agent; provided, -------- however, that: (i) no sublease or other relinquishment of possession of the - ------- Property shall in any way discharge or diminish any of the Lessee's obligations to the Lessor hereunder, and the Lessee shall remain directly and primarily liable under this Master Lease as to the Property, or portion thereof, so sublet and (ii) each sublease shall be made subject and subordinate to this Master Lease and to the rights of the Lessor hereunder and shall be set to terminate on or prior to the Expiration Date. 6.2 Assignment. The Lessee may not assign this Master Lease or any of ---------- its rights or obligations hereunder in whole or in part to any Person except to a Person that the Lessee merges or consolidates into pursuant to Section 10.2 of ------------ the Participation Agreement. 7 ARTICLE VII LESSEE ACKNOWLEDGMENTS 7.1 Condition of the Property. THE LESSEE ACKNOWLEDGES AND AGREES ------------------------- THAT IT IS LEASING THE LAND AND THE IMPROVEMENTS CONSTRUCTED THEREON "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR, THE LENDERS OR THE ADMINISTRATIVE AGENT AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE (EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE DATE HEREOF. NEITHER THE LESSOR, THE LENDERS NOR THE ADMINISTRATIVE AGENT HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT (EXCEPT SECTION 4.1 HEREOF) WHATSOEVER, EXPRESS OR IMPLIED, WITH ----------- RESPECT TO THE PROPERTY (OR ANY PART THEREOF) AND NEITHER THE LESSOR, THE LENDERS NOR THE ADMINISTRATIVE AGENT SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW. 7.2 Risk of Loss. Subject to the terms of Section 14.1, during the ------------ ------------ Lease Term the risk of loss of or decrease in the enjoyment and beneficial use of the Property as a result of the damage or destruction thereof by fire, earthquake, the elements, flood, gas explosion, sabotage, casualties, thefts, riots, wars or otherwise is assumed by the Lessee, and except for loss or damages arising from the gross negligence or willful misconduct of Lessor, Lenders, the Administrative Agent or their respective agents, employees or contractors, neither the Lessor, the Lenders nor the Administrative Agent shall in any event be answerable or accountable to Lessee therefor. 8 ARTICLE VIII POSSESSION AND USE OF THE PROPERTY, ETC. 8.1 Utility Charges. The Lessee shall pay or cause to be paid all --------------- charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents and utilities used in or on the Property during the Lease Term. The Lessee shall be entitled to receive any credit or refund with respect to any utility charge paid by the Lessee and the amount of any credit or refund received by the Lessor on account of any utility charges paid by the Lessee, net of the costs and expenses reasonably incurred by the Lessor in obtaining such credit or refund, shall be promptly paid over to the Lessee. 8.2 Possession and Use of the Property. The Property shall be used in ---------------------------------- a manner consistent with this Master Lease for any lawful purpose in accordance with Applicable Law now or hereafter in effect; provided, that such use does not -------- (i) result in a diminution in the value of the Property from that projected in the Appraisal delivered on the Documentation Date with respect to the Property or (ii) violate any restriction with respect to Hazardous Materials as they relate to the Property pursuant to the Operative Documents. The Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of the Property as contemplated by this Master Lease. The Lessee shall not commit or permit any waste of the Property or any part thereof. 8.3 Compliance with Requirements of Laws and Insurance Requirements. --------------------------------------------------------------- Subject to the terms of Article XII relating to permitted contests, the Lessee, ----------- at its sole cost and expense, shall (a) comply in all material respects with all Requirements of Law (including all Hazardous Materials Laws) and Insurance Requirements relating to the Property, including the use, construction, operation, maintenance, repair and restoration thereof and the remarketing thereof pursuant to Article XX, whether or not compliance therewith shall ---------- require structural or extraordinary changes in the Improvements or interfere with the use and enjoyment of the Property, and (b) procure, maintain and comply with all licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of the Property and for the use, operation, maintenance, repair and restoration of the Improvements. 9 ARTICLE IX MAINTENANCE AND REPAIR; RETURN 9.1 Maintenance and Repair; Return. ------------------------------ (a) From and after the Completion Date, the Lessee, at its sole cost and expense, shall maintain the Property in good condition (ordinary wear and tear excepted) and make all necessary repairs thereto, of every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary, structural or nonstructural or foreseen or unforeseen, in each case as required by all Requirements of Law and Insurance Requirements and in no event less than the standards applied by the Lessee in the operation and maintenance of other comparable properties owned or leased by the Lessee or its Affiliates. (b) The Lessor shall under no circumstances be required to build any improvements on the Property, make any repairs, replacements, alterations or renewals of any nature or description to the Property, make any expenditure whatsoever in connection with this Master Lease (other than for Advances made in accordance with and pursuant to the terms of the Participation Agreement and the Construction Agency Agreement) or maintain the Property in any way. The Lessee waives any right to (i) require the Lessor to maintain, repair, or rebuild all or any part of the Property or (ii) make repairs at the expense of the Lessor pursuant to any Requirement of Law, Insurance Requirement, contract, agreement, or covenant, condition or restriction in effect at any time during the Lease Term. (c) The Lessee shall, upon the Expiration Date (other than as a result of the Lessee's purchase of the Property from the Lessor as provided herein), vacate and surrender the Property to the Lessor subject to the Lessee's obligations under Sections 8.3, 9.1(a), 10.1, 11.1, 14.1, 14.2 and 20.1. Title ------------ ------ ---- ---- ---- ---- ---- to all improvements, furnishings, furniture, fixtures and any personal property of the Lessee which were not funded by the Lessor and the Lenders pursuant to the Participation Agreement, located on or about the Property whether or not affixed to the realty, shall, subject to the following sentence, be and remain the property of the Lessee throughout the Lease Term, and at any time during the Lease Term, and within thirty (30) days following the Expiration Date, the Lessor may require that such improvements, furnishings, fixtures and personal property be removed from the Property by the Lessee with any damages resulting from such removal and the cost of removal being borne by the Lessee. 10 ARTICLE X MODIFICATIONS, ETC. 10.1 Modifications, Substitutions and Replacements. During the Lease --------------------------------------------- Term, the Lessee, at its sole cost and expense, may at any time and from time to time make alterations, renovations, improvements and additions to the Property or any part thereof and substitutions and replacements therefor (collectively, "Modifications"); provided, however, that: ------------- -------- ------- (i) except for any Modification required to be made pursuant to a Requirement of Law (a "Required Modification"), no Modification --------------------- shall reduce the Fair Market Sales Value of the Property by more than $100,000 or diminish the capacity, efficiency, utility or remaining useful life of the Property following the completion of such Modification; (ii) such Modifications shall be (and shall be done in a manner) consistent with the Plans and Specifications for the Property; (iii) such Modifications shall comply with Sections 8.3 and ------------ 9.1(a); and ------ (iv) the Lessee shall have provided notice to the Lessor of any Modification the cost of which, individually or in the aggregate, would exceed 10% of the Improvements Budget for the Property. All Modifications shall remain part of the realty and shall be subject to this Master Lease; provided, however, that Modifications that (x) are not -------- ------- Required Modifications, (y) were not financed by the Participants and (z) can be removed without causing material damage to or diminution in the Fair Market Sales Value of the Property or diminish the capacity, efficiency, utility or remaining useful life of the Property shall be the property of the Lessee or other third party and may be removed by Lessee during the Lease Term and up to the Expiration Date and shall not be subject to this Master Lease. The Lessee may place upon the Property any trade fixtures, machinery, equipment, inventory or other property belonging to the Lessee or third parties, subject, however, to the terms of Section 9.1; provided, however, that such trade fixtures, ----------- -------- ------- machinery, equipment, inventory or other property can be removed without causing material damage to or diminution in the Fair Market Sales Value of the Property below the Lease Balance; provided, further, however, that the Lessee shall keep and maintain at the Property and shall not remove from the Property any Facility Equipment financed or otherwise paid for by the Participants pursuant to the Participation Agreement. 11 ARTICLE XI WARRANT OF TITLE; EASEMENTS 11.1 Warrant of Title. ---------------- (a) The Lessee agrees that except as otherwise provided herein and subject to the terms of Article XII relating to permitted contests, the ----------- Lessee shall not directly or indirectly create or allow to remain, and shall promptly discharge at its sole cost and expense, any Lien (other than any Lessor Lien or any Permitted Property Lien), defect, attachment, levy, title retention agreement or claim upon the Property or any Lien, attachment, levy or claim with respect to the Rent or with respect to any amounts held by the Lessor, the Administrative Agent or the Collateral Agent pursuant to the Loan Agreements or the other Operative Documents, other than Permitted Property Liens. (b) Nothing contained in this Master Lease shall be construed as constituting the consent or request of the Lessor or any other Participant, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NEITHER THE LESSOR, THE LENDERS NOR THE ADMINISTRATIVE AGENT IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR, THE LENDERS OR THE ADMINISTRATIVE AGENT IN AND TO THE PROPERTY. 11.2 Grants and Releases of Easements; Lessor's Waivers. Provided that -------------------------------------------------- no Lease Default or Lease Event of Default shall have occurred and be continuing, and subject to the provisions of Articles VII, IX and X and Section ------------ -- - ------- 8.3, the Lessor hereby consents in each instance to the following actions by the - --- Lessee as the Lessor's agent, and the Lessor hereby appoints the Lessee the Lessor's attorney-in-fact, with full authority in the place and stead of the Lessor to take such action or actions from time to time during the Lease Term, but at the Lessee's sole cost and expense: (i) the granting of easements, licenses, rights-of-way and other rights and privileges in the nature of easements reasonably necessary or desirable for the use, repair, or maintenance of the Property as herein provided; (ii) the release of existing easements or other rights in the nature of easements which are for the benefit of the Property; (iii) if required by applicable Governmental Authority in connection with the Construction, the dedication or transfer of unimproved portions of the Property for road, highway or other public 12 purposes; (iv) the imposition of and the execution of amendments to any covenants and restrictions; (v) the filing and processing of site development permit amendments, parcel maps, tentative maps, development agreements and any and all other permit applications, authorizations, entitlement, agreements with any governmental authority or regulatory agency or amendments thereof, or other documents reasonably required or beneficial for construction or Modification of the Improvements, or amendments to Permitted Property Liens or governmental permits or approvals affecting the Property; and (vi) the execution and filing of tract or parcel maps subdividing the Land into lots or parcels or reconfiguring existing lots or parcels; provided, however, that in each case (A) -------- ------- such grant, release, dedication, transfer, imposition or amendment does not reduce the Fair Market Sales Value of the Property, (B) such grant, release, dedication, transfer, imposition or amendment in the Lessee's judgment is reasonably necessary or beneficial in connection with the use, maintenance, alteration or improvement of the Property, (C) such grant, release, dedication, transfer, imposition or amendment will not cause the Property or any portion thereof to fail to comply with the provisions of this Master Lease or any other Operative Documents and all Requirements of Law (including, without limitation, all applicable zoning, planning, building and subdivision ordinances, all applicable restrictive covenants and all applicable architectural approval requirements); (D) any and all governmental consents or approvals required prior to such grant, release, dedication, transfer, imposition, annexation or amendment have been obtained, and any and all filings required prior to such action have been made; (E) the Lessee shall remain obligated under this Master Lease and under any instrument executed by the Lessee consenting to the assignment of the Lessor's interests in this Master Lease as security for indebtedness, in each such case in accordance with their terms, substantially as though such grant, release, dedication, transfer, imposition or amendment had not been effected and (F) the Lessee shall pay and perform any obligations of the Lessor under such grant, release, dedication, transfer, imposition or amendment. Without limiting the effectiveness of the foregoing, the Lessor shall, upon the request of the Lessee, and at the Lessee's sole cost and expense, execute and deliver any instruments necessary or appropriate to confirm any such grant, release, dedication, transfer, imposition or amendment to any Person permitted under this Section 11.2(a) including landlord waivers with --------------- respect to any of the foregoing. ARTICLE XII PERMITTED CONTESTS 12.1 Permitted Contests in Respect of Applicable Law Other Than ---------------------------------------------------------- Impositions. Except to the extent otherwise provided in Section 13.5(b) of the - ----------- --------------- Participation Agreement regarding Taxes and other Impositions, if, to the extent and for so long as (a) a test, challenge, appeal or proceeding for review of any Applicable Law relating to the Property shall be prosecuted diligently and in good faith in appropriate proceedings by the Lessee or (b) compliance with such Applicable Law 13 shall have been excused or exempted by a valid nonconforming use, variance permit, waiver, extension or forbearance, then, provided no Lease Default or Lease Event of Default has occurred and is continuing, the Lessee shall not be required to comply with such Applicable Law but only if and so long as any such test, challenge, appeal, proceeding, waiver, extension, forbearance or noncompliance shall not, in the reasonable opinion of the Lessor and the Administrative Agent, involve (A) any risk of criminal liability being imposed on the Lessor, the Lenders or the Administrative Agent or (B) any risk of (1) foreclosure, forfeiture or loss of the Property, or any material part thereof, or (2) the nonpayment of Rent or (C) any substantial risk of (1) the sale of, or the creation of any Lien (other than Permitted Property Lien) on, any part of the Property, (2) civil liability being imposed on the Lessor, the Lenders, the Administrative Agent, or the Property, or (3) enjoinment of, or interference with, the use, possession or disposition of the Property in any material respect. Lessor, at Lessee's sole cost and expense, shall execute and deliver to Lessee such authorizations and other documents as may reasonably be required in connection with any such permitted contest. The Lessor will not be required to join in any proceedings pursuant to this Section 12.1 unless a provision of any Applicable Law requires that such ------------ proceedings be brought by or in the name of the Lessor; and in that event the Lessor will join in the proceedings or permit them or any part thereof to be brought in its name if and so long as (i) the Lessee has not elected the Remarketing Option and (ii) the Lessee pays all related expenses and indemnifies the Lessor, the Lenders and the Administrative Agent with respect to such proceedings. ARTICLE XIII INSURANCE 13.1 Insurance by the Lessee During the Interim Lease Term. ----------------------------------------------------- During the Interim Lease Term, the Lessee shall procure or cause others to procure and maintain at the Lessee's sole cost and expense and in full force and effect the insurance required under the Construction Agency Agreement. The parties acknowledge that any Advance made in accordance with Article III of ----------- the Participation Agreement may be used to pay clause (l) of the definition of ---------- "Construction Costs"; provided, however, such payment shall not affect the -------- ------- Lessee's obligations under Article V hereof. --------- 13.2 Insurance by the Lessee During the Basic Lease Term. --------------------------------------------------- 14 (a) During the Basic Lease Term, the Lessee shall procure and carry, or cause others to procure and carry, at the Lessee's sole cost and expense, insurance policies with insurance companies authorized to do business in the State of California (if required by law or regulation) with (i) a Best Insurance Reports rating of "A-" or better and a financial size category of "VIII" or higher, (ii) or a Standard & Poors financial strength rating of "BBB+" or higher, or (iii) other companies acceptable to the Lessor. (i) Workers' Compensation Insurance. Workers' compensation ------------------------------- insurance as required by applicable California laws. (ii) Employer's Liability Insurance. Employer's liability ------------------------------ insurance for the Lessee's liability arising out of injury to or death of employees of the Lessee in the amount of $1,000,000 per accident. (iii) General Liability Insurance. Liability insurance on an --------------------------- occurrence basis against claims filed in the United States of America and occurring in anywhere in the world for the Lessee's liability arising out of claims for personal injury (including bodily injury and death) and property damage. Such insurance shall provide coverage for all operations of the Lessee with a $1,000,000 minimum limit per occurrence for combined bodily injury and property damage; provided that policy aggregates, if any, shall apply separately to claims occurring with respect to the Project. (iv) Automobile Liability Insurance. Automobile liability ------------------------------ insurance for the Lessee's liability arising out of claims for bodily injury and property damage covering all owned (if any), leased, non- owned and hired vehicles of the Lessee, including loading and unloading, with a $1,000,000 minimum limit per accident for combined bodily injury and property damage and containing appropriate no-fault insurance provisions wherever applicable. (v) Excess Liability Insurance. Excess liability insurance on -------------------------- an occurrence basis covering claims (on at least a following form basis) in excess of the underlying insurance described in the foregoing subsections (ii), (iii) and (iv), with a $25,000,000 minimum limit per occurrence, provided that aggregate limits of liability, if any, shall apply separately to claims occurring with respect to the Project. The amounts of insurance required in the foregoing subsections (ii), (iii), (iv) and this subsection (v) may be satisfied by the Lessee purchasing coverage in the amounts 15 specified or by any combination of primary and excess insurance, so long as the total amount of insurance meets the requirements specified above. (vi) Operational Property Damage Insurance. On or prior to the ------------------------------------- end of the Construction Period or the expiration of the builder's risk insurance, whichever comes first, property damage insurance on an "all risk" basis insuring the Lessee and the Lessor, as their interests may appear, including coverage against damage or loss caused by earth movement (including but not limited to earthquake, landslide, subsidence and volcanic eruption), flood, and boiler and machinery accidents, and in form and substance reasonably satisfactory to the Lessor and its Insurance Consultant. (1) Property Insured. The property damage insurance shall ---------------- provide coverage for (i) the buildings, structures, boilers, machinery, equipment, facilities, fixtures, supplies and other properties constituting a part of the Improvements, (ii) the cost of recreating plans, drawings or any other documents or computer system records, (iii) electronic equipment, and (iv) foundations and other property below the surface of the ground. (2) Additional Coverages. The property damage insurance -------------------- shall insure (i) attorney's fees, engineering and other consulting costs, and permit fees directly incurred in order to repair or replace damaged insured property, (ii) the cost of preventive measures to reduce or prevent a loss (sue and labor), (iii) increased cost of construction and loss to undamaged property as the result of enforcement of building laws or ordinances, (iv) debris removal, and (v) expediting expenses. (3) Special Clauses. The property damage policy shall --------------- include (i) a 72 hour clause for flood, windstorm and earthquakes, (ii) an unintentional errors and omissions clause, (iii) a requirement that the insurer pay losses within forty (40) days after receipt of an acceptable proof of loss or partial proof of loss, and (iv) an other insurance clause making this insurance primary over any other insurance. (4) Sum Insured. Losses shall be valued at their repair or ----------- replacement cost, without deductible for physical depreciation or obsolesce, including custom duties, taxes and fees. The property damage policy shall insure the Property in an amount not less than the "Full Insurable Value." For purposes of this subsection, "Full Insurable Value" shall mean the full 16 replacement value of the Improvements, including any equipment and supplies, without deduction for physical depreciation and/or obsolescence. The earth movement (which may be self insured pursuant to Section 13.4) and flood shall be insured with a sub- ------------ limit of no less than $50,000,000.00; provided, however, that -------- ------- such sub-limit for earth movement shall be adjusted by the Lessee, if the Lessor determines that any of the parameters or inputs listed on the earth movement study prepared by [____] and attached hereto as Exhibit A shall change or be amended after the --------- Documentation Date. (vii) Endorsements. All policies of liability insurance (except ------------ for workers' compensation and employers' liability insurance) required to be maintained by the Lessee shall be endorsed as follows: (1) To name the Lessor, the Administrative Agent and the Lenders as additional insureds with respect to the policies required under Section 13.2(a)(iii) through (v) and to name the ------------------- - Administrative Agent as loss payee under a standard form mortgage endorsement under Section 13.2(a)(vi); (2) To provide a severability of interests and cross liability clause; and (3) That the insurance shall be primary and not excess to or contributing with any insurance or self-insurance maintained by the Lessor or the Administrative Agent. (viii) Waiver of Subrogation. The Lessee hereby waives any and --------------------- every claim for recovery from the Lessor for any and all loss or damage covered by any of the insurance policies to be maintained under this Master Lease to the extent that such loss or damage is recovered under any such policy. (b) Conditions. ---------- (i) Loss Notification. The Lessee shall promptly notify the ----------------- Lessor of any single loss or event likely to give rise to a claim against an insurer for an amount in excess of $50,000 covered by any insurance policies providing operational property damage. 17 (ii) Policy Cancellation and Change. All policies of insurance ------------------------------ required to be maintained pursuant to this Article XIII shall be ------------ endorsed so that if at any time they are canceled, or their coverage is reduced (by any party including the insured) so as to affect the interests of the Lessor, such cancellation or reduction shall not be effective as to the Lessor for sixty (60) days, except for non-payment of premium which shall be for ten (10) days, after receipt by the Lessor of written notice from such insurer of such cancellation or reduction. (iii) Separation of Interests. All policies (other than in ----------------------- respect to liability or workers compensation insurance) shall insure the interests of the Lessor regardless of any breach or violation by the Lessee or any other Party of warranties, declarations or conditions contained in such policies, any action or inaction of the Lessees or others, or any foreclosure relating to the Project or any change in ownership of all or any portion of the Project. 13.3 Evidence of Insurance. Prior to the end of the Construction --------------------- Period and on an annual basis at least 10 days prior to each policy anniversary, the Lessee shall furnish the Lessor and the Administrative Agent, acting on behalf of the Lender, with (a) certificates of insurance or binders, in a form acceptable to the Lessor and the Administrative Agent, evidencing all of the insurance required by the provisions of this Article XIII and (b) a schedule of ------------ the insurance policies held by or for the benefit of the Lessee and required to be in force by the provisions of this Article XIII. Such certificates of ------------ insurance/binders shall be executed by each insurer or by an authorized representative of each insurer where it is not practical for such insurer to execute the certificate itself. Such certificates of insurance/binders shall identify underwriters, the type of insurance, the insurance limits and the policy term and shall specifically list the special provisions enumerated for such insurance required by this Article XIII. Upon request, the Lessee will ------------ promptly furnish the Lessor or the Administrative Agent, acting on behalf of the Lenders, with copies of all insurance policies, binders and cover notes or other evidence of such insurance relating to the insurance required to be maintained by the Lessee. 13.4 Self-Insurance. During the Basic Lease Term, the Lessee shall -------------- have the right to self-insure with respect to earthquake insurance required under this Master Lease so long as (i) the Lessee is a publicly traded domestic corporation whose stock is traded on a nationally recognized exchange; (ii) the Lessee has not assigned this Master Lease; (iii) the Lessee maintains a Consolidated Tangible Net Worth of at least $400 million according to its most recent audited financial statements and (iv) the Lessee governs and manages its self-insurance program in a manner consistent with programs managed by prudent businesses in similar seismic zones whose stock is publicly traded on a nationally recognized exchange. Upon request, the Lessee shall supply the Lessor and the Administrative Agent from time to time with evidence reasonably satisfactory to the Lessor and the 18 Administrative Agent of the Lessee's net worth and the satisfaction of the condition set forth in the above clauses (i)-(iv). If the Lessee elects to self-insure, the Lessee shall be responsible for losses or liabilities which would have been assumed by the insurance companies issuing the insurance required of the Lessee under the Master Lease. The Lessee will notify the Lessor in advance of any period for which it intends to self-insure and shall provide the Lessor with satisfactory evidence of its compliance with these requirements in order to give the Lessor an opportunity to confirm the satisfaction of the conditions set forth in the above clauses (i)-(iv). ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS 14.1 Casualty and Condemnation. ------------------------- (a) Subject to the provisions of this Article XIV, if all or a ----------- portion of the Property is damaged or destroyed in whole or in part by a Casualty or if the use, access, occupancy, easement rights or title to the Property or any part thereof, is the subject of a Condemnation, then: (i) in the case of a Casualty, any insurance proceeds payable with respect to such Casualty shall be paid to the Lessee for the sole purpose of reconstruction, refurbishment and repair of the Property; provided, that such reconstruction, refurbishment or repair can be completed six (6) months prior to the end of the Lease Term and, the Lessee shall have furnished the Lessor with a certificate from an independent engineer reasonably acceptable to the Lessor as to the timing of completion of such reconstruction, refurbishment or repair; provided, further, that in the event that either (x) such reconstruction, refurbishment or repair cannot be completed six (6) months prior to the end of the Lease Term or (y) the Lessee shall elect not to use such proceeds for the reconstruction, refurbishment or repair of the Property, then the Lessee shall be deemed to have exercised its option to purchase the Property notwithstanding any limitations on purchase set forth in Article XVIII hereof and all such ------------- insurance proceeds payable with respect to such Casualty shall be paid to the Lessor to be applied towards the payment of the Lease Balance in accordance with Section 7.2 of the Participation Agreement; ----------- (ii) in the case of a Condemnation (that is not a Significant Condemnation) of any part of the Property, any award or compensation relating thereto shall be paid to the Lessee for the sole purpose of restoration of the Property (provided, that such restoration can be completed prior to the end of the Lease Term) provided, that in the 19 event that such restoration cannot be completed prior to the end of the Lease Term, then the Lessee shall be deemed to have exercised its option to purchase the Property notwithstanding any limitation on purchase set forth in Article XVIII hereof and all such award or ------------- compensation payable with respect to such Condemnation shall be paid to the Lessor to be applied towards the payment of the Lease Balance in accordance with Section 7.2 of the Participation Agreement; and ----------- (iii) in the case of a Significant Condemnation, then the Lessee shall be deemed to have exercised its option to purchase the Property notwithstanding any limitation on the purchase set forth in Article ------- XVIII hereof and all such award or compensation payable with respect ----- to such Condemnation shall be paid to the Lessor to be applied towards the payment of the Lease Balance in accordance with Section 7.2 of the ----------- Participation Agreement; provided, however, that, in each case, if a Lease Default or a Lease Event of Default shall have occurred and be continuing, such award, compensation or insurance proceeds shall be paid directly to the Lessor or, if received by the Lessee, shall be held in trust for the Lessor and the Administrative Agent, and shall be paid immediately by the Lessee to the Account to be distributed in accordance with Article VII of the Participation Agreement. All amounts held by ----------- the Lessor or the Administrative Agent when a Lease Default or a Lease Event of Default exists hereunder on account of any award, compensation or insurance proceeds either paid directly to the Lessor or the Administrative Agent or turned over to the Lessor or the Administrative Agent shall at the option of the Lessor either be (i) paid to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with clause (d) of this Section 14.1, or ---------- ------------ (ii) applied to the repayment of the Lease Balance of the Property on the Termination Date with respect to the Property in accordance with Article XV. ---------- (b) Provided no Lease Default or Lease Event of Default has occurred and is continuing, the Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At the Lessee's reasonable request, and at the Lessee's sole cost and expense, the Lessor and the Administrative Agent shall participate in any such proceeding, action, negotiation, prosecution or adjustment. The Lessor and the Lessee agree that this Master Lease shall control the rights of the Lessor and the Lessee in and to any such award, compensation or insurance payment. (c) If the Lessor or the Lessee shall receive notice of a Casualty or of an actual, pending or threatened Condemnation of the Property or any interest therein, the Lessor or the Lessee, 20 as the case may be, shall give notice thereof to the other and to the Administrative Agent promptly after the receipt of such notice. (d) If pursuant to this Section 14.1 and Section 15.1, this Master ------------ ------------ Lease shall continue in full force and effect following a Casualty or Condemnation, the Lessee shall, at its sole cost and expense (and, without limitation, if any award, compensation or insurance payment is not sufficient to restore the Property in accordance with this clause (d), the Lessee shall pay the shortfall), promptly and diligently repair any damage to the Property caused by such Casualty or Condemnation in conformity with the requirements of Sections -------- 8.3 and 9.1, to restore the Property to at least the same condition, operative - --- --- value and useful life as existed immediately prior to such Casualty or Condemnation. Upon completion of such restoration, the Lessee shall furnish to the Lessor (which, in turn, shall furnish to the Administrative Agent) an architect's certificate of substantial completion and a Responsible Officer's Certificate confirming that such restoration has been completed pursuant to this Master Lease. (e) In no event shall a Casualty or Condemnation affect the Lessee's obligations to pay Rent pursuant to Section 3.1 and any other amounts hereunder ----------- or to perform its obligations and pay any amounts due on the Expiration Date or pursuant to Articles XVIII and XXI (except to the extent the Lessee has -------------- --- exercised its Purchase Option with respect to the Property). (f) Any Excess Casualty/Condemnation Proceeds received by the Lessor or the Administrative Agent in respect of a Casualty or Condemnation shall be turned over to the Lessee. 14.2 Environmental Matters. If the Lessee gains knowledge of the --------------------- existence of an Environmental Violation with respect to the Property, the Lessee shall promptly notify the Lessor in writing of such Environmental Violation and the Lessee shall within thirty (30) days of such notice deliver to the Lessor a remediation plan with respect to such violation. If the cost of remedying the Environmental Violation would exceed $2,500,000 and the Lessor elects not to terminate this Master Lease with respect to the Property pursuant to Section ------- 15.1, or if the cost of remedying such Environmental Violation is less than - ---- $2,500,000, then in each case, at the Lessee's sole cost and expense, the Lessee shall promptly and diligently commence any response, clean up, remedial or other action necessary to remove, clean up or remediate the Environmental Violation in accordance with the terms of Section 8.3. The Lessee shall, upon completion of ----------- remedial action by the Lessee, cause to be prepared by an environmental consultant reasonably acceptable to the Lessor a report describing the Environmental Violation and the actions taken by the Lessee (or its agents) in response to such Environmental Violation, and a statement by the consultant that the Environmental Violation has been remedied in compliance in all material respects with applicable Environmental Law or Hazardous Materials Laws together, if appropriate under Applicable Law, a certificate of compliance or release 21 from the applicable Governmental Authority. Each such Environmental Violation shall be remedied prior to the Expiration Date and in accordance with the provisions set forth above, unless the Property has been purchased by the Lessee in accordance with Section 15.2 or Section 18.1(b). Nothing in this Article XIV ------------ --------------- ----------- shall reduce or limit the Lessee's obligations under Section 13.1, 13.2 or 13.3 ------------ ---- ---- of the Participation Agreement. 14.3 Notice of Environmental Matters. Promptly, but in any event ------------------------------- within fifteen (15) Business Days from the date the Lessee has knowledge thereof pursuant to written notice from any Governmental Authority, the Lessee shall provide the Lessor written notice of any pending or threatened claim, action or proceeding involving any Environmental Law or any Hazardous Materials Laws or any Release on or in connection with the Property. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and the Lessee's proposed response thereto. In addition, the Lessee shall provide to the Lessor, within thirty (30) Business Days of receipt, copies of all written communications with any Governmental Authority relating to any Environmental Violation in connection with the Property. The Lessee shall also promptly provide such detailed reports of any such material environmental claims. ARTICLE XV TERMINATION OF LEASE 15.1 Termination upon Certain Events. If any of the following occurs ------------------------------- during the Basic Lease Term with respect to the Property: (i) a Significant Condemnation occurs; or (ii) an Environmental Violation occurs or is discovered the cost of remediation of which would exceed $2,500,000; and the Lessor shall have given written notice (a "Termination Notice") to the ------------------ Lessee that, as a consequence of such event this Master Lease is to be terminated, then the Lessee shall be obligated to purchase the Property within thirty (30) days after Lessee's receipt of the Termination Notice, by paying to the Lessor an amount equal to the Lease Balance. 15.2 Termination Procedures. On the date of the payment by the Lessee ---------------------- of the Lease Balance in accordance with Section 15.1 (such date, the ------------ "Termination Date"), this Master Lease shall terminate and, concurrent with the ---------------- Lessor's receipt of such payment, 22 (a) the Property shall be conveyed to the Lessee (or to the Lessee's designee) "AS IS" and in its then present physical condition free of Lessor Liens and the Lessor shall execute and deliver a grant deed, without representation or warranty other than as provided under Applicable Law, of the Property in recordable form together with a FIRPTA Affidavit; and (b) in the case of a termination pursuant to clause (i) of Section ------- 15.1, the Lessor shall convey to the Lessee any Net Proceeds with respect ---- to the Significant Condemnation giving rise to the termination of this Master Lease received by the Lessor or, at the request of the Lessee, such amounts shall be applied towards payment of the Lease Balance. ARTICLE XVI EVENTS OF DEFAULT 16.1 Lease Events of Default. The occurrence of any one or more of the ----------------------- following events (whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall constitute a "Lease Event of -------------- Default": - ------- (a) the Lessee shall fail to make payment of (i) any Basic Rent when due and payable within two (2) Business Days of such Basic Rent Payment Date, (ii) any Supplemental Rent due and payable within five (5) days after receipt of written notice thereof, or (iii) the Lease Balance, Purchase Price or Maximum Recourse Amount on the date due therefor; or (b) the Lessee shall fail to deposit with the Collateral Agent, prior to 3:00 P.M., New York City time, on the Business Day next succeeding facsimile notice of the occurrence of a Deficiency Date, the Deficiency Collateral; (c) the Lessee shall not be in compliance with Section 10.2 of the ------------ Participation Agreement; (d) the Lessee shall fail to observe or perform any term, covenant or condition under this Master Lease or the other Operative Documents to which it is party other than those described in clauses (a), (b), (c), (m) or (p) of this Section 16.1, and, in each such case, such failure shall have ------------ continued unremedied for thirty (30) days after written notice; provided, that such cure period shall be extended from thirty (30) days to ninety (90) days if such term, 23 covenant or condition is, without material prejudice to the Lessor and/or the Lenders, curable or remediable and the Lessee is at all times during such extended period diligently taking action reasonably satisfactory to the Lessor and the Lenders to so cure or remedy default; provided, further, -------- ------- that, for purposes of clarification, the failure by the Lessee to comply with the foregoing clauses (a), (b), (c), (m) or (p) of this Section 16.1 ------------ shall not be subject to any cure period except as expressly set forth in such clauses (a), (b), (c), (m) or (p); (e) any representation or warranty made or deemed made by the Lessee herein or in any Operative Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with any Operative Document shall prove to have been incorrect or false in any material respect on or as of the date made or deemed made, unless the fact or condition which made such representation of warranty incorrect or false is, without material prejudice to the Lessor and/or the Lenders, curable or remediable and the Lessee is at all times diligently taking action reasonably satisfactory to the Lessor and the Administrative Agent to so cure or remedy such fact or condition in order to make such representation and/or warranty true and correct in all material respects, in which event the Lessee shall have one-hundred and twenty (120) days from the date a Responsible Officer gains knowledge, by receipt of notice or otherwise, that such representation or warranty was incorrect or false to cure or remedy such default; (f) a Construction Agency Agreement Event of Default shall have occurred and be continuing and any applicable cure period relating thereto shall have elapsed; (g) any Operative Document or any Lien granted under any Operative Document shall cease to be effective against, or cease to be the legal, valid, binding and enforceable obligation of the Lessee, other than due to any action taken by the Lessor or the Collateral Agent; (h) the Lessee shall directly or indirectly contest the effectiveness, validity, binding nature of enforceability of any Operative Document or any Lien granted in favor of the Lessor or the Administrative Agent under the Master Lease, the Lenders Mortgage, the Assignment of Lease, Rent, Construction Period Pledge Agreement and CAA, the Construction Agency Agreement, the Pledge Agreements and the Lessor Financing Statements related thereto or any other Operative Document; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV 24 of ERISA by any member of the ERISA Group, any Plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $10,000,000; (j) any judgments or orders for the payment of money, in any case not covered by insurance, individually or in the aggregate in excess of $10,000,000 shall be rendered against the Lessee and such judgment or order shall continue unsatisfied and unstayed (pursuant to laws, rules or court orders) for a period of thirty (30) days; (k) a default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness of the Lessee having a principal amount, individually or in the aggregate, in excess of $10,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity; (l) the Guarantor shall breach any of its obligations under the Guaranty or other Operative Documents to which it is party and the time for cure of such breach, shall have elapsed; (m) the Lessee shall fail to maintain the insurance required under Article XIII hereof, including compliance with the requirements of Section ------------ ------- 13.4 if the Lessee elects to self-insure with respect to earthquake ---- insurance; (n) the Lessee shall (i) admit in writing its inability to pay its debts generally as they become due, (ii) file a petition under the United States bankruptcy laws or any other applicable insolvency law or statute of the United States of America or any State or Commonwealth thereof or other applicable jurisdiction, (iii) make a general assignment for the benefit of its creditors, (iv) consent to the appointment of a receiver of itself or the whole or any substantial part of its property, (v) fail to cause the discharge of any custodian, trustee or receiver 25 appointed for the Lessee or the whole or a substantial part of its property within sixty (60) days after such appointment, or (vi) file a petition or answer seeking or consenting to reorganization under the United States bankruptcy laws or any other applicable insolvency law or statute of the United States of America or any State or Commonwealth thereof or other applicable jurisdiction; (o) insolvency proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency law or statute of the United States of America or any State or Commonwealth thereof or other applicable jurisdiction shall be filed against the Lessee and not dismissed within sixty (60) days from the date of its filing (provided, that the -------- Lessee hereby expressly authorizes the Lessor and the Administrative Agent to appear in any court conducting any such proceeding during such sixty (60) day period to preserve, protect and defend their respective rights under the Operative Documents), or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of the Lessee, a receiver of the Lessee, or the whole or a substantial part of any of its property, and such order or decree shall not be vacated or set aside within sixty (60) days from the date of the entry thereof; or (p) the Lessee exercises the Undeveloped Land Purchase Option set forth in Section 18.2 during the Construction Period but fails to purchase ------------ the Loan Balance on the Completion Date as required under Section ------- 18.2(b)(iv) hereof and Section 10.1(b)(i)(B) of the Participation ----------- --------------------- Agreement. 16.2 Remedies. If a Lease Event of Default shall have occurred and be -------- continuing, the Lessor shall have the right to recover, by demand to the Lessee and at the Lessor's election, and the Lessee shall pay to the Lessor, as and for a final payment, but exclusive of the indemnities payable under the Operative Documents, and in lieu of all damages beyond the date of such demand the sum of (a) the Lease Balance, plus (b) all other amounts owing in respect of Basic Rent and Supplemental Rent theretofore accruing under this Master Lease; provided, -------- however, that if a Lease Event of Default has occurred pursuant to Section - ------- ------- 16.1(n) or (o), such final payment shall be immediately due and payable without - ------- --- demand or notice. Upon payment of the amount specified pursuant to the first sentence of this Section 16.2, the Lessee shall be entitled to receive from the ------------ Lessor, at the Lessee's request and cost, an assignment of Lessor's right, title and interest in the Property pursuant to the provisions of Section 21.1. It is ------------ the intent of the Lessor and the Lessee that the payment required to be made pursuant to this Section 16.2 together with the payment of the Maximum Recourse ------------ Amount shall be treated as an obligation on the part of the Lessee to repay a loan obligation to the Lessor in such amounts; provided, that the Lessee shall -------- not be entitled to receive an assignment of Lessor's interest in the Property unless the Lessee shall have paid in full the Lease Balance and all other payments required hereunder. 26 (a) The Lessor may, by facsimile notice to the Lessee, rescind or terminate this Master Lease as of the date specified in such notice; provided, -------- however (i) no reletting, reentry or taking of possession of the Property (or - ------- any portion thereof) by the Lessor will be construed as an election on the Lessor's part to terminate this Master Lease unless a written notice of such intention is given to the Lessee, (ii) notwithstanding any reletting, reentry or taking of possession, the Lessor may at any time thereafter elect to terminate this Master Lease for a continuing Lease Event of Default and (iii) no act or thing done by the Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of the Property shall be valid unless the same be made in writing and executed by the Lessor; (b) The Lessor may (i) demand that the Lessee, and the Lessee shall upon the written demand of the Lessor, return the Property promptly to the Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VII and IX and Section 8.3 hereof as if the ------------ -- ----------- Property were being returned at the end of the Lease Term, and the Lessor shall not be liable for the reimbursement of the Lessee for any costs and expenses incurred by the Lessee in connection therewith and (ii) without prejudice to any other remedy which the Lessor may have for possession of the Property, and to the extent and in the manner permitted by Applicable Law, enter upon the Property and take immediate possession of (to the exclusion of the Lessee) the Property or any part thereof and expel or remove the Lessee and any other Person who may be occupying the Property, by summary proceedings or otherwise, all without liability to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to the Lessor's other damages, the Lessee shall be responsible for all costs and expenses incurred by the Lessor, the Lenders and/or the Administrative Agent in connection with any reletting, including, without limitation, reasonable brokers' fees and all costs of any alterations or repairs made by the Lessor, the Lenders or the Administrative Agent; (c) As more fully set forth in the Memorandum of Lease, the Lessor may sell all or any part of the Property, at public or private sale, as the Lessor may determine and upon any such sale the Lessee's obligation to pay Basic Rent with respect to the Property sold shall terminate; (d) The Lessor may, at its option, elect not to terminate this Master Lease with respect to the Property and continue to collect all Basic Rent, Supplemental Rent, and all other amounts due to the Lessor (together with all costs of collection) and enforce the Lessee's obligations under this Master Lease as and when the same become due, or are to be performed, and at the option of the Lessor, upon any abandonment of the Property by the Lessee or re-entry of same by the Lessor, the Lessor may enforce, by suit or otherwise, all other covenants and conditions hereof to be performed or complied with by the Lessee hereunder and to exercise all other remedies permitted by Applicable Law. 27 (e) Unless the Property has been sold, the Lessor may, whether or not the Lessor shall have exercised or shall thereafter at any time exercise any of its rights under clause (b), (c) or (d) of this Section 16.2 with respect to the ------------ Property or any portions thereof, demand, by written notice to the Lessee specifying a date (a "Termination Date") not earlier than five (5) days after ---------------- the date of such notice, that the Lessee purchase, on such Termination Date for a price equal to the Lease Balance, in accordance with the provisions of Article ------- XXI; - --- (f) The Lessor may exercise any other right or remedy that may be available to it under Applicable Law, including any and all rights or remedies under the Pledge Agreements, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any period(s), and such suits shall not in any manner prejudice the Lessor's right to collect any such damages for any subsequent period(s), or the Lessor may defer any such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term; (g) The Lessor may retain and apply against the Lease Balance all sums which the Lessor would, absent such Lease Event of Default, be required to pay to, or turn over to, the Lessee pursuant to the terms of this Master Lease and upon payment in full of the Lease Balance from such sums, the Property shall be conveyed to Lessee in accordance with Section 21.1 of the Master Lease; ------------ (h) If a Lease Event of Default shall have occurred and be continuing, the Lessor, to the extent permitted by Applicable Law, as a matter of right and with notice to the Lessee, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Property, and the Lessee hereby irrevocably consents to any such appointment. Any such receiver(s) shall have all of the usual powers and duties of receivers in like or similar cases and all of the powers and duties of the Lessor in case of entry, and shall continue as such and exercise such powers until the date of confirmation of the sale of the Property unless such receivership is sooner terminated; (i) To the maximum extent permitted by law, the Lessee hereby waives the benefit of any appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshaling in the event of any sale of the Property or any interest therein; (j) The Lessor shall be entitled to enforce payment of the indebtedness and performance of the obligations secured hereby and to exercise all rights and powers under this instrument or under any of the other Operative Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, security agreement, pledge, lien, assignment or otherwise. 28 Neither the acceptance of this instrument nor its enforcement, shall prejudice or in any manner affect the Lessor's right to realize upon or enforce any other security now or hereafter held by the Lessor, it being agreed that the Lessor shall be entitled to enforce this instrument and any other security now or hereafter held by the Lessor in such order and manner as the Lessor may determine in its absolute discretion. No remedy herein conferred upon or reserved to the Lessor is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Operative Documents to the Lessor or to which it may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Lessor. In no event shall the Lessor, in the exercise of the remedies provided in this instrument (including, without limitation, in connection with the assignment of rents to Lessor, or the appointment of a receiver and the entry of such receiver onto all or any part of the Property), be deemed a "mortgagee in possession", and the Lessor shall not in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies; and (k) Grant; Foreclosure; Power of Sale. The Lessee hereby grants to --------------------------------- the Lessor or, in deed of trust jurisdictions, to the trustee named in the Memorandum of Lease for such jurisdictions, as trustee (together with all successor trustees, the "Trustee"), IN TRUST, WITH POWER OF SALE, or a mortgage ------- on, all of the Lessee's right, title and interest in and to the Property and, upon the occurrence of a Lease Event of Default and following termination of this Master Lease by the Lessor, the Lessor shall have the power and authority, after proper notice and lapse of such time as may be required by law and by the Master Lease, to cause the Trustee to sell the Property or any part thereof by notifying the Trustee of that election and depositing with the Trustee this instrument and receipts and evidence of expenditures made and secured hereby as the Trustee may reasonably require. Upon receipt of any such notice from the Lessor, the Trustee shall cause to be recorded, published and delivered to Lessee such Notice of Default and Election to Sell as is then required by applicable statutory authority and by this instrument, which notice shall set forth, among other things, the nature of the breach(es) or default(s), the action(s) required to effect a cure thereof and the time period within which that cure may be effected. If no cure is effected within the statutory time limits following recordation of the Notice of Default and Election to Sell and after Notice of Sale has been given as required by the above-referenced statutes, the Trustee may without further notice or demand sell and convey the Property or any part thereof in accordance with the above-referenced statutes. The Property or any part thereof may be sold as a whole or in separate lots, parcels or items and in such order as the Lessor may direct, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. The Trustee shall deliver to such purchaser(s) a good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truthfulness 29 thereof. Any Person, including the Lessee, the Trustee or the Lessor, may purchase at any sale. After deducting all costs, fees and expenses of the Lessor and the Trustee, including costs of evidence of title in connection with any sale, the Lessor shall apply the proceeds of sale, in the following order of priority, to payment of the following (collectively referred to herein as the "Obligated Amounts"): (i) first, all amounts expended by or for the account of ----------------- the Lessor under the terms hereof and not then repaid, with accrued interest at the Overdue Rate; and (ii) second, all other amounts then due and owing hereunder including, without limitation, all Basic Rent, Supplemental Rent, the full amount of the Lease Balance as of the date of sale as if this Master Lease had been terminated under Section 18.1, and all other amounts then payable by ------------ the Lessee under this Master Lease and the other Operative Documents, with the Lessor having the right to apply the proceeds of sale to the amounts described above in this clause (ii) in such order, proportion and priority as the Lessor may elect in its sole and absolute discretion. To the extent permitted by applicable statutes, the Trustee may postpone the sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may again postpone that sale by public announcement or subsequently noticed sale, and without further notice may make such sale at the time fixed at the last postponement or may, in its discretion, give a new notice of sale. A sale of less than all of the Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein, and subsequent sales may be made hereunder until all of the Obligated Amounts have been satisfied or the Property have been sold, without defect or irregularity. No action of the Lessor or the Trustee based upon the provisions contained herein or contained in the applicable statutes, including, without limitation, the giving of the Notice of Default and Election to Sell or the Notice of Sale, shall constitute an election of remedies which would preclude the Lessor from pursuing judicial foreclosure before a completed sale pursuant to the power of sale contained herein. The Lessor shall have the right, with the irrevocable consent of the Lessee hereby given and evidenced by the execution of this instrument, to obtain appointment of a receiver by any court of competent jurisdiction without further notice to the Lessee, which receiver shall be authorized and empowered to enter upon and take possession of the Property or any part thereof, including all personal property used upon or in connection with the real property herein conveyed, to let the Property or any part thereof, to receive all the rents, issues and profits, if any, which may be due or become due in respect to the leasing of the Property or any part thereof to another party (herein, "Property Rents"), and apply the Property Rents after payment of -------------- all necessary charges and expenses to reduction of the Obligated Amounts in such order, proportion and priority as the Lessor may elect. At the option of the Lessor, the receiver shall accomplish entry and taking possession of the Property or any part thereof by actual entry and possession or by notice to the Lessee. The receiver so appointed by a court of competent jurisdiction shall be empowered to issue receiver's certificates for funds advanced by the Lessor for the purpose of protecting the value of the Property or any part thereof as security for the Obligated Amounts. The amounts evidenced by receiver's certificates shall bear interest at the Overdue Rate and may be added to the Obligated Amounts if the Lessee or a junior lienholder purchases the Property or any part thereof at the trustee's 30 sale. The Trustee or any successor acting hereunder may resign and thereupon be discharged of the trusts hereunder upon thirty (30) days' prior written notice to the Lessor. Regardless of whether the Trustee resigns, the Lessor may, from time to time, substitute a successor or successors to any Trustee named herein or acting hereunder in accordance with any statutory procedure for such substitution; or if Lessor, in its sole and absolute discretion, so elects, and if permitted by law, the Lessor may substitute such successors or successors by recording, in the office of the recorder of the county or counties where the Property is located, a document executed by the Lessor and containing the name of the original Lessee and Lessor hereunder, the book and page where this instrument (or a memorandum hereof) is recorded (and/or instrument number, as applicable) and the name of the new Trustee, which instrument shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the predecessor Trustee, succeed to the rights, powers and duties hereunder. It is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW LESSOR TO TAKE THE PROPERTY AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE LESSEE UNDER THIS INSTRUMENT. The Lessor acknowledges and agrees that upon the declaration of an Event of Default, to the maximum extent permitted by law, the Lessee waives any right to contest the sum of the Lessor Balance and the Loan Balance as the liquidated sum due upon acceleration of this instrument. If, pursuant to the exercise by the Lessor of its remedies pursuant to this Section 16.2, the Lease Balance and all other amounts due and owing from ------------ the Lessee under this Master Lease and the other Operative Documents have been paid in full, then the Lessor shall remit to the Lessee any excess amounts received by the Lessor. The obligation to deliver such excess to the Lessee shall survive this Master Lease. Notwithstanding any termination of this Master Lease pursuant to this Section 16.2 or otherwise, the Lessor agrees that for thirty (30) days after the - ------------ declaration of the occurrence of an Event of Default, Lessor shall forebear from exercising the remedies set forth in clauses (c), (h), (j) or (k) of this Section 16.2 during which time Lessee may tender to the Lessor in immediately - ------------ available funds the Lease Balance and all past due and accrued and unpaid Rent upon the receipt of which Lessor shall transfer the Property to the Lessee or its designee in accordance with Article XXI hereof. ----------- Notwithstanding the foregoing, the Lessor may exercise its rights against the Collateral at any time after acceleration of the Lease Balance. 16.3 Waiver of Certain Rights. Subject to the foregoing, if this ------------------------ Master Lease shall be terminated pursuant to Section 16.2, the Lessee waives, to ------------ the fullest extent permitted by law, (a) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (b) any 31 right of redemption, re-entry or repossession except as expressly provided herein; (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting the Lessor with respect to the election of remedies; and (d) any other rights which might otherwise limit or modify any of the Lessor's rights or remedies under this Article XVI. ----------- ARTICLE XVII LESSOR'S RIGHT TO CURE 17.1 The Lessor's Right to Cure the Lessee's Lease Defaults. The ------------------------------------------------------ Lessor, with notice to the Lessee but without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to) remedy any Lease Event of Default for the account and at the sole cost and expense of the Lessee, including the failure by the Lessee to maintain the insurance required by Article XIII, and may, to the fullest extent permitted by ------------ law, and notwithstanding any right of quiet enjoyment in favor of the Lessee, enter upon the Property for such purpose and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of the Lessee. All reasonable out-of-pocket costs and expenses so incurred (including fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be paid by the Lessee to the Lessor as Supplemental Rent. ARTICLE XVIII PURCHASE PROVISIONS 18.1 Purchase of the Property. ------------------------ (a) Subject to the conditions contained herein, the Lessee shall have the irrevocable option on any Business Day to purchase the Property at a price (the "Purchase Price") equal to the Lease Balance on the date of such purchase -------------- offset by any Deposit Taker Losses if such purchase is made during the Basic Lease Term. The Lessee's exercise of its option pursuant to this Section 18.1 ------------ shall be subject to the condition that the Lessee shall have delivered a Purchase Notice to the Lessor not less than thirty (30) days prior to such purchase, specifying the date of such purchase. (b) Notwithstanding any other provision contained herein, if any Environmental Violation shall not be remedied by the Lessee with respect to the Property in accordance with Section 14.2 and the Lessor has not otherwise ------------ delivered a Termination Notice pursuant to Section 15.2 hereof ------------ 32 in the event the remedying of such Environmental Violation would exceed $2,500,000, the Lessee shall be deemed to have made a timely election of an option to purchase the Property in accordance with this Section 18.1. ------------ (c) If the Lessee exercises an option pursuant to this Section 18.1 ------------ or 18.2 then, upon the Lessor's receipt of all amounts due in connection ---- therewith, the Lessor shall transfer to the Lessee or its designee all of the Lessor's right, title and interest in and to the Property in accordance with the procedures set forth in Section 21.1(a), such transfer to be effective as of the --------------- date specified in the Purchase Notice. The Lessee may designate, in a notice given to the Lessor not less than ten (10) Business Days prior to the closing of such purchase (time being of the essence), the transferee or transferees to whom the conveyance shall be made (if other than to the relevant Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee or transferees shall not cause the Lessee to be released, fully or partially, from any of its obligations under this Master Lease, including, without limitation, the obligation to pay to the Lessor that portion of the Lease Balance on the date specified in the applicable Purchase Notice. 18.2 Undeveloped Land Purchase Option. -------------------------------- (a) On not less than thirty (30) days prior notice (the "Release ------- Notice"), the Lessee may request that the Lessor consent to the purchase by the - ------ Lessee, or its designee of a parcel of the Land which shall be located within the Release Parcel Area (the "Release Parcel") which notice shall specify the -------------- date of the closing for the sale of the Release Parcel (the "Release Parcel -------------- Closing Date"). - ------------ (b) The Lessor shall not unreasonably withhold its consent to the Lessee's purchase of the Release Parcel provided the following terms and conditions are met: (i) no Lease Default or Lease Event of Default shall have occurred and be continuing; (ii) the Release Parcel shall (x) be a separate lot from the Land for tax purposes and subdivided pursuant to all Requirements of Law and (y) be zoned to allow construction of not less than 250,000 buildable square feet; and (iii) the remainder of the Land not constituting the Release Parcel after conveyance of the Release Parcel shall (x) have adequate and legal access for vehicular and pedestrian ingress and egress and for all necessary utilities including water, sewer, 33 electricity and gas, (y) not be configured in a manner that would adversely effect its fair market value and (z) otherwise be in compliance with all Requirements of Law. (c) With the Release Notice, the Lessee shall provide the Lessor with the information which the Lessor shall reasonably require to determine that the Lessee is in compliance with all conditions required by Section 18.2(b) as of --------------- the date of conveyance of the Release Parcel. (d) The Release Price shall be paid to the Lessor and upon receipt by the Lessor shall be applied to the Land Lease Balance. (e) On the Release Parcel Closing Date, upon receipt of the Release Price, the Lessor shall convey the Release Parcel to the Lessee pursuant to the provisions of Section 18.1(c) hereof. --------------- (f) All costs and expenses relating to the Release Parcel and Lessee's obligations hereunder shall be paid for by the Lessee and the Lessor shall not be responsible for any Transaction Expenses relating to the Release Parcel. ARTICLE XIX EXTENSION OF EXPIRATION DATE 19.1 Extension of Expiration Date. The Lessee may extend the ---------------------------- Expiration Date subject to, and in accordance with, the terms and conditions of Section 11.2 of the Participation Agreement. - ------------ ARTICLE XX REMARKETING OPTION 20.1 Option to Remarket. Subject to the fulfillment of each of the ------------------ conditions set forth in this Section 20.1, the Lessee shall have the option (the ------------ "Remarketing Option") to market the Property on behalf of the Lessor. ------------------ 34 The Lessee's effective exercise and consummation of the Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions as to the Property as of the dates set forth below: (a) No earlier than twelve months and not later than six months prior to the Expiration Date, the Lessee shall give to the Lessor written notice of the Lessee's exercise of the Remarketing Option, which exercise shall be irrevocable. Failure by the Lessee to give timely notice shall be deemed to be an election by the Lessee, without further act thereby, of its Purchase Option for the Property. (b) Not more than six (6) months and not less than ninety (90) days prior to the Expiration Date, the Lessee shall deliver to the Lessor an Environmental Audit for the Property. Such Environmental Audit shall be prepared by a nationally recognized environmental consultant selected by the Lessor and shall contain conclusions reasonably satisfactory to the Lessor as to the environmental status of the Property. If any such Environmental Audit indicates any exceptions, the Lessee shall have also delivered prior to the Expiration Date, a Phase Two environmental assessment by such environmental consultant and a written statement by such environmental consultant indicating that all such exceptions have been remedied in compliance with Applicable Law. As of the Expiration Date, any Permitted Property Liens that were contested by the Lessee shall have been removed. (c) No Default or Event of Default shall have occurred and be continuing. (d) During the Marketing Period, the Lessee shall, as agent for the Lessor, use reasonable commercial efforts to sell the Lessor's interest in the Property on or before the Expiration Date and will attempt to obtain the lesser of the Lease Balance or the highest purchase price therefor. (e) The Lessee shall have obtained, at its cost and expense, all required governmental and regulatory consents and approvals and shall have made all filings as required by Applicable Law in order to carry out and complete the transfer of the Property. As to the Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by the Lessor other than the absence of Lessor Liens. (f) The Lessee shall pay directly, and not from the sale proceeds, the cost of all appraisals required under Section 13.2 of the Participation ------------ Agreement and under Section 20.1 of the Master Lease, the Lessee's attorneys' ------------ fees, all audit fees and other out-of-pocket expenses relating to such sale. 35 (g) The Lessee shall pay to the Lessor concurrently with any sale on or prior to the Expiration Date (or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to the Maximum Recourse Amount plus all accrued and unpaid Rent and all other amounts hereunder which have accrued or will accrue prior to or as of the Expiration Date, in the type of funds specified in Section 3.4 hereof, provided, however, with respect to any Land for ----------- -------- ------- which the Basic Lease Term has expired pursuant to Section 2.3 hereof the Lessee ----------- shall pay to the Lessor on or prior to the end of the Basic Lease Term with respect to the Land, an amount equal to the Land Lease Balance offset by any Deposit Taker Losses. (h) The gross proceeds (the "Gross Remarketing Proceeds") of the sale -------------------------- of the Property (less any marketing, closing or other costs, prorations or commissions related to the marketing of the Property), shall be paid directly to the Lessor. The Gross Remarketing Proceeds shall be distributed as set forth in Section 7.4 of the Participation Agreement; provided, however, that any sums due - ----------- -------- ------- and payable to the Lessee shall only be paid if all Supplemental Rent has been paid. The obligations of the Lessor under this paragraph shall survive the expiration or termination of this Master Lease. (i) No subleases affecting the Property shall be in effect on the Expiration Date. (j) The Lessee shall cause to be delivered to the Lessor on the earlier of (i) thirty (30) days prior to the sale of the Property pursuant to this Article XX and (ii) the Expiration Date, at the Lessee's sole cost and ---------- expense, a report from an Appraiser in form and substance satisfactory to the Lessor and the Administrative Agent which shall separately state the Fair Market Sales Value (Land) and Fair Market Sales Value (Improvements). Upon the sale or return of the Property in accordance with the terms hereof pursuant to the Remarketing Option, the Lessor will instruct the Collateral Agent to return any outstanding Collateral to the Lessee. If the Lessee elects the Remarketing Option in accordance with Section ------- 20.1 and the sale of the Property is not consummated prior to the end of the - ---- Marketing Period, the Lessee shall, in addition to making the payment required pursuant to Section 20.1(g) above, at its own cost and expense, do each of the --------------- following: (i) execute and deliver to the Lessor and the Lessor's title insurance company an affidavit as to the absence of any Liens (other than Permitted Property Liens of the type described in clause (i), (v), (vii), (viii), (ix) or (x) Liens for taxes not 36 yet due and Lessor Liens), and shall execute and deliver to the Lessor a statement of termination of this Master Lease to the extent relating to the Property; (ii) on the Expiration Date, transfer possession of the Property to the Lessor or any Person designated by the Lessor, by surrendering the same into the possession of the Lessor or such Person, as the case may be, in the condition required by this Section ------- 20.1 and in compliance with Applicable Law; and ---- (iii) after the Expiration Date, cooperate reasonably with the Lessor and/or any Person designated by the Lessor to receive the Property, which cooperation shall include reasonable efforts with respect to the following, all of which the Lessee shall do on or before the Expiration Date for the Property or as soon thereafter as is reasonably practicable: providing copies of all books and records regarding the maintenance and ownership of the Property and all know- how, data and technical information relating thereto, providing a current copy of the applicable Plans and Specifications, granting or assigning all assignable licenses necessary for the operation and maintenance of the Property and cooperating reasonably in seeking and obtaining all necessary Governmental Action. The obligations of the Lessee under this paragraph shall survive the expiration or termination of this Master Lease. Lessor shall have no obligation to approve any bid for the Property except for bona fide all-cash bids which, together with amounts payable by the Lessee under clause (g) hereof, in the aggregate is at least equal to the Lease Balance and the acceptance of which will not subject the Lessor to any additional liability. Except as expressly set forth herein, the Lessee shall have no right, power or authority to bind the Lessor or any Participant in connection with any proposed sale of the Property. If one or more of the foregoing provisions (a) through (i) shall not be fulfilled as of the Expiration Date with respect to the Property, then the Remarketing Option shall be null and void (whether or not it has been theretofore exercised by the Lessee), in which event all of the Lessee's rights under this Section 20.1 shall immediately terminate and the Lessee shall ------------ purchase from the Lessor, and the Lessor shall convey to the respective Lessee, on the Expiration Date all of the Lessor's interest in the Property for an amount equal to the Lease Balance. If an Event of Default occurs after the Lessee elects the Remarketing Option, such election shall be automatically revoked and the Lessee shall be deemed to have elected the Purchase Option. 37 20.2 No Duty to Solicit. The Lessor shall have the right, but shall ------------------ be under no duty, to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take action in connection with any such sale. ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR REMARKETING 21.1 Provisions Relating to the Exercise of the Purchase Option or ------------------------------------------------------------- Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other - ---------------------------------------------------------------------------- Events. - ------ (a) In connection with any termination of this Master Lease with respect to the Property pursuant to the terms of Article XV, in connection with ---------- any purchase or in connection with the Lessee's purchase of the Property (or a portion thereof) in accordance with Section 18.1 or Section 18.2 or in ------------ ------------ connection with the Lessee's exercise of the purchase right under Section 16.2, ------------ then, upon the date on which this Master Lease is to terminate and upon the payment of all amounts due under Section 5.1 of the Construction Agency ----------- Agreement, as applicable, or upon tender by the Lessee of the amounts set forth in Article XV, Section 16.2, 18.1 or 18.2 as applicable: ---------- ------------ ---- ---- (i) the Lessor shall execute and deliver to the Lessee (or to the Lessee's designee) at the Lessee's sole cost and expense an instrument of transfer, whether a bill of sale, grant deed or other form of assignment, as the case may be, without representations or warranties other than as provided by Applicable Law, relating to the Lessor's entire interest in the Property (which shall include an assignment of all of the Lessor's right, title and interest in and to any Net Proceeds with respect to the Property not previously received by the Lessor and an assignment of leases of the Property and rights under Construction Documents warranties and other contracts) or, if pursuant to Section 18.2, the Release Parcel only, in each case where ------------ necessary, in recordable form, and otherwise in conformity with local custom and free and clear of any Lessor Liens together with a FIRPTA Affidavit; and (ii) the Property shall be conveyed to the Lessee "AS IS" and in its then present physical condition. (b) If the Lessee properly exercises the Remarketing Option and the Property is sold, then the Lessee shall, on the Expiration Date, and at its own cost, transfer possession of all of the Property to the independent purchaser(s) thereof, in each case by surrendering the same into the 38 possession of the Lessor or such purchaser(s), as the case may be, free and clear of all Liens, in good condition (as modified by Modifications permitted by this Master Lease), and in compliance with Applicable Law. ARTICLE XXII ESTOPPEL CERTIFICATES 22.1 Estoppel Certificates. At any time and from time to time upon not --------------------- less than fifteen (15) Business Days' prior request by the Lessor or the Lessee (the "Requesting Party"), the other party (whichever party shall have received ---------------- such request, the "Certifying Party") shall furnish to the Requesting Party a ---------------- certificate signed by an individual having the office of vice president or higher in the Certifying Party certifying that this Master Lease is in full force and effect (or that this Master Lease is in full force and effect as modified and setting forth the modifications); the dates to which the Basic Rent and Supplemental Rent have been paid; to the best knowledge of the signer of such certificate, whether or not the Requesting Party is in default under any of its obligations hereunder (and, if so, the nature of such alleged default); and such other matters under this Master Lease as the Requesting Party may reasonably request. Any such certificate furnished pursuant to this Article XXII ------------ may be relied upon by the Requesting Party, and any existing or prospective mortgagee, purchaser or lender, and any accountant or auditor, of, from or to the Requesting Party (or any Affiliate thereof). ARTICLE XXIII ACCEPTANCE OF SURRENDER 23.1 Acceptance of Surrender. No surrender to the Lessor of this ----------------------- Master Lease or of all or any of the Property or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by the Lessor and, prior to the payment or performance of all obligations under the Loan Agreements and termination of the Commitments, the Administrative Agent, and no act by the Lessor, a Lender, the Administrative Agent or any representative or agent of the Lessor, a Lender or the Administrative Agent, other than a written acceptance, shall constitute an acceptance of any such surrender. 39 ARTICLE XXIV NO MERGER OF TITLE 24.1 No Merger of Title. There shall be no merger of this Master Lease ------------------ or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Master Lease or the leasehold estate created hereby or any interest in this Master Lease or such leasehold estate, (b) the fee or ground leasehold estate in the Property, except as may expressly be stated in a written instrument duly executed and delivered by the appropriate Person or (c) a beneficial interest in the Lessor. ARTICLE XXV INTENT OF THE PARTIES 25.1 Nature of Transaction. --------------------- (a) It is the intent of the parties that: (i) the Master Lease constitutes an operating lease from Lessor to the Lessee for purposes of the Lessee's financial reporting, (ii) the Master Lease and other transactions contemplated will result in the Lessee being recognized as the owner of the Property for Federal and state income tax and bankruptcy purposes, (iii) the Memorandum of Lease grants to Lessor a Lien on the Lessee's interest in the Property, and (iv) the obligations of the Lessee to pay Basic Rent and any part of the Lease Balance shall be treated as payments of interest and principal, respectively, for Federal and state income tax and bankruptcy purposes. The Lessor shall be deemed to have a valid and binding security interest in and Lien on the Lessee's interest in the Property, free and clear of all Liens other than Permitted Property Liens, as security for the obligations of the Lessee under the Operative Documents (it being understood and agreed that the Lessee does hereby grant a Lien, and convey, transfer, assign, mortgage and warrant to Lessor and its successors, transferees and assigns, for the benefit of the Lessor and its successors, transferees and assigns, the Property and any proceeds or products thereof, to have and hold the same as collateral security for the payment and performance of the obligations of the Lessee under the Operative Documents), each of the parties hereto agrees that it will not, nor will it permit any Affiliate to at any time, take any action or fail to take any action with respect to the preparation or filing of any income tax return, including an amended income tax return, to the extent that such action or such failure to take action would be inconsistent with the intention of the parties expressed in this Section 25.1. ------------ 40 (b) Specifically, without limiting the generality of clause (a) of this Section 25.1, the parties hereto intend and agree that in the event of any ------------ insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth or other applicable jurisdiction thereof affecting Lessee, Lessor, any Participant or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by the Participants to the Lessee. ARTICLE XXVI MISCELLANEOUS 26.1 Survival; Severability; Etc. Anything contained in this Master --------------------------- Lease to the contrary notwithstanding, all claims against and liabilities of the Lessee or the Lessor arising from events commencing prior to the expiration or earlier termination of this Master Lease shall survive such expiration or earlier termination. If any term or provision of this Master Lease or any application thereof shall be declared invalid or unenforceable, the remainder of this Master Lease and any other application of such term or provision shall not be affected thereby. If any right or option of the Lessee provided in this Master Lease, including any right or option described in Article XIV, XV, XVIII ----------- -- ----- or XX, would, in the absence of the limitation imposed by this sentence, be -- invalid or unenforceable as being in violation of the rule against perpetuities or any other rule of law relating to the vesting of an interest in or the suspension of the power of alienation of property, then such right or option shall be exercisable only during the period which shall end twenty-one (21) years after the date of death of the last survivor of the descendants of Franklin D. Roosevelt, the former President of the United States and John D. Rockefeller, the founder of the Standard Oil Company, known to be alive on the date of the execution, acknowledgment and delivery of this Master Lease. 26.2 Amendments and Modifications. Subject to the requirements, ---------------------------- restrictions and conditions set forth in the Participation Agreement, neither this Master Lease nor any provision hereof may be amended, waived, discharged or terminated except by an instrument in writing in recordable form signed by the Lessor and the Lessee. 26.3 No Waiver. No failure by the Lessor, any Participant or the --------- Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Master Lease, and this Master Lease shall continue in full force and effect with respect to any other then existing or subsequent default. 41 26.4 Notices. All notices, demands, requests, consents, approvals and ------- other communications hereunder shall be in writing and directed to the address described in, and deemed received in accordance with the provisions of, Section ------- 15.3 of the Participation Agreement. - ---- 26.5 Successors and Assigns. All the terms and provisions of this ---------------------- Master Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 26.6 Headings and Table of Contents. The headings and table of ------------------------------ contents in this Master Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 26.7 Counterparts. This Master Lease may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument. 26.8 GOVERNING LAW. THIS MASTER LEASE SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS MASTER LEASE IS DEEMED TO CONSTITUTE A FINANCING WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT THE LIEN CREATED HEREBY AND THE CREATION AND THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. 26.9 Liability Limited. The parties hereto agree that except as ----------------- specifically set forth in this Master Lease or in any other Operative Document, the Lessor shall have no personal liability whatsoever to the Lessee, the Lenders, the Administrative Agent or their respective successors and assigns for any claim based on or in respect of this Master Lease or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and the recourse shall be solely had against the Lessor's interest in the Property; provided, however, that Lessor shall be liable in its -------- ------- individual capacity for the removal of Lessor Liens and for its own willful misconduct or gross negligence; and further provided nothing therein shall impair or limit the rights of 42 Lessee against the Administrative Agent or Lessor relating to any Collateral held by either of them from time to time under the Operative Documents. 26.10 Priority. On or prior to the Expiration Date and as long as no -------- Lease Event of Default has occurred and is continuing, the Lenders Mortgage shall be subject and subordinate to this Master Lease and following the Expiration Date or if a Lease Event of Default shall have occurred and be continuing, then at the sole election of the Administrative Agent, this Master Lease shall be subject and subordinate to the Lenders Mortgage without any further act by any Person. 26.11 Original Master Lease. The single executed original of this --------------------- Master Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt thereof of Societe Generale, New York Branch as the Administrative Agent therefor on or following the signature page thereof shall be the Original Executed Counterpart of this Master Lease (the "Original Executed Counterpart"). To the extent that this ----------------------------- Master Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Master Lease may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. IN WITNESS WHEREOF, the parties have caused this Master Lease to be duly executed and delivered as of the date first above written. PALM, INC., as Lessee By: /s/ Judy Bruner ------------------------------ Name: JUDY BRUNER Title: CHIEF FINANCIAL OFFICER SOCIETE GENERALE FINANCIAL CORPORATION, as Lessor By: /s/ illegible ------------------------------ Name: illegible Title: Senior Vice President THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART. Receipt of this original counterpart of the foregoing Master Lease is hereby acknowledged as of the date hereof. SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent By: /s/ illegible ---------------------------- Name: Sean Rheuben Title: Attorney-in-fact SCHEDULE I TO THE MASTER LEASE Release Parcel Area Description The Release Parcel Area encompasses 14.11 acres bounded by Route 237, North First Street and Holder Way; excludes all Improvements constructed on the Land; and is limited to the following Assessor's Parcel Numbers (APN): 097-03-066; 097-03-081; 097-03-100; 097-03-101; and 0973-03-105. APPENDIX A to Participation Agreement, Master Lease, Loan Agreements, Construction Agency Agreement, Lender Mortgage, Pledge Agreements DEFINITIONS AND INTERPRETATION A. Interpretation. In each Operative Document, unless a clear contrary -------------- intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended, supplemented, amended and restated or otherwise modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (v) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) reference in any Operative Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit thereto; (vii) "hereunder", "hereof'", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section or other provision thereof; (viii) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (ix) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding"; (x) with respect to any rights and obligations of the parties under the Operative Documents, all such rights and obligations shall be construed to the extent permitted by Applicable Law; and (xi) reference to the obligations being paid and performed at any time shall mean those obligations that are known at such time. B. Computation of Time Periods. For purposes of computation of periods --------------------------- of time under the Operative Documents, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". C. Accounting Terms and Determinations. Unless otherwise specified in ----------------------------------- any Operative Document, all terms of an accounting character used therein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Lessee's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of the Lessee's and its consolidated Subsidiaries delivered to the Lessor and Administrative Agent, for the benefit of the Lenders unless with respect to any such change concurred in by the Lessee's independent public accountants or required by GAAP, in determining compliance with any of the provisions of any Operative Document, the Lessee shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, in which event such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made. D. Conflict in Operative Documents. If there is any conflict between ------------------------------- any Operative Documents, such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Participation Agreement shall prevail and control. E. Legal Representation of the Parties. The Operative Documents were ----------------------------------- negotiated by the parties with the benefit of legal representation and any rule of construction or 2 interpretation otherwise requiring the Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. F. Defined Terms. Unless a clear contrary intention appears, terms ------------- defined herein have the respective indicated meanings when used in each Operative Document. "Account" means the account established by the Lessor and the Tranche A Lender with the Administrative Agent into which all payments by the Lessee under the Operative Documents shall be made. The Account shall be specified on Schedule II to the Participation Agreement, as such Schedule II may from time to - ----------- ----------- time be amended, supplemented, amended and restated or otherwise modified from time to time. "Acquisition Date" means September 5, 2000. "Add Backs" means as of the last day of any Fiscal Quarter, the cumulative total, for the period commencing on April 29, 2000 and ending on and including such first mentioned date, of all goodwill attributable to acquisitions during such period and all reductions in Consolidated Tangible Assets attributable to the Lessee's purchase of its own capital stock during such period, in each case as determined in accordance with GAAP. "Adjusted Eurodollar Rate" means the applicable London Interbank Offered Rate, as applicable to any Interest Period and, in the event any Lender is required to maintain reserves against "Eurocurrency Liabilities" under Regulation D by the F.R.S. Board, during such period the Adjusted Eurodollar Rate shall mean a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the Eurodollar Reserve Percentage. "Administrative Agent" means Societe Generale, acting through its New York Branch, as Administrative Agent under the Participation Agreement and the other Operative Documents. "Advance" means an advance of funds by the Administrative Agent to the Construction Agent pursuant to Article III of the Participation Agreement. ----------- "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Pension Plan or welfare plan). For purposes of this definition, "control" when used with respect to any Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "After Tax Basis" means, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the amount of all taxes required to be paid by the 3 recipient (less any tax savings actually realized by the recipient as a result of such payment) with respect to the receipt by the recipient of such amounts, such increased payment (as so reduced) is equal to the payment otherwise required to be made. "Applicable Law" means all existing and future applicable laws, rules, regulations (including Hazardous Materials Laws) statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including, without limitation, wetlands) and those pertaining to the construction, use or occupancy of the Property) or in each case affecting the Lessee, the Property or any material interests in any other kind of property or asset, whether real, personal or mixed, or tangible or intangible, of the Lessee. "Appraisal" means, (i) with respect to the Land, an appraisal of the Land prepared by an Appraiser, appraising the Fair Market Sales Value (Land) as of the Acquisition Date and (ii) with respect to the Improvements, an appraisal of the Improvements prepared by an Appraiser, appraising the Fair Market Sales Value (Improvements) to be constructed on the Land in accordance with the Plans and Specifications therefor as of the Completion Date and as of the Expiration Date, and each such Appraisal complies in all material respects (as determined by the judgment of counsel to the Administrative Agent and the Lessor) with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto and all other applicable Requirements of Law. "Appraiser" means, as of the Documentation Date (a) with respect to the Improvements, Marshall & Stevens, Incorporated, and (b) with respect to the Land, Carneghi-Bautovich & Partners, Inc., and thereafter, an independent third party reputable appraiser or appraisers selected by the Lessor and the Administrative Agent with the consent of the Lessee (which consent shall not be unreasonably withheld or delayed). "Appurtenant Rights" means, with respect to the Land, (i) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to the Land or the Improvements thereon, including, without limitation, the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to the Land and (ii) all permits, licenses and rights, whether or not of record, appurtenant to the Land. "Assignment and Acceptance" means an Assignment and Acceptance substantially in the form of Exhibit B to the Construction Period Loan Agreement --------- or Exhibit C to the Basic Term Loan Agreement. --------- "Assignment of Lease, Rent, Construction Period Pledge Agreement and CAA" means the Assignment of Lease, Rent, Rights Under the Construction Period Pledge Agreement and CAA 4 dated as of November 16, 2000 from the Lessor, as assignor, to the Administrative Agent for the benefit of the Lenders, as assignee. "Attributed Fair Market Sales Value (Improvements)" means, as of the date of determination, the product of (a) the sum of the Gross Remarketing Proceeds and the Property Completion Differential, if any, and (b) the Fair Market Sales Value (Improvements) divided by the Fair Market Sales Value of the Property. "Attributed Fair Market Sales Value (Land)" means, as of the date of determination, the product of (a) the sum of the Gross Remarketing Proceeds and the Property Completion Differential, if any, and (b) the Fair Market Sales Value (Land) divided by the Fair Market Sales Value of the Property. "Available Commitment" means the aggregate of the Available Loan Commitment and the Available Lessor Commitment. "Available Lessor Commitment" means at any time, an amount equal to the excess, if any, of (x) the Lessor Commitment over (y) the Lessor Balance. "Available Loan Commitment" means at any time, an amount equal to the excess, if any, of (x) the Loan Commitment over (y) the Loan Balance. "Bankruptcy Code" is defined in Section 5.1(e) of each Loan Agreement. ------------- "Base Rate" means, for any day, the rate per annum equal to one-half of one percent above the Federal Funds Rate. "Base Rate Loan(s)/Lessor Amount(s)" means a Loan or Lessor Amount, as the case may be, bearing interest at the Base Rate. "Basic Lease Term" is defined in Section 2.3 of the Master Lease. ----------- "Basic Rent" means the aggregate of (i) the Lender Basic Rent and (ii) the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is due. "Basic Rent Payment Date" means the during the Commitment Period, the last day of each Interest Period then in effect, and during the Basic Lease Term, the Payment Set Date. "Basic Term Loan Agreement" means the Basic Term Loan Agreement, to be dated as of the Completion Date, among the Lessor, as borrower, the Lenders party thereto and the Administrative Agent, as same may be amended, supplemented, amended and restated or otherwise modified from time to time. 5 "Basic Term Pledge Agreement" means the Basic Term Pledge Agreement, to be dated as of the Completion Date, among the Lessee as Grantor and the Collateral Agent for the benefit of the Secured Parties thereunder, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Break Costs" means an amount equal to the amount, if any, required to compensate any Participant for any additional losses (including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or funds acquired by such Participant to fund its obligations under the Operative Documents) it may reasonably incur as a result of (w) the Lessee's payment of Basic Rent other than on a Basic Rent Payment Date for any reason, (x) any Advance not being made on the date specified therefor in the applicable Funding Request (other than as a result of a breach by such Participant, as the case may be, of its obligation under Section 3.1, ----------- 3.2 or 3.3, as the case may be, of the Participation Agreement to make Advances - --- --- to the Lessee or make Lessor Amounts or Loans available to the Lessor), (y) the Lessee's payment of the Lease Balance, or a portion thereof, on any date other than a Basic Rent Payment Date, or (z) as a result of any conversion of the Adjusted Eurodollar Rate in accordance with Section 13.7 of the Participation ------------ Agreement. A statement as to the amount of such loss, cost or expense, prepared in good faith and in reasonable detail and submitted by such Participant, as the case may be, to the Lessee, shall be presumed correct and binding on the Lessee absent demonstrable error. "Business Day" means (i) each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banks in San Francisco, California, New York, New York or the Funding Office of any Other Lender are generally authorized or obligated, by law or executive order, to close and (ii) relative to the payment of Rent determined by reference to the Adjusted Eurodollar Rate, any day which is a Business Day under clause (i) and is also a day on which dealings in Dollars are carried on in the London interbank eurodollar market. "Capital Lease" means any lease of property, real or personal, the obligations with respect to which are required to be capitalized on a balance sheet of a lessee in accordance with GAAP. "Capital Lease Obligations" means the capitalized lease obligations relating to a Capital Lease determined in accordance with GAAP. "Cash Collateral Account" has the meaning attributed to the term in the Basic Term Pledge Agreement. "Casualty" means any damage or destruction of all or any portion of the Property as a result of a fire, flood, gas explosion, earthquake or other casualty or catastrophe. 6 "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. (S)(S)_9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986, as otherwise amended or modified from time to time, or any successor statute thereto. "Certifying Party" is defined in Section 22.1 of the Master Lease. ------------ "Change of Control" means as to the Lessee and Guarantor, (i) an event or series of events by which any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as in effect on the Documentation Date) or related persons constituting a "group" (as such term is used in Rule 13d-5 under the Securities Exchange Act of 1934 as in effect on the Documentation Date), is or becomes or has the absolute, unconditional right to become the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934 as in effect on the Documentation Date), directly or indirectly, of 50% or more of the number of shares of voting stock of the Lessee, and, in addition, (ii) after the occurrence of such event or series of events, during any period of twelve (12) consecutive months, individuals who, at the beginning of such period, constituted the board of directors of the Lessee (together with any new director whose election by the Lessee's board of directors whose nomination for election by the Lessee's stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (other than due to death or disability) to constitute a majority of the board of directors of the Lessee then in office. "City of San Jose" means a municipal corporation, under the Constitution and laws of the State of California and its charter with all powers of a charter city granted by the Constitution of the State of California. "Claims" means any and all obligations, liabilities, losses, actions, suits, damages, judgments, penalties, fines, claims, demands, settlements, costs and expenses (including, without limitation, reasonable legal fees and expenses) of any nature whatsoever. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. "Collateral" means, with respect to the Construction Period, as defined in Section 2.1 of the Construction Period Pledge Agreement and, with ----------- respect to the Basic Lease Term, as defined in paragraph 3 of the Basic Term ----------- Pledge Agreement. "Collateral Account" is defined in Section 3.1 of the Construction ----------- Period Pledge Agreement. "Collateral Agent" means during the Construction Period pursuant to the Construction Period Pledge Agreement, State Street Bank and Trust Company and during the Basic Lease Term 7 pursuant to the Basic Term Pledge Agreement, Societe Generale, New York Branch, each collateral agent acting on behalf of the Lenders. "Commencement of Construction" means the date that Construction commences. "Commitment Period" means the period from and including the Documentation Date but excluding the date occurring on the earliest of (i) the Final Commitment Termination Date, (ii) the date on which the Lease Balance equals the Maximum Commitment Amount, subject to Section 4.3(b)(i) of the ---------------- Participation Agreement, (iii) the Final Funding Date for the Property and (iv) the date on which the Commitments shall terminate as provided in the Operative Documents. "Commitments" means (i) as to the Tranche A Lender, the Tranche A Loan Commitment, (ii) as to each Tranche B Lender, its respective Tranche B Loan Commitment, and (iii) as to the Lessor, the Lessor Commitment. "Commonly Controlled Entity" means an entity, whether or not incorporated, which is under common control with the Lessee within the meaning of Section 4001 of ERISA or is part of a group which includes the Lessee and which is treated as a single employer under Section 414 of the Code. "Competitor" means any Person that manufactures, distributes or markets computers, computer systems, computer components and peripherals or provides web hosting or similar services or internet advisory and e-commerce consulting services. "Completed Property" means the Property after Completion has been achieved. "Completion" means, with respect to the Property, such time as the conditions set forth in Section 6.3 of the Participation Agreement are satisfied ----------- with respect thereto. "Completion Certificate" is defined in Section 6.3(a) of the ------------- Participation Agreement. "Completion Date" means, with respect to the Property, the date determined under Section 6.3 of the Participation Agreement. ----------- "Compliance Certificate" means the certification required pursuant to Section 10.1(a)(iii) of the Participation Agreement. - ------------------- "Condemnation" means, with respect to the Property, any condemnation, requisition, confiscation, seizure or other taking or sale of the use, access, occupancy, easement rights or title to the Property or any part thereof, wholly or partially (temporarily or permanently), by or on account of any actual or threatened eminent domain proceeding or other taking of action by any Person having the power of eminent domain, including an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, the Property or alter the pedestrian or vehicular traffic flow to the 8 Property so as to result in change in access to the Property, or by or on account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action. "Consolidated EBITDAR" for any period, means the Consolidated Net Income for such period plus, without duplication and to the extent reflected as ---- a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) all scheduled rent under Capital Leases and Operating Leases, (f) any extraordinary, unusual or non- recurring non-cash expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business), and (g) any other non-cash charges, and minus, to the ----- extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income, (b) any extraordinary, unusual or non- recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) any other non-cash income, all as determined on a consolidated basis. "Consolidated Fixed Charge Coverage Ratio" for any period, means the ratio of (a) Consolidated EBITDAR for such period to (b) Consolidated Fixed Charges for such period. "Consolidated Fixed Charges" for any period, with respect to each of the Lessee and the Guarantor, means the sum (without duplication) of (a) Consolidated Interest Expense for such period, (b) Consolidated Lease Expense for such period and (c) scheduled payments made during such period on account of principal of Indebtedness of the Lessee or the Guarantor (including scheduled principal payments). "Consolidated Interest Expense" for any period, with respect to each of the Lessee and the Guarantor, means the total cash interest expense (including that attributable to Capital Lease Obligations) of the Lessee or the Guarantor for such period with respect to all outstanding Indebtedness of the Lessee or the Guarantor (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing) . "Consolidated Lease Expense" for any period, with respect to each of the Lessee and the Guarantor, means the aggregate amount of fixed and contingent rentals payable by the Lessee or the Guarantor for such period with respect to capital or operating leases of real and personal property, determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" for any period, with respect to each of the Lessee and the Guarantor, means the consolidated net income (or loss) determined on a consolidated basis in accordance with GAAP; provided that there shall be -------- excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Lessee or the Guarantor or is merged into or 9 consolidated with the Lessee or the Guarantor, (b) the income (or deficit) of any Person (other than a Subsidiary of the Lessee or the Guarantor) in which the Lessee or the Guarantor has an ownership interest, except to the extent that any such income is actually received by the Lessee or the Guarantor in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Lessee or the Guarantor to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Operative Document) or Requirement of Law applicable to such Subsidiary. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Lessee or the Guarantor in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Tangible Assets" means, as of any date of determination, Consolidated Total Assets minus the following: (i) all assets which would be classified as intangible assets in accordance with GAAP, including goodwill, organizational expense, research and development expense, patent applications, patents, trademarks, trade names, brands, copyrights, trade secrets, customer lists, licenses, franchises and covenants not to compete; (ii) all unamortized debt discount and expense; (iii) all treasury stock; and to the extent remaining after consolidation (iv) all receivables from Affiliates, directors, officers or employees of the Lessee or the Guarantor. "Consolidated Tangible Net Worth" means, as of any date of determination, Consolidated Tangible Assets minus Consolidated Total Liabilities ----- plus (minus) the cumulative foreign currency translation adjustment as of such - ---- ----- date, as determined in accordance with GAAP. "Consolidated Total Assets" means, with respect to each of the Lessee and Guarantor, as of any date of determination, the total assets of the Lessee or the Guarantor on a consolidated basis, as determined in accordance with GAAP. "Consolidated Total Liabilities" means, with respect to each of the Lessee and Guarantor, as of any date of determination, the total liabilities of the Lessee on a consolidated basis, as determined in accordance with GAAP. "Constituent Document" means, relative to any Person, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts, its partnership agreement, its certificate of limited partnership and similar arrangements applicable to any of its authorized shares of capital stock or partnership interests. "Construction" means, with respect to the Land, the construction and installation of all Improvements thereon contemplated by the Plans and Specifications applicable to the Land. "Construction Agency Agreement" means the Construction Agency Agreement, dated as of November 16, 2000, among the Lessor and the Construction Agent. 10 "Construction Agency Agreement Default" means any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Construction Agency Agreement Event of Default. "Construction Agency Agreement Event of Default" means a "Construction Agency Agreement Event of Default" as defined in Section 5.1 of the Construction ----------- Agency Agreement. "Construction Agent" means the Lessee acting in the capacity of construction agent under the Construction Agency Agreement. "Construction Costs" means the fees, expenses, costs and other items related to the development and construction of the Improvements and specified below: (a) the costs of development, architectural and engineering services related to the Improvements, including the costs of preparation of studies, surveys, reports, tests, plans and specifications; (b) the costs of legal, accounting, the costs of the Insurance Consultant and other services related to the Improvements; (c) the fees and charges incurred in connection with securing all Governmental Actions required to be taken, given or obtained in connection with the development, construction, ownership, financing, maintenance or operation of the Improvements; (d) any title fees, premium and escrow costs and other expenses relating to title insurance and the closings contemplated by the Operative Documents; (e) all expenses relating to any Environmental Audit and compliance with Environmental Laws and Hazardous Materials Laws; (f) fees and other expenses relating to Appraisals pursuant to the Operative Documents; (g) the costs incurred in connection with the acquisition, construction, improvement, rehabilitation or extension of the Improvements comprising a part of the Property and the provision of the necessary services and utilities thereto; (h) interest on the Loans and Yield on the Lessor Amounts during the Construction Period with respect to the Construction Costs and the Land Costs; (i) any sales, use, property, real or personal, tangible or intangible taxes incurred in connection with the Improvements; 11 (j) any other items included in the construction budget; (k) any other costs and expenses incurred in connection with the construction, development and equipping of the Property including fees to Participants and other Transaction Expenses; (l) fees, expenses and premiums related to property insurance under Section 2.9 of the Construction Agency Agreement; ----------- (m) such other items as the Participants may reasonably approve in writing. "Construction Documents" is defined in Section 2.6 of the Construction ----------- Agency Agreement. "Construction Period" means, with respect to the Property, the period commencing on the Commencement of Construction and ending on the earlier of (i) the Completion Date and (ii) the Final Commitment Termination Date. "Construction Period Loan Agreement" means the Construction Period Loan Agreement, dated as of November 16, 2000, between the Lessor, as borrower, the Lenders party thereto and the Administrative Agent acting on behalf of the Lenders. "Construction Period Pledge Agreement" means the Construction Period Security and Control Agreement, dated as of November 16, 2000, among the Lessor, the Lessee and the Collateral Agent for the benefit of the Secured Parties thereunder as the same may be amended, supplemented, amended and restated or otherwise modified from time to time. "Construction Period Property" means, at any date of determination, the Property during the Construction Period. "Construction Recourse Amount" means, as determined as of any date with respect to the Construction Period Property, an amount equal to the sum of (i) the Land Lease Balance plus (ii) 89.95% of the Project Costs. "Contingent Obligation" means, as to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person, whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring the owner or any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure 12 or hold harmless the holder of any such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof; provided, -------- however, that the term "Contingent Obligation" shall not include endorsements of - ------- instruments for deposit or collection in the ordinary course of business. "Contractual Obligations" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Deficiency Collateral" is defined in Section 14.1 of the ------------ Participation Agreement. "Deficiency Date" is defined in Section 14.1 of the Participation ------------ Agreement. "Deposit Taker Losses" means, the value of any Collateral that the Collateral Agent shall fail to deliver to the Lessee, the Administrative Agent, the Lender(s) or the Lessor in accordance with the Operative Documents during the Basic Lease Term (as a result of the Collateral Agent's insolvency or offsets by the Collateral Agent in violation of the Operative Documents). "Development Agreement" means that certain Development Agreement entered into as of August 5, 1997, by and between the City of San Jose and 3COM Corporation, authorized by the City Council by adoption of Ordinance No. 25402, recorded under Series No. 15206980 in the official records of Santa Clara County on April 7, 2000, as amended by that certain First Amendment to Development Agreement entered into by the parties as of March 21, 2000, authorized by the City Council by adoption of Ordinance No. 26074. "Documentation Date" is November 16, 2000, the date upon which all conditions precedent in Section 6.1 of the Participation Agreement have been satisfied. "Documentation Date Land Lease Balance" means $221,525,168.20. "Dollars" and "$" mean dollars in lawful currency of the United States of America. "End of the Term Report" is defined in Section 13.2(a) of the --------------- Participation Agreement. "Engagement Letter" means the Amended and Restated Engagement Letter, dated November 7, 2000, between the Lessor, Societe Generale, New York Branch and the Lessee. 13 "Environmental Audit" means, with respect to the Property, a Phase One environmental site assessment (the scope and performance of which meets or exceeds the then most current ASTM Standard Practice E1527 for Environmental Site Assessments: Phase One Environmental Site Assessment Process) of the Property. "Environmental Law" means any and all applicable foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes or decrees of any Governmental Authority or other Requirement of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment or the use, storage, handling, disposal, transport, treatment or generation of Hazardous Materials, as now or may at any time be in effect, including, without limitation, the California Environmental Quality Act and any Requirement of Law related to the protection of the Western Burrowing Owl (athene cunicularia hypngaea) and any rules, regulations and guidance documents promulgated thereunder. "Environmental Violation" means, with respect to the Property, any activity, occurrence or condition that violates or results in non-compliance with any Environmental Law or Hazardous Materials Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means, with respect to the Lessee, the Lessee and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Lessee, are treated as a single employer under Section 414 of the Code. "Eurodollar Loan(s)/Lessor Amount(s)" means a Loan or Lessor Amount, as the case may be, bearing interest at the Adjusted Eurodollar Rate. "Eurodollar Reserve Percentage" means that percentage (expressed as a decimal) which is in effect on any day that a reserve percentage is prescribed by the F.R.S. Board for determining the maximum reserve requirement for a member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non- United States office of any Bank to United States residents). The London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means with respect to the Lease, a Lease Event of Default and with respect to the Construction Agency Agreement, a Construction Agency Agreement Event of Default. "Excess Casualty/Condemnation Proceeds" means the excess, if any, of (x) the aggregate of all awards, compensation or insurance proceeds payable in connection with a Casualty or 14 Condemnation minus (y) that portion of the Lease Balance paid by the Lessee pursuant to Article XV of the Master Lease with respect to such Casualty or ---------- Condemnation. "Excess Sales Proceeds" means the excess, if any, of (x) the aggregate of all proceeds received by the Lessor in connection with the Lessee's exercise of the Remarketing Option under Article XX of the Master Lease, less all fees, ---------- costs and expenses of the Lessor in connection with the exercise of its rights and remedies thereunder, minus (y) the outstanding Lease Balance. ----- "Expiration Date" means September 5, 2007, unless the Master Lease shall have been earlier terminated in accordance with the provisions thereof. "Facility Equipment" means all equipment, apparatus, furnishings, fittings and personal property of every kind and nature whatsoever purchased, leased or otherwise acquired by the Lessor using the proceeds of the Loans and Lessor Amounts and now or subsequently attached to, contained in or used or usable in any way in connection with any operation or letting of the Property, including but without limiting the generality of the foregoing, all screens, awnings, shades, blinds, curtains, draperies, artwork, carpets, rugs, storm doors and windows, shelving, display cases, counters, furniture and furnishings, heating, electrical, switch gear, uninterrupted power supply, and mechanical equipment, lighting, switchboards, plumbing, ventilation, air conditioning and air-cooling apparatus, refrigerating, and incinerating equipment, escalators, generators, elevators, stoves, ranges, laundry equipment, cleaning systems (including window cleaning apparatus), telephones, communications systems (including satellite dishes and antennae), computers, sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of every kind and description. "Fair Market Sales Value" means with respect to the Property, the sum of the Fair Market Sales Value (Land) plus the Fair Market Sales Value (Improvements). "Fair Market Sales Value (Improvements)" means, with respect to the Improvements, the amount, which in any event shall not be less than zero, that would be paid in cash in an arm's-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, for the ownership (or the economic equivalent thereof) of the Improvements. "Fair Market Sales Value (Land)" means, with respect to the Land, the amount, which in any event shall not be less than zero, that would be paid in cash in an arm's-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, for the ownership (or the economic equivalent thereof) of the Land. "Federal Funds Rate" means, for any day or period, as applicable, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) at which Federal funds in the amount equal to the principal amount of the related Loans or Lessor Amounts are offered in the interbank 15 market to Societe Generale, New York Branch, as of 11:00 a.m., New York time, on such day for such day or for such period, as applicable. "Fees" means, collectively, the Transaction Expenses and all other fees paid or payable to the Lessor, Societe Generale, New York Branch and/or the Administrative Agent under the Participation Agreement and the other Operative Documents. "Final Commitment Termination Date" means the earlier of (a) the Final Funding Date and (b) September 5, 2003. "Final Funding" means the Advance made on the Final Funding Date. "Final Funding Date" means the Completion Date at which time the Construction Agent shall provide the Completion Certificate with attached punchlist items to be funded by the Construction Agent, pursuant to Section ------- 6.3(a) of the Participation Agreement. - ------ "Financial Officer" means, with respect to any Person, the chief financial officer, principal accounting officer, treasurer, controller, or vice president of finance of such Person. "FIRPTA Affidavit" means, the certification of Nonforeign Status in accordance with Internal Revenue Code Section 897 and Section 1445(b)(2) of the Foreign Investment and Real Property Tax Act, as amended. "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on the Friday closest in time to May 31. "Fixture" mean all fixtures relating to the Improvements, including all components thereof, located in or on such Improvements, together with all replacements, modifications, alterations and additions thereto. "Force Majeure Event" means, with respect to the Construction of the Property, any event (the existence of which was not known and could not have been discovered through the exercise of reasonable due diligence by the Lessee or the Construction Agent prior to the Documentation Date) beyond the control of the Lessee and the Construction Agent, including, but not limited to, strikes, lockouts, adverse soil conditions, acts of God, adverse weather conditions, inability to obtain labor or materials, government activities, civil commotion and enemy action; but excluding any event, cause or condition that results from the Construction Agent's financial condition or failure to pay or any event, cause or condition which could have been avoided or which could be remedied through the exercise of commercially reasonable efforts or the commercially reasonable expenditure of funds. 16 "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Funding Date" is defined in Section 3.1(c) of the Participation -------------- Agreement. "Funding Office" means the office of each Participant identified on Schedule II to the Participation Agreement as its Funding Office. - ----------- "Funding Request" means the Funding Request substantially in the form of Exhibit A to the Participation Agreement. "GAAP" means United States generally accepted accounting principles (including principles of consolidation) applied on a basis consistent with those which, are to be used in making the calculations for purposes of determining compliance with the terms of the Operative Documents. "Governmental Action" means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law, and shall include, without limitation, all environmental and operating permits and licenses that are required for the use, occupancy, zoning and operation of the Property as provided in the Master Lease. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and having jurisdiction over the Property or the Operative Documents, as applicable. "Gross Remarketing Proceeds" is defined in Section 20.1(h) of the --------------- Master Lease. "Guarantor" means Palm, Inc., a Delaware corporation. "Guaranty" means the Guaranty Agreement, dated as of November 16, 2000, made by the Guarantor to the Administrative Agent for the ratable benefit of the Lenders. "Hazardous Activity" means any activity, process, procedure or undertaking that (a) directly or indirectly (i) produces, generates or creates any Hazardous Material; (ii) causes or results in (or threatens to cause or result in) the Release of any Hazardous Material into the environment (including air, water vapor, surface water, groundwater, drinking water, land (including surface or subsurface), plant, aquatic and animal life) or (iii) involves the containment or storage of any Hazardous Material and (b) is regulated as hazardous waste treatment, storage or disposal within the meaning of any Hazardous Materials Law. 17 "Hazardous Materials" means any hazardous, toxic or dangerous materials, substances, chemicals, wastes or pollutants that from time to time are defined by or pursuant to or are regulated under any Hazardous Materials Laws, including asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or by-products, other hydrocarbons, urea formaldehyde and any material, substance, pollutant or waste that is defined as a hazardous waste under RCRA or defined as a hazardous substance under CERCLA. "Hazardous Materials Laws" means all laws, statutes, rules, regulations or ordinances of Governmental Authority, now or hereafter in effect, relating to the generation, recycling, use, reuse, sale, storage, handling, transport, treatment or disposal of Hazardous Materials, including CERCLA, RCRA, the Clean Air Act, 42 U.S.C. (S) 7401, et seq. ("CAA"), the Toxic Substances --- Control Act, 15 U.S.C. (S)_2601 et seq. ("TSCA") and any rules, regulations and ---- guidance documents promulgated or published thereunder, and any statute, law, rule, regulation or ordinance of Governmental Authority now or hereafter in effect that relates to public health, safety or the discharge, emission or disposal of Hazardous Materials in or to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or by-products, other hydrocarbons or urea formaldehyde, to the treatment, storage, disposal or management of Hazardous Materials, to exposure to Hazardous Materials or to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of the Lessee, any qualification or exception to such opinion or certification which (a) is of a "going concern" or similar nature or (b) relates to the limited scope of examination of matters relevant to such financial statement or (c) relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Lessee to be in default of any of its obligations under Section 10.2 of the Participation Agreement. ------------ "Impositions" means any and all liabilities, losses, expenses and costs of any kind whatsoever for fees, taxes, levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever imposed by any foreign, United States Federal, state or local authority ("Taxes") (including, without limitation, (i) real and personal property taxes, including personal property taxes on any property covered by the Master Lease that is classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including rent taxes and intangibles taxes); (iii) any excise taxes; (iv) real estate transfer taxes, conveyance taxes, mortgage taxes, intangible taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are, or are in the nature of, franchise, income, value added, gross receipts, privilege and doing business taxes, license and registration fees or taxes; and (vi) assessments on the Property, including all assessments for public improvements or benefits, whether or not such improvements are commenced or completed within the Lease Term), and in each case all interest, additions to tax and penalties thereon, which at any time may be levied, assessed or imposed upon or with respect to (a) any Tax Indemnitee, the Property or any part thereof or interest therein, or 18 the Lessee or any sublessee or user of the Property; (b) the financing, refinancing, demolition, construction, substitution, subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, purchase, rental, lease, activity conducted on, delivery, insuring, use, operation, improvement, transfer, return or other disposition of the Property or any part thereof or interest therein; (c) Notes or interest therein or transfer thereof, (d) the Rent and all other rentals, receipts or earnings arising from the Property or any part thereof or interest therein; (e) the Operative Documents or any payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to the Property or any part thereof or interest therein upon the sale or disposition thereof; (g) any contract (including the Construction Agency Agreement) relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; (h) the issuance of the Notes; or (i) otherwise in connection with the transactions contemplated by the Operative Documents. The term "Impositions" shall not mean or include the following Taxes, unless such taxes are incurred or increased, directly or indirectly, by actions of the Lessee on or after the Acquisition Date (other than actions specifically required of the Lessee hereunder or under any other Operative Document): (i) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on a Tax Indemnitee by the United States federal government (other than any taxes imposed by means of withholding at source) that are based on or measured by the net income (including taxes based on capital gains and minimum taxes) of such Person; provided that this clause (i) shall not be -------- interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (ii) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are (x) imposed by any state or local jurisdiction or taxing authority within any state or local jurisdiction to the extent such Tax Indemnitee is organized or otherwise a taxpayer in such jurisdiction without regard to the transactions contemplated by the Operative Documents and (y) based upon or measured by the gross or net income (including any minimum taxes, withholding taxes or taxes on or measured by capital, net worth, excess profits or items of tax preference or taxes that are capital stock, franchise or doing business taxes), except that this clause (ii) shall not apply to (and thus shall not exclude) any such Taxes imposed on a Tax Indemnitee by a state (or any local taxing authority thereof or therein) where the Property is located, possessed or used under the Master Lease unless the Tax Indemnitee was subject to such tax in such jurisdiction without regard to the transaction contemplated by the Operative Documents and the Master Lease; provided that this clause (ii) shall not be -------- interpreted to prevent a payment from 19 being made on an After Tax Basis if such payment is otherwise required to be so made; (iii) any Taxes imposed by the United States federal government by means of withholding at the source if and to the extent that such Taxes are not attributable to a change in applicable Law after the effective date which such Person became a Lender or Lessor, as the case may be; (iv) any Tax to the extent, but only to such extent, it relates to any act, event or omission that occurs, or relates to a period, after the termination of the Master Lease, except when such termination is the result of the exercise of remedies after an Event of Default occurs, in which case such exclusion shall commence only after the sale of all the Property (but not any Tax or imposition that relates to any period prior to the termination of the Master Lease); (v) any interest, additions to tax or penalties imposed on a Tax Indemnitee as a result of a Tax Indemnitee's failure to file any return or other documents timely and as prescribed by Applicable Law; provided that this clause (v) shall not apply (x) if such interest or penalties arise as a result of a position taken (or requested to be taken) by the Lessee in a contest controlled by the Lessee under Section 13.5(b) of the --------------- Participation Agreement or (y) if such failure is attributable to a failure by the Lessee to fulfill its obligations under the Master Lease with respect to any such return; (vi) any Taxes imposed upon a Tax Indemnitee with respect to any voluntary transfer, sale, financing or other voluntary disposition of any interest in the Property or any part thereof, or any interest therein (other than any transfer contemplated by the terms of the Operative Documents in connection with (1) the exercise by the Lessee of its Purchase Option or any termination option or other purchase or sale of the Property by the Lessee, (2) the occurrence of an Event of Default, (3) a Casualty or Condemnation affecting the Property, or (4) any sublease, modification or addition to the Property by the Lessee); (vii) any Taxes imposed against or payable by a Tax Indemnitee that would not have been imposed but for, the gross negligence or willful misconduct of such Tax Indemnitee; (viii) Taxes to the extent resulting from such Tax Indemnitee's failure to comply with the provisions of Section ------- 13.5(b) of the Participation Agreement, which failure precludes ------- the ability to conduct a contest pursuant to Section 13.5(b) of --------------- the Participation Agreement (unless such failure is caused by the Lessee's breach of its obligations); 20 (ix) Taxes imposed on or with respect to or payable by a Tax Indemnitee resulting from, or that would not have been imposed but for the existence of, any Lessor Lien created by or through such Tax Indemnitee or an Affiliate thereof and not caused by acts or omissions of the Lessee, unless required to be removed by the Lessee; and (x) Taxes imposed on or with respect to or payable by a Tax Indemnitee that would not have been imposed but for an amendment, supplement, modification, consent or waiver to any Operative Document not initiated, requested or consented to by the Lessee unless such amendment, supplement, modification, consent or waiver (A) arises due to, or in connection with there having occurred, an Event of Default or (B) is required by the terms of the Operative Documents or is executed in connection with any amendment to the Operative Documents required by law; Notwithstanding the foregoing, the exclusions from the definition of Impositions set forth in clauses (i) through (x) above shall not apply to any Taxes or any ----------- --- increase in Taxes imposed on a Tax Indemnitee, to the extent that such tax increase would not have occurred if on the Documentation Date and each Funding Date the Lenders and the Lessor, through the Administrative Agent, had advanced funds to the Lessee in the form of a loan in an amount equal to the Lease Balance funded on such date secured by the Property, with debt service for such loan equal to the Basic Rent payable on each Basic Rent Payment Date and a principal balance at the maturity of such loan in an amount equal to the then outstanding Lease Balance at the end of the term of the Master Lease. "Improvement Advance Percentage" means the aggregate of the Lender Improvement Advance Percentage and the Lessor Improvement Advance Percentage, as set forth in Schedule I to the Participation Agreement. ---------- "Improvement Lease Balance" means the aggregate of the Improvement Lessor Balance and the Improvement Loan Balance. "Improvement Lessor Amount" means, during the Construction Period, the product of the Lessor Improvement Advance Percentage and the Advances made for Construction Costs pursuant to Article III of the Participation Agreement. ----------- "Improvement Lessor Balance" means (i) during the Construction Period, the Improvement Lessor Amount and (ii) thereafter, the amount determined in clause (i) with all accrued and unpaid Yield thereon. "Improvement Lessor Basic Rent" means the amount of accrued Yield due on the Improvement Lessor Balance, determined in accordance with Section 4.1 of ----------- the Participation Agreement as of any Basic Rent Payment Date and excluding any interest at the applicable Overdue Rate on any installment of Improvement Lessor Basic Rent not paid when due and any fine, penalty, 21 interest or cost assessed or added under any agreement with a third party for nonpayment or late payment of Improvement Lessor Basic Rent. "Improvement Loan Amount" means, during the Construction Period, the product of the Lender Improvement Advance Percentage and the Advances made for Construction Costs pursuant to Article III of the Participation Agreement. ----------- "Improvement Loan Balance" means (i) during the Construction Period, the Improvement Loan Amount and (ii) thereafter, the amount determined in clause (i) with all accrued and unpaid interest thereon. "Improvement Loan Basic Rent" means the amount of accrued interest due on the Improvement Loan Balance, determined in accordance with Section 4.2 of ----------- the Participation Agreement as of any Basic Rent Payment Date and excluding any interest at the applicable Overdue Rate on any installment of Improvement Loan Basic Rent not paid when due and any fine, penalty, interest or cost assessed or added under any agreement with a third party for nonpayment or late payment of Improvement Loan Basic Rent. "Improvement Portion" means, as of the date of calculation, that portion of the Basic Rent which is the aggregate of the Improvement Lessor Basic Rent and the Improvement Loan Basic Rent. "Improvements" means the improvements to real property described in Schedule I to the Lease Supplement (Improvements). - ---------- "Improvements Budget" means, with respect to the Property, the budget for the Construction of Improvements as agreed to by the Lessor and the Lessee. "Indebtedness" of any Person means, without duplication (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business pursuant to ordinary terms); (c) all reimbursement obligations with respect to surety bonds, letters of credit, bankers' acceptances and similar instruments (in each case, to the extent material or non-contingent); (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement (including holding title or security under synthetic lease transactions) and including, without duplication, five times the aggregate annual payments to be made on Operating Leases in the next succeeding twelve months, or incurred under any similar financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all Capital Lease Obligations; (g) all net obligations with respect to Rate Contracts; (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or 22 otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (but only to the extent of the lesser of such Indebtedness or the fair market value of the property subject to such Lien); and (i) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. "Indemnitee" means (i) during the Construction Period, only the Lessor and, as to pre-existing environmental conditions, the Administrative Agent and the Lenders, and (ii) thereafter each of the Lessor, the Lenders, any Other Lender(s), the Administrative Agent, the Collateral Agent, the Trustee and their respective Affiliates, successors, assigns, directors, shareholders, partners, officers, employees and agents. "Initial Funding Date" means the Funding Date to occur on the Documentation Date or the first Funding Date to occur thereafter. "Insolvency" means, with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent" means pertaining to a condition of Insolvency. "Insurance Consultant" means AON Risk Services. "Insurance Requirements" means all terms and conditions of any insurance policy either required by the Master Lease to be maintained by the Lessee or required by the Construction Agency Agreement to be maintained, or arranged on behalf of the Lessor, by the Construction Agent, and all requirements of the issuer of any such policy. "Intercreditor Agreement" means an agreement entered into during the Construction Period between the Administrative Agent, the Tranche A Lender and the Tranche B Lenders. "Interest Period" means: (a) with respect to any Loan or Lessor Amount advanced during the Commitment Period: (i) initially, the period commencing on the Funding Date with respect to such Loan or Lessor Amount and ending on the day preceding the next twelfth (12/th/) day of the month; and (ii) thereafter, each period commencing on the day after the last day of the preceding Interest Period and ending on the day preceding the next succeeding twelfth (12/th/) day of the month; and 23 (b) with respect to the outstanding Lessor Balance or Loan Balance during the Basic Lease Term: (i) initially, the period commencing on the day the Basic Lease Term begins and ending on the next Payment Set Date; and (ii) thereafter, each period commencing on the day after the last day of the preceding Interest Period applicable to such Loan Balance or Lessor Balance and ending on the next Payment Set Date or earlier if the Maturity Date. The foregoing provisions relating to Interest Periods are subject to the following: (w) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (x) Interest Periods shall, to the fullest extent practicable, be reset to commence on the twelfth (12th) day and end on the eleventh (11/th/) day of the relevant month; (y) any Interest Period that would otherwise extend beyond the Commitment Period shall end on the last day of the Commitment Period; and (z) any Interest Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date. "Interim Lease Term" means, with respect to the Property, the period commencing on the Documentation Date therefor and ending on the earlier of (i) the Completion Date and (ii) the Outside Completion Date. "Land" means the parcel of real property described on Schedule I to ---------- the Lease Supplemental (Land), and includes all Appurtenant Rights attached thereto; provided, however, upon exercise of the Undeveloped Land Purchase -------- ------- Option pursuant to Section 18.2 of the Master Lease, Land shall specifically ------------ exclude the Release Parcel. "Land Acquisition Cost" means $218,591,127.49. "Land Advance Percentage" means, the aggregate of the Lender Land Advance Percentage and the Lessor Land Advance Percentage, as set forth in Schedule I to the Participation Agreement. - ---------- 24 "Land Costs" means the aggregate amount of the Advances made by the Administrative Agent to the Construction Agent for (i) the Documentation Date Land Lease Balance and (ii) Transaction Expenses related to the Land, as such amount is set forth in the Funding Request, including without limitation: (a) the costs of preparation of studies, surveys, reports, tests and plans and specifications; (b) the costs of legal services, accounting services, the Insurance Consultant fees and other services related to the Land; (c) the fees and charges incurred in connection with securing all Governmental Actions required to be taken, given or obtained in connection with the acquisition, financing and ownership of the Land; (d) any title fees, premium and escrow costs and other expenses relating to title insurance and the closings contemplated by the Land Lease; (e) all expenses relating to any Environmental Audit and compliance with Environmental Laws and Hazardous Materials Law relating to the Land; (f) fees and other expenses for the Appraisal (with respect to the Land Lease and the Master Lease) relating to the Land; (g) any sales, use, property, real or personal, tangible or intangible taxes incurred in connection with the Land; (h) any other costs and expenses including fees to Participants and other Transaction Expenses; (i) fees, expenses and premiums related to property insurance under Section 2.10 of the Construction Agency Agreement; and ------------ (j) such other items as the Participants may reasonably approve in writing. "Land Lease" means the Land Lease, dated as of September 5, 2000, between the Lessor and the Lessee. "Land Lease Balance" means the aggregate of the Land Lessor Balance and the Land Loan Balance. 25 "Land Lessor Amount" means, during the Construction Period, the product of the Lessor Land Advance Percentage and the Advances made for Land Costs pursuant to Article III of the Participation Agreement. ----------- "Land Lessor Balance" means (i) during the Construction Period, the Land Lessor Amount and (ii) thereafter, the amount determined in clause (i) with all accrued and unpaid Yield thereon. "Land Lessor Basic Rent" means the amount of accrued Yield due on the Land Lessor Balance, determined in accordance with Section 4.1 of the ----------- Participation Agreement as of any Basic Rent Payment Date and excluding any interest at the applicable Overdue Rate on any installment of Land Lessor Basic Rent not paid when due and any fine, penalty, interest or cost assessed or added under any agreement with a third party for nonpayment or late payment of Land Lessor Basic Rent. "Land Loan Amount" means, during the Construction Period, the product of the Lender Land Advance Percentage and the Advances made for Land Costs pursuant to Article III of the Participation Agreement. ----------- "Land Loan Balance" means (i) during the Construction Period, the Land Loan Amount and (ii) thereafter, the amount determined in clause (i) with all accrued and unpaid interest thereon. "Land Loan Basic Rent" means the amount of accrued interest due on the Land Loan Balance, determined in accordance with Section 4.2 of the ----------- Participation Agreement as of any Basic Rent Payment Date and excluding any interest at the applicable Overdue Rate on any installment of Land Loan Basic Rent not paid when due and any fine, penalty, interest or cost assessed or added under any agreement with a third party for nonpayment or late payment of Land Loan Basic Rent. "Land Portion" means, as of the date of calculation, that portion of the Basic Rent which is the aggregate of the Land Lessor Basic Rent and the Land Loan Basic Rent. "Lease" means, collectively, the Master Lease, the Memorandum of Lease and the Lease Supplements. "Lease Balance" means, as of any date of determination, an amount equal to the aggregate of the Loan Balance and the Lessor Balance. "Lease Default" means any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Lease Event of Default. "Lease Event of Default" means a "Lease Event of Default" as defined in Section 16.1 of the Master Lease. ------------ 26 "Lease Supplement (Improvements)" means that certain Lease Supplement (Improvements), dated as of November 16, 2000, between the Lessor and the Lease. "Lease Supplement (Land)" means that certain Lease Supplement (Land), dated as of November 16, 2000, between the Lessor and the Lessee. "Lease Supplements" means (i) the Lease Supplement (Land) and (ii) the Lease Supplement (Improvements). "Lease Term" means the period commencing on the first day of the Interim Lease Term and ending on the Expiration Date. "Lender(s)" means the Tranche A Lender and the Tranche B Lenders. "Lender Basic Rent" means, the aggregate of the Land Loan Basic Rent and the Improvement Loan Basic Rent. "Lender Commitment Percentage" means, with respect to the Tranche A Lender, the Tranche A Commitment Percentage and with respect to the Tranche B Lender, the Tranche B Commitment Percentage. "Lender Financing Statements" means UCC financing statements appropriately completed and executed for filing in the applicable jurisdiction in order to protect the Lenders' interest under the Lender Mortgage, the Assignment of Lease, Rent, Construction Period Pledge Agreement and CAA and the Master Lease. "Lender Improvement Advance Percentage" means 85%. "Lender Improvement Commitment" has the meaning set forth in Schedule -------- I to the Participation Agreement, or as otherwise modified by the Administrative - - Agent to the Lessee. "Lender Land Advance Percentage" means 97%. "Lender Land Commitment" has the meaning set forth in Schedule I to ---------- the Participation Agreement, or as otherwise modified in writing by the Administrative Agent to the Lessee. "Lender Mortgage" means the Deed of Trust, dated as of November 16, 2000 from the Lessor to the Lenders, joined in by the Lessee, creating a first Lien on the Property securing the Notes and the other obligations of the Lessor under the Loan Agreements. "Lessee" means Palm, Inc., a Delaware corporation, and its successors and assigns expressly permitted under the Master Lease. 27 "Lessor" means Societe Generale Financial Corporation, a Delaware corporation, together with its successors and assigns permitted pursuant to Section 12.1 of the Participation Agreement. - ------------ "Lessor Amount" is defined in Section 3.2 of the Participation ----------- Agreement. "Lessor Balance" means, as of any date of determination, an amount equal to the aggregate of the Land Lessor Balance and the Improvement Lessor Balance. "Lessor Basic Rent" means the aggregate of the Land Lessor Basic Rent and the Improvement Lessor Basic Rent. "Lessor Commitment" means the aggregate of the Lessor Land Commitment and the Lessor Improvement Commitment. "Lessor Commitment Percentage" means the Lessor Land Advance Percentage and the Lessor Improvement Advance Percentage. "Lessor Financing Statements" means UCC financing statements appropriately completed and executed for filing in the applicable jurisdiction in order to protect the Lessor's interest under the Master Lease in the Property. "Lessor Improvement Advance Percentage" means 15%. "Lessor Improvement Commitment" has the meaning set forth in Schedule -------- I to the Participation Agreement, or as otherwise modified in writing by the - - Administrative Agent to the Lessee. "Lessor Land Advance Percentage" means 3%. "Lessor Land Commitment" has the meaning set forth in Schedule I to -------- the Participation Agreement, or as otherwise modified in writing by the Administrative Agent to the Lessee. "Lessor Lien" means any Lien, true lease or sublease or disposition of title arising as a result of (a) any claim against any Participant or the Administrative Agent, whether or not resulting from the transactions contemplated by the Operative Documents, (b) any act or omission of any Participant or the Administrative Agent which is not required or permitted by the Operative Documents or is in violation of any of the terms of the Operative Documents, (c) any claim against any Participant or the Administrative Agent, with respect to Taxes or Transaction Expenses against which the Lessee is not required to indemnify any Participant or the Administrative Agent, in its individual capacity, pursuant to Article IX of the Participation Agreement or ---------- (d) any claim against the Lessor arising out of any transfer by the Lessor of all or any portion of the interest of the Lessor in the Property or the Operative Documents other than the transfer of title to or possession of the Property by the Lessor pursuant to 28 and in accordance with the Master Lease, the Loan Agreement, or the Participation Agreement or pursuant to the exercise of the remedies set forth in Section 16.2 of the Master Lease. - ------------ "Lessor Margin" means, (i) during the Construction Period, the applicable margin shall be 65 basis points and (ii) upon commencement of the Basic Lease Term, the applicable margin shall be 35 basis points. "Lessor Mortgage" means, with respect to the Property, the Memorandum of Lease and any and all other security instruments in appropriate recordable form in each relevant jurisdiction sufficient to grant to the Lessor a first priority Lien on the Lessee's interest in the Property. "Lien" means any mortgage, deed of trust, pledge, security interest, encumbrance, lien, easement, servitude or charge of any kind, including, without limitation, any irrevocable license, conditional sale or other title retention agreement, any lease in the nature thereof, or any other right of or arrangement with any creditor to have its claim satisfied out of any specified property or asset with the proceeds therefrom prior to the satisfaction of the claims of the general creditors of the owner thereof, whether or not filed or recorded, or the filing of, or agreement to execute as "debtor", any financing or continuation statement under the Uniform Commercial Code of any jurisdiction or any federal, state or local lien imposed pursuant to any Environmental Law. "Loan Advance" means advances of funds made pursuant to the Construction Period Loan Agreement. "Loan Agreement Default" means any event, act or condition which with notice or lapse of time, or both, would constitute a Loan Agreement Event of Default. "Loan Agreement Event of Default" is defined in Section 6 of the --------- Construction Period Loan Agreement and Section 5 of the Basic Term Loan --------- Agreement. "Loan Agreements" means, collectively, the Construction Period Loan Agreement and the Basic Term Loan Agreement. "Loan Balance" means, as of any date of determination, an amount equal to the aggregate of the Land Loan Balance and the Improvement Loan Balance. "Loan Commitment" means the aggregate of the Tranche A Loan Commitment and the Tranche B Loan Commitment. "Loan Documents" means the Loan Agreements and the Notes. "Loan Margin" means, (i) during the Construction Period with respect to the Tranche A Loans, the applicable margin set forth in the Loan Note issued to the Tranche A Lender and with respect to any Tranche B Loan, the applicable margin set forth in the Loan Note issued to such 29 Tranche B Lender, or (ii) during the Basic Lease Term, so long as all of the Loan Balance is held by a Related Party Lender, 0 basis points, provided, -------- however if all of the Loan Balance is not held by a Related Party Lender, then - ------- with respect to the Tranche A Loans as agreed to in writing between the Lessee and the Tranche A Lender and evidenced in the Note issued to such Tranche A Lender pursuant to the Basic Term Loan Agreement and with respect to the Tranche B Loan, as determined pursuant to Section 10.1(i)(B) of the Participation ------------------ Agreement. "Loan Note" is defined in Section 2.2 of the Construction Period Loan ----------- Agreement. "Loan Purchase Price" is defined in Section 10.1(i) of the --------------- Participation Agreement. "Loans" means, collectively, the loans made by the Tranche A Lender and Tranche B Lender pursuant to either of the Loan Agreements. "London Interbank Offered Rate" or "LIBOR" means, as applicable to any Eurodollar Loan, the rate per annum determined by the Administrative Agent on the basis of the offered rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Eurodollar Loan offered for a period comparable to such Interest Period, which rates appear on the Bloomberg Screen Page as of 11:00 A.M., London time, two (2) Business Days prior to the first day of each such Interest Period, provided that (i) if more than one such offered rate appears on the Bloomberg Screen Page, the "London Interbank Offered Rate" will be the arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of 1%) of such offered rates; and (ii) if no such offered rates appear on such page, the "London Interbank Offered Rate" for such Interest Period will be the rate per annum quoted by Societe Generale, New York Branch prior to the first day of each such Interest Period, for deposits in Dollars offered to leading banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Eurodollar Loan; provided, -------- that in the event this rate is unavailable for such comparable period an - ---- Interest Period based on a combination of shorter duration interest periods shall be used. "Marketing Period" means the period commencing on the date notice of the exercise of the Remarketing Option is given, but at least twelve (12) months prior to the Expiration Date and ending on the Expiration Date. "Master Lease" means the (i) Master Lease, dated as of November 16, 2000, among the Lessor and the Lessee and (ii) the Lease Supplements. "Material" and "Materially" mean material to (i) the ability of a Person to perform its obligations under the Operative Documents to which it is a party, or (ii) the value or condition of the Property. "Material Adverse Effect" means a material adverse effect on (i) the business, financial position, results of operations or prospects of the Lessee, (ii) the ability of the Lessee to perform its 30 obligation under the Operative Documents or (iii) any of the rights and remedies of the Lessor, the Administrative Agent and/or the Lenders under any of the Operative Documents. "Maturity Date" means September 5, 2007, unless such Maturity Date is extended pursuant to Section 2.7 of each Loan Agreement and Section 11.2 of the ----------- ------------ Participation Agreement, or an earlier date if a Default or Event of Default has occurred or is continuing. "Maximum Commitment Amount" means an amount equal to $460,000,000. "Maximum Recourse Amount" means the maximum Rent payment that can be made on the Expiration Date under the Master Lease without causing the Master Lease to be treated as a Capital Lease for the purposes of SFAS No. 13 which Maximum Recourse Amount shall be the sum of (i) the Land Lease Balance and (ii) the highest portion of the Improvement Lease Balance that can be included in the calculation pursuant to Paragraph 7(d) of SFAS No. 13; provided, however, that -------- ------- with respect to clause (ii) hereof, in no event shall the amount be less than the Improvement Loan Balance. "Memorandum of Lease" means the Memorandum of Lease and Deed of Trust, dated as of November 16, 2000, among the Lessor, Lessee and the Trustee. "Modifications" is defined in Section 10.1 of the Master Lease. ------------ "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has since its date of incorporation made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such period. "Net Proceeds" means all amounts received by the Administrative Agent in connection with any Casualty or Condemnation or any sale of the Property pursuant to the Lessor's exercise of remedies under Section 16.2 of the Master ------------ Lease or the Lessee's exercise of the Remarketing Option under Article XX of the ---------- Master Lease, and all interest earned thereon, less any Impositions arising in connection with such amounts, if any, and less the expense of claiming and collecting such amounts, including all costs and expenses in connection therewith for which the Lessor, the Administrative Agent or any Participant is entitled to be reimbursed pursuant to the Lease. "Notes" means, collectively, the Loan Notes issued pursuant to Section ------- 2.2 of the Construction Period Loan Agreement and the Notes issued pursuant to - -- Section 2.2 of the Basic Term Loan Agreement. - ----------- "Obligations" means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured, direct or indirect, choate or inchoate, sole, joint, several or joint and several, due or to become due, heretofore or hereafter contracted or acquired) of the Lessee (whether as the Lessee, the Construction Agent or the Guarantor) arising under or in connection with the 31 Operative Documents including (i) all obligations for Basic Rent, Lessor Balance or Loan Balance, whether incurred on the Documentation Date or thereafter, (ii) all obligations for Supplemental Rent and all other obligations and liabilities of the Lessee, the Construction Agent, whether incurred on the Documentation Date or thereafter, whether for fees, costs, indemnification or otherwise, arising under any Operative Document, (iii) all out-of-pocket costs and expenses, including attorneys' fees and legal expenses, incurred by the Lessor, Administrative Agent or any Lenders to the extent set forth in the Operative Documents in connection with such Indebtedness, obligations and liabilities, and (iv) following the occurrence and during the continuance of a Lease Event of Default or a Construction Agency Agreement Event of Default, all advances made by the Lessor or any Lender for the maintenance, protection, preservation or enforcement of, or realization upon, the collateral in which the Lenders and/or Lessor have been granted a security interest pursuant to an Operative Document (or any portion thereof) including advances for storage, transportation charges, taxes, insurance, repairs and the like. "Operating Lease" means, with respect to any Person, any leasing or similar arrangement as which such Person is the obligor or lessee, which is not a Capital Lease. "Operative Documents" means the following: (a) the Participation Agreement; (b) the Master Lease; (c) Memorandum of Lease; (d) the Loan Agreements; (e) the Lender Mortgage; (f) each Note; (g) the Guaranty; (h) the Assignment of Lease, Rent, Construction Period Pledge Agreement and CAA; (i) the Pledge Agreements; (j) the Lessor Financing Statements; (k) the Lender Financing Statements; (l) the Construction Agency Agreement; (m) the Engagement Letter; (n) the Related Party Lender Note Assignment and Acceptance Agreement; and (o) the Lease Supplements. "Other Lender(s)" means one or more other lenders executing an Assignment and Acceptance under the Construction Period Loan Agreement or the Basic Term Loan Agreement, other than Societe Generale, New York Branch and the Related Party Lender. 32 "Outside Completion Date" means with respect to the Construction Period Property the earlier of (i) the date that is thirty (30) months after the Commencement of Construction and (ii) the Final Commitment Termination Date. "Overdue Interest" is defined in Section 4.1(a) of the Participation -------------- Agreement. "Overdue Rate" means, with respect to any Loan or Lessor Amount, the Base Rate or the Adjusted Eurodollar Rate then in effect for such Loan or Lessor Amount, as the case may be, plus two percent (2%), or the highest rate permitted by Applicable Law (if any), whichever is less. In the event that the Overdue Rate collected by any Participant is in violation of any usury or similar law, then the Overdue Rate shall be reduced to the extent necessary to cause the Overdue Rate to comply with any usury or similar law. "Participant Balance" means, as of any date of determination, (i) with respect to the Lenders, the Loan Balance or (ii) with respect to the Lessor, the Lessor Balance. "Participants" means, collectively, the Lenders and the Lessor, and their respective successors and assigns and "Participant" means each Lender and the Lessor. "Participation Agreement" means the Participation Agreement, dated as of November 16, 2000, among Palm, Inc., as Lessee, Construction Agent and Guarantor, the Lessor, the Administrative Agent and the Lenders party thereto. "Payment Set Date" means the twelfth (12th) day of the month of March, June, September, and December. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, and any successor thereto. "Pension Plan" means a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Lessee or any corporation, trade or business that is, along with the Lessee, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time since its date of incorporation, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "Permitted Property Liens" means, with respect to the Property, any of the following: (i) the respective rights and interests of the parties to the Operative Documents as provided in the Operative Documents; 33 (ii) The rights of any sublessee under a sublease permitted by the terms of the Master Lease; (iii) Liens for Taxes that either are not yet due or are being contested in accordance with the provisions of Section 12.1 of the Master ------------ Lease; (iv) Liens arising by operation of law, materialmen's, mechanics', workers', repairmen's, employees', carriers', warehousemen's and other like Liens relating to the construction of the Improvements or in connection with any Modifications or arising in the ordinary course of business for amounts that either are not more than thirty (30) days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 12.1 of the Master Lease; ------------ (v) Liens of any of the types referred to in clause (iv) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements satisfactory to the Lessor have been made), which bonding (or arrangements) shall comply with applicable Requirements of Law, and has effectively stayed any execution or enforcement of such Liens; (vi) easements, rights of way and other encumbrances on title to real property pursuant to Section 11.2 of the Master Lease; ------------ (vii) Lessor Liens; provided that the existence of such liens -------- ---- shall not be deemed Lessee's authorization or recognition of such liens; and (viii) Liens described on the title insurance policy delivered with respect to the Property pursuant to Section 6.1(m) of the -------------- Participation Agreement. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Authority or any other entity. "Phase of Construction" means a discrete portion of the Improvements or an integral component of the Improvements which upon Completion can either (i) be utilized by the Lessee independent of any of the other Improvements and is suitable for the Lessee's use whether or not any other Improvements are constructed or (ii) adds value as a component to the completion of the Improvements. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time since its date of incorporation been maintained, or contributed to, by any Person which was at such time a member of 34 the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Plans and Specifications" means, with respect to the Property, all plans and specifications for the Construction of Improvements, including but not limited to, those described in Schedule I to the Construction Agency Agreement. ---------- "Pledge Agreements" means the Construction Period Pledge Agreement and the Basic Term Pledge Agreement. "Project" means the physical site and operations conducted at or related to the physical site. "Project Cost" means with respect to the Improvements the total amount which may be capitalized in the project by the Lessor in accordance with GAAP plus other costs related to the project paid to third parties other than lenders or owners. "Project Site" means the geographical premises of the Land and Improvements. "Property" means all Improvements (including all Facility Equipment) to be constructed or installed on the Land and the Land. "Purchase Notice" means an irrevocable written notice by the Lessee delivered to the Lessor pursuant to Sections 18.1 and 18.2 of the Master Lease ------------- ---- or Section 3.2 of the Construction Agency Agreement, notifying the Lessor of the ----------- Lessee's exercise of its option pursuant to such Section, and identifying the Property to be purchased in accordance therewith and the proposed purchase date therefor. "Purchase Option" means the Lessee's/Construction Agent's option to purchase the Property in accordance with the provisions of Sections 18.1 and ------------- 18.2 of the Master Lease and Section 3.2 of the Construction Agency Agreement. - ---- ----------- "Purchase Price" is defined in Sections 18.1 of the Master Lease. ------------- "Rate Contracts" means interest rate and currency swap agreements, cap, floor and collar agreements, interest rate insurance, currency spot and forward contracts and other agreements or arrangements designed to provide protection against fluctuation in interest or currency exchange rates. "RCRA" means the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. (S) 6901 et seq., or as otherwise amended or modified or any successor statute thereto. 35 "Related Party Lender" means the Lessee or any Affiliate thereof as lender under the Basic Term Loan Agreement. "Related Party Lender Note Assignment and Acceptance Agreement" means the Related Party Lender Note Assignment and Acceptance Agreement, the form of which is attached as Exhibit B to the Basic Term Loan Agreement. --------- "Release" means any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or emission of a Hazardous Material. "Release Parcel" is defined in Section 18.2 of the Master Lease. ------------ "Release Parcel Area" means the Release Parcel Area described in Schedule I to the Master Lease. "Release Price" means, as of the date of determination, the product of (i) the amount of square feet of building space, excluding parking structures, located on the Release Parcel divided by the aggregate 1,598,000 square feet of ------- building space that can be constructed on the entire Property pursuant to the Site Development Permit Amendment, expressed as a percent and (ii) the Land Lease Balance. "Remarketing Option" is defined in Section 20.1 of the Master Lease. ------------ "Rent" means, collectively, the Basic Rent and the Supplemental Rent, in each case payable under the Master Lease. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the PBGC has by regulation waived the applicable notice requirement, or as to which the PBGC has announced a policy of not enforcing penalties for failure to satisfy applicable notice requirements. "Required Collateral Balance" is defined in Section 14.1(b) of the --------------- Participation Agreement. "Required Lenders" means the Lenders holding a majority of the outstanding Loan Balance, excluding any Related Party Lender and the Loan Balance held thereby, or as otherwise agreed to by the Tranche A Lender and the Tranche B Lenders as set forth in the Intercreditor Agreement. "Required Modification" is defined in clause (i) of Section 10.1 of ---------- ------------ the Master Lease. "Requirement of Law" means, as to any Person, (a) the partnership agreement, certificate of incorporation, bylaws or other organizational or governing documents of such Person, and 36 (b) all statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of any Governmental Authority affecting the Property, the acquisition of the Property, the Improvements or the demolition, Construction, use or alteration thereof, whether now or hereafter enacted and in force, including any that require repairs, modifications or alterations in or to the Property or in any way limit the use and enjoyment thereof (including all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. (S) 1201 et. seq. and any other similar Federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including all Environmental Laws and Hazardous Materials Laws), and all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to the Lessee affecting the Property or the Appurtenant Rights and any easements, licenses or other agreements entered into pursuant to Section ------- 11.2 of the Master Lease. - ---- "Responsible Officer" with respect to the Construction Agent, Lessee or the Guarantor means, in connection with all financial matters, the Vice President - Treasury, and in connection with all other matters, a Vice President or higher. "Responsible Officer's Certificate" means a certificate signed by any Responsible Officer, which certificate shall certify as true and correct the subject matter being certified to in such certificate. "Scheduled Payment Date" means each Payment Set Date. "SEC" means the Securities and Exchange Commission. "SFAS No. 13" means Statement of Financial Accounting Standards ("SFAS") No. 13, existing as of the Documentation Date. ---- "Shortfall Amount" means, as of the Expiration Date, an amount equal to (i) the Lease Balance, minus (ii) the Maximum Recourse Amount received by the Lessor from the Lessee pursuant to Section 20.1(g) of the Master Lease. --------------- "Significant Condemnation" means (a) a Condemnation that involves a taking of the Lessor's entire title to the Land and/or the Improvements, or (b) a Condemnation that in the reasonable, good faith judgment of the Administrative Agent and the Lessor (i) renders the Property unsuitable for continued use as property of the type of the Property immediately prior to such Condemnation, or (b) is so substantial in nature that restoration of the related property to substantially its condition as it existed immediately prior to such Condemnation would be impracticable or impossible. "Significant Subsidiary" means any Subsidiary of the Lessee or the Guarantor the assets of which represent 10% or more of the total assets of the Lessee or the Guarantor and its Subsidiaries on a consolidated basis. 37 "Single Employer Plan" means any Plan which is not a Multiemployer Plan. "Site Development Permit" means that certain Site Development Permit File No. HSH 96-12-089 approved and issued on June 25, 1997 by James R. Derryberry, Director of Planning, Building and Code Enforcement, City of San Jose ("Director of Planning"), as amended by that certain Site Development -------------------- Permit Amendment File No. HASH 96-01-089 approved and issued on July 23, 1998 by the Director of Planning, as further amended by that certain Site Development Permit Amendment File No. HASH 96-02-089 approved and issued on August 14, 1998 by the Director of Planning, as further amended by that certain Site Development Permit Amendment File No. HASH 96-03-089 approved and issued on December 1, 1999 by the Director of Planning, and as further amended by the Site Development Permit Amendment. "Site Development Permit Amendment" means that certain Site Development Permit Amendment File No HASH 96-04-089 approved and issued on October 18, 2000 by the Director of Planning. "Solvent" means with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person (including, without limitation, its Consolidated Subsidiaries) is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person (including, without limitation, its Consolidated Subsidiaries), (ii) the present fair saleable value of the assets of such Person (including, without limitation, its Consolidated Subsidiaries) is not less than the amount that will be required to pay the probable liability of such Person (including, without limitation, its Consolidated Subsidiaries) on its debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, Contingent Obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or action, for which such Person's property (including, without limitation, the property of its Consolidated Subsidiaries and other Subsidiaries) would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability taking into account any subrogation and contribution rights. "Subsidiary" means, with respect to any Person, (i) any corporation of which more than 10% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person, or (ii) any partnership, joint venture, limited liability company or other entity as to which such Person, directly or indirectly, owns more than a 10% ownership, equity or similar interest of has the power to direct or 38 cause the direction of management and policies, or the power to elect the managing general partner or the equivalent), of such partnership, joint venture, limited liability company or other entity, as the case may be. "Sufficient Collateral", during the Construction Period, means 103.0% of the outstanding Lease Balance and, during the Basic Lease Term, means the Required Collateral Balance. "Supplemental Rent" means all amounts, liabilities and obligations (other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor or any other Person including, without limitation, the Administrative Agent under the Master Lease, or under any of the other Operative Documents, including, without limitation, Fees, Break Costs, the Maximum Recourse Amount, the Shortfall Amount, amounts due pursuant to Section 13.2 of the Participation ------------ Agreement and payments pursuant to Sections 15.2 of the Master Lease and ------------- Articles XVIII and XX of the Master Lease. - -------------- -- "Surplus Collateral" is defined in Section 14.2 of the Participation ------------ Agreement. "Syndication Agent" means during the Construction Period, Societe Generale, New York Branch and as of the Completion Date, in the event the Related Party Lender does not hold all of the Loan Balance, Societe Generale, New York Branch or such other financial institution selected by the Lessee and reasonably acceptable to the Lenders. "Syndication Date" means (i) the date after the Documentation Date and up to but excluding the Completion Date that the Tranche A Lender proposes to assign an amount of the Tranche A Loan Commitment and the Tranche A Loans relating thereto, not to exceed $60 million, to the Tranche B Lenders pursuant to Article II of the Participation Agreement and (ii) the date including and ---------- following the Completion Date that the Lenders propose to assign their Loans and interest in the Operative Documents to one or more Other Lender(s) pursuant to Section 10.1(i) of the Participation Agreement. - --------------- "Tax Indemnitee" means the Lenders, the Lessor, any Other Lenders, the Administrative Agent, the Trustee, the Collateral Agent, their respective Affiliates and their respective successors, assigns, directors, shareholders, partners, officers, employees and agents. "Taxes" is defined in the definition of "Impositions". "Termination Date" is defined in Section 15.2 of the Master Lease. ------------ "Termination Notice" is defined in Section 15.1 of the Master Lease. ------------ "3COM" means 3COM Corporation, a Delaware corporation. "Tranche A Commitment Percentage" means, at any time, the percentage which such Tranche A Loan Commitment then constitutes of the Loan Commitment (or, at any time after the Loan 39 Commitment shall have expired or terminated, the percentage which the aggregate principal amount of such Tranche A Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding). "Tranche A Lender" means Societe Generale, New York Branch under each of the Loan Agreements and its successors and assigns. "Tranche A Loan Commitment" means, as to the Tranche A Lender, the obligation of such Tranche A Lender to make Loans under the Loan Agreements which when added to the Lessor Commitment shall not exceed $460 million, as such Tranche A Loan Commitment may subsequently be reduced, but when aggregated with the Lessor Commitment shall not be below $400 million, upon the execution and delivery of an Assignment and Acceptance substantially in the form of Exhibit B --------- to the Construction Period Loan Agreement to be entered into by one or more Tranche B Lenders. "Tranche A Loan Facility" means the Tranche A Loan Commitment and the Loans made thereunder. "Tranche A Loans" has the meaning set forth in Section 2.1 of each ----------- Loan Agreement. "Tranche B Commitment Percentage" means, as to any Tranche B Lender at any time, the percentage which such Tranche B Loan Commitment then constitutes of the Loan Commitment (or, at any time after the Loan Commitment shall have expired or terminated, the percentage which the aggregate principal amount of such Tranche B Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding). "Tranche B Lenders" means one or more Other Lenders that become a Tranche B Lender by assignment pursuant to Section 10.1 of the Construction ------------ Period Loan Agreement. "Tranche B Loan Commitment" means, as to any Tranche B Lender, the obligation of such Tranche B Lender to make Tranche B Loans under the Loan Agreements in a principal amount as agreed to in its Assignment and Acceptance substantially in the form of Exhibit B to the Construction Period Loan Agreement --------- to be entered into by such Tranche B Lender, but not to exceed, in the aggregate, $60 million. "Tranche B Loan Facility" means the Tranche B Loan Commitments and the Loans made thereunder. "Tranche B Loans" has the meaning set forth in Section 2.1 of each ----------- Loan Agreement. "Transaction Expenses" means all costs, expenses and Impositions incurred in connection with the preparation, execution and delivery of the Operative Documents and the transactions contemplated by the Operative Documents including without limitation: 40 (a) the reasonable fees, out-of-pocket expenses and disbursements of Simpson Thacher & Bartlett, special counsel for the Lessor and the Administrative Agent, and such other reasonable fees, expenses and disbursements of Gray Cary Ware & Freidenrich LLP, Clifford Chance Rogers & Wells LLP, and Shipman & Goodwin LLP in negotiating the terms of the Operative Documents and the other transaction documents, preparing for the closing under, and rendering opinions in connection with, such transactions and in rendering other services customary for counsel representing parties to transactions of the types involved in the transactions contemplated by the Operative Documents; (b) the reasonable fees, out-of-pocket expenses and disbursements of the Lessor, the Lenders and the Administrative Agent in connection with (1) syndication of the Loan Commitment and the Loans as contemplated by the Operative Documents, negotiating the terms of the Operative Documents, preparing for the closing, and closing the transaction, (2) any amendment, supplement, waiver or consent with respect to any Operative Documents requested or approved by the Lessee and (3) any enforcement of any rights or remedies against the Lessee in respect of the Operative Documents; (c) any and all Taxes and fees incurred in recording, registering or filing any Operative Document or any other transaction document, any deed, declaration, mortgage, security agreement, notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Documents; (d) any brokerage commissions paid or payable by the Lessee; (e) any other reasonable fees, out-of-pocket expenses, disbursements or cost of any party to the Operative Documents; (f) any title fees, premiums and escrow costs and other expenses relating to title insurance and the closings contemplated by the Operative Documents; (g) all fees, expenses and disbursements of each local counsel retained in connection with the transactions contemplated by the Operative Documents; (h) all costs and expenses relating to surveys and Environmental Audits for the Property; (i) fees and other expenses relating to Appraisals; (j) all fees, expenses and disbursements of the Collateral Agent and of the Collateral Agent's counsel, experts and agents; and 41 (k) costs of the Insurance Consultant and its experts and agents. "Trustee" means the trustee from time to time named in the Memorandum of Lease. "U.S. Government Obligations" is defined in Section 1.1 of the ----------- Construction Period Pledge Agreement. "Uncompleted Property" is defined in Section 3.3 of the Construction ----------- Agency Agreement. "Undeveloped Land Purchase Option" is defined in Section 18.2 of the ------------ Master Lease. "Uniform Commercial Code" and "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "Yield" is defined in Section 4.1(a) of the Participation Agreement. -------------- "Yield Rate" means, the Adjusted Eurodollar Rate plus the Lessor Margin. 42 EXECUTION COPY LEASE SUPPLEMENT (LAND) dated as of November 16, 2000 between PALM, INC., as the Lessee, and SOCIETE GENERALE FINANCIAL CORPORATION, as the Lessor This Lease Supplement (Land) is subject to a lien in favor of the Administrative Agent under the Loan Agreements. This Lease Supplement (Land) has been executed in several counterparts. To the extent, if any, that this Lease Supplement (Land) constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Lease Supplement (Land) may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent for the Lenders, on or following the signature page hereof. This counterpart is not the original counterpart. THIS LEASE SUPPLEMENT (LAND) (this "Lease Supplement "), dated as of ---------------- November 16, 2000, between PALM, INC., a Delaware corporation, as the Lessee (the "Lessee"), and SOCIETE GENERALE FINANCIAL CORPORATION, as the Lessor (the ------ "Lessor"). ------ W I T N E S S E T H: ------------------- WHEREAS, the Lessor is the record owner of the Land described in Schedule I ---------- attached hereto, and Appurtenant Rights located on such Land (such Land and the Appurtenant Rights are collectively referred to herein as the "Land"); and ---- WHEREAS, the Lessor wishes to lease the Land to the Lessee and the Lessee wishes to lease the Land from the Lessor; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to enter into this Lease Supplement, as follows: SECTION 1. Certain Terms. Capitalized terms used but not otherwise defined ------------- in this Lease Supplement have the meanings specified in Appendix A to the Master ---------- Lease, dated as of November 16, 2000 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Master Lease"), among the ------------ Lessee and the Lessor; and the rules of interpretation specified in Appendix A ---------- shall apply to this Lease Supplement. SECTION 2. Land. Effective upon the execution and delivery of this Lease ---- Supplement by the Lessor and the Lessee, the Land shall be subject to all terms and provisions of the Master Lease relating to the Land. Subject to the terms and conditions of the Master Lease, the Lessor hereby leases the Land to the Lessee for the Term (as defined below) of this Lease Supplement, and the Lessee hereby leases, expressly for the direct benefit of the Lessor, the Land from the Lessor for the Term. SECTION 3. Lease Term. The term of this Lease Supplement (the "Term") shall ---------- ---- commence on (and include) the date hereof and end on the Expiration Date, as such Expiration Date may be extended from time to time in accordance with Article XIX of the Master Lease, unless the Term with respect to the Land is - ----------- terminated at an earlier date in accordance with the terms and provisions of the Master Lease and the other Operative Documents. For and in consideration of good and valuable consideration paid by the Lessee to the Lessor as described in the Master Lease, the Lessor hereby grants to the Lessee the right to purchase the Land or to market and sell the Land during the Term of this Lease Supplement on the terms set forth in Articles XVIII, XX, and XXI of the Master Lease and ----- -- --- Section 3.2 of the Construction Agency Agreement. - ----------- SECTION 4. Basic Rent. During the Term of this Lease Supplement, Lessee ---------- shall pay to the Lessor the Land Portion of the Basic Rent in accordance with Section 3.1 of the Master Lease. - ----------- SECTION 5. Ratification. The terms and provisions of the Master Lease are ------------ hereby ratified and confirmed in all respects and remain in full force and effect. SECTION 6. GOVERNING LAW. THE MASTER LEASE AND THIS LEASE SUPPLEMENT SHALL ------------- BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATE AND LIENS HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. SECTION 7. Counterpart Execution. This Lease Supplement may be executed in --------------------- any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. SECTION 8. Original Lease Supplement (Land). The single executed original ------------------------------- of this Lease Supplement (Land) marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt therefor of SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent for the Lenders, on or following the signature page thereof shall be the Original Executed Counterpart of this Lease Supplement (Land) (the "Original Executed ----------------- Counterpart"). To the extent that this Lease Supplement (Land) constitutes - ----------- chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement (Land) may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. PALM, INC., as the Lessee By:______________________________________ Name: Title: SOCIETE GENERALE FINANCIAL CORPORATION, as the Lessor By: /s/ illegible ---------------------------------------- Name: illegible Title: Senior Vice President THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART. Receipt of this original counterpart of the foregoing Lease Supplement (Land) is hereby acknowledged as of the date hereof. SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent By: /s/ Sean Rheuben --------------------------------- Name: Sean Rheuben Title: Attorney-in-fact SCHEDULE I TO LEASE SUPPLEMENT Legal Description of Land EXECUTION COPY LEASE SUPPLEMENT (IMPROVEMENTS) dated as of November 16, 2000 between PALM, INC. as the Lessee, and SOCIETE GENERALE FINANCIAL CORPORATION, as the Lessor This Lease Supplement (Improvements) is subject to a lien in favor of the Administrative Agent under the Loan Agreements. This Lease Supplement (Improvements) has been executed in several counterparts. To the extent, if any, that this Lease Supplement (Improvements) constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Lease Supplement (Improvements) may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefore executed by the SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent for the Lenders, on or following the signature page hereof. This counterpart is not the original counterpart. THIS LEASE SUPPLEMENT (IMPROVEMENTS) (this "Lease Supplement"), dated as of ---------------- November 16, 2000, between PALM, INC., a Delaware corporation, as Lessee (the "Lessee"), and SOCIETE GENERALE FINANCIAL CORPORATION, as the Lessor (the ------ "Lessor"). ------ W I T N E S S E T H: WHEREAS, the Lessor is the record owner of the Land and the Appurtenant Rights described in Schedule I attached hereto (such Land and Appurtenant Rights are collectively referred to herein as the "Land") and the owner of all the ---- Improvements as described in Schedule II hereto (the "Improvements") located on ----------- ------------ the Land; WHEREAS, the Lessor wishes to lease the Improvements to the Lessee and the Lessee wishes to lease the Improvements from the Lessor; and WHEREAS, the Lessor and the Lessee are parties to that certain Master Lease, dated as of November 16, 2000 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Master Lease"), and the ------------ Lessor and the Construction Agent are parties to that certain Construction Agency Agreement, dated as of November 16, 2000 ( the "Construction Agency ------------------- Agreement"); - --------- NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to enter into this Lease Supplement, as follows: SECTION 1. Certain Terms. Capitalized terms used but not otherwise defined ------------- in this Lease Supplement have the meanings specified in Appendix A to the Master ---------- Lease and the rules of interpretation specified in Appendix A shall apply to ---------- this Lease Supplement. SECTION 2. Improvement. Effective upon the execution and delivery of this ----------- Lease Supplement by the Lessor and the Lessee, the Improvements shall be subject to all terms and provisions of the Master Lease relating to Improvements. Subject to the terms and conditions of the Master Lease, the Lessor hereby leases the Improvements to the Lessee for the Term (as defined below) of this Lease Supplement, and the Lessee hereby leases, expressly for the direct benefit of the Lessor, the Improvements from the Lessor for the Term. SECTION 3. Lease Term. The term of this Lease Supplement (the "Term") shall ---------- ---- commence on (and include) the date hereof and end on the Expiration Date, as such Expiration Date may be extended from time to time in accordance with Article XIX of the Master Lease, unless the Term with respect to the - ----------- Improvements is terminated at an earlier date in accordance with the terms and provisions of the Master Lease or the other Operative Documents. For and in consideration of good and valuable consideration paid by the Lessee to the Lessor as described in the Master Lease and the Construction Agency Agreement, the Lessor has granted to the Lessee the right to purchase the Improvements or to market and sell the Improvements during the Term of this Lease Supplement on the terms set forth in Articles XVIII, XX and XXI of -------------- -- --- the Master Lease and Section 3.2 of the Construction Agency Agreement. SECTION 4. Rent. During the Term of this Lease Supplement, Lessee shall pay ---- to the Lessor the Improvements Portion of the Basic Rent in accordance with Section 3.1 of the Master Lease. - ----------- SECTION 5. Ratification. The terms and provisions of the Master Lease are ------------ hereby ratified and confirmed in all respects and remain in full force and effect. SECTION 6. GOVERNING LAW. THE MASTER LEASE AND THIS LEASE SUPPLEMENT SHALL ------------- BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATE AND LIENS HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. SECTION 7. Counterpart Execution. This Lease Supplement may be executed in --------------------- any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. SECTION 8. Original Lease Supplement (Improvements). The single executed ---------------------------------------- original of this Lease Supplement (Improvements) marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt thereof of SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent for the Lenders, on or following the signature page thereof shall be the Original Executed Counterpart of this Lease Supplement (Improvements) (the "Original Executed Counterpart"). To the extent that this Lease Supplement ----------------------------- (Improvements) constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement (Improvements) may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. PALM, INC., as the Lessee By:__________________________________ Name: Title: SOCIETE GENERALE FINANCIAL CORPORATION, as the Lessor By: /s/ illegible ---------------------------------- Name: illegible Title: Senior Vice President 3 THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART. Receipt of this original counterpart of the foregoing Lease Supplement (Improvements) is hereby acknowledged as of the date hereof. SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent By: /s/ Sean Rheuben --------------------------------- Name: Sean Rheuben Title: Attorney-in-fact 4 SCHEDULE I TO LEASE SUPPLEMENT Legal Description of Land 5 SCHEDULE II TO LEASE SUPPLEMENT Description of Improvements All buildings, structures, fixtures, Facility Equipment, and other improvements of every kind existing at any time and from time to time and constructed pursuant to the Construction Agency Agreement, or otherwise purchased, with amounts advanced by the Lessor pursuant to the Participation Agreement, on or under the Land, together with any and all appurtenances to such buildings, structures or improvements, including sidewalks, utility pipes, conduits and lines, parking areas and roadways, and including all Modifications and other additions to or changes in the Improvements at any time. 6 EX-10.2 3 0003.txt PARTICIPATION AGREEMENT EXHIBIT 10.2 EXECUTION COPY PARTICIPATION AGREEMENT dated as of November 16, 2000 among PALM, INC., acting as Lessee, as Guarantor and as Construction Agent, SOCIETE GENERALE FINANCIAL CORPORATION, as Lessor, SOCIETE GENERALE, acting through its New York Branch, as Administrative Agent and as Lender and THE LENDERS PARTIES HERETO
TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS; INTERPRETATION............................................................................... 2 ARTICLE II SYNDICATION................................................................................................ 2 ARTICLE III FUNDING OF ADVANCES........................................................................................ 3 SECTION 3.1 Advances..................................................................................... 3 SECTION 3.4 Procedures for Advances...................................................................... 4 SECTION 3.7 Capitalized Interest and Yield During Construction Period.................................... 5 ARTICLE IV YIELD; INTEREST; FEES...................................................................................... 6 SECTION 4.1 Yield........................................................................................ 6 SECTION 4.2 Interest on Loans............................................................................ 6 SECTION 4.3 Prepayments.................................................................................. 7 SECTION 4.4 Fee.......................................................................................... 8 SECTION 4.5 Place and Manner of Payments................................................................. 8 SECTION 4.6 Pro Rata Treatment and Payments.............................................................. 8 SECTION 4.7 Sharing of Payments.......................................................................... 9 ARTICLE V CERTAIN INTENTIONS OF THE PARTIES.......................................................................... 9 SECTION 5.1 Intent....................................................................................... 9 SECTION 5.2 Amounts Due Under Lease...................................................................... 10 ARTICLE VI CONDITIONS TO FUNDING...................................................................................... 10 SECTION 6.1 Documentation Date; Initial Funding Date..................................................... 10 SECTION 6.2 All Funding Dates............................................................................ 13
i
Page ---- SECTION 6.3 Conditions to Completion Date............................................................. 16 SECTION 6.4 Other Actions in Respect of Completion.................................................... 16 ARTICLE VII DISTRIBUTIONS........................................................................................... 16 SECTION 7.1 Basic Rent................................................................................ 16 SECTION 7.2 Purchase Payments by the Lessee........................................................... 17 SECTION 7.3 Payment of Maximum Recourse Amount and Construction Recourse Amount....................... 17 SECTION 7.4 Sales Proceeds of Remarketing............................................................. 18 SECTION 7.5 Supplemental Rent......................................................................... 18 SECTION 7.6 Collateral Realizations................................................................... 18 SECTION 7.7 Distribution of Payments After Lease Event of Default..................................... 20 SECTION 7.8 Other Payments............................................................................ 21 SECTION 7.9 Casualty and Condemnation Amounts......................................................... 22 SECTION 7.10 Order of Application...................................................................... 22 SECTION 7.11 Payments to Account....................................................................... 22 SECTION 7.12 Payments to Related Party Lender.......................................................... 23 ARTICLE VIII REPRESENTATIONS......................................................................................... 23 SECTION 8.1 Representations of the Participants....................................................... 23 SECTION 8.2 Representations of the Lessee and the Guarantor........................................... 25 SECTION 8.3 Representations of the Lessee and the Guarantor with Respect to Each Funding Date.......................................................................................... 28 ARTICLE IX PAYMENT OF CERTAIN EXPENSES............................................................................. 29 SECTION 9.1 Transaction Expenses...................................................................... 29 SECTION 9.2 Brokers' Fees and Stamp Taxes............................................................. 30 SECTION 9.3 Basic Term Loan Agreement and Related Obligations......................................... 30 ARTICLE X OTHER COVENANTS AND AGREEMENTS.......................................................................... 30 SECTION 10.1 Affirmative Covenants of the Lessee and the Guarantor..................................... 30 SECTION 10.2 Negative Covenants of the Lessee and the Guarantor........................................ 34 SECTION 10.3 Covenants of the Participants and the Lessor.............................................. 35
ii
Page ---- ARTICLE XI LESSEE DIRECTIONS; CERTAIN RIGHTS OF LESSEE............................................................. 36 SECTION 11.1 Lessee Directions......................................................................... 36 SECTION 11.2 Extension of Maturity Date and Expiration Date............................................ 36 ARTICLE XII TRANSFERS OF PARTICIPANTS' INTERESTS.................................................................... 36 SECTION 12.1 Assignments............................................................................... 36 SECTION 12.2 Participations............................................................................ 37 ARTICLE XIII INDEMNIFICATION......................................................................................... 38 SECTION 13.1 General Indemnification................................................................... 38 SECTION 13.2 End of Term Indemnity .................................................................... 39 SECTION 13.3 Environmental Indemnity................................................................... 41 SECTION 13.4 Proceedings in Respect of Claims.......................................................... 42 SECTION 13.5 General Tax Indemnity..................................................................... 42 SECTION 13.6 Indemnity Payments in Addition to Lease Obligations....................................... 47 SECTION 13.7 Eurodollar Rate Lending Unlawful.......................................................... 47 SECTION 13.8 Deposits Unavailable...................................................................... 47 SECTION 13.9 Increased Costs, etc...................................................................... 48 SECTION 13.10 Funding Losses............................................................................ 49 SECTION 13.11 Capital Adequacy.......................................................................... 50 ARTICLE XIV COLLATERAL.............................................................................................. 50 SECTION 14.1 Deficiency................................................................................ 51 SECTION 14.2 Surplus................................................................................... 51 ARTICLE XV MISCELLANEOUS........................................................................................... 52 SECTION 15.1 Survival.................................................................................. 52 SECTION 15.2 No Broker, etc............................................................................ 53 SECTION 15.3 Notices................................................................................... 53
iii
Page ---- SECTION 15.4 Counterparts.................................................................................. 53 SECTION 15.5 Amendments.................................................................................... 53 SECTION 15.6 Headings, etc................................................................................. 53 SECTION 15.7 Parties in Interest........................................................................... 53 SECTION 15.8 GOVERNING LAW................................................................................. 54 SECTION 15.9 Severability.................................................................................. 54 SECTION 15.10 Liability Limited............................................................................. 54 SECTION 15.11 Further Assurances............................................................................ 54 SECTION 15.12 SUBMISSION TO JURISDICTION; WAIVERS........................................................... 55 SECTION 15.13 WAIVER OF JURY TRIAL.......................................................................... 56 SECTION 15.14 Highest Lawful Rate........................................................................... 57
SCHEDULES - --------- Schedule I Commitments Schedule II Notice Information, Wire Transfer Instructions and Funding Offices EXHIBITS - -------- Exhibit A Funding Request Exhibit B Responsible Officer's Certificate Exhibit C Completion Certificate APPENDIX - -------- Appendix A Definitions; Interpretations iv PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT (this "Participation Agreement"), dated ----------------------- as of November 16, 2000, is entered into by and among PALM, INC., a Delaware corporation, as Lessee (in such capacity, the "Lessee"), as Construction Agent ------ (in such capacity, the "Construction Agent"), and as Guarantor, (in such ------------------ capacity, the "Guarantor") and SOCIETE GENERALE FINANCIAL CORPORATION, as Lessor -------- (in such capacity, the "Lessor"), and SOCIETE GENERALE, acting through its New ------ York Branch and various institutions as are or may from time to time become parties hereto as lenders (each a "Lender"; collectively, the "Lenders") and ------ ------- SOCIETE GENERALE, acting through its New York Branch, as administrative agent for the Lenders (the "Administrative Agent"). -------------------- W I T N E S S E T H: WHEREAS, the Lessor, has purchased the Land located in California, and has simultaneously leased the Land to the Lessee pursuant to the Land Lease; WHEREAS, the Construction Agent will construct, at Lessor's expense, Improvements on the Land, which Improvements as constructed will be the property of the Lessor; WHEREAS, the Lessor desires to amend and restate the Land Lease, and the Lessee desires to amend and restate the Land Lease pursuant to the terms of the Master Lease; WHEREAS, the Lessor is willing to provide, as set forth herein, financing for a portion of the costs of the Construction of Improvements and the Transaction Expenses incurred in connection therewith; WHEREAS, the Lenders are willing to provide, as set forth herein, the balance of the financing for the Land, which was acquired on the Acquisition Date, and the Construction of Improvements and Transaction Expenses incurred in connection with each; WHEREAS, to secure such financing (a) the Lessor will have the benefit of a first priority Lien on the Lessee's interests in the Property and (b) the Lenders have and/or will have the benefit of (i) a Lien on the Lessor's right, title and interest in the Property pursuant to the Lender Mortgage executed by the Lessor and joined in by the Lessee and (ii) an assignment of certain of the Lessor's rights against the Lessee under the Lease and against the Construction Agent under the Construction Agency Agreement and certain rights under the Construction Period Pledge Agreement, (c) the Lessee has delivered and will deliver and pledge to the Collateral Agent, certain Collateral, and (d) the Guarantor has executed and delivered the Guaranty pursuant to which the Guarantor fully 2 guarantees all obligations of the Lessor to the Administrative Agent acting on behalf of the Lenders under the Operative Documents to which the Lessor is a party; WHEREAS, upon the Completion Date, the Lenders are willing to sell to a Related Party Lender the Lenders' rights and interests under the Loan Agreements, with respect to the Loans, and the Lessee may elect in its sole discretion to cause such Related Party Lender to purchase such Loans from the Lenders as provided herein and in the Basic Term Loan Agreement; and WHEREAS, the Lessor is willing to grant the Lessee the option to purchase a Release Parcel by payment of the Release Price, and provided the Lessee exercises such option, it shall cause the Related Party Lender to purchase from the Lenders the outstanding Loan Balance on the Completion Date. NOW, THEREFORE, in consideration of the mutual agreements contained in this Participation Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS; INTERPRETATION Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof (as such Appendix A may be amended, supplemented, amended and restated or otherwise modified from time to time, "Appendix A"); and ---------- the rules of interpretation set forth in Appendix A shall apply to this Participation Agreement. ARTICLE II SYNDICATION SECTION 2.1. Syndication. The Syndication Agent intends after the ----------- ----------- Documentation Date and up to the Completion Date, to syndicate a portion of its Tranche A Loan Facility to Tranche B Lenders in an amount not to exceed $60 million, thereby reducing the Tranche A Lender Commitment to $400 million, pursuant to execution and delivery by each Tranche B Lender of an Assignment and Acceptance substantially in the form of Exhibit B to the Construction Period --------- Loan Agreement, whereby such Tranche B Lender will become party to the Participation Agreement, the Construction Period Loan Agreement and the other relevant Operative Documents. The Syndication Agent shall be entitled to change the pricing, terms and structure of the Tranche B Loan Facility if the Syndication Agent determines that such changes are advisable to ensure a successful syndication; provided, that, (a) the amount of the Tranche B Loan -------- ---- Facility shall remain unchanged and (b) with 3 respect to the Construction Period, the Loan Margin shall be set forth in the Loan Note belonging to each Tranche B Lender, and with respect to the Basic Lease Term, the Loan Margin shall be set forth in the Note belonging to each Tranche B Lender. ARTICLE III FUNDING OF ADVANCES SECTION 3.1 Advances. Subject to the conditions and terms hereof, the -------- Lessor shall authorize the Construction Agent to request Advances from the Administrative Agent and the Administrative Agent shall take the following actions at the written request of the Construction Agent, from time to time during the Commitment Period: (a) subject to the terms hereof the Administrative Agent shall make Advances in Dollars only (out of funds provided by the Lessor and the Lenders) to the Construction Agent for the purpose of financing Land Costs and Construction Costs (including reimbursing the Lessee or the Construction Agent for any of the foregoing which it paid), and the proceeds of all Advances shall be paid directly to the Construction Agent; provided, that, the Administrative Agent shall not be required to make any -------- ---- Advance if, after giving effect thereto, the aggregate outstanding amount of all such Advances would exceed the Available Commitment; (b) the Administrative Agent shall, no later than three (3) Business Days after the date of the receipt of a Funding Request and in accordance with Section 3.4(a), make Advances in an amount not less than $250,000 per -------------- Advance (except that the Final Funding may be for a lesser amount); (c) all Advances for Land Costs and Construction Costs shall be made, subject to timely receipt of a Funding Request, on the twelfth (12th) day of the calendar month (or if such day is not a Business Day, the next succeeding Business Day); provided that the Advance on the Initial Funding -------- ---- Date and the Advance on the Final Funding Date may be made on any Business Day (each such date referred to as a "Funding Date"); and ------------ (d) neither the Lessor nor any Lender shall be obligated to make funds available to the Administrative Agent for any Advance unless the Lessee has deposited Sufficient Collateral with the Collateral Agent in compliance with Article XIV and has otherwise satisfied all of the ----------- conditions precedent for such Advance. Notwithstanding any other provision hereof, the Administrative Agent shall not be obligated to make any Advance if, after giving effect thereto, the aggregate outstanding amount of each of the Loan Balance and the Lessor Balance would exceed the Maximum Commitment Amount. 4 SECTION 3.2. Lessor's Commitment. The Lessor shall have made available ------------------- to the Construction Agent, (i) the Lessor Land Commitment, as set forth in Schedule I for the purpose of financing the Land Costs, (ii) the Lessor - ---------- Improvement Commitment for the purpose of financing Construction Costs and (iii) subject to the conditions and terms hereof, the Lessor shall authorize the Construction Agent to request from the Administrative Agent, and the Administrative Agent shall make available to the Construction Agent, from time to time during the Commitment Period on any Funding Date, an amount in immediately available funds, equal to the amount of the Advance being requested on such Funding Date multiplied by the relevant Lessor Commitment Percentage in an aggregate principal amount not to exceed the amount of the applicable Lessor Commitment. The Lessor Land Advance Percentage shall apply to that portion of an Advance which relates to the Land Costs and the Lessor Improvement Advance Percentage shall apply to that portion of an Advance which relates to the Construction Costs. The aggregate principal amount made available under this Section 3.2 shall be the lessor amount (collectively, the "Lessor Amount"). - ----------- ------------- SECTION 3.3. Loan Commitment. Subject to the conditions and terms --------------- hereof and in the Construction Period Loan Agreement, each Lender shall make Loans to Lessor for distribution to the Administrative Agent (i) on the Documentation Date to finance the previously purchased Land in an amount equal to the Documentation Date Land Lease Balance and (ii) at the request of the Construction Agent from time to time during the Commitment Period on any Funding Date in an amount in immediately available funds equal to the amount of the Advance being requested on such Funding Date multiplied by the relevant Lender Commitment Percentage in an aggregate principal amount not to exceed the amount of such Lender's Loan Commitment. The Lender Land Advance Percentage shall apply to that portion of an Advance which relates to the Land Costs and the Lender Improvement Advance Percentage shall apply to that portion of an Advance which relates to the Construction Costs. Notwithstanding any other provision hereof, the Administrative Agent shall provide written notice to the Lessee upon reallocation of the Commitments between the Lenders and the Lessor; provided, however, such reallocation shall -------- ------- not change the Lessor Land Advance Percentage, Lender Land Advance Percentage, Lessor Improvement Advance Percentage and the Lender Improvement Advance Percentage. SECTION 3.4 Procedures for Advances. ----------------------- (a) With respect to each funding of an Advance, the Lessor shall authorize the Construction Agent to give the Administrative Agent prior written notice pursuant to a funding request substantially in the form of Exhibit A --------- hereto (a "Funding Request"), which Funding Request shall be delivered not later --------------- than 1:00 P.M., New York City time, three (3) Business Days prior to the proposed Funding Date, specifying: (i) the proposed Funding Date, (ii) the total amount of Advance requested and (iii) wire transfer instructions for such Advance. Each Lender shall make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Lessor at the office of the Administrative Agent specified in Schedule II prior to 1:00 ----------- P.M., New York City time on the 5 Funding Date requested by the Construction Agent in funds immediately available to the Administrative Agent. Such borrowing shall then be made available to the Construction Agent by the Administrative Agent crediting the account of the Construction Agent specified in Schedule II with the aggregate of the amounts ----------- made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (b) Except as the parties may otherwise agree in writing, (i) Advances made on the Initial Funding Date shall be made in part to provide the Construction Agent with funds with which to pay or reimburse itself for Land Costs and (ii) and on the Initial Funding Date and thereafter, Advances shall be made solely to provide the Construction Agent with funds with which to pay or reimburse itself for Construction Costs and Land Costs as provided for in the Construction Agency Agreement. (c) In the event that the Administrative Agent is unable to obtain an Adjusted Eurodollar Rate with respect to an Advance for the interest period from the requested Funding Date to the twelfth (12th) day of the succeeding month, the Lessor and each Lender shall make available Lessor Amounts and Loans, as the case may be, equal to the Advance requested in such Funding Request at the applicable Base Rate. Such Lessor Amounts and Loans, as the case may be, shall be maintained at the Base Rate until the date on which the Lessor and the Lenders shall be able to obtain an Adjusted Eurodollar Rate for the amount of such Advance, at which time such Base Rate Lessor Amounts and such Base Rate Loans shall convert to Eurodollar Lessor Amounts or Eurodollar Loans, as the case may be. SECTION 3.5 Calculation of Land Loan Balance, Land Lessor Balance, ----------------------------------------------------- Improvement Loan Balance and Improvement Lessor Balance. The Administrative - ------------------------------------------------------- Agent shall calculate on each Funding Date (i) the outstanding Lessor Balance and the allocation thereof between Land Lessor Balance and the Improvement Lessor Balance and (ii) the outstanding Loan Balance and the allocation thereof between the Land Loan Balance and the Improvement Loan Balance and shall furnish a statement of such calculation to the Lessor. SECTION 3.6 [Intentionally deleted] SECTION 3.7 Capitalized Interest and Yield During Construction Period. --------------------------------------------------------- From the Documentation Date until the Completion Date, all interest and Yield shall accrue and shall be added to the Improvement Loan Amount and the Improvement Lessor Amount, on each Funding Date. Such capitalized interest and Yield shall constitute part of each Advance made with respect to the Property and the Construction Agent shall be deemed to have submitted monthly a Funding Request to the Administrative Agent with respect to such capitalized interest and Yield whether or not such amounts are specifically set forth in any Funding Request. 6 ARTICLE IV YIELD; INTEREST; FEES SECTION 4.1 Yield. ----- (a) The Lessor Amounts outstanding from time to time shall accrue yield ("Yield") at the applicable Yield Rate, calculated using the actual number ----- of days elapsed and, when the Yield Rate is based on the Adjusted Eurodollar Rate, a 360-day year basis. Upon the occurrence, and during the continuance of a Default, the principal of and, to the extent permitted by law, Yield on the Lessor Amounts and any other amounts owing hereunder or under the other Operative Documents shall bear interest (the "Overdue Interest"), payable on ---------------- demand, at the Overdue Rate (or if no rate is applicable, whether in respect of interest, fees or other amounts, then the sum of (i) 2.00% per annum plus (ii) the Base Rate). (b) The Administrative Agent shall distribute, in accordance with Article VII, the Lessor Basic Rent and all other amounts due in satisfaction of - ----------- the Lessor Balance under the Lease from time to time. (c) During the Construction Period, the Yield shall accrue on the outstanding Lessor Amounts and shall be capitalized and constitute part of each Advance requested by the Construction Agent pursuant to Section 3.4, on each ----------- Scheduled Payment Date during such Construction Period, and on the last day thereof. (d) During the Basic Lease Term, Yield shall accrue on the outstanding Lessor Amounts and shall be paid on the Basic Rent Payment Date that corresponds to the last day of each Interest Period. SECTION 4.2 Interest on Loans. ----------------- (a) Each Loan shall accrue interest computed and payable in accordance with the terms of the Loan Agreements. During the Basic Lease Term, interest shall accrue on the outstanding Loans and shall be paid on the Basic Rent Payment Date that corresponds to the last day of each Interest Period. (b) The Administrative Agent shall distribute, in accordance with Article VII, the Lender Basic Rent and all other amounts due with respect to the - ----------- Loan Balance, paid to the Administrative Agent by the Lessee under the Assignment of Lease, Rent, Construction Period Pledge Agreement and CAA from time to time. To the extent that any payment of Basic Rent includes amounts due to a Related Party Lender, such payment of Basic Rent shall be made net of the amounts due to 7 such Related Party Lender and the Lessee. The Related Party Lender hereby so acknowledge that it shall have received adequate consideration for the transfer of value represented by such netting. SECTION 4.3 Prepayments. ----------- (a) Voluntary Prepayments. The Lessee shall have the right to --------------------- prepay an amount (a) equal to the current aggregate outstanding Lessor Balance and the Loan Balance in whole from time to time pursuant to the exercise of the Purchase Option pursuant to Section 18.1 of the Master Lease and Section 3.2 of ------------ ----------- the Construction Agency Agreement or (b) equal to the amount paid under Section ------- 18.2 of the Master Lease relating to the exercise of the Undeveloped Land - ---- Purchase Option pursuant thereto, in each case, without premium or penalty; provided, however, that any prepayment of Loans and Lessor Amounts which are - -------- ------- Eurodollar Loans or Eurodollar Lessor Amounts will be subject to Section 13.10. ------------- The application of each such prepayment with respect to any Lease Balance shall be determined by the Lessee and the Administrative Agent. The Lessee shall not be entitled to or have the right to reborrow any amounts repaid to the Lessor and the Administrative Agent. (b) Mandatory Prepayments. --------------------- (i) If at any time the sum of the aggregate amount of outstanding Lease Balance, without duplication, shall exceed the Maximum Commitment Amount, the Lessee shall immediately make payments in respect of the Land Lessor Amount, Improvement Lessor Amount, Land Loan Amount and Improvement Loan Amount to the Administrative Agent in an amount sufficient to eliminate such excess. Payments required to be made hereunder shall be applied pro rata by the Administrative Agent to Base Rate Loans and Base Rate Lessor Amounts and then to Eurodollar Loans and Eurodollar Lessor Amounts in direct order of their Interest Period maturities. (ii) All amounts payable by the Lessee pursuant to Article XV, ---------- XVI, XVIII or XX of the Master Lease shall be used to prepay amounts --- ----- -- outstanding under the Loan Balance and Lessor Balance in the manner set forth in Article VII. ----------- (iii) Any payments made pursuant to Section 4.3(b)(i) or (ii) ----------------- ---- shall reduce the Lease Balance by the amount of any such payment. (iv) The Lessee shall not be entitled to or have the right to reborrow any amounts repaid to the Lessor and the Administrative Agent on behalf of the Lenders. (c) Prepayments to Related Party Lender. To the extent any ----------------------------------- voluntary or mandatory prepayment described above includes amounts due to a Related Party Lender, such prepayment shall be made net of the amounts due to such Related Party Lender and the Lessee and 8 Related Party Lender hereby so acknowledge that the Related Party Lender shall have received adequate consideration for the transfer of value represented by such netting. (d) Notice. The Lessee will provide notice to the Lessor and the ------ Administrative Agent (which shall promptly notify each Lender, unless such lender is the Related Party Lender) of any voluntary prepayment by 11:00 A.M. (New York City time) at least three (3) Business Days prior to the date of such voluntary prepayment. SECTION 4.4 Fee. The Lessee shall pay to the Administrative --- Agent for the benefit of the Lessor on the Documentation Date the fees specified in the Engagement Letter. SECTION 4.5 Place and Manner of Payments. Except as otherwise ---------------------------- specifically provided herein, all payments hereunder shall be made to the Administrative Agent in Dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind (except that amounts due a Related Party Lender shall be deducted from such payments), to the Account not later than 2:00 P.M. (New York City time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Lessee shall, at the time it makes any payment under any Operative Document, specify to the Administrative Agent how such payment is to be applied to the Loan Balance and Lessor Balance, and in the event that the Lessee fails to so specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Participants in such manner as the Administrative Agent may determine to be appropriate in respect of obligations owing by the Lessee, unless an Event of Default shall have occurred and be continuing in which event the provisions of Section 7.7 shall apply. The Administrative Agent will ----------- distribute such payments to the Participants in accordance with Article VII, if ----------- any such payment is received prior to 2:00 P.M. (New York City time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Administrative Agent will distribute such payment to the Participants on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest (at the applicable Base Rate or Adjusted Eurodollar Rate) and fees for the period of such extension). SECTION 4.6 Pro Rata Treatment and Payments. Except to the extent ------------------------------- otherwise provided herein or in any other Operative Document, each Advance by the Administrative Agent shall be made pro rata according to the Lender Commitment Percentage and the Lessor Commitment Percentage. Each payment or prepayment by the Lessee to the Administrative Agent in satisfaction of the Loan Balance and the Lessor Balance shall be made pro rata according to the respective outstanding principal amounts of the (i) Loans then held by each Lender (it being understood that any payment so made in respect of principal of any Lender's Loans shall be deemed to ratably reduce the outstanding amount of each Lender's Loan Balance) and (ii) Lessor Amounts held by the Lessor. 9 SECTION 4.7 Sharing of Payments. The Participants agree among ------------------- themselves that, in the event that a Participant shall obtain payment to satisfy any part of the Loan Balance or Lessor Balance or any other obligation owing to such Participant under the Operative Documents through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Participant under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Participation Agreement, such Participant shall promptly purchase from the other Participant a participation in such Loan Balance or Lessor Balance and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that each Participant shares such payment in accordance with its respective ratable shares as provided for in this Participation Agreement. The Participants further agree among themselves that if payment to a Participant obtained by such Participant through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, the Participant which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to the Participant whose payment shall have been rescinded or otherwise restored. The Lessee agrees that a Participant so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation as fully as if such Participant were a holder of such Loan Balance or Lessor Balance or other obligation in the amount of such participation. Except as otherwise expressly provided herein, if a Participant shall fail to remit to any other Participant an amount payable by such Participant to the other Participant pursuant to the Operative Documents on the date when such amount is due, such payments shall be made together with interest thereon (at no additional expense to the Lessee) from the date such amount is due until the date such amount is paid to such other Participant at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, a Participant receives a secured claim in lieu of a setoff to which this Section 4.7 applies, such Participant shall, to the ----------- extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the other Participant under this Section ------- 4.7 to share in the benefits of any recovery on such secured claim. - --- Notwithstanding the foregoing, no Participant shall be required under this Section 4.7 to share any payment received by it with a Related Party Lender. - ----------- ARTICLE V CERTAIN INTENTIONS OF THE PARTIES SECTION 5.1 Intent. It is the intent of the parties that: (a) ------ the Lease constitutes an Operating Lease as determined by GAAP from the Lessor to the Lessee for purposes of the Lessee's financial reporting, (b) the Lease and other transactions contemplated hereby will result in the Lessee being recognized as the owner of the Property for Federal and state income tax and bankruptcy 10 purposes, (c) the Memorandum of Lease grants to Lessor a Lien on the Lessee's interest in the Property covered thereby, and (d) the obligations of the Lessee to pay Basic Rent and any part of the Lease Balance shall be treated as payments of interest and principal, respectively, for Federal and state income tax and bankruptcy purposes. The Lessor shall be deemed to have a valid and binding security interest in and Lien on the Lessee's interest in the Property, free and clear of all Liens other than Permitted Property Liens, as security for the obligations of the Lessee under the Operative Documents. Each of the parties hereto agrees that it will not, nor will it permit any Affiliate to at any time, take any action with respect to the preparation or filing of any income tax return, including an amended income tax return, to the extent that such action would be inconsistent with the intention of the parties expressed in this Section 5.1. - ----------- Specifically, without limiting the generality of the foregoing, the parties hereto intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting the Lessee or any Participant or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as purchase money loans made by the Participants to the Lessee. SECTION 5.2 Amounts Due Under Lease. Anything else herein or elsewhere ----------------------- to the contrary notwithstanding, it is the intention of the Lessee, the Lessor, the Administrative Agent and the Lenders that: (i) the amount and timing of installments of Lessor Basic Rent and the Lender Basic Rent shall be due and payable from time to time from the Lessee under the Lease; (ii) if the Lessee elects a Purchase Option (other than the exercise of the Undeveloped Land Purchase Option) or becomes obligated to purchase the Property, then the Lease Balance and all other obligations of the Lessee owing to the Lessor and the Lenders related thereto shall be immediately due and payable in full by the Lessee; and (iii) if the Lessee properly elects the Remarketing Option, the Lessee shall only be required to pay to the Administrative Agent the proceeds of the sale of the Property, the Maximum Recourse Amount and any amounts due pursuant to Article XIII hereof and Section 20.1 of the Master Lease. ------------ ------------ ARTICLE VI CONDITIONS TO FUNDING SECTION 6.1 Documentation Date; Initial Funding Date. The obligation ---------------------------------------- of the Lessor to make available any Lessor Amount and the obligation of the Lenders to make any Loans on the Initial Funding Date, are subject to satisfaction or waiver on or prior to the Initial Funding Date of the following conditions precedent: 11 (a) Operative Documents. All Operative Documents, except for the ------------------- Basic Term Loan Agreement and exhibits thereto and the Basic Term Pledge Agreement and exhibits thereto, shall have been duly authorized, executed and delivered by the parties hereto. (b) Constituent Documents. The Lessee shall have delivered to the --------------------- Administrative Agent and the Lessor the following: (i) Articles of Incorporation. Copies of its articles of ------------------------- incorporation, charter documents, or other governing documents, as the case may be, certified to be true and correct as of a recent date by the appropriate governmental authority of the jurisdiction of its incorporation or creation and in full force and effect as of such date. (ii) Resolutions. Copies of resolutions of its Board of ----------- Directors approving the transactions contemplated by the Operative Documents, and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of the Lessee as of the Documentation Date to be true and correct and in full force and effect as of such date. (iii) By-laws. A copy of its by-laws certified by a secretary ------- or assistant secretary of the Lessee as of the Documentation Date to be true and correct and in full force and effect as of such date. (iv) Good Standing. A certificate of good standing, certified ------------- as of a recent date by the appropriate governmental authorities of the jurisdiction of incorporation. (c) Confirmation of the Development Agreement. The Site Development ----------------------------------------- Permit Amendment shall be approved in writing by the Director of Planning and the Director of Planning shall make a formal and final non-appealable written determination that such approved Site Development Permit Amendment shall not require an amendment to the Development Agreement in order to be vested under the Development Agreement. (d) Representations and Warranties. On the Initial Funding Date, ------------------------------ the representations and warranties of the Lessee set forth in the Participation Agreement and in the Operative Documents (or in certificates delivered pursuant thereto) executed by Lessee, including, without limitation, the representation in Sections 8.2 and 8.3 of the Participation Agreement, shall be true and ------------ --- correct in all material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (e) Fees. The fee payable under Section 4.4 hereof shall have been ---- ----------- paid to the Administrative Agent, or will be paid from the proceeds of such Advance. 12 (f) Appraisal. The Lessor shall have received an Appraisal of the --------- Property, assuming the Construction of the Improvements thereon, in form and substance reasonably satisfactory to the Administrative Agent and the Lessor. (g) Governmental Approvals. All necessary Governmental Actions ---------------------- required by any Requirement of Law for the purpose of authorizing the Construction Agent to commence the Construction of the initial Phase of Construction thereon shall have been obtained and be in full force and effect. (h) Responsible Officer's Certificate. The Administrative Agent and --------------------------------- the Lessor shall have received a Responsible Officer's Certificate from the Lessee, in substantially the form of Exhibit B attached hereto, dated as of the --------- Initial Funding Date, stating that (i) to such Responsible Officer's knowledge each and every representation and warranty of the Lessee, contained in each Operative Document to which it is a party is true and correct in all material respects on and as of the Initial Funding Date; (ii) to such Responsible Officer's knowledge no Default or Event of Default has occurred and is continuing under any Operative Document to which it is a party; (iii) to such Responsible Officer's knowledge each Operative Document to which the Lessee is a party is in full force and effect with respect to it; (iv) the Lessee has duly performed and complied with all conditions contained herein or in any other Operative Document required to be performed or complied with by it on or prior to the Initial Funding Date and (v) to such Responsible Officer's knowledge there has been no change in the Lessee's financial condition prior to the Initial Funding Date which has a Material Adverse Effect. (i) Evidence of Insurance. The Lessor, the Administrative Agent and --------------------- the Insurance Consultant shall have received satisfactory evidence that the insurance required under the Construction Agency Agreement shall be in effect, and such evidence (which shall include, without limitation, certificates of insurance) shall set forth the respective coverage, insured, additional insured, limits of liability, carrier, policy number and period of coverage. (j) Environmental Audit. The Lessor shall have received an ------------------- Environmental Audit dated no earlier than six (6) months prior to the Initial Funding Date with respect to the Land in form and substance satisfactory to the Lessor and the Administrative Agent. (k) Lessor Financing Statements. In connection with the acquisition --------------------------- of Facility Equipment, the Lessee shall have delivered to the Administrative Agent all Lessor Financing Statements relating to such Facility Equipment as the Lessor or the Administrative Agent may reasonably request in order to protect the interests of the Lessor under the Master Lease to the extent the Master Lease constitutes a security agreement. (l) Recordation of Lessor Mortgage and the Lender Mortgage and Filing ----------------------------------------------------------------- of Lessor Financing Statements and Lender Financing Statements. Each of the - -------------------------------------------------------------- Participants shall have 13 received evidence or a commitment reasonably satisfactory to it that each of (i) the Lessor Mortgage, (ii) the Lender Mortgage, (iii) the Assignment of Lease, Rent, Construction Period Pledge Agreement and CAA and all supplements thereto and (iv) the Lessor Financing Statements and the Lender Financing Statements, in each case relating to the Property or Facility Equipment has been, or are being, recorded in a manner sufficient to properly perfect each of their interests therein. (m) Property Survey and Title Insurance. The Lessee shall have ----------------------------------- delivered to the Lessor and the Administrative Agent a survey of the Land certified to the Participants and the title company and otherwise in form reasonably acceptable to the Participants and a commitment to deliver an American Land Title Association ("ALTA") extended owners and lenders title ---- insurance policy covering the Property in favor of the Lessor and the Administrative Agent for the benefit of the Lenders, and such policy shall be in an amount not less than the Lease Balance and shall be reasonably satisfactory to the Lenders and the Lessor with such customary endorsements issued by the title company as a routine matter, if requested by the Lessor or the Administrative Agent. (n) Lessee Opinion of Counsel. The Administrative Agent, for the ------------------------- benefit of the Lenders, and the Lessor shall have received an opinion or opinions of counsel for the Lessee dated as of the Documentation Date and addressed to the Lessor and the Administrative Agent, addressing matters of Federal, Delaware General Corporation Law, California, New York and other relevant jurisdiction law in form and substance reasonably satisfactory to the Lessor and the Administrative Agent, it being understood that certain opinions may be provided by internal counsel to the Lessee. The opinion on California, Delaware and Federal law shall be given by Gray Cary Ware & Freidenrich LLP and the opinion on New York law shall be given by Clifford Chance Rogers & Wells LLP with respect to the perfection of the pledged Collateral. (o) Collateral; Perfection Opinion. Immediately prior to the initial ------------------------------ Advance, the Lessee shall have deposited with the Collateral Agent, Sufficient Collateral in the form of U.S. Government Obligations to satisfy the requirements of Section 14.1 hereof and Section 2.4(a) of the Construction ------------ -------------- Period Pledge Agreement and, in connection with the first such deposit, the Lessor and the Administrative Agent for the benefit of the Lenders shall have received an opinion of New York counsel for the Lessee as to the creation, attachment and perfection of the security interest of the Collateral Agent (for the benefit of the Lessor) in such Collateral, in form and substance reasonably satisfactory to the Lessor and the Administrative Agent. All documents and instruments required to be delivered pursuant to this Section 6.1 shall be or deemed to be delivered at the New York offices of ----------- Simpson Thacher & Bartlett or at such other location as may be determined by the Lessor, the Administrative Agent and the Lessee. SECTION 6.2 All Funding Dates. The obligation of the Lessor to make ----------------- available any Lessor Amounts on the Initial Funding Date or any other Funding Date and the obligation of the Lenders to make any Loans on the Initial Funding Date or other Funding Date, are subject to 14 satisfaction or waiver on or prior to such Initial Funding Date or other Funding Date of the following conditions precedent: (a) Funding Request. The Administrative Agent shall have received an --------------- executed Funding Request in accordance with Section 3.4. The delivery of ----------- the Funding Request and the acceptance of the proceeds of such Advance shall constitute a representation and warranty by the Lessee that on the applicable Funding Date (both immediately before and after giving effect to the making of such Advance and the application of the proceeds thereof), that the statements made in Section 8.2 and Section 8.3 are true and ----------- ----------- correct in all material respects. (b) Fees. All fees due and payable pursuant to this Participation ---- Agreement and the other Operative Documents shall have been paid or shall be paid out of the proceeds of such Advance. (c) Representations and Warranties. On the applicable Funding Date, ------------------------------ the representations and warranties of the Lessee contained in Sections 8.2 ------------ and 8.3 and in each of the other Operative Documents shall be true and --- correct in all material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (d) Litigation. On the applicable Funding Date, there shall not be ---------- any actions, suits or proceedings pending or, to the knowledge of the Lessee threatened with respect to the Lessee: (i) that are reasonably likely to have a Material Adverse Effect, or (ii) which have been filed or threatened by or for or on behalf of the Lessee questioning or challenging the validity of the Operative Documents or the rights or remedies of the Administrative Agent, the Lessor or the Lenders with respect to the Lessee or the Land, Construction or Improvements under the Operative Documents. (e) No Default or Event of Default. There shall not have occurred and ------------------------------ be continuing any Default or Event of Default, and no Default or Event of Default will have occurred after giving effect to the making of the Advance requested by such Funding Request. (f) Available Commitments. After giving effect to the applicable --------------------- Advance, the condition set forth in the last paragraph of Section 3.1 shall ----------- not be violated. (g) Taxes. All taxes, fees and other charges in connection with the ----- execution, delivery, recording, filing and registration of the Operative Documents shall have been paid or provisions for such payment shall have been made to the reasonable satisfaction of the Lessor and the Administrative Agent. 15 (h) Collateral. The Lessee shall have deposited Sufficient Collateral ---------- with the Collateral Agent to satisfy the requirements of Section 14.1 hereof and ------------ Section 2.4(a) of the Construction Period Pledge Agreement. - -------------- (i) Lessor Financing Statements and Lender Financing Statements. To ----------------------------------------------------------- the extent not previously received, each of the Participants shall have received evidence that Lessor Financing Statements and Lender Financing Statements with respect to Facility Equipment have been, or are being, recorded in a manner sufficient to properly perfect each of their interests therein. (j) Improvements Budget. The Construction Agent shall have delivered ------------------- the preliminary Improvements Budget for the Improvements to be constructed on the Land which shall be in form and substance acceptable to the Lessor and the Administrative Agent. Prior to the Construction Agent commencing any Phase of Construction in which the preliminary Improvements Budget does not accurately reflect the anticipated costs associated with such Phase of Construction, the Construction Agent must obtain the Lessor's and Administrative Agent's prior approval to the changes needed to the preliminary Improvements Budget in order to accurately reflect the anticipated costs for such Phase of Construction. The Construction Agent shall demonstrate to the reasonable satisfaction of the Lessor and the Administrative Agent that such budget includes a line item for contingencies of not less than five percent (5%) of the Improvements Budget. (k) Plans and Specifications. The Construction Agent shall have ------------------------ delivered the Plans and Specifications for the Improvements to be constructed on the Land which shall be in form and substance acceptable to the Lessor and the Administrative Agent; provided, however, to the extent that the Funding Request -------- ------- only requests an Advance for a Phase of Construction, the Plans and Specifications need only be for the Improvements which are part of such Phase of Construction. (l) Title Update. The Lessee shall provide to the Lessor and the ------------ Administrative Agent an update to the policy provided pursuant to Section 6.1(m) -------------- to the extent such policy does not provide coverage for the full amount of proposed Construction Costs reflected in the Improvements Budget which shall be in form and substance acceptable to the Lessor and the Administrative Agent. (m) Governmental Approvals. All necessary Governmental Actions ---------------------- required by any Requirement of Law for the purpose of authorizing the Construction Agent to commence the Construction of the Phase of Construction for which the Funding Request covers shall have been obtained and be in full force and effect. 16 SECTION 6.3 Conditions to Completion Date. The Completion Date shall ----------------------------- be deemed to have occurred for purposes of the Operative Documents on the earliest to occur of the following dates: (a) the date on which the Construction shall have been substantially completed in accordance with the applicable Plans and Specifications therefor as confirmed by a completion certificate from the Construction Agent substantially in the form of Exhibit C hereto (a "Completion --------- ---------- Certificate"), which Completion Certificate shall have attached to it the ----------- punchlist items for the Improvements with cost allocations; or (b) the date on which the Property shall be ready for occupancy and operation in accordance with the Plans and Specifications therefor, as evidenced by the issuance by the appropriate Governmental Authority of a temporary certificate of occupancy for the Improvements contemplated by the Plans and Specifications for the Property. SECTION 6.4 Other Actions in Respect of Completion. In connection with -------------------------------------- the Completion of the Property and (i) simultaneous with the commencement of the Basic Lease Term entries made on the Loan Notes issued under the Construction Period Loan Agreement with respect to the Property shall be canceled and entries shall be made on the Notes issued under the Basic Term Loan Agreement in the amount of such canceled entries and (ii) Sufficient Collateral with respect to the Property shall be deposited with the Collateral Agent under the Basic Term Pledge Agreement and the Collateral deposited with the Collateral Agent under the Construction Period Pledge Agreement shall be released to the Lessee. ARTICLE VII DISTRIBUTIONS SECTION 7.1 Basic Rent. Subject to Section 7.12 hereof, each payment ---------- ------------ of Basic Rent (and any payment of interest on overdue installments of Basic Rent) received by the Administrative Agent shall be distributed by the Administrative Agent: first, pro rata to the Lenders, Lender Basic Rent for payment to the ----- Tranche A Lender of interest then due on the Tranche A Loan and to the Tranche B Lenders of interest then due on the Tranche B Loan, and as among the Tranche B Lenders, pro rata based on the interest due to each Tranche B Lender as well as any Overdue Interest due to the Lenders (to the extent permitted by Applicable Law), and second, to the Lessor for payment of the Yield then due on the Lessor ------ Amounts, as well as any Overdue Interest due to the Lessor (to the extent permitted by Applicable Law). 17 SECTION 7.2 Purchase Payments by the Lessee. ------------------------------- Any payment received by the Administrative Agent as a result of: (i) the purchase of any or all of the Property in connection with the exercise of a Purchase Option, or (ii) compliance with the obligation to purchase (or cause its designee to purchase) the Property in accordance with Section 20.1 of ------------ the Master Lease, or (iii) failure to fulfill one or more of the conditions to the exercise of the Remarketing Option with respect to the Property pursuant to Section 20.1 of the Master Lease, or ------------ (iv) the payment of the Lease Balance in accordance with Section ------- 15.1 of the Master Lease, or ---- (v) the payment of the Lease Balance from the proceeds of any Casualty or Condemnation pursuant to Section 14.1 of the Master ------------ Lease, shall be distributed by the Administrative Agent, subject to Section 4.3(c) and -------------- Section 7.12, first, to the Lenders on a pro rata basis in accordance with the - ------------ Lender Commitment Percentage, in satisfaction of the Loan Balance, then, second, ------ to the Lessor in satisfaction of the Lessor Balance. SECTION 7.3 Payment of Maximum Recourse Amount and Construction --------------------------------------------------- Recourse Amount. The full payment to the Administrative Agent of the Maximum - --------------- Recourse Amount in accordance with Section 20.1(g) of the Master Lease and the --------------- Construction Recourse Amount in accordance with Section 5.3(b)(ii) of the ------------------ Construction Agency Agreement, shall, in each case, be applied: (a) with respect to the amount paid under clause (i) of the definition of "Construction Recourse Amount" and clause (i) of the definition of "Maximum Recourse Amount", in the following order of priority: first, to the Lenders, on a pro rata basis in accordance with the ----- Lender Commitment Percentage for application to pay in full the Land Loan Balance; and second, to the Lessor, for application to pay in full the Land ------ Lessor Balance; and 18 (b) with respect to the amount paid under clause (ii) of the ----------- definition of "Construction Recourse Amount" and clause (ii) of the ----------- definition of "Maximum Recourse Amount", in the following order of priority: first, to the Lenders, on a pro rata basis in accordance with ----- the Lender Commitment Percentage for application to pay in full the Improvement Loan Balance; and second, the balance, if any, to the Lessor, for application to ------ pay the Improvement Lessor Balance. SECTION 7.4 Sales Proceeds of Remarketing. The Gross Remarketing ----------------------------- Proceeds from the exercise of the Remarketing Option pursuant to Article XX of ---------- the Master Lease together with any payment made as a result of an appraisal pursuant to Section 13.2, shall be allocated between the Land Lease Balance and ------------ the Improvement Lease Balance in accordance with Section 20.1(j) of the Master --------------- Lease, and distributed by the Administrative Agent: (a) for the Land in the following order of priority: first, the balance, if any, of the Attributed Fair Market Sales ----- Value (Land) less the aggregate of the amounts distributed in clause "first" and ---- ----- "second" of Section 7.3(a), shall promptly be distributed to, or as directed by, ------ -------------- the Lessee; and (b) for the Improvements in the following order of priority: first, to the Lessor, an amount equal to the Attributed Fair ----- Market Sales Value (Improvements) less the aggregate of the amounts distributed in clauses "first" and "second" of Section 7.3(b), for application to pay any ----- ------ -------------- outstanding Improvement Lessor Balance; and second, the balance, if any, of such payments and amounts ------ remaining after the Improvement Lease Balance has been reduced to zero shall promptly be distributed to, or as directed by, the Lessee. SECTION 7.5 Supplemental Rent. All payments of Supplemental ----------------- Rent (excluding any amounts payable pursuant to the preceding provisions of this Article VII) shall be distributed promptly by the Administrative Agent upon - ----------- receipt thereof to the Persons entitled thereto pursuant to the Operative Documents. SECTION 7.6 Collateral Realizations. All amounts realized and ----------------------- received by the Administrative Agent on account of the exercise of the Lessor's, the Administrative Agent's or the Collateral Agent's remedies with respect to the Collateral shall be distributed by the Administrative Agent (a) with respect to repayment of the Lease Balance, in the following order of priority: 19 first, so much of such payment or amount as shall be required to ----- reimburse the Collateral Agent for any tax, expense or other loss incurred by the Collateral Agent (to the extent not previously reimbursed and to the extent incurred in connection with any duties as the "Collateral Agent" under a Pledge Agreement), shall be distributed to the Collateral Agent for its own account; second, so much of such payments or amounts as shall be required to ------ pay the Administrative Agent the amounts payable to it pursuant to any expense reimbursement or indemnification provisions of the Operative Documents, including, without limitation all amounts required to be paid pursuant to Articles IX and XIII, shall be distributed to the ----------- ---- Administrative Agent for its own account; third, so much of such payments or amounts as shall be required to pay ----- the Lenders on a pro rata basis in accordance with the Lender Commitment Percentage or the Lessor the amounts payable to it pursuant to any expense reimbursement or indemnification provisions of the Operative Documents, including without limitation all amounts required to be paid pursuant to Articles IX and XIII, shall be distributed to the Lenders or the Lessor, as the case may be; fourth, to the Lenders, on a pro rata basis in accordance with the ------ Lender Commitment Percentage for application to pay in full the outstanding Loan Balance; and fifth, to the Lessor, for application to pay in full the outstanding ----- Lessor Balance. sixth, the balance, if any, of such payment or amounts remaining after ----- satisfaction of all the Lessee's liabilities under the respective Operative Documents shall be promptly distributed to, or as directed by, the Lessee; and (b) with respect to repayment of the Construction Recourse Amount or the Maximum Recourse Amount, in the following order of priority: first, so much of such payment or amount as shall be required to ----- reimburse the Collateral Agent for any tax, expense or other loss incurred by the Collateral Agent (to the extent not previously reimbursed and to the extent incurred in connection with any duties as the "Collateral Agent" under a Pledge Agreement), shall be distributed to the Collateral Agent for its own account; second, so much of such payments or amounts as shall be required to ------ pay the Administrative Agent the amounts payable to it pursuant to any expense reimbursement or indemnification provisions of the Operative Documents, including, without limitation all amounts 20 required to be paid pursuant to Articles IX and XIII, shall be distributed ----------- ---- to the Administrative Agent for its own account; third, so much of such payments or amounts as shall be required to pay ----- the Lenders on a pro rata basis in accordance with the Lender Commitment Percentage or the Lessor the amounts payable to it pursuant to any expense reimbursement or indemnification provisions of the Operative Documents, including without limitation all amounts required to be paid pursuant to Articles IX and XIII, shall be distributed to the Lenders or the Lessor, as the case may be; fourth, to the Lenders, on a pro rata basis in accordance with the ------ Lender Commitment Percentage for application to pay in full the outstanding Loan Balance; fifth, to the Lessor, for application to pay in full the outstanding ----- Land Lessor Balance; and sixth, the balance, to the Lessor, for application to pay the ----- Improvement Lessor Amount; It is hereby acknowledged and agreed that no Related Party Lender or an assignee of a Related Party Lender shall have any interest in the proceeds from the realization of the Collateral and such Related Party Lender shall waive all claims to such proceeds. SECTION 7.7 Distribution of Payments After Lease Event of Default. ----------------------------------------------------- (a) All amounts received by the Administrative Agent during the continuance of a Lease Event of Default, shall, except as provided in Section 7.6, be distributed by the Administrative Agent in the following order - ----------- of priority: first, so much of such payment or amount as shall be required ----- to reimburse the Lessor or the Lenders for any tax, expense or other loss incurred by the Lessor or the Lenders (to the extent not previously reimbursed and to the extent incurred in connection with any duties as the Lessor or the Lenders), shall be distributed to the Lessor or the Lenders on a pro rata basis in accordance with the Lender Commitment Percentage for their own account; second, so much of such payments or amounts as shall be required to ------ pay the Administrative Agent the amounts payable to it pursuant to any expense reimbursement or indemnification provisions of the Operative Documents, including, without limitation all amounts required to be paid pursuant to Articles IX and XIII, shall be distributed to the ----------- ---- Administrative Agent for its own account; 21 third, so much of such payments or amounts as shall be required to pay ----- the Lenders and the Lessor the amounts payable to them pursuant to any expense reimbursement or indemnification provisions of the Operative Documents, including, without limitation all amounts required to be paid pursuant to Articles IX and XIII, shall be distributed to the Lenders on a pro rata basis in accordance with the Lender Commitment Percentage and the Lessor without priority of one over the other in accordance with the amount of such payment or payments payable to each such Person; fourth, subject to Section 4.3(c) and Section 7.12, to the Lenders on ------ -------------- ------------ a pro rata basis in accordance with the Lender Commitment Percentage to pay in full any outstanding Loan Balance; fifth, to the Lessor to pay in full the Lessor Balance; and ----- sixth, the balance, if any, of such payment or amounts remaining ----- thereafter shall be promptly distributed to, or as directed by, the Lessee. (b) All payments received and amounts realized by the Administrative Agent in connection with any Casualty or Condemnation during the continuance of a Lease Event of Default shall be distributed by the Administrative Agent as follows: (i) in the event that the Lessor and the Lenders elect to pay all or a portion of such amounts to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with Section 14.1(a) of the Master Lease, then such amounts shall be --------------- distributed to the Lessee, and (ii) in the event that the Lessor and the Lenders elect to apply all or a portion of such amounts to the purchase price of the related Property in accordance with Section 14.1(a) and Article XV of --------------- ---------- the Master Lease, then such amounts shall be distributed in accordance with clause (a). SECTION 7.8 Other Payments. -------------- (a) Except as otherwise provided in Sections 7.1, 7.2, 7.3, 7.4, 7.5, ------------ --- --- --- --- 7.6, 7.7, 7.9, 7.10 and clause (b) below, any payment received by the --- --- --- ---- ---------- Administrative Agent for which no provision as to the application thereof is made in the Operative Documents or elsewhere in this Article VII shall ----------- be distributed, subject to Section 7.12, first to the Lenders on a pro rata ------------ basis in accordance with the Lender Commitment Percentage, to the extent of the obligations owed to the Lenders, and then to the Lessor. 22 (b) Except as otherwise provided in Sections 7.1, 7.2, 7.3, 7.4, 7.5, ------------ --- --- --- --- 7.6, 7.7, 7.9 and 7.10, all payments received and amounts realized by the --- --- --- ---- Administrative Agent on behalf of the Lenders, subject to Section 7.12, or ------------ the Lessor under the Master Lease, or otherwise with respect to the Property to the extent received or realized at any time after payment in full of the Loan Balance and the Lessor Balance and any other amounts due and owing to the Lenders or the Lessor, shall be remitted to the Administrative Agent and distributed forthwith by the Administrative Agent in the order of priority set forth in Section 7.7. ----------- (c) Except as otherwise provided in Sections 7.1 and 7.2, any payment ------------ --- received by the Administrative Agent for which provision as to the application thereof is made in an Operative Document but not elsewhere in this Article VII shall be distributed forthwith by the Administrative Agent ----------- to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document. SECTION 7.9 Casualty and Condemnation Amounts. Subject to Section --------------------------------- ------- 7.7(b), any amounts payable to the Administrative Agent as a result of a - ------ Casualty or Condemnation pursuant to Section 14.1 of the Master Lease and the ------------ Assignment of Lease, Rent, Construction Period Pledge Agreement and CAA shall be distributed as follows : (a) all amounts payable to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with Section 14.1(a) of the --------------- Master Lease shall be distributed to the Lessee, and (b) all amounts that are to be applied to the purchase price of the Property in accordance with Section 14.1(a) and Article XV of the Master --------------- ---------- Lease shall be distributed by the Lessor, subject to Section 7.12, first to ------------ the Lenders on a pro rata basis in accordance with the Lender Commitment Percentage, in satisfaction of the Loan Balance and then to the Lessor in satisfaction of the Lessor Balance. SECTION 7.10 Order of Application. To the extent any payment -------------------- made to the Lenders or the Lessor pursuant to Section 7.2, 7.3, 7.4, 7.6 or 7.7 ----------- --- --- --- --- is insufficient to pay in full the Loan Balance or the Lessor Balance, then each such payment shall first be applied to accrued interest then due to each Lender in the manner set forth in Section 7.1, "first", or Yield, as applicable, and ----------- then to the outstanding Loan Balance pro rata in accordance with the Lender Commitment Percentage, or the Lessor Balance, as applicable, subject to the provisions of Section 7.12. ------------ SECTION 7.11 Payments to Account. Unless otherwise expressly provided, ------------------- including Section 7.12, all payments made pursuant to the Operative Documents ------------ shall be made to the Account of the Administrative Agent. The Administrative Agent shall distribute all such funds to the Lessor to its account as set forth in Schedule II and it shall distribute such funds to the Lenders to their respective accounts as notified in writing from time to time, by such Lender to the Administrative Agent. 23 SECTION 7.12 Payments to Related Party Lender. Notwithstanding -------------------------------- anything contained in any Operative Document to the contrary, all payments due to a Related Party Lender under this Participation Agreement, the Basic Term Loan Agreement or otherwise under any Operative Document derived or to be derived from obligations payable by the Lessee as Rent or otherwise, and whether before or after an Event of Default, shall be satisfied and remediated by a deemed transfer of value from the Lessee and the Lessor to the Related Party Lender (which the Lessor, Lessee and Related Party Lender each acknowledge is made for adequate consideration) in the amount due the Related Party Lender which amount shall be netted by the Lessee from the payment of Rent or otherwise to be made to the Lessor; it being the intent of the Lessee, the Lessor and the Related Party Lender that due to the fact that the Related Party Lender and the Lessee will either both be Palm, Inc. or Affiliates of each other, the amounts due and payable by the Lessee under the Master Lease and the other Operative Documents whether in fact paid and whether before or after a Default or an Event of Default, to the extent assigned by the Lessor under the Lender Mortgage to pay principal and/or interest on the Loans, shall be offset dollar for dollar against amounts due and payable to the Related Party Lender under the Basic Term Loan Agreement, the Lender Mortgage and the Notes issued under the Basic Term Loan Agreement. ARTICLE VIII REPRESENTATIONS SECTION 8.1 Representations of the Participants. Each Participant ----------------------------------- represents and warrants to the other Participant and the Lessee that: (a) ERISA. Such Participant is not and will not be making its Loans ----- or funding its Lessor Amounts hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section 4975(e)(1) of the Code). (b) Power and Authority. Such Participant has the requisite power and ------------------- authority to enter into and perform under the Operative Documents to which it is a party. In addition the Lessor further represents and warrants to the Lessee that: (c) Organization. The Lessor is a corporation validly organized and ------------ existing and in good standing under the laws of the State of its incorporation. (d) Due Authorization, Non-Contravention, etc. The execution, ----------------------------------------- delivery and performance by the Lessor of this Participation Agreement and each other Operative 24 Document executed or to be executed by it are within its corporate powers, have been duly authorized by all necessary corporate action, and do not: (i) contravene its Constituent Documents; (ii) contravene any contractual restriction the contravention of which is reasonably likely to have a material adverse effect on the financial condition of the Lessor (including any covenant relating to the incurrence of indebtedness, which restrictions the Lessor hereby acknowledge are material), law or governmental regulation or court decree or order binding on or affecting it; or (iii) result in, or require the creation or imposition of, any Lien on any of its property (including the Property) other than as are contemplated by the Operative Documents. (e) Government Approval, Regulation, etc. No authorization or ------------------------------------ approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than in connection with the construction of the Improvements) is required for the due execution, delivery or performance by the Lessor of this Participation Agreement, or any other Operative Document to which it is a party. The Lessor is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (f) Validity, etc. This Participation Agreement constitutes the ------------- legal, valid and binding obligation of the Lessor enforceable in accordance with its terms, and each Operative Document executed by the Lessor pursuant hereto will, on the due execution and delivery thereof, be the legal, valid and binding obligation of the Lessor, enforceable in accordance with its terms, subject, in each case, as to enforceability, bankruptcy, insolvency, reorganization and other similar laws affecting enforcement of creditor rights generally (insofar as any such law relates to the bankruptcy, insolvency, reorganization or similar event of the Lessor) and, as to the availability of specific performance or other injunctive relief, subject to the discretionary power of a court to deny such relief and to general equitable principles. (g) Assignment. The Lessor has not assigned or transferred any of its ---------- right, title or interest in or under the Master Lease or the Construction Agency Agreement except in accordance with the Operative Documents. (h) Chief Place of Business. The Lessor's chief place of business, ----------------------- chief executive office and office where the documents, accounts and records relating to the transactions contemplated by this Participation Agreement and each other Operative Document are kept is located at its address set forth in Schedule II attached hereto. - ----------- 25 SECTION 8.2 Representations of the Lessee and the Guarantor. Palm, ----------------------------------------------- Inc. in its capacity as the Lessee and the Guarantor represents and warrants to the Lessor and the Lenders that: (a) Corporate Existence and Power. It is duly formed or incorporated ----------------------------- (as the case may be), validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation, and is duly qualified to do business and is in good standing as foreign corporation in the jurisdiction where the Lessee will lease the Property and where the conduct of its business requires it to so qualify. The Lessee and the Guarantor have all powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and needed to perform its obligations under this Participation Agreement and each other Operative Document to which it is a party and to own and hold under lease their properties. (b) Corporate and Governmental Authorization; No Contravention. The ---------------------------------------------------------- execution, delivery and performance by it of this Participation Agreement and each other Operative Document to which it is a party are within its lawful powers, have been duly authorized by all necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene any provision of Applicable Law or of its Constituent Documents, or, to its knowledge, contravene or constitute a default under any Material agreement, judgment, injunction, order, decree, Contractual Obligation, or other instrument binding upon it or result in the creation or imposition of any Lien on any asset of it(other than Permitted Property Liens). Neither the Lessee nor the Guarantor is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (c) Binding Effect. This Participation Agreement constitutes the -------------- legal, valid and binding agreement of the Lessee and the Guarantor and each of the other Operative Documents, when executed and delivered in accordance with this Participation Agreement, will constitute a valid and binding obligation of the Lessee and the Guarantor, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. (d) Financial Information. The audited consolidated balance sheet of --------------------- the Lessee and the Guarantor as of June 2, 2000 and the related consolidated statements of operations and cash flows for the fiscal year then ended, reported on by Deloitte & Touche, LLP and set forth in each of the Lessee's and the Guarantor's 2000 annual report on Form 10-K, a copy of which has been delivered to the Administrative Agent and the Lessor, fairly present, in conformity with GAAP, the consolidated financial position of the Lessee and the Guarantor as of such date and their consolidated results of operations and cash flows for such fiscal year. 26 (e) Litigation. There is no pending or threatened action, suit, ---------- claim, dispute or proceeding to which the Lessee or the Guarantor is a party, or by which the Lessee or the Guarantor may be bound, before any court, governmental agency or arbitrator which (i) would individually or in the aggregate have a Material Adverse Effect if determined in a manner adverse to the Lessee (taking into account the reasonable likelihood of an adverse determination and the availability of contributions from other potentially responsible parties) or (ii) purports to affect this Participation Agreement or the other Operative Documents or the transactions contemplated hereby or by the Operative Documents and would individually or in the aggregate have a Material Adverse Effect if determined in a manner adverse to the Lessee or the Guarantor. (f) Governmental Approvals. No Governmental Action by any ---------------------- Governmental Authority having jurisdiction over the Lessee or the Guarantor, or the Land, Construction, or Improvements is required to authorize or is required in connection with (i) the execution, delivery and performance (other than in connection with construction of Improvements) by the Lessee or the Guarantor of any Operative Document to which it is a party, or (ii) the legality, validity, binding effect or enforceability against the Lessee or the Guarantor of any Operative Document to which either is a party. (g) Compliance with ERISA. The Lessee and the Guarantor are in --------------------- compliance with all material provisions of ERISA, except to the extent that its failure to be in compliance is not reasonably likely to have a Material Adverse Effect. (h) Solvency. The Lessee and the Guarantor are Solvent. -------- (i) Environmental Matters. Except as described in the Environmental --------------------- Audit delivered to the Lessor and the Administrative Agent: (i) there are no pending or threatened claims, complaints, notices or requests for information relating to the Property received by the Lessee with respect to any alleged violation of any Environmental Law, which may reasonably be expected to have a Material Adverse Effect on the Property, and (ii) there are no pending or threatened complaints, notices or inquiries to the Lessee relating to the Property regarding potential liability of the Lessee under any Environmental Law, which may reasonably be expected to have a Material Adverse Effect. (j) Information Provided to Appraiser. All information and materials --------------------------------- which have been provided by the Lessee to the Appraiser in connection with the Appraisal are true and accurate in all material respects on the date as of which such information and materials are 27 dated or certified and are not incomplete by omitting to state any fact necessary to make such information not misleading at such time in light of the circumstances under which such information was provided. (k) Offer of Securities, etc. Neither the Lessee nor any Person ------------------------ authorized to act on the Lessee's behalf, has, directly or indirectly, offered the Notes, the outstanding Lessor Balance or any other similar securities (the sale or offer of which would be integrated with the sale or offer of the Notes or the outstanding Lessor Balance), for sale to, or solicited any offer to acquire any of the same from, any Person other than the Participants and other "accredited investors" (as defined in Regulation D of the Securities and Exchange Commission). (l) Federal Regulations. No part of the proceeds of any Advance will ------------------- be used, directly or indirectly, for any purpose which violates or which would be inconsistent with, the provisions of Regulations T, U or X of the Board of Governors of the Federal Reserve System. (m) Property. The Property as improved in accordance with the -------- applicable Plans and Specifications and the contemplated use thereof by the Lessee and its agents, assignees, employees, Lessee, licensees and tenants will comply with all Material Requirements of Law (including, without limitation, all zoning and land use laws and Environmental Laws and the Development Agreement, as amended as of the Documentation Date) and Material Insurance Requirements, except for such Requirements of Law as the Lessee shall be contesting in good faith by appropriate proceedings. (n) Plans and Specifications. Upon Completion, the Property will have ------------------------ available all Material services of public facilities and other utilities necessary for use and operation of the Property for its primary purposes including, without limitation, adequate water, gas and electrical supply, storm and sanitary sewerage facilities, telephone, other required public utilities and means of access between the Improvements and public highways for pedestrians and motor vehicles. All utilities serving the Property, or proposed to serve the Property in accordance with the Plans and Specifications, are located in, and vehicular access to the Improvements is provided by, either public rights-of-way abutting the Property or Appurtenant Rights. All Material licenses, approvals, authorizations, consents, permits (including, without limitation, building, demolition and environmental permits, licenses, approvals, authorizations and consents and any required amendment to the Development Agreement), easements and rights- of-way, including proof and dedication, required for (x) the use, treatment, storage, transport, disposal or disposition of any Hazardous Materials on, at, under or from the Property during the construction of the Improvements thereon, and (y) construction of the Improvements on the Property in accordance with the Plans and Specifications and the Construction Agency Agreement have either been obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, or will be obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, prior 28 to commencing each Phase of Construction for which the foregoing are required or use and operation, as applicable and in each case all of the foregoing to the extent necessary to build or use the Property shall be assignable to the Lessor. (o) Insurance. The Lessee has obtained or arranged for on behalf of --------- the Lessor insurance coverage covering the Property which meets the requirements of the Construction Agency Agreement, and such coverage is in full force and effect. The Lessee carries insurance with reputable insurers in respect of the Property and its material assets, in such manner, in such amounts and against such risks as is customarily maintained by the Lessee and its Affiliates that own or operate similar properties. (p) Flood Hazard Areas. Except as otherwise identified on the ------------------ applicable survey delivered pursuant to Section 6.1(m), no portion of the ------------- Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency. If any part of the Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, then flood insurance has been arranged for by the Construction Agent on behalf of the Lessor for the Property in accordance with the National Flood Insurance Act of 1968, as amended. (q) Offset. No right of offset will exist with respect to any Rent or ------ other sums payable under the Master Lease other than (i) the Lessee's right of offset for Deposit Taker Losses during the Basic Lease Term and (ii) as provided for pursuant to Section 7.12 hereof. ------------ (r) Land Lease. The representatives and warranties made under the ---------- Land Lease are true and correct in all material respects and no Lease Default or Lease Event of Default (as such terms are defined in the Land Lease) has occurred or is continuing. (s) Default/Event of Default. No Default or Event of Default has ------------------------ occurred or is continuing. SECTION 8.3 Representations of the Lessee and the Guarantor with ---------------------------------------------------- Respect to Each Funding Date. Each of the Lessee and Guarantor represents and - ---------------------------- warrants to the Lessor and the Lenders as of each Funding Date as follows: (a) Representations and Warranties. The representations and ------------------------------ warranties of the Lessee and the Guarantor set forth in the Operative Documents (including those in Section 8.2) are true and correct on and as ----------- of such Funding Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct on and as of such earlier date. Each of the Lessee and the Guarantor is in compliance with its obligations under the Operative Documents and there exists 29 no Default or Event of Default. No Default or Event of Default will occur as a result of, or after giving effect to, the Advance requested by the Funding Request on such Funding Date. (b) Improvements. The Construction of the Improvements to date has ------------ been performed in a good and workmanlike manner, substantially in accordance with the applicable Plans and Specifications and in compliance with all Insurance Requirements and Requirements of Law. (c) Liens. The Lessee has not permitted any Liens to be placed ----- against the Property other than Permitted Property Liens. (d) Advance. The amount of the Advance requested represents amounts ------- owed by the Construction Agent in respect of Construction Costs and Land Costs incurred prior to the date of such Advance and for which the Construction Agent has not previously been reimbursed by an Advance. Based upon the Improvements Budget, after the making of the relevant Advance, the anticipated Construction Costs to be incurred to Completion shall be less than the Available Commitment. With respect to each Advance, the conditions precedent to the making of each such Advance and the related Lessor Amounts and Loans set forth in Article VI have been satisfied. ---------- (e) No Material Adverse Change. Since the date of the financial -------------------------- statements described in clause (d) of Section 8.2, there has been no ----------- material adverse change in the financial condition or results of operations of the Lessee or the Guarantor, and no event or occurrence has transpired which is reasonably likely to have a Material Adverse Effect. ARTICLE IX PAYMENT OF CERTAIN EXPENSES The Lessee agrees, for the benefit of the Lessor and the Lenders, that: SECTION 9.1 Transaction Expenses. -------------------- (a) Subject to the terms hereof, Transaction Expenses in respect of the Documentation Date and each other Funding Date relating to Land Costs and Construction Costs shall be paid from the proceeds of Advances or otherwise; provided, that the Lessee has received written invoices therefor. Each such - -------- ---- invoice received not less than ten (10) days prior to a Funding Date shall be paid on such Funding Date. 30 (b) The Lessee shall pay or cause to be paid (i) all Transaction Expenses incurred by the Lessor, the Administrative Agent or the Lenders in entering into any future amendments or supplements with respect to any of the Operative Documents, whether or not such amendments or supplements are ultimately entered into, or giving of waivers of consents hereto or thereto, (ii) all Transaction Expenses incurred by the Lessor, the Administrative Agent or the Lenders in connection with Construction by the Lessee or the Construction Agent, respectively or other Person pursuant to Articles XVIII and XXI of the Master Lease and (iii) all Transaction Expenses incurred by any of the other parties hereto in respect of enforcement of any of their rights or remedies against the Lessee or any other Affiliate of the Lessee in respect of the Operative Documents. SECTION 9.2 Brokers' Fees and Stamp Taxes. The Lessee shall pay during ----------------------------- the Basic Lease Term, or during the Construction Period, cause to be paid, from the proceeds of the Advances or otherwise any brokers' fees and any and all stamp, transfer and other similar taxes, fees and excises, if any, including any interest and penalties, which are payable in connection with the transactions contemplated by this Participation Agreement and the other Operative Documents. SECTION 9.3 Basic Term Loan Agreement and Related Obligations. With ------------------------------------------------- respect to the Completed Property, the Lessee will pay, without duplication of any other obligation of the Lessee to pay any such amounts under the Operative Documents, before the due date thereof, all costs, expenses and other amounts (other than principal and interest on the Loans which are payable to the extent otherwise required by the Operative Documents) required to be paid by the Lessor under the Basic Term Pledge Agreement and the Basic Term Loan Agreement subject to Section 7.12. ------------ ARTICLE X OTHER COVENANTS AND AGREEMENTS SECTION 10.1 Affirmative Covenants of the Lessee and the Guarantor. ----------------------------------------------------- Until all Commitments have terminated and all Obligations have been paid and performed in full, Palm, Inc., in its capacity as the Lessee and the Guarantor, hereby agrees that: (a) Financial Information, Reports, Notices, etc. The Lessee and the -------------------------------------------- Guarantor will furnish, or will cause to be furnished, to each of the Lessor and the Administrative Agent copies of the following financial statements, reports, notices and information: (i) as soon as available and in any event within forty-five (45) days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Lessee and the Guarantor, consolidated balance sheets of the Lessee and Guarantor as of the end of such Fiscal Quarter and consolidated statements of earnings and cash flow of the 31 Lessee and Guarantor for such Fiscal Quarter, certified by a Financial Officer of the Lessee and Guarantor; (ii) as soon as available and in any event within ninety (90) days after the end of each Fiscal Year of the Lessee and the Guarantor, consolidated balance sheets of the Lessee and the Guarantor as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Lessee and the Guarantor for such Fiscal Year, in each case certified (without any Impermissible Qualification) by Deloitte & Touche LLP or any other nationally recognized public accounting firm; (iii) together with each delivery of financial statements of the Lessee, the Guarantor and its Subsidiaries pursuant to clause (i) or (ii) ---------- ---- above, (x) a certificate of a Responsible Officer's Certificate stating that the signer thereof has reviewed the terms of this Participation Agreement, the Master Lease and the Construction Agency Agreement and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of the Lessee and the Guarantor during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signer does not have knowledge of the existence as of the date of such certificate, of any condition or event which constitutes a Lease Default, Construction Agency Agreement Default, Lease Event of Default or Construction Agency Agreement Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Lessee or the Guarantor has taken, is taking and proposes to take with respect thereto; (iv) promptly after the occurrence of each Default of which a Responsible Officer has knowledge, provide a statement of a Responsible Officer setting forth details of such Default and the action which the Lessee has taken and proposes to take with respect thereto; (v) promptly after the sending or filing thereof, copies of all reports on Form 8-K which the Lessee and the Guarantor file with the SEC; (vi) immediately upon becoming aware of the institution of any steps by the Lessee or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Lessee furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Lessee of any material 32 liability, fine or penalty, notice thereof and copies of all documentation relating thereto; and (vii) such other publicly available information respecting the business, properties, condition or operations, financial or otherwise, of the Lessee and the Guarantor (including documentation relating to any event referred to in the clause (v)), or regarding the Property, ----------- in each case, as the Lessor or Administrative Agent may from time to time reasonably request. (b) Compliance with Laws, etc. The Lessee and the Guarantor will -------------------------- comply in all material respects with all Applicable Laws, rules, regulations and orders (including without limitation Environmental Laws and ERISA and the rules and regulations thereunder) except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. The Lessee and the Guarantor will maintain and preserve (A) its corporate existence and (B) its qualification as a foreign corporation in (x) the State of California and (y) each jurisdiction in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect, and will maintain all governmental licenses, approvals, authorizations and consents necessary for the conduct of its business (except where the failure to maintain such governmental licenses, approvals, authorizations and consents could not reasonable be expected to have a Material Adverse Effect). (c) Payment of Taxes. The Lessee and the Guarantor will pay, before ---------------- the same become delinquent, all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books. (d) Maintenance of Properties. The Lessee and the Guarantor will ------------------------- maintain, preserve, protect and keep its properties in good repair, working order and condition (ordinary wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. (e) Insurance. During the Lease Term, the Lessee will maintain all --------- insurance required under the Construction Agency Agreement and the Master Lease. The Lessee shall furnish to the Lessor or the Administrative Agent, upon request of the Lessor or the Administrative Agent, information presented in reasonable detail as to the insurance so carried. (f) Books and Records; Visitation. The Lessee and the Guarantor will ----------------------------- keep proper books of record and account as are necessary to prepare consolidated financial statements in accordance with GAAP, in which full and correct entries shall be made of all financial transactions and the assets and business of the Lessee in accordance with GAAP. If 33 an Event of Default has occurred and is continuing, at any reasonable time during normal business hours and upon reasonable prior notice, the Lessee shall permit the Lessor or the Administrative Agent or any agents or representatives thereof (other than a Competitor) to examine the books and records of the Lessee and the Guarantor and make copies of and abstracts from the records and books of account of, and visit the properties of, the Lessee and the Guarantor, and to discuss the affairs, finances and accounts of the Lessee and the Guarantor with any of its officers and directors and with independent public accountants. The Lessor and the Administrative Agent will give prior notice to the Lessee and the Guarantor of any such discussion with such accountants and will afford the Lessee and the Guarantor the opportunity to participate therein. (g) Use of Proceeds. The Lessee shall cause the Construction --------------- Agent to use the proceeds of the Advances only as contemplated by this Participation Agreement and the other Operative Documents. (h) Further Assurances. The Lessee and the Guarantor shall ------------------ take or cause to be taken from time to time all action reasonably necessary to assure that the intent of the parties pursuant to the Operative Documents is given effect as contemplated by Section 25.1 of ------------ the Master Lease, and that the Lessor holds a perfected Lien on the Property securing the Loans and interest thereon. The Lessee or the Guarantor shall execute and deliver, or cause to be executed and delivered, to the Administrative Agent and the Lessor from time to time, promptly upon request therefor, any and all other and further instruments (including the Basic Term Loan Agreement, correction instruments and supplemental mortgages and security agreements, as appropriate) that may be reasonably requested by the Administrative Agent or the Lessor to cure any deficiency in the execution and delivery of this Participation Agreement or any other Operative Document to which it is a party. (i) Purchase by Related Party Lender. (A) The Lessee shall -------------------------------- have the option on the Completion Date to elect to cause a Related Party Lender to purchase as provided herein all of the outstanding Loan Balance and the Lessee shall exercise such option by delivering an irrevocable notice of exercise to the Lessor at least sixty (60) days prior to the Completion Date. After such election, the Related Party Lender shall purchase on the Completion Date, all but not less than all of the Loan Balance for such Property by payment in immediately available funds to the account of the Administrative Agent on behalf of each Lender, on such date, of an amount equal to the sum of the outstanding principal amount of Loans, the accrued and unpaid interest thereon to such date, together with Break Costs related thereto, if any, and any other amounts due and owing to the Lenders with respect to such Loans (the "Loan Purchase Price") and (B) in the event that the ------------------- Lessee exercises its rights during the Construction Period to purchase a Release Parcel under Section 18.1 of the Master Lease, the Lessee ------------ shall be required to cause a Related Party Lender to purchase as provided herein all of the outstanding Loan Balance for the Loan Purchase Price on the Completion Date. 34 If (B) above shall not apply, then in the event that such option is not exercised by the Lessee or the purchase of the Loans is not consummated on the Completion Date, the Syndication Agent shall syndicate all or a portion of the Loans made or to be made pursuant to the Basic Term Loan Agreement and shall, upon written notice by the relevant Lender of its intention to sell all or a portion of its Loan pursuant to the provisions hereof, be entitled, without the consent of the Lessee, to add to or change the affirmative and negative covenants set forth herein, change the manner in which the Collateral is held (allowing, among other things, the Collateral to be held by the Lenders and the Other Lenders) and change the method, amount and rates at which Basic Rent shall be determined as the Lessor and the Required Lenders, acting in their sole discretion, shall deem to be appropriate, considered in light of market conditions and the Lessee's financial condition and prospects at the time of syndication, in order to ensure a successful syndication of the Loans; provided, that, (i) -------- ---- the Lessor Margin shall not be increased, (ii) the Loan Margin with respect to Loans held by the new Tranche A Lender shall be set forth in the Note belonging to such new Tranche A Lender and (iii) the Loan Margin with respect to the Loans held by the new Tranche B Lender (or in the event that the Tranche B Lender after the Completion Date continues to hold such Tranche B Loan) shall be increased to 100 basis points on the Completion Date. Lessee hereby agrees to be bound by such changes and shall execute and deliver amendments to the Operative Documents effecting such changes and agrees to pay all expenses and upfront fees incurred by the Syndication Agent, the Administrative Agent, the Lenders and the Lessor in connection with the syndication of such Loans. If the Related Party Lender has not purchased the Loans on the Completion Date, at any time after the Completion Date but prior to the Syndication Date, the Related Party Lender shall have the option to purchase all but not less than all of the Loan Balance for the Loan Purchase Price. Upon receipt of the Loan Purchase Price, the Lenders shall transfer on the date of receipt all of their respective right, title and interest in such Loans, subject to the terms of the Operative Documents, to the Related Party Lender and the Related Party Lender and such Lenders shall each enter into the Related Party Lender Note Assignment and Acceptance Agreement and the Lessee, Lessor and Related Party Lender shall enter into the Basic Term Loan Agreement. SECTION 10.2 Negative Covenants of the Lessee and the Guarantor. -------------------------------------------------- Until all Commitments have terminated and all Obligations have been paid and performed in full, the Lessee and the Guarantor hereby agree that: (a) Consolidated Tangible Net Worth. Neither the Lessee nor the ------------------------------- Guarantor will permit its Consolidated Tangible Net Worth, as at the end of any Fiscal Quarter, to be less than $600,000,000. 35 (b) Consolidated Fixed Charge Coverage Ratio. Neither the Lessee nor ---------------------------------------- the Guarantor will permit the Consolidated Fixed Charge Coverage Ratio, as at the end of any four consecutive Fiscal Quarters, to be less than 2:00 to 1:00. (c) Mergers, Etc. Neither the Lessee nor the Guarantor shall without ------------ the consent of the Lessor and the Required Lenders: (i) Merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets whether now owned or hereafter acquired), or liquidate or apply to be wound up or dissolved, unless (1) (a) the entity surviving such merger or consolidation, or the beneficiary of such sale, transfer, lease or disposal, shall assume the obligations of the Lessee or the Guarantor under the Operative Documents in a form reasonably satisfactory to the Lessor and the Required Lenders; and (b) both before and immediately after giving effect to such transaction, no Lease Default or Lease Event of Default has occurred and is continuing; and (c) immediately after giving effect to such transaction, the Lessor and the Required Lenders shall be satisfied that such entity or transferee shall have a credit rating equally as high as the Lessee or the Guarantor immediately before such transaction or (2) the Lessee or the Guarantor is the surviving entity, and provided further, that the Lessee or the Guarantor certifies to the veracity of either clause (1) or (2) by a certificate from a Responsible Officer; (ii) Modify or amend any of its Constituent Documents if doing so would prevent or interfere with (i) the day to day business operation or management of the Lessee, (ii) the ability of the Lessee to perform its obligations under the Operative Documents or (iii) any rights or remedies of the Lessor, the Administrative Agent and/or the Lenders under any of the Operative Documents; or (iii) Conduct business in any other name. Notwithstanding the above, the foregoing shall not prevent the Lessee or the Guarantor from engaging in mergers or consolidations without obtaining consent, wherein a Change of Control has not occurred as a result of such merger or consolidation. SECTION 10.3 Covenants of the Participants and the Lessor. Each of the -------------------------------------------- Participants hereby agrees that so long as this Participation Agreement is in effect it: (i) will not create, incur, assume or suffer to exist any Lessor Lien attributable to such Participant upon the Master Lease or the Property (other than as contemplated by any of the Operative Documents); and 36 (ii) will remove any Lessor Lien created or incurred by it and remove any Lessor Lien attributable to it upon the Master Lease or the Property (other than the Lessor Mortgage and such other Liens as are contemplated by any of the Operative Documents). ARTICLE XI LESSEE DIRECTIONS; CERTAIN RIGHTS OF LESSEE SECTION 11.1 Lessee Directions. The Lessor and each of the Lenders ----------------- hereby agree that, so long as no Lease Default or Lease Event of Default exists, the Lessee shall have the exclusive right to exercise any right of the Lessor under the applicable Participation Agreement upon not less than ten (10) Business Days' prior written notice from the Lessee to the Lessor, unless the Lessor objects to such exercise within five (5) Business Days of receipt of such notice. SECTION 11.2 Extension of Maturity Date and Expiration Date. Upon ---------------------------------------------- terms to be mutually agreed upon and subject to the availability of refinancing and in the sole discretion of the Lessee and each Participant, the Lessee and such Participants may agree to extend the term of the Lease and any such extension pursuant to this Section 11.2 shall automatically extend the Maturity ------------ Date of the Loans to the newly extended Lease expiration date. Not later than twelve (12) months prior to the expiration of the Basic Lease Term or the giving of notice of election of the Remarketing Option, the Lessee may by written notice to the Participants request the aforementioned extension. The Participants will endeavor to respond to such written request within forty-five (45) days of the receipt thereof, but any failure to respond affirmatively within ninety (90) days of the receipt of such written request shall be deemed a rejection thereof without requiring any further action by any Participant. ARTICLE XII TRANSFERS OF PARTICIPANTS' INTERESTS SECTION 12.1 Assignments. (a) Any Participant, with prior written ----------- notice to the Lessee and without the consent of any Person, subject to and in accordance with the terms and conditions of the Loan Agreements, (i) may assign and delegate all or any portion of its rights and obligations hereunder and under the other Operative Documents to any of its Affiliates or to any financial institution selected as a replacement Participant pursuant to Section 13.9 or ------------ 13.11; (ii) may assign and pledge all or any portion of the Notes held by it to - ----- any Federal Reserve Bank, the United States Treasury or to any other financial institution as collateral security pursuant to Regulation A of the F.R.S. Board and any operating circular issued by the Federal Reserve System and/or the Federal Reserve Bank or otherwise; (iii) on or after the Completion Date, each Lender may assign its Loan 37 Balance to a Related Party Lender; (iv) may assign a portion of the Tranche A Loan and the related Tranche A Loan Commitment to a Tranche B Lender in accordance with Section 10.1 of the Construction Period Loan Agreement and (v) ------------ if in connection with the occurrence of the Completion Date, the Lessee does not cause a Related Party Lender to purchase the Loan Balance, each Lender may assign or participate its interest in its Loan Balance and related Notes to one or more financial institutions, subject to the conditions of Section 10.1(i). --------------- Notwithstanding the previous sentence, any Tranche B Lender with the consent of the Lessee (not to be unreasonably withheld or delayed), subject to and in accordance with the terms of the Construction Period Loan Agreement or the Basic Term Loan Agreement, as applicable, may assign any or all of its Loan Balance and its Notes to one or more banks or other financial institutions. (b) Upon execution, delivery, acceptance and recordation of any Assignment and Acceptance substantially in the form of Exhibit B to the --------- Construction Period Loan Agreement, such Assignment and Acceptance shall be deemed to amend this Participation Agreement and the other Operative Documents to the extent, and only to the extent, necessary to (i) reflect the addition of Tranche B Lenders, (ii) release the Tranche A Lender thereunder from its rights and obligations set forth in the Assignment and Acceptance and (iii) set forth the revised Commitments reflecting the new Tranche A Loan Commitment and the Tranche B Loan Commitments. The Administrative Agent shall upon registration of such Assignment and Acceptance in the Register, update Schedule I and Schedule II to reflect ---------- ----------- the changes thereto resulting from such assignment, which updated Schedule -------- I shall list, with respect to the Tranche A Lender and the Tranche B - Lenders, each Lender's respective portion of the Lender Land Commitment, Lender Improvement Commitment, Land Advance Percentage and Improvement Advance Percentage, and which updated Schedule II shall list, with respect ----------- to the Tranche B Lenders such Lender's address for service of notice and funding office. SECTION 12.2 Participations. The Participants may sell participation -------------- interests in all or a portion of its rights and obligations under this Participation Agreement or the other Operative Documents (including, without limitation, all or a portion of the Rent owing to it); provided, however, that -------- ------- (i) the Lessee shall continue to deal solely and directly with the Participant and the Participant shall remain liable to the Lessee in connection with the Participant's rights and obligations under this Participation Agreement and the other Operative Documents to which it is a party and (ii) the Participant shall retain the sole right and responsibility to enforce the obligations of the Lessee relating to this Participation Agreement, the Lease and the other Operative Documents. Notwithstanding any assignment pursuant to Section 12.1 ------------ hereof or any transfer of a participation interest pursuant to this Section ------- 12.2, the Collateral shall continue to be held by the Collateral Agent, unless - ---- the Lessee has provided its written consent for any other party to hold all or any portion of the Collateral; provided, however, that no Default or Event of -------- ------- Default shall occur or be continuing at the time of such consent. 38 ARTICLE XIII INDEMNIFICATION SECTION 13.1 General Indemnification. The Lessee, whether or not any ----------------------- of the transactions contemplated hereby shall be consummated, agrees to assume liability for, and to indemnify, protect, defend, save and keep harmless each Indemnitee, on an After Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted against such Indemnitee (whether because of action or omission by such Indemnitee or otherwise), as to Property leased by it in any way relating to or arising out of: (a) any of the Operative Documents or any of the transactions contemplated thereby (including syndication of the Loans as contemplated herein and in the other Operative Documents), and any amendment, modification or waiver in respect thereof; (b) the Property or any part thereof or interest therein; (c) the purchase, design, construction, preparation, installation, inspection, delivery, nondelivery, acceptance, rejection, ownership, management, possession, operation, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition or substitution, storage, transfer of title, redelivery, use, financing, refinancing, disposition, operation, condition, sale (including, without limitation, any sale pursuant to Section 16.2(c) or 16.2(e) of the Master Lease or any sale --------------- ------- pursuant to Article V, XVIII or XX of the Master Lease), return or other --------- ----- -- disposition of all or any part or any interest in the Land and/or Improvements or the imposition of any Lien (or incurring of any liability to refund or pay over any amount as a result of any Lien) thereon, including, without limitation: (1) Claims or penalties arising from any violation of law or in tort (on the basis of strict liability or otherwise), (2) latent or other defects, whether or not discoverable, (3) any Claim based upon a violation or alleged violation of the terms of any restriction, easement, condition or covenant or other matter affecting title to any of the Property, (4) the making of any Modifications in violation of any standards imposed by any insurance policies required to be maintained by the Lessee pursuant to the Master Lease and Construction Agency Agreement which are in effect at any time with respect to any of the Property or any part thereof, (5) any Claim for patent, trademark or copyright infringement, and (6) Claims arising from any public improvements with respect to the Property resulting in any change or special assessments being levied against any Property or any plans to widen, modify or realign any street or highway adjacent to any of the Properties, or any Claim for utility "tap-in" fees; (d) the breach by the Lessee of any covenant, representation or warranty made by it or deemed made by it in any Operative Document or any certificate required to be delivered by any Operative Document; 39 (e) the retaining or employment of any broker, finder or financial advisor by the Lessee to act on its behalf in connection with this Participation Agreement or any other Operative Document or pursuant to the acquisition of the Property pursuant to this Participation Agreement or any other Operative Document; (f) the existence of any Lien on or with respect to the Property, the Improvements, any Basic Rent or Supplemental Rent, title thereto, or any interest therein including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of the Property or by reason of labor or materials furnished or claimed to have been furnished to the Lessee, or any of its contractors or agents or by reason of the financing of any personalty or equipment purchased or leased by the Lessee or Modifications constructed by the Lessee, except Lessor Liens and Liens in favor of the Administrative Agent, the Lenders and/or the Lessor; or (g) the transactions contemplated by the Lease or by any other Operative Document, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA and any prohibited transaction described in Section 4975(c) of the Code; (h) Lessor's indemnification of the Collateral Agent pursuant to Section 5.9 of the Construction Period Security and Control Agreement. ----------- provided, however, that the Lessee shall not be required to indemnify any - -------- ------- Indemnitee under this Section 13.1 for any of the following: (1) any Claim to ------------ the extent resulting from the willful misconduct or gross negligence of such Indemnitee or (2) any Claim resulting from Lessor Liens which the Lessor or the Administrative Agent is responsible for discharging under the Operative Documents. Each Indemnitee shall, at the expense of the Lessee, supply the Lessee with such information and documents reasonably requested by the Lessee as are necessary or advisable for the Lessee to defend in any action, suit or proceeding to the extent permitted by Section 13.1. The Lessee and each ------------ Indemnitee agree to give each other prompt written notice of any Claim hereby indemnified against but the giving of any such notice by an Indemnitee shall not be a condition to the Lessee's obligations under this Section 13.1. ------------ Without limiting the express rights of the Indemnitees under this Section 13.1, this Section 13.1 shall be construed as an indemnity only and not - ------------ ------------ a guaranty of the residual value of the Property or as a guaranty of the Loan Balance and Lessor Balance. SECTION 13.2 End of Term Indemnity. --------------------- (a) If the Lessee elects the Remarketing Option and the proposed remarketing transaction does not result in Gross Remarketing Proceeds sufficient to pay the Lease Balance, then 40 prior to the Expiration Date and as a condition to the Lessee's right to complete the remarketing of the Property pursuant to Section 20.1 of the Master ------------ Lease, the Lessee shall cause to be delivered to the Lessor at least thirty (30) days prior to the Expiration Date, at the Lessee's sole cost and expense, a report from the Appraiser in form and substance satisfactory to the Lessor and the Administrative Agent (the "End of the Term Report") which shall state the ---------------------- Appraiser's conclusions as to the reason for any decline in the Fair Market Sales Value of the Property from that anticipated for such date in the original Appraisal for the Property. (b) If the Lessee elects the Remarketing Option then on or prior to the Expiration Date, the Lessee shall pay to the Administrative Agent an amount (together with amounts payable under Section 13.2(c), not to exceed the --------------- Shortfall Amount) equal to the portion of the Shortfall Amount that the End of the Term Report demonstrates was the result of a decline in the Fair Market Sales Value of the applicable Property due to: (i) use contrary to the limitations imposed by the Lease, failure to maintain, to repair, to restore, to rebuild or to replace, failure to comply with all applicable laws, or (ii) any Modification made to, or any rebuilding of, the applicable Property or any part thereof by the Lessee not consented to by the Lessor, or (iii) the existence of any Hazardous Activity, Hazardous Materials or Environmental Violations, the indemnity for which shall not exceed the cost of the remediation thereof, or (iv) any grant, release, dedication, transfer, annexation or amendment made pursuant to Section 11.2 of the Master Lease but not ------------ consented to by the Lessor. (c) In addition to the foregoing and not in limitation of the other provisions hereof, including the provisions of this Article XIII, in the ------------ event that with respect to the Property all of the structural Modifications, restoration and rebuilding of such Property, if any, pursuant to Section 10.1 ------------ and 14.1 (as the case may be) of the Master Lease shall not have been completed ---- in accordance with the provisions of such Section(s) prior to the Expiration Date, then the report from the Appraiser shall state the Appraiser's opinion as to the amount determined by subtracting the Fair Market Sales Value of the Property given the state and condition of non-completion of such structural Modifications, restoration and rebuilding of the Property; and giving effect to scheduled and funded construction to the Expiration Date from the Appraiser's determination of the Fair Market Sales Value of the Property as if such structural Modifications, restoration and rebuilding had been completed (such difference in amount being referred to herein as the "Property Completion ------------------- Differential"), and the Lessee shall on the Expiration Date pay to the - ------------ Administrative Agent the amount of any Property Completion Differential for 41 the Property, and which amount, together with amounts payable under Section ------- 13.2(b), shall in no event exceed the Shortfall Amount. - ------ The matters giving rise to the Lessee's obligation to make a payment under this Section 13.2 are exclusive and are intended to expressly ------------ exclude loss attributable to ordinary wear and tear and adverse market conditions. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under the Lease or any other Operative Document. SECTION 13.3 Environmental Indemnity. Without limitation of ----------------------- the other provisions of this Article XIII, the Lessee hereby agrees to ------------ indemnify, hold harmless and defend each Indemnitee from and against any and all claims (including, without limitation, third party claims for personal injury or real or personal property damage), losses (including, but not limited to, to the extent the Lease Balance has not been fully paid, any loss of value of the Property), damages, liabilities, fines, penalties, charges, administrative and judicial proceedings (including informal proceedings) and orders, judgments, remedial action, requirements, enforcement actions of any kind, and all reasonable and documented costs and expenses incurred in connection therewith (including, but not limited to, reasonable and documented attorneys' and/or paralegals' fees and expenses), including, but not limited to, all costs incurred in connection with any investigation or monitoring of site conditions or any clean-up, remedial, removal or restoration work by any federal, state or local government agency, arising in whole or in part, out of (a) the presence on or under the Property of any Hazardous Materials, or any Releases or discharges of any Hazardous Materials on, under, from or onto any of the Property, (b) any activity, including, without limitation, construction, carried on or undertaken on or off the Property, and whether by the Lessee or any predecessor in title or any employees, agents, contractors or subcontractors of the Lessee or any predecessor in title, or any other Persons (including such Indemnitee), in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials that at any time are located or present on or under or that at any time migrate, flow, percolate, diffuse or in any way move onto or under the Property, (c) loss of or damage to any property or the environment (including, without limitation, clean-up costs, response costs, remediation and removal costs, costs of corrective action, costs of financial assurance, fines and penalties and natural resource damages), or death or injury to any Person, and all expenses associated with the protection of wildlife, aquatic species, vegetation, flora and fauna, and any mitigative action required by or under Hazardous Materials Laws, 42 (d) any claim concerning lack of compliance with Hazardous Materials Laws, or any act or omission causing an environmental condition that requires remediation or would allow any Governmental Authority to record a Lien on the land records, or (e) any residual contamination on or under any of the Land, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in accordance with applicable laws, regulations, codes and ordinances; provided, however, that the Lessee shall not be required to indemnify any - -------- ------- Indemnitee under this Section 13.3 for any Claim to the extent resulting from ------------ the willful misconduct or gross negligence of such Indemnitee. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under the Lease or any other Operative Document. SECTION 13.4 Proceedings in Respect of Claims. Any amount -------------------------------- payable to an Indemnitee pursuant to Section 13.1 or 13.3 shall be paid to such ------------ ---- Indemnitee promptly upon receipt of a written demand therefor from such Indemnitee, accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. SECTION 13.5 General Tax Indemnity. --------------------- (a) Indemnification. (i) The Lessee shall pay and assume --------------- liability for, and does hereby agree to indemnify, protect and defend the Property and all Tax Indemnitees, and hold them harmless against, all Impositions on an After Tax Basis. (ii) All payments to or for the benefit of any Tax Indemnitee under the Lease and/or the other Operative Documents (including without limitation, payments of Supplemental Rent and Basic Rent under the Master Lease, payments of principal and interest under the Loans and payments of Yield to the Lessor), shall be made free and clear of and without deduction for any and all present or future Impositions. If the Lessee and any Tax Indemnitee or any other Person ("Applicable Payor") ---------------- shall be required by law to deduct any Impositions from or in respect of any amounts payable under the Lease or any other Operative Document to or for the benefit of the any Tax Indemnitee ("Applicable Payee"), ---------------- (A) the amounts payable by such Applicable Payor (as rent, interest or otherwise) shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 13.5(a)(ii)) the Applicable ------------------ Payee shall receive an amount equal to the sum it would have received had no such deductions been made, (B) the Applicable Payor shall make such deductions and (C) the Applicable Payor shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in 43 accordance with all Applicable Laws. The Lessee will indemnify each Tax Indemnitee on demand for the full amount of any sums paid or owed by such Tax Indemnitee pursuant to the second sentence of this Section ------- 13.5(a)(ii) on an After Tax Basis and any liability the Tax Indemnitee ---------- may incur or be required to pay. (iii) Subject to the terms of Section 13.5(b), the Lessee -------------- shall pay or cause to be paid all Impositions directly to the taxing authorities where feasible and otherwise to the Tax Indemnitee, as appropriate, and the Lessee shall at its own expense, upon such Tax Indemnitee's reasonable request, furnish to such Tax Indemnitee copies of official receipts or other satisfactory proof evidencing such payment. (iv) In the case of Impositions for which no contest is conducted pursuant to Section 13.5(b) and which the Lessee pays -------------- directly to the taxing authorities, the Lessee shall pay such Impositions (together with any interest thereon) prior to the latest time permitted by the relevant taxing authority for timely payment (other then in the case of withholding taxes, which shall be paid immediately). In the case of Impositions for which the Lessee reimburses a Tax Indemnitee, the Lessee shall do so (together with any interest thereon) within twenty (20) days after receipt by the Lessee of demand by such Tax Indemnitee describing in reasonable detail the nature of the Impositions and the basis for the demand (including the computation of the amount payable and interest thereon), but in no event shall the Lessee be required to pay such reimbursement prior to fifteen (15) days before the latest time permitted by the relevant taxing authority for timely payment. In the case of Impositions for which a contest is conducted pursuant to Section 13.5(b), the Lessee -------------- shall pay such Impositions or reimburse such Tax Indemnitee for such Impositions, to the extent not previously paid or reimbursed pursuant to subsection (i), prior to the latest time permitted by the relevant taxing authority for timely payment after conclusion of all contests under Section 13.5(b) unless payment shall be required before -------------- commencement of such contest, in which case the Lessee shall pay such Impositions or reimburse the Tax Indemnitee for such Impositions prior to the latest time permitted by the relevant taxing authority for timely payment prior to commencement of such contest. (v) Impositions imposed for a billing period during which the Lease expires or terminates (unless the Lessee has exercised the Purchase Option) shall be adjusted and prorated on a daily basis between the Lessee and the Lessor, whether or not such Imposition is imposed before or after such expiration or termination and each party shall pay or reimburse the other for each party's pro rata share thereof. (vi) The determination of all Impositions to be paid or indemnified against by the Lessee under this Section 13.5(a) on an -------------- After Tax Basis shall be made (in good faith) by Tax Indemnitee. Such determination shall state with reasonable clarity and detail the basis for such determination and shall, absent manifest error, be final and conclusive and binding on the Lessee. In no event shall the Lessee in connection with this Section 13.5(a) or for any other -------------- 44 purpose whatsoever under any Operative Document have any right to examine any Tax return or related books and records of any Tax Indemnitee. (vii) As between the Lessee and any Tax Indemnitee, the Lessee shall be responsible for, and the Lessee shall indemnify and hold harmless the Tax Indemnitee (without duplication of any indemnification required by subsection (a)) on an After Tax Basis against, any obligation for United States withholding taxes imposed in respect of payments under the Operative Documents to the extent, but only to the extent, the Tax Indemnitee has actually paid funds to a taxing authority with respect to such withholding taxes (and, if the Tax Indemnitee receives a demand for such payment from any taxing authority, the Lessee shall discharge such demand on behalf of the Tax Indemnitee). Notwithstanding anything in the Operative Documents to the contrary, the Lessee shall pay the Lessor an amount which, on an After Tax Basis, shall be sufficient to allow the Lessor to fulfill its obligations to make scheduled payments of principal and interest under the Loan Agreements and receive the Yield on the Lessor Amount. (b) Contests. If any claim shall be made against any Tax -------- Indemnitee or if any proceeding shall be commenced against any Tax Indemnitee (including a written notice of such proceeding) for any Imposition as to which the Lessee may have an indemnity obligation pursuant to this Section 13.5, or if ------------ any Tax Indemnitee shall determine that any Imposition to which the Lessee may have an indemnity obligation pursuant to this Section 13.5 may be payable, such ------------ Tax Indemnitee shall, within thirty (30) days, notify the Lessee in writing (provided that failure to so notify the Lessee within thirty (30) days shall not alter such Tax Indemnitee's rights under this Section 13.5 except to the extent ------------ such failure precludes the ability to conduct a contest of any indemnified Taxes) and shall not take any action with respect to such claim, proceeding or Impositions without the written consent of the Lessee (such consent not to be unreasonably withheld or unreasonably delayed) for thirty (30) days after the receipt of such notice by the Lessee; provided, however, that in the case of any -------- ------- such claim or proceeding, if such Tax Indemnitee shall be required by law or regulation to take action prior to the end of such 30-day period, such Tax Indemnitee shall in such notice to the Lessee, so inform the Lessee, and such Tax Indemnitee shall not take any action with respect to such claim, proceeding or Impositions without the consent of the Lessee (such consent not to be unreasonably withheld or unreasonably delayed) for ten (10) days after the receipt of such notice by the Lessee unless such Tax Indemnitee shall be required by law or regulation to take action prior to the end of such 10-day period. The Lessee shall be entitled for a period of sixty (60) days from receipt of such notice from such Tax Indemnitee (or such shorter period as such Tax Indemnitee has notified the Lessee is required by law or regulation for such Tax Indemnitee to commence such contest), to request in writing that such Tax Indemnitee contest the imposition of such Tax, at the Lessee's expense. If (x) such contest can be pursued in the name of the Lessee and independently from any other proceeding involving a Tax liability of such Tax Indemnitee for which the Lessee has not agreed to indemnify such Tax Indemnitee or (y) such Tax Indemnitee so requests, then the Lessee shall be permitted to control 45 the contest of such claim, provided, that by taking control of the contest, the Lessee acknowledges that it is responsible for the Impositions ultimately determined to be due by reason of such claim. In all other claims requested to be contested by the Lessee, such Tax Indemnitee shall control the contest of such claim, acting through counsel reasonably acceptable to the Lessee. In no event shall the Lessee be permitted to contest (or such Tax Indemnitee required to contest) any claim (A) if such Tax Indemnitee provides the Lessee with a legal opinion of counsel reasonably acceptable to the Lessee that such action, suit or proceeding involves a risk of imposition of criminal liability or will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Property Lien) on the Property or any part of any thereof unless the Lessee shall have posted and maintained a bond or other security satisfactory to the relevant Tax Indemnitee in its sole discretion in respect to such risk, (B) if a Lease Event of Default has occurred and is continuing, unless the Lessee shall have posted and maintained a bond or other security satisfactory to the relevant Tax Indemnitee in its sole discretion in respect of the Taxes subject to such claim and any and all expenses for which the Lessee is responsible hereunder is reasonably foreseeable in connection with the contest of such claim, (C) unless the Lessee shall have agreed to pay and shall pay, to such Tax Indemnitee on demand all reasonable out-of-pocket costs, losses and expenses that such Tax Indemnitee may incur in connection with contesting such Impositions including all reasonable legal, accounting and investigatory fees and disbursements, or (D) if such contest shall involve the payment of the Tax prior to the contest, unless the Lessee shall provide to such Tax Indemnitee an interest-free advance in an amount equal to the Impositions that the Tax Indemnitee is required to pay (with no additional net after-tax costs to such Tax Indemnitee). In addition, for Tax Indemnitee controlled contests and claims contested in the name of such Tax Indemnitee in a public forum, no contest shall be required: (A) unless the amount of the potential indemnity (taking into account all similar or logically related claims that have been or could be raised in any audit involving such Tax Indemnitee with respect to any period for which the Lessee may be liable to pay an indemnity under this Section 13.5(b)) exceeds $100,000 and (B) unless, if requested by such Tax - -------------- Indemnitee, the Lessee shall have provided to such Tax Indemnitee an opinion of counsel selected by the Lessee and reasonably acceptable to such Tax Indemnitee (except, in the case of income taxes indemnified hereunder, in which case such opinion shall be an opinion of independent tax counsel selected by such Tax Indemnitee and reasonably acceptable to the Lessee) that a reasonable basis exists to contest such claim (or, in the case of an appeal of an adverse determination, and opinion of such counsel to the effect that there is substantial authority for the position asserted in such appeal). In no event shall an Tax Indemnitee be required to appeal an adverse judicial determination to the United States Supreme Court. In addition, an Tax Indemnitee shall not be required to contest any claim in its name (or that of an Affiliate) if the subject matter thereof shall be of a continuing nature and shall have previously been decided adversely by a court of competent jurisdiction pursuant to the contest provisions of this Section 13.5(b), unless there shall have been a -------------- change in law (or interpretation thereof) and the Tax Indemnitee shall have received, at the Lessee's expense, an opinion of independent tax counsel selected by the Lessee and reasonably acceptable to the Tax Indemnitee stating that as a result of such change in law (or interpretation thereof), it is more likely than not that the Tax Indemnitee will prevail in such contest. 46 The party conducting the contest shall consult in good faith with the other party and its counsel with respect to the contest of such claim for Taxes but the decisions regarding what actions to be taken shall be made by the controlling party in its sole judgement. In addition, the controlling party shall keep the noncontrolling party reasonably informed as to the progress of the contest, and shall provide the noncontrolling party with a copy of (or appropriate excerpts from) any reports or claims issued by the relevant auditing agents or taxing authority to the controlling party thereof, in connection with such claim or the contest thereof. Each Tax Indemnitee shall, at the Lessee's expense, supply the Lessee with such information and documents reasonably requested by the Lessee as are necessary or advisable for the Lessee to participate in any action, suit or proceeding to the extent permitted by this Section 13.5(b). Notwithstanding -------------- anything in this Section 13.5(b) to the contrary, no Tax Indemnitee shall enter -------------- into any settlement or other compromise or fail to appeal an adverse ruling with respect to any claim which is entitled to be indemnified under this Section 13.5 ------------ (and with respect to which contest is required under this Section 13.5(b)) -------------- without the prior written consent of the Lessee, unless such Tax Indemnitee waives its right to be indemnified under this Section 13.5 with respect to such ------------ claim. No settlement of any contest may be made by the Lessee without the Tax Indemnitee's written consent, which consent shall not be unreasonably withheld. Notwithstanding anything contained herein to the contrary, a Tax Indemnitee will not be required to contest (and the Lessee shall not be permitted to contest) a claim with respect to the imposition of any Tax if such Tax Indemnitee shall waive its right to indemnification under this Section 13.5 ------------ with respect to such claim (and any claim with respect to such year or any other taxable year the contest of which is materially adversely affected as a result of such waiver). (c) Reports. The Lessee shall be responsible for preparing ------- and filing any real and personal property or ad valorem tax returns in respect of the Property. In case any other report or tax return shall be required to be made with respect to any obligations of the Lessee under or arising out of subsection (a) and of which the Lessee has knowledge, the Lessee, at its sole cost and expense, shall notify the relevant Tax Indemnitee of such requirement and (except if such Tax Indemnitee notifies the Lessee that such Person intends to file such report or return) (A) to the extent required or permitted by and consistent with Requirements of Law, make and file in its own name such return, statement or report; and (B) in the case of any other such return, statement or report required to be made in the name of such Tax Indemnitee, advise such Tax Indemnitee of such fact and prepare such return, statement or report for filing by such Tax Indemnitee or, where such return, statement or report shall be required to reflect items in addition to any obligations of the Lessee under or arising out of subsection (a), provide such Tax Indemnitee at the Lessee's expense with information sufficient to permit such return, statement or report to be properly made with respect to any obligations of the Lessee under or arising out of subsection (a). Such Tax Indemnitee shall, upon the Lessee's request and at the Lessee's expense, provide any data regularly maintained by such Tax Indemnitee (and not otherwise within the 47 control of the Lessee) with respect to the Property, which the Lessee may reasonably require to prepare any required tax returns or reports. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under the Lease or any other Operative Document. SECTION 13.6 Indemnity Payments in Addition to Lease --------------------------------------- Obligations. The Lessee acknowledges and agrees that the Lessee's obligations to - ----------- make indemnity payments under this Article XIII are separate from, in addition to, and do not reduce, the Lessee's obligation to pay under the Lease that portion of the Lease Balance constituting the Maximum Recourse Amount or Basic Rent. SECTION 13.7 Eurodollar Rate Lending Unlawful. Notwithstanding -------------------------------- any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Documentation Date shall make it unlawful for a Participant to make or maintain Eurodollar Loans and Eurodollar Lessor Amounts as contemplated by the Operative Documents (i) such Participant shall promptly give written notice of such circumstances to the Lessee and the other Participant (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of each such Lender or Lessor, as the case may be, hereunder to make Eurodollar Loans and Eurodollar Lessor Amounts shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Participant to make or maintain Eurodollar Loans and Eurodollar Lessor Amounts, such Participant shall then have a commitment only to make a Base Rate Loan or a Base Rate Lessor Amount when a Eurodollar Loan or a Eurodollar Lessor Amount is requested and (c) Participant's Loans and Lessor Amounts then outstanding as Eurodollar Loans and Eurodollar Lessor Amounts, if any, shall be converted automatically to Base Rate Loans and Base Rate Lessor Amounts on the respective last days of the then current Interest Periods with respect to such Loan Balance and Lessor Balance or within such earlier period as required by law. If any such conversion of Eurodollar Loans and Eurodollar Lessor Amounts occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Lessee shall pay to such Participant such amounts, if any, as may be required pursuant to Section ------- 13.10. In any such case, interest and principal (if any) shall be payable - ----- contemporaneously with the related Eurodollar Loans and Eurodollar Lessor Amounts of the other Participant. SECTION 13.8 Deposits Unavailable. If either of the -------------------- Participants shall have determined that (i) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to such Participant in its relevant market; or 48 (ii) by reason of circumstances affecting such Participant's relevant market, adequate means do not exist for ascertaining the interest rate or Yield, as the case may be, applicable to such Participant's Loans or Lessor Amounts, then, the obligations of the Participants to make Loans or Lessor Amounts, as the case may be, by reference to the Adjusted Eurodollar Rate shall be suspended and thereafter, all such Loans or Lessor Amount, until the suspension is ineffective, shall be made at the Base Rate and each outstanding Loan or Lessor Amount, as the case may be, shall begin to bear interest or accrue Yield at the Base Rate on the last day of the then current Interest Period applicable thereto. SECTION 13.9 Increased Costs, etc. -------------------- (a) If the adoption, introduction or effectiveness of or any change in any Requirement of Law or in the interpretation, re-interpretation or application thereof applicable to any Participant, or compliance by any Participant with any request, regulation, guideline or directive (whether or not having the force of law) from any central bank or other Governmental Authority or regulator, in each case made subsequent to the Acquisition Date (or, if later, the date on which such Participant becomes a Participant): (i) shall subject such Participant to any tax of any kind whatsoever with respect to any Eurodollar Loans or Eurodollar Lessor Amounts made by it or its obligation to make Eurodollar Loans or Eurodollar Lessor Amounts, or change the basis of taxation of payments to such Participant in respect thereof; or (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of Loans and Lessor Amounts loans or other extensions of credit by, or any other acquisition of funds by, any office of such Participant which is not otherwise included in the determination of the Adjusted Eurodollar Rate hereunder; or (iii) shall impose on such Participant any other condition whatsoever in connection with the Operative Documents; and the result of any of the foregoing is to increase the cost to such Participant of making or maintaining Eurodollar Loans or Eurodollar Lessor Amounts or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Lessee from such Participant, the Lessee shall pay such Participant, any additional amounts necessary to compensate such Participant for such increased cost or reduced amount receivable; provided, -------- that, in any such case, the Lessee may elect to convert the Eurodollar Loans and - ---- Eurodollar Lessor Amounts made by such Participant hereunder to Base Rate Loans and Base Rate Lessor Amounts by giving the Lessor at least one (1) Business Day's 49 notice of such election, in which case the Lessee shall promptly pay to such Participant, upon demand, without duplication, such amounts, if any, as may be required pursuant to Section 13.10. All payments required by this Section ------------- ------- 13.9(a) shall be made by the Lessee within ten (10) Business Days after demand - ------- by the affected Participant. If any Participant becomes entitled to claim any additional amounts pursuant to this subsection, it shall provide prompt notice thereof to the Lessee, certifying (x) that one of the events described in this clause (a) has occurred and describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such Participant. Such a certificate as to any additional amounts payable pursuant to this clause submitted by such Participant, to the Lessee shall be conclusive in the absence of manifest error; provided, however, that the method by which such Participant allocated such amount to the Lessee must have been applied in good faith and must have been a method generally used by such Participant for such purpose. This covenant shall survive the termination of this Participation Agreement and the payment in satisfaction of the Loan Balance and Lessor Balance and all other amounts payable hereunder. (b) Each Participant shall use its reasonable efforts to reduce or eliminate any claim for compensation pursuant to this Section 13.9, including, ------------ without limitation, a change in the office of such Participant at which its obligations related to this Participation Agreement are maintained if such change will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Participant, be otherwise disadvantageous to it. SECTION 13.10 Funding Losses. The Lessee agrees to indemnify each -------------- Participant and to hold each Participant harmless from any loss or expense which such Participant may sustain or incur (other than through such Person's own gross negligence or willful misconduct) as a consequence of (a) default by the Lessee in making a borrowing of, conversion into or continuation of Loans or Lessor Amounts which are Eurodollar Loans or Eurodollar Lessor Amounts after the Lessee has given a notice requesting the same in accordance with the provisions of this Participation Agreement, (b) default by the Lessee in making any prepayment of a Loan or Lessor Amounts which is a Eurodollar Loan or Eurodollar Lessor Amount after the Lessee has given a notice thereof in accordance with the provisions of this Participation Agreement or (c) the making of a prepayment of Loans or Lessor Amounts which are Eurodollar Loans or Eurodollar Lessor Amounts on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loan or Lessor Amount which is a Eurodollar Loan or a Eurodollar Lessor Amount provided for herein over (ii) the amount of interest (as reasonably determined by such Indemnitee) which would have accrued to such Participant on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Participation Agreement or any 50 other Operative Document and the payment in satisfaction of the Loan Balance and the Lessor Balance and all other amounts payable under the Operative Documents. SECTION 13.11 Capital Adequacy. ---------------- (a) If the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Participant with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, in each case made subsequent to the Documentation Date has or will have the effect of reducing the rate of return on either Participant's or its parent company's capital by an amount such Participant deems to be material, as a consequence of its commitments or obligations hereunder to a level below that which such Participant or its parent company could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Participant's or its parent company's policies with respect to capital adequacy), then, upon notice from such Participant, the Lessee shall pay to such Participant such additional amount or amounts as will compensate such Participant and its parent company for such reduction. All payments required by this Section 13.11 shall be made by the ------------- Lessee within ten (10) Business Days after demand by the affected Participant. If any Participant becomes entitled to claim any additional amounts pursuant to this clause, it shall provide prompt notice thereof to the Lessee certifying (x) that one of the events described in this clause or reduced amount resulting from such event and (z) as to the additional amount demanded by such Participant and a reasonably detailed explanation of the calculation thereof (including the method by which such Participant allocated such amounts to the Lessee). Such a certificate as to any additional amounts payable pursuant to this clause submitted by such Participant to the Lessee shall be conclusive in the absence of manifest error; provided, however, that the method by which such Participant allocated such amount to the Lessee must have been applied in good faith and must have been a method generally used by such Participant for such purpose. This covenant shall survive the termination of this Participation Agreement and the other Operative Documents and the payment of the Loans, Lessor Amounts and all other amounts payable hereunder and thereunder. (b) Each Participant shall use its commercially reasonable efforts to reduce or eliminate any claim for compensation pursuant to this Section 13.11, ------------- including, without limitation, a change in the office of such Participant at which its obligations related to the Operative Documents are maintained if such change will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Participant, be otherwise disadvantageous to it. ARTICLE XIV COLLATERAL 51 SECTION 14.1 Deficiency. ---------- (a) During the Construction Period, if on any day the marked to market value of U.S. Government Obligations held in the Collateral Account held by the "Collateral Agent" under the Construction Period Pledge Agreement shall be less than 103.0% of the Lease Balance then outstanding (any such day of determination, a "Deficiency Date"), and the Lessee has been given notice of --------------- such deficiency by the Lessor or the Collateral Agent before 3:00 P.M., New York City time, on such date pursuant to the terms and conditions of the Construction Period Pledge Agreement, then, on or before 3:00 P.M., New York City time on the next Business Day following such notice, the Lessee shall deposit with such Collateral Agent such additional Collateral ("Deficiency Collateral") so as to --------------------- cause the value of the marked to market U.S. Government Obligations held in the Collateral Account pursuant to the terms and conditions of the Construction Period Pledge Agreement, and after giving effect to the deposit of such Deficiency Collateral, to be equal to or in excess of 103.0% of the then outstanding Lease Balance. (b) During the Basic Lease Term, if the cash held in the Cash Collateral Account by the Collateral Agent under the Basic Term Pledge Agreement shall be less than 100.0% of the sum of the then outstanding Lessor Balance and any Loan Balance of a lender other than a Related Party Lender and any assignee of a Related Party Lender (the "Required Collateral Balance") (any such day of --------------------------- determination, a "Deficiency Date"), and the Lessor has been given notice of --------------- such deficiency, on or before 3:00 P.M., New York City time, by the Lessor or Collateral Agent pursuant to the terms and conditions of the Basic Term Pledge Agreement, then, on or before 3:00 P.M., New York City time, on the next Business Day following such Deficiency Date, the Lessee shall deposit with such Collateral Agent such additional Collateral ("Deficiency Collateral") so as to --------------------- cause the amount of cash held in the Cash Collateral Account pursuant to the terms and conditions of the Pledge Agreement, and after giving effect to the deposit of such Deficiency Collateral, to be equal to or in excess of 100.0% of the Required Collateral Balance. SECTION 14.2 Surplus. ------- (a) During the Construction Period, if on any day the marked to market value of U.S. Government Obligations held by the Collateral Agent pursuant to the terms and conditions of the Construction Period Pledge Agreement shall exceed 103.0% of the then outstanding Lease Balance, and provided that no Default or Event of Default has occurred and is continuing, then the Lessee may request in writing to the Lessor and the Administrative Agent that it cause the Collateral Agent to release to the Lessee, such excess securities in an amount such that, after giving effect to such release, the marked to market value of U.S. Government Obligations remaining in the Collateral Account held by the Collateral Agent subject to the terms and conditions of the Construction Period Pledge Agreement shall equal or exceed 103.0% of the then outstanding Lease Balance (for the purposes of this subsection (a), such released Collateral, "Surplus Collateral"). By 3:00 P.M., New York City ------------------ 52 time, on the next Business Day after receipt of such notice, and subject to the terms and conditions of the Construction Period Pledge Agreement, the Lessor and the Administrative Agent shall cause the Collateral Agent to release such Surplus Collateral to the Lessee; provided, however, that after giving effect to -------- ------- such release, no Default or Event of Default shall occur; and provided further, that no release of Surplus Collateral shall in any way affect the obligations of the Lessee pursuant to Section 14.1. ------------ (b) During the Basic Lease Term, if on any day the amount of cash held by the Collateral Agent pursuant to the terms and conditions of the Basic Term Pledge Agreement in the Cash Collateral Account shall exceed 100.0% of the Required Collateral Balance and provided that no Default or Event of Default has occurred and is continuing, then the Lessee may request in writing to the Administrative Agent and the Lessor that the Collateral Agent release to the Lessee such excess cash in an amount such that after giving effect to such release, the amount of cash remaining in the Cash Collateral Account held by the Collateral Agent subject to the terms and conditions of the Basic Term Pledge Agreement shall equal or exceed 100.0% of the Required Collateral Balance (for the purposes of this subsection (a), such released Collateral, "Surplus ------- Collateral"). By 3:00 P.M., New York City time, on the next Business Day after, - ---------- receipt of such notice, and subject to the terms and conditions of the Basic Term Pledge Agreement, the Collateral Agent shall release such Surplus Collateral to the Lessee; provided, however, that after giving effect to such -------- ------- release, no Default or Event of Default shall occur; and provided further, that -------- ------- no release of Surplus Collateral shall in any way affect the obligations of the Lessee pursuant to Section 14.1. If the Lessee elects to purchase the then ------------ outstanding Loan Balance pursuant to Section 10.1(i), then, simultaneously with --------------- the purchase by the Related Party Lender of the Lenders' interest in the Loan Balance after the Completion Date, the amount of Collateral held by the Collateral Agent equal to the Loan Balance shall be automatically paid to the Administrative Agent for application against the Loan Purchase Price up to the Loan Balance. Alternatively, at the Pledgor's election, pledged Collateral may be used to fund the purchase by a Related Party Lender of that portion of the Loan Balance which it has elected to purchase pursuant to Section 10.1(i) --------------- hereof. ARTICLE XV MISCELLANEOUS SECTION 15.1 Survival. The representations, warranties and -------- indemnities of the parties provided for in the Operative Documents, and the parties' obligations under any and all of such representations, warranties and indemnities shall survive the execution and delivery of this Participation Agreement, the transfer of the Property to the Lessor, the construction of Improvements, any disposition of any interest of the Lessor or any Participant in the Property or Improvements and the payment of the Notes and any disposition thereof and shall be and continue in effect notwithstanding any investigation made by any party and the fact that any party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents. Except as otherwise 53 expressly set forth herein or in the other Operative Documents, the indemnities of the parties provided for in the Operative Documents shall survive the expiration or termination of any thereof. SECTION 15.2 No Broker, etc. Each of the parties hereto represents to -------------- the others that it has not retained or employed any broker, finder or financial adviser to act on its behalf in connection with this Participation Agreement or the transactions contemplated herein or in the other Operative Documents, nor has it authorized any broker, finder or financial adviser retained or employed by any other Person so to act. Any party who is in breach of this representation shall indemnify and hold the other parties harmless from and against any liability arising out of such breach of this representation. SECTION 15.3 Notices. Unless otherwise specifically provided herein, ------- all notices, consents, directions, approvals, instructions, requests and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing by facsimile transmission, with receipt confirmed, or by delivery by a nationally recognized courier service, with receipt confirmed, shall be directed to the address of such Person as indicated on Schedule II. From time to time any party may designate a new address for ----------- purposes of notice hereunder by written notice to each of the other parties hereto in accordance with this Section. SECTION 15.4 Counterparts. This Participation Agreement may be ------------ executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 15.5 Amendments. The provisions of this Participation ---------- Agreement and each other Operative Document may not be amended, modified or waived, unless such amendment, modification or waiver is in writing and consented to by each of the Lessee, the Lessor, the Required Lenders and the Administrative Agent or is made pursuant to Section 10.1(i) hereof. For the --------------- purposes of this Section 15.5 any Related Party Lender shall be deemed to have ------------ consented or not consented, as the case may be, to any such waiver, amendment or modification to the extent that Societe Generale Financial Corporation shall have so consented or not consented, as applicable or to the extent the Lenders (other than a Related Party Lender) shall have so consented or not consented, as applicable. SECTION 15.6 Headings, etc. The Table of Contents and headings of the ------------- various Articles and Sections of this Participation Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. SECTION 15.7 Parties in Interest. Except as expressly provided herein, ------------------- none of the provisions of this Participation Agreement is intended for the benefit of any Person except the parties hereto. The Lessee shall not assign or transfer any of its rights or obligations under the Operative Documents except in accordance with the terms and conditions thereof. 54 SECTION 15.8 GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL ------------- RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. SECTION 15.9 Severability. Any provision of this Participation ------------ Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 15.10 Liability Limited. (a) The parties hereto agree that ----------------- except as specifically set forth herein or in any other Operative Document, the Lessor shall have no personal liability whatsoever to the Lessee or any other Participant or the Administrative Agent or their respective successors and assigns for any claim based on or in respect hereof or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and recourse, if any, shall be solely had against the Lessor's interest in the Property; provided, however, that the Lessor shall be liable in its individual capacity for its own willful misconduct or gross negligence. It is understood and agreed that, except as provided in the preceding sentence: (i) the Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents; (ii) all obligations of the Lessor to the Lessee are solely nonrecourse obligations; and (iii) all such personal liability of the Lessor is expressly waived and released as a condition of, and as consideration for, the execution and delivery of the Operative Documents by the Lessor. (b) No Participant shall have any obligation to the other Participant or to the Lessee, with respect to transactions contemplated by the Operative Documents, except those obligations of such Participant expressly set forth in the Operative Documents or except as set forth in the instruments delivered in connection therewith, and no Participant shall be liable for performance by any other party hereto of such other party's obligations under the Operative Documents except as otherwise so set forth. SECTION 15.11 Further Assurances. The parties hereto shall promptly ------------------ cause to be taken, executed, acknowledged or delivered, at the sole expense of the Lessee, all such further acts, conveyances, documents and assurances as the other parties may from time to time reasonably request in order to carry out and preserve the security interests and liens (and the priority thereof) intended to be created pursuant to this Participation Agreement, the other Operative Documents, and the transactions thereunder (including, without limitation, the preparation, execution and filing of any and all Uniform Commercial Code financing statements and other filings or registrations which the parties 55 hereto may from time to time request to be filed or effected). The Lessee, at its own expense and without need of any prior request from any other party, shall take such action as may be necessary (including any action specified in the preceding sentence), or as so requested, in order to maintain and protect all security interests provided for hereunder or under any other Operative Document. SECTION 15.12 SUBMISSION TO JURISDICTION; WAIVERS. ----------------------------------- (a) LESSEE HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ALL LEGAL ACTIONS OR PROCEEDINGS RELATING TO THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY, TO THE GENERAL JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK, AND THE APPELLATE COURTS THEREOF AND WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION OR PROCEEDING TO ANY FEDERAL COURT; (ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURT, WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND WAIVES ANY OBJECTION THAT SUCH ACTION OR PROCEEDING IN ANY SUCH COURT WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD, CLAIM OR ASSERT THE SAME. (iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID TO, OR BY PERSONAL SERVICE AT, ITS ADDRESS SET FORTH HEREIN OR SUCH OTHER ADDRESS OF WHICH THE LESSOR SHALL HAVE BEEN NOTIFIED PURSUANT HERETO, WHETHER OR NOT SUCH ADDRESS BE WITHIN THE JURISDICTION OF ANY SUCH COURT; (iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE LESSOR TO SUE IN ANY OTHER JURISDICTION; AND (v) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL 56 ACTION OR PROCEEDING REFERRED TO IN THIS SECTION 15 ANY SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES. (b) THE LESSEE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO ASSERT, ARGUE OR RAISE, IN ANY ACTION BROUGHT BY THE LESSOR AGAINST THE LESSEE UNDER THIS PARTICIPATION, THAT THE LESSOR STRUCTURED THE TRANSACTION CONTEMPLATED BY THE OPERATIVE DOCUMENTS IN SUCH A MANNER PRIMARILY TO CIRCUMVENT THE CALIFORNIA ONE-FORM-OF-ACTION AND ANTI-DEFICIENCY LAWS, INCLUDING CALIFORNIA CODE OF CIVIL PROCEDURE ss.ss. 580a, 580b, 580d AND 726. (c) THE LESSEE HEREBY WAIVES ALL OF THE LESSEE'S RIGHTS OF SUBROGATION AND REIMBURSEMENT AND ANY OTHER RIGHTS AND DEFENSES AVAILABLE TO THE LESSEE BY REASON OF CALIFORNIA CIVIL CODE SECTIONS 2787 TO 2855, (INCLUSIVE), INCLUDING (A) ANY DEFENSES THE LESSEE MAY HAVE TO THE OBLIGATIONS UNDERTAKEN BY THE LESSEE IN THIS PARTICIPATION BY REASON OF AN ELECTION OF REMEDIES BY THE LESSOR, AND (B) ANY RIGHTS OR DEFENSES THE LESSEE MAY HAVE BY REASON OF PROTECTION AFFORDED TO THE LESSEE WITH RESPECT TO THE OBLIGATIONS HEREUNDER PURSUANT TO THE ANTIDEFICIENCY OR OTHER LAWS OF THE STATE OF CALIFORNIA LIMITING OR DISCHARGING LESSEE'S INDEBTEDNESS, INCLUDING CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 580a, 580b, 580d OR 726. SECTION 15.13 WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND -------------------- INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 15.13 ------------- HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO EXCEPTIONS. THE LESSEE ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE LESSOR AND THE LENDERS ENTERING INTO THIS PARTICIPATION AGREEMENT AND EACH SUCH OTHER OPERATIVE DOCUMENT. 57 SECTION 15.14 Highest Lawful Rate. It is the intention of the parties ------------------- hereto to conform strictly to applicable usury laws and, anything herein to the contrary notwithstanding, the obligations of the Lessee or the Lessor or any other party under the Master Lease or any other Operative Document, shall be subject to the limitation that payments of Rent or of other amounts which may constitute interest shall not be required to the extent that receipt thereof would be in excess of the Highest Lawful Rate (as defined herein), or otherwise contrary to provisions of law applicable to the recipient limiting rates of interest which may be charged or collected by the recipient. Accordingly, if the transactions or the amount paid or otherwise agreed to be paid for the use, forbearance or detention of money under this Master Lease and any other Operative Document would exceed the Highest Lawful Rate or otherwise be usurious with respect to the recipient of any such amount, then, in that event, notwithstanding anything to the contrary in the Master Lease or any other Operative Document, it is agreed as follows as to the recipient of any such amount: (a) the provisions of this Section 15.14 shall govern and control over ------------- any other provision in the Master Lease and any other Operative Document and each provision set forth herein or therein is hereby so limited; (b) the aggregate of all consideration which constitutes interest that is contracted for, charged or received under the Master Lease, or any other Operative Document shall under no circumstances exceed the maximum amount of interest allowed by any Requirement of Law (such maximum lawful interest rate, if any, with respect to the Lessor herein called the "Highest Lawful Rate"), and ------------------- all amounts owed under the Master Lease and any other Operative Document shall be held subject to reduction and (i) the amount of interest which would otherwise be payable to the recipient hereunder and under the Master Lease, and any other Operative Document shall be automatically reduced to the amount allowed under any Requirement of Law and (ii) any unearned interest paid in excess of the Highest Lawful Rate shall be credited to the payor by the recipient (or, if such consideration shall have been paid in full, refunded to the payee); (c) all sums paid, or agreed to be paid for the use, forbearance and detention of the money under the Master Lease or any other Operative Document shall, to the extent permitted by any Requirement of Law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform throughout the full term thereof; and (d) if at any time the Basic Rent and any Supplemental Rent, together with any other fees, late charges and other sums payable pursuant to or in connection with the Master Lease and any other Operative Document executed in connection herewith or therewith, and deemed interest under any Requirement of Law exceeds that amount which would have accrued at the Highest Lawful Rate, the amount of the Basic Rent and any Supplemental Rent and any such other fees, charges and sums to accrue to the recipient thereof pursuant to any Operative Document shall be limited, notwithstanding anything to the contrary in the Operative Document to that amount which would have 58 accrued at the Highest Lawful Rate for the recipient, but any subsequent reductions, as applicable, shall not reduce the interest to accrue pursuant to the Operative Document below the recipient's Highest Lawful Rate until the total amount of interest payable to the recipient (including all consideration which constitutes interest) equals the amount of interest which would have been payable to the recipient (including all consideration which constitutes interest), plus the amount of fees which would have been received but for the effect of this Section 15.14. ------------- 59 IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. PALM, INC., as Lessee, Construction Agent and Guarantor By: /s/ Judy Bruner ------------------------------------ Name: JUDY BRUNER Title: CHIEF FINANCIAL SOCIETE GENERALE FINANCIAL CORPORATION, as Lessor By: /s/ illegible ------------------------------------ Name: illegible Title: Senior Vice President SOCIETE GENERALE, acting through its New York Branch, as Administrative Agent and as Tranche A Lender By: /s/ Sean Rheuben ------------------------------------ Name: Sean Rheuben Title: Attorney-in-fact SCHEDULE I TO PARTICIPATION AGREEMENT - -------------------------------------------------------------------------------- COMMITMENTS - -------------------------------------------------------------------------------- Improvement Land Advance Land Advance Improvement Percentage Commitment Percentage Commitment ---------- ---------- ---------- ---------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Lender - ------ Societe Generale, acting through its 97% $219,220,000 85% $198,900,000 New York Branch - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Lessor - ------ Societe Generale Financial 3% $6,780,000 15% $35,100,000 Corporation - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL 100% $226,000,000 100% $234,000,000 - -------------------------------------------------------------------------------- SCHEDULE II TO THE PARTICIPATION AGREEMENT Notice Information, Wire Transfer Instructions and Funding Office Lessee, Construction Agent and Guarantor: PALM, INC. 5470 Great America Parkway Santa Clara, CA 95052 Attention: Mark Mohler or John Igoe Facsimile No.: (408) 326-3309 Telephone No.: (408) 326-8212 with a copy to: PALM, INC. 5470 Great America Parkway Santa Clara, CA 95052 Attention: General Counsel Wire Transfer Instructions: First American Trust Company, Santa Ana Branch 521 N. Main Street Santa Ana, CA 92701 ABA Number: 122241255 Account Name: First American Title Guaranty Company Trust Account Account Number: 12201 Reference: Office number 282-05; Escrow number ________ Attention: Carol Weir Lessor: SOCIETE GENERALE FINANCIAL CORPORATION 1221 Avenue of the Americas New York, NY 10020 Attention: Paul Sottnik Facsimile No.: (212) 278-7320 Telephone No.: (212) 278-6446 Wire Transfer Instructions: Bank: Societe Generale, New York ABA Number:0260-042-26 Account Name: Societe Generale Financial Corporation Account Number:01-59379 Ref: Palm, Inc. Synthetic Lease Administrative Agent: SOCIETE GENERALE, acting through its New York Branch 1221 Avenue of the Americas - 13/th/ Floor New York, NY 10020 Attention: Anna Lopiccolo Facsimile No.: (212) 278-5525 Telephone No.: (212) 278-6732 Wire Transfer Instructions for the Account: Bank: Societe Generale, New York ABA Number: 0260-042-26 Account Number: 9051511 Ref: Palm, Inc. Synthetic Lease Tranche A Lender SOCIETE GENERALE, acting through its New York Branch 1221 Avenue of the Americas - 13/th/ Floor New York, NY 10020 Attention: Angeline Quintana Facsimile No: (212) 278-7490 Telephone No: (212) 278-6853 EXHIBIT A TO THE PARTICIPATION AGREEMENT FUNDING REQUEST TO: SOCIETE GENERALE, acting through its New York Branch, _________, __________ as Administrative Agent 1221 Avenue of the Americas - 13/th/ Floor New York, New York 10020 Facsimile: (212) 278-5525 Attention: Anna Lopiccolo cc: SOCIETE GENERALE FINANCIAL CORPORATION, as Lessor 1221 Avenue of the Americas New York, New York 10020 Facsimile: (212) 278-7320 Attention: Paul Sottnik This Funding Request is delivered to you pursuant to Section 3.1 of ----------- the Participation Agreement, dated as of November 16, 2000, (as amended, supplemented, amended and restated or otherwise, modified from time to time, the "Participation Agreement"), among PALM, INC., a Delaware corporation ("Palm"), ----------------------- ---- as the Lessee ( the "Guarantor"), and the Construction Agent, SOCIETE GENERAL --------- FINANCIAL CORPORATION, a Delaware corporation, as Lessor, SOCIETE GENERALE, acting through its New York Branch and the Lenders party thereto (collectively, the "Lender") and SOCIETE GENERALE, NEW YORK BRANCH as Administrative Agent for ------ the Lenders. Capitalized terms used but not otherwise defined herein have the respective meanings specified in Appendix A to the Participation Agreement (as ---------- such Appendix may be amended, supplemented, amended and restated or otherwise modified from time to time, "Appendix A"), and the rules of interpretation set ---------- forth in Appendix A shall apply to this Funding Request. The Construction Agent hereby notifies you that: (i) the Business Day of such proposed Advance is the proposed funding date (the "Proposed Funding Date"); --------------------- 2 (ii) the Construction Agent requests the making of an Advance in the amount of [ ]1 inclusive of accrued interest and Yield which is to be capitalized on the Proposed Funding Date; (iii) the Advance is to be allocated between the Land Lease Balance and Improvements Lease Balance in accordance with the Participation Agreement and the other Operative Documents; (iv) prior to making the requested Advance, the Lessee will have delivered to the Collateral Agent, Sufficient Collateral as set forth in Section 6.1 of the Participation Agreement, in ----------- an amount to cover such requested Advance; and (v) [the Construction Agent's account to which funds are to be disbursed is ABA Number 122241255, Account Number 12201, Account Name: First American Title Guaranty Company Trust Account, Reference: Office Number 282-05.] [The account to which funds are to be disbursed is ____________]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on each such Funding Date, before and after giving effect thereto and to the application of the proceeds from the Advance to be made on such Funding Date: (x) the representations and warranties contained in any Operative Document are true and correct as though made on as of such Funding Date; (y) the conditions set forth in Article VI of the Participation ---------- Agreement have been satisfied; and (z) no event has occurred and is continuing, or would result from the making of such Advance, that constitutes a Default or Event of Default. - --------------------- 1 Amount not to be less than $250,000 (except that the Final Funding may be for a lesser amount). 3 The Lessee has caused this Funding Request to be executed and delivered by its duly authorized Responsible Officer as of this [ ]TH day of [ ]. PALM, INC., as Construction Agent By: _______________________ Name: [ ] Title: [ ] 4 */ The Funding Request is required to be delivered not later than 1:00 p.m., - -- New York City time, three (3) Business Days prior to the proposed Funding Date. Schedule A to the Funding Request ---------------
- ------------------------------------------------------------------------------------------------------------------------------------ Aggregate Property Cost Portion of Land Construction (all Advances to date, Property Cost Costs Costs including Current Allocable to (Current Advance Only) (Current Advance Only) Advance) Capitalizable Costs - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT B TO THE PARTICIPATION AGREEMENT RESPONSIBLE OFFICER'S CERTIFICATE To Follow EXHIBIT C TO THE PARTICIPATION AGREEMENT COMPLETION CERTIFICATE EX-10.3 4 0004.txt GUARANTY EXHIBIT 10.3 EXECUTION COPY GUARANTY dated as of November 16, 2000 made by PALM, INC., as Guarantor in favor of SOCIETE GENERALE, NEW YORK BRANCH, as Administrative Agent for the ratable benefit of the Lenders GUARANTY THIS GUARANTY (this "Guaranty"), dated as of November 16, 2000, is -------- made by PALM, INC., a Delaware corporation (the "Guarantor"), in favor of --------- SOCIETE GENERALE, NEW YORK BRANCH as administrative agent for the ratable benefit of the Lenders (the "Administrative Agent") (with its successors and -------------------- assigns, the "Beneficiary"). ----------- W I T N E S S E T H: WHEREAS, pursuant to the Participation Agreement, dated as the date hereof (together with all amendments, supplements, amendments and restatements and other modifications, if any, from time to time thereafter made thereto, the "Participation Agreement"), among the Lessee, the Guarantor, the Construction ----------------------- Agent, the Lessor, the Administrative Agent and the Lenders, the Lenders have agreed, subject to the terms thereof, to make Loans available to the Lessor from time to time during the Commitment Period, and the Lessor has agreed, subject to the terms thereof, to make Advances to the Lessee from time to time during the Commitment Period; WHEREAS, as a condition precedent to the Lender making Loans under the Loan Agreements and the other relevant Operative Documents, the Guarantor is required to execute and deliver this Guaranty in favor of the Beneficiary; WHEREAS, the Guarantor has duly authorized the execution, delivery and performance of this Guaranty; WHEREAS, it is in the best interest of the Guarantor to execute this Guaranty inasmuch as the Guarantor will derive substantial benefits from the transactions contemplated by the Participation Agreement and the other Operative Documents; and WHEREAS, the Guarantor desires to execute this Guaranty. NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, and in order to induce the Lenders to enter into the Participation Agreement and each of the other Operative Documents to which they are a party, the Guarantor agrees, for the benefit of the Beneficiary, as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definitions. Capitalized terms used but not otherwise ----------- defined in this Guaranty have the respective meanings specified in Appendix A to the Participation Agreement; and the rules of interpretation set forth therein shall apply to this Guaranty. ARTICLE II GUARANTY PROVISIONS SECTION 2.1. Guaranty. (a) Subject to the provisions of Section -------- ------- 2.1(b), the Guarantor, as primary obligor and not as surety, hereby absolutely, - ------ unconditionally and irrevocably guarantees to the Beneficiary the prompt and complete payment and performance by the Lessor when due (whether at the stated maturity, by acceleration or otherwise) of the unpaid principal of and interest on the Notes and all other obligations and liabilities of the Lessor to the Beneficiary (including interest accruing at the then applicable rate provided in the Loan Agreements after the maturity of the Loans and interest accruing at the then applicable rate provided in the Loan Agreements after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Lessor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in connection with, the Loan Agreements, the Notes, the other Operative Documents or any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all reasonable fees and disbursements of counsel to the Beneficiary that are required to be paid by the Lessor pursuant to the terms of the Loan Agreements or any other Operative Document) (collectively, the "Guaranteed Obligations"). ---------------------- (b) Notwithstanding anything herein to the contrary, unless and until a Lease Event of Default or a Lease Default has occurred and is continuing as of the Expiration Date, the Guarantor shall have no liability with respect to the Guaranteed Obligations. (c) The Guarantor agrees to pay any and all expenses (including all reasonable fees and disbursements of counsel) which may be paid or incurred by the Beneficiary in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Guaranteed Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guaranty. This Guaranty shall remain in full force and effect until the Guaranteed Obligations and all amounts owing hereunder are paid in full and the Loan Commitments are terminated, notwithstanding that from time to time prior thereto the Lessor may be free from any Guaranteed Obligations. (d) No payment or payments made by the Lessor, the Guarantor or any other Person or received or collected by the Beneficiary from the Lessor, the Guarantor or any other Person by virtue of any action or proceeding or any set- off or appropriation or application at any time or from time to time in reduction of or in payment of the Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Guarantor hereunder which shall, notwithstanding any such payment or payments remain liable for the Guaranteed Obligations until the Guaranteed Obligations and all amounts owing hereunder are paid in full and the Loan Commitments are terminated. (e) The Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Beneficiary on account of its liability hereunder, it will notify the Beneficiary in writing that such payment is made under this Guaranty for such purpose. SECTION 2.2. Right of Set-off. In addition to any rights now or ---------------- hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, the Beneficiary is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Lessor, the Guarantor or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by the Beneficiary (including, without limitation, by branches and agencies of the Beneficiary wherever located) to or for the credit or the account of the Guarantor against and on account of the obligations and liabilities of the Guarantor hereunder or under any of the other Operative Documents, and all other claims of any nature or description arising out of or connected with this Guaranty or any other Operative Documents, irrespective of whether the Beneficiary shall have made any demand hereunder and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured. SECTION 2.3. No Subrogation. Notwithstanding any payment or payments -------------- made by the Guarantor hereunder or any set-off or application of funds of the Guarantor by the Beneficiary, the Guarantor shall not be entitled to exercise or enforce any subrogation rights of the Beneficiary against the Lessor or any other Person or any collateral security or guaranty or right of offset held by the Beneficiary for the payment of the Guaranteed Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Lessor or any other Person in respect of payments made by the Guarantor hereunder, until all amounts owing to the Beneficiary by the Lessor on account of the Guaranteed Obligations and all amounts owing hereunder are paid in full and the Loan Commitments are terminated. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Guaranteed Obligations and all amounts owing hereunder shall not have been paid in full or the Loan Commitments shall not have been terminated, such amount shall be held by the Guarantor in trust for the Beneficiary, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Beneficiary in the exact form received by the Guarantor (duly indorsed by the Guarantor to the Beneficiary, if required), to be applied against the Guaranteed Obligations, whether matured or unmatured, in such order as the Beneficiary may determine. SECTION 2.4. Amendments, etc. with respect to the Guaranteed ----------------------------------------------- Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder - ----------------------------- notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment of any of the Guaranteed Obligations made by the Beneficiary may be rescinded by such party and any of the Guaranteed Obligations continued, and the Guaranteed Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guaranty therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Beneficiary, and the Loan Agreements, the Participation Agreement and the other Operative Documents may be amended, modified, supplemented or terminated, in whole or in part, as the Beneficiary may deem advisable from time to time, and any collateral security, guaranty or right of offset at any time held by the Beneficiary for the payment of the Guaranteed Obligations may be sold, exchanged, waived, surrendered or released. The Beneficiary shall not have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Guaranteed Obligations or for this Guaranty or any property subject thereto. When making any demand hereunder against the Guarantor, the Beneficiary may, but shall be under no obligation to, make a similar demand on the Lessor or any other guarantor, and any failure by the Beneficiary to make any such demand or to collect any payments from the Lessor or any other guarantor or any release of the Lessor or such other guarantor shall not relieve the Guarantor, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Beneficiary against the Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. SECTION 2.5. Guaranty Absolute and Unconditional. The Guarantor waives ----------------------------------- any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Beneficiary upon this Guaranty or acceptance of this Guaranty; the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty; and all dealings between the Lessor and the Guarantor, on the one hand, and the Beneficiary, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guaranty. The Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Lessor or the Guarantor with respect to the Guaranteed Obligations. The Guarantor understands and agrees that this Guaranty shall be construed as a continuing, absolute and unconditional guaranty and surety of payment without regard to (a) the validity, regularity or enforceability of the Loan Agreements or any other Operative Document, any of the Guaranteed Obligations or any other collateral security therefor or guaranty or right of offset with respect thereto at any time or from time to time held by the Beneficiary (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Lessor or the Guarantor against the Beneficiary, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Lessor or the Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Lessor for the Guaranteed Obligations, or of the Guarantor under this Guaranty, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantor, the Beneficiary may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Lessor or any other Person or against any collateral security or guaranty for the Guaranteed Obligations or any right of offset with respect thereto, and any failure by the Beneficiary to pursue such other rights or remedies or to collect any payments from the Lessor or any such other Person or to realize upon any such collateral security or guaranty or to exercise any such right of offset, or any release of the Lessor or any such other Person or any such collateral security, guaranty or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Beneficiary against the Guarantor. This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Beneficiary, and its successor, indorsee, transferee and assign, until all the Guaranteed Obligations and the obligations of the Guarantor under this Guaranty shall have been satisfied by payment in full and the Loan Commitments shall be terminated, notwithstanding that from time to time during the term of the Loan Agreements the Lessor may be free from any Guaranteed Obligations. SECTION 2.6. Reinstatement. This Guaranty shall continue to be ------------- effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by the Beneficiary upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Lessor or the Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Lessor or the Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. ARTICLE III MISCELLANEOUS PROVISIONS SECTION 3.1. Operative Document. This Guaranty is an Operative ------------------ Document executed pursuant to the Participation Agreement and shall (unless expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions of the Participation Agreement, including, without limitation, Article XV thereof. SECTION 3.2. Binding on Successors, Transferees and Assigns; ---------------------------------------------- Assignment of Guaranty. This Guaranty shall be binding upon the Guarantor and - ---------------------- its successors, transferees and assigns and shall inure to the benefit of and be enforceable by the Beneficiary and its permitted successor and assign; provided, however, that the Guarantor may not assign any of its obligations hereunder without the prior written consent of each Participant. SECTION 3.3. Amendments, etc. No amendment to or waiver of any --------------- provision of this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Beneficiary, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 3.4. Addresses for Notices to the Guarantor. All notices, -------------------------------------- demands, requests, consents, approvals and other communications hereunder shall be in writing and directed to the address described in, and deemed received in accordance with the provisions of, Section 15.3 of the Participation Agreement. SECTION 3.5. No Waiver; Remedies. In addition to, and not in ------------------- limitation of, the other provisions of this Guaranty, no failure on the part of the Beneficiary to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 3.6. Section Captions. Section captions used in this Guaranty ---------------- are for convenience of reference only, and shall not affect the construction of this Guaranty. SECTION 3.7. Severability. Wherever possible each provision of this ------------ Guaranty shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. SECTION 3.8. Termination of Guaranty. The Guarantor's obligations ----------------------- under this Guaranty shall terminate on the date upon which all Guaranteed Obligations have been paid in full, and all other Obligations shall have been fully and finally discharged. SECTION 3.9. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND ------------- CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW). SECTION 3.10. SUBMISSION TO JURISDICTION; WAIVERS. (a) THE GUARANTOR ----------------------------------- HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ALL LEGAL ACTIONS OR PROCEEDINGS RELATING TO THIS GUARANTY OR ANY OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY, TO THE GENERAL JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK, AND THE APPELLATE COURTS THEREOF AND WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION OR PROCEEDING TO ANY FEDERAL COURT; (ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURT, WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND WAIVES ANY OBJECTION THAT SUCH ACTION OR PROCEEDING IN ANY SUCH COURT WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD, CLAIM OR ASSERT THE SAME; (iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID TO, OR BY PERSONAL SERVICE AT, ITS ADDRESS SET FORTH HEREIN OR SUCH OTHER ADDRESS OF WHICH THE BENEFICIARY SHALL HAVE BEEN NOTIFIED PURSUANT HERETO, WHETHER OR NOT SUCH ADDRESS BE WITHIN THE JURISDICTION OF ANY SUCH COURT; (iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BENEFICIARY (AND NOT OF GUARANTOR) TO SUE IN ANY OTHER JURISDICTION; AND (v) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SECTION 3.10 ANY SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES. (b) THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER OPERATIVE DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. (c) THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO ASSERT, ARGUE OR RAISE, IN ANY ACTION BROUGHT BY THE BENEFICIARY AGAINST THE GUARANTOR UNDER THIS GUARANTY, THAT THE BENEFICIARY STRUCTURED THE TRANSACTION CONTEMPLATED BY THE OPERATIVE DOCUMENTS IN SUCH A MANNER PRIMARILY TO CIRCUMVENT THE CALIFORNIA ONE-FORM-OF-ACTION AND ANTI-DEFICIENCY LAWS, INCLUDING CALIFORNIA CODE OF CIVIL PROCEDURE (S)(S) 580a, 580b, 580d AND 726. (d) The Guarantor hereby waives all of the Guarantor's rights of subrogation and reimbursement and any other rights and defenses available to the Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive, including (i) any defenses the Guarantor may have to the obligations undertaken by the Guarantor in this Guaranty by reason of an election of remedies by the Beneficiary, and (ii) any rights or defenses the Guarantor may have by reason of protection afforded to the Lessor with respect to the obligations guaranteed hereby pursuant to the antideficiency or other laws of the State of California limiting or discharging Lessors's indebtedness, including California Code of Civil Procedure Section 580a, 580b, 580d or 726. The Guarantor's waiver of defenses under clause (i) above is made even though an election of remedies by the Beneficiary, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, destroys such Guarantor's rights of subrogation and reimbursement against the Lessor by the operation of California Code of Civil Procedure Section 580d or otherwise. The foregoing waivers shall not be deemed a waiver of the defense that the Guaranteed Obligations have been paid or the Loan Commitments reduced. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PALM, INC. By: /s/ Judy Bruner ------------------------------- Name Judy Bruner Title: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----